<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. 14 X
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940 X
Amendment No. 16 X
JULIUS BAER 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)
__X__ on January 31, 2000 pursuant to paragraph (b)
_____ 60 days after filing pursuant to paragraph (a)(1)
_____ on (date) pursuant to paragraph (a)(1)
_____ 75 days after filing pursuant to paragraph (a)(2)
_____ on (date) pursuant to paragraph (a)(2) of rule 485.
Title of Securities Being Registered:
<PAGE>
JULIUS BAER INVESTMENT
FUNDS
Prospectus
January 31, 2000
JULIUS BAER GLOBAL INCOME FUND
JULIUS BAER INTERNATIONAL EQUITY FUND
Neither the Securities and Exchange Commission nor any state securities
commission has approved either Fund's shares or determined whether this
prospectus is accurate or complete. Anyone who tells you otherwise is committing
a crime.
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
PAGE
----
<S> <C> <C>
WHAT EVERY INVESTOR THE FUNDS
SHOULD KNOW ABOUT JULIUS BAER INVESTMENT FUNDS 3
THE FUNDS
RISK/RETURN SUMMARIES 3
Introduction 3
Investments, Risks, Performance
and Fees 3
INVESTMENT STRATEGIES AND RISKS 13
THE FUNDS' MANAGEMENT 20
INFORMATION FOR YOUR INVESTMENT
MANAGING YOUR INVESTING IN THE FUNDS 21
FUND ACCOUNT
Opening an Account 21
Pricing of Fund Shares 21
Purchasing Your Shares 22
Selling Your Shares 26
Distribution and Shareholder
Servicing Plans-Class A Shares 28
Distributions and Taxes 29
Distributions 29
Tax Information 29
FOR MORE INFORMATION
WHERE TO FIND MORE
INFORMATION
ABOUT JULIUS BAER
INVESTMENT FUNDS
BACK COVER
</TABLE>
2
<PAGE>
JULIUS BAER INVESTMENT FUNDS
RISK/RETURN SUMMARIES
INTRODUCTION
Julius Baer Investment Funds (Trust) currently offers two funds: Julius Baer
International Equity Fund and Julius Baer Global Income Fund (Funds). Each Fund
has a different investment goal and risk level. Each Fund currently offers two
separate classes of shares: Class A shares and Class I shares.
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 on your
investment.
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
considers companies with above average earnings potential, companies that are
dominant within their industry, companies within industries that are undergoing
dramatic change and companies that are market leaders in developing industries.
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 fewer 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 that may exceed the volatility of U.S. securities, uncertain
political conditions and other factors.
4
<PAGE>
o Derivatives Risk: the possibility that the use of futures, options and forward
contracts may expose the Fund to additional investment risks and transaction
costs. These are described more fully under the heading Investment Strategies
and Risks and in the SAI.
THE FUND'S PERFORMANCE
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 Class A shares
from year to year after the first full calendar year since the Fund commenced
operations. Class I shares of the Fund are new and therefore do not have
performance information for a full calendar year. How the Fund has performed in
the past is not necessarily an indication of how the Fund will perform in the
future.
INTERNATIONAL EQUITY FUND - CLASS A
[BAR GRAPH]
Calendar Year Total Return
- ------------- ------------
1994 (33.58%)
1995 (0.19%)
1996 17.66%
1997 15.33%
1998 27.07%
1999 76.58%
During the periods shown in the Bar Chart, the highest quarterly return was
50.61% (for the quarter ended December 31, 1999) and the lowest quarterly return
was -22.49% (for the quarter ended March 31, 1994).
5
<PAGE>
The table below shows how the Fund's average annual total returns for Class A
shares for the periods shown compare to that of the Morgan Stanley Capital
International Europe Australia and Far East Index (MSCI EAFE Index). The MSCI
EAFE Index is an unmanaged index that measures stock performance in Europe,
Australia and the Far East. Class I shares commenced operations after the
periods indicated.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
SINCE FUND'S
PAST ONE YEAR PAST FIVE YEARS INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
International Equity Fund 76.58% 24.88% 16.65%
- ------------------------------------------------------------------------------
MSCI EAFE Index 26.96% 12.83% 11.23%
- ------------------------------------------------------------------------------
</TABLE>
The Fund's Fees and Expenses
The tables below describe the fees and expenses that you may pay if you buy and
hold shares of the Fund.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A SHARES CLASS I SHARES
<S> <C> <C>
Redemption Fee
(as a percentage of amount redeemed) 2.00%1 2.00%1
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS I SHARES
- ------------------------------------------------------------------------------
Management Fees 0.75% 0.75%
- ------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees 0.25% None
- ------------------------------------------------------------------------------
Other Expenses 0.96% 0.69%
- ------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.96% 1.44%
- ------------------------------------------------------------------------------
Fee Waiver 0.15%2 0.15%2
- ------------------------------------------------------------------------------
Net Expenses 1.81% 1.29%
- ------------------------------------------------------------------------------
</TABLE>
- ----------
1 If you purchase shares on or after November 15, 1999, you will pay a
redemption fee of 2% of the amount redeemed if those shares are sold 90 days or
less from the date that they were purchased. If you sell shares and request your
money by wire transfer, the Fund reserves the right to impose a $12.00 fee. Your
bank may also charge you a fee for receiving wires.
2 The Adviser has contractually agreed to waive that portion of its fee equal to
an annual rate of 0.15% of the Fund's average daily net assets until at least
November 15, 2000.
6
<PAGE>
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, except
that the effect of the contractual fee waiver between the Adviser and the Fund
is only taken into account through November 15, 2000, when it will expire unless
renewed by the Adviser and the Fund.
Although your actual returns and expenses may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
CLASS A SHARES CLASS I SHARES
- -----------------------------------------------------------------------------
<S> <C> <C>
1 Year $184 $131
- -----------------------------------------------------------------------------
3 Years $600 $440
- -----------------------------------------------------------------------------
5 Years $1,042 $771
- -----------------------------------------------------------------------------
10 Years $2,270 $1,708
- -----------------------------------------------------------------------------
</TABLE>
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, notes and mortgage-backed securities. 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:
o any one foreign government, its agencies, instrumentalities, or political
subdivisions; and
o supranational entities as a group.
THE KEY RISKS
8
<PAGE>
You could lose money on your investment in the Fund, or the Fund could return
less than other investments due to:
o Diversification Risk: the possibility that, 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.
o Interest Rate Risk: the possibility that the Fund's investments in
fixed-income securities will lose value because of increases in interest rates.
o Credit Risk: the possibility that an issuer will fail to repay interest and
principal in a timely manner, reducing the Fund's return.
o Prepayment Risk: the possibility that the principal amount of the mortgages
underlying the Fund's investments in mortgage-related securities may be repaid
prior to the mortgage's maturity date. Such repayments are common when interest
rates decline and may cause the Fund's income to decline.
o Income Risk: the possibility that falling interest rates will cause the Fund's
income to decline if the Fund reinvests its assets at the lower rate. Income
risk is generally higher for short-term bonds.
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 Derivatives Risk: the possibility that the use of futures, options and forward
contracts may expose the Fund to additional investment risks and transaction
costs. These are described more fully under the heading Investment Strategies
and Risks and in the SAI.
9
<PAGE>
THE FUND'S PERFORMANCE
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 Class A shares from year
to year after the first full calendar year since the Fund commenced operations.
Class I shares are new and therefore do not have performance information for a
full calendar year. How the Fund has performed in the past is not necessarily an
indication of how the Fund will perform in the future.
GLOBAL INCOME FUND - CLASS A
[BAR GRAPH]
Calendar Year Total Return
- ------------- ------------
1993 11.47%
1994 (6.61%)
1995 19.51%
1996 5.73%
1997 2.83%
1998 9.60%
1999 (3.41%)
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).
10
<PAGE>
The table below shows how the Fund's average annual returns for Class A shares
for the periods shown compare to those of a benchmark index composed of 80%
Merrill Lynch 1-10 Year U.S. Government/Corporate Index and 20% J.P. Morgan
Global Government Bond (non-U.S.) Index.
AVERAGE ANNUAL TOTAL RETURNS (FOR THE
PERIODS ENDED DECEMBER 31, 1999)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
SINCE FUND'S
PAST ONE YEAR PAST FIVE YEARS INCEPTION
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Global Income Fund-Class A (3.41%) 6.51% 5.35%
- -----------------------------------------------------------------------------
80% Merrill Lynch 1-10 Year
U.S.Government/Corporate
Index/20% J.P. Morgan
Global Government Bond
(non-U.S.) Index (0.81%) 6.99% 6.23%
- ------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
THE FUND'S FEES AND EXPENSES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
SHAREHOLDER FEES
(fees paid directly from your investment) CLASS A SHARES CLASS I SHARES
- ------------------------------------------------------------------------------
<S> <C> <C>
Redemption Fee
(as a percentage of amount redeemed) 2.00%1 2.00%1
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS I SHARES
- ------------------------------------------------------------------------------
<S> <C> <C>
Management Fees 0.50% 0.50%
- ------------------------------------------------------------------------------
Distribution and/or Service (12b-1) Fees 0.25% None
- ------------------------------------------------------------------------------
Other Expenses 0.65% 0.48%
- ------------------------------------------------------------------------------
Total Annual Fund Operating Expenses 1.40% 0.98%
- ------------------------------------------------------------------------------
Fee Waiver 0.325%2 0.325%2
- ------------------------------------------------------------------------------
Net Expenses 1.075% 0.655%
- ------------------------------------------------------------------------------
</TABLE>
- ------------
1 If you purchase shares on or after November 15, 1999, you will pay a
redemption fee of 2% of the amount redeemed if those shares are sold 90 days or
less from the date that they were purchased. If you sell shares and request your
money by wire transfer, the Fund reserves the right to impose a $12.00 fee. Your
bank may also charge you a fee for receiving wires.
2 The Adviser has contractually agreed to waive that portion of its fee equal to
an annual rate of 0.325% of the first $25 million of the Fund's average daily
assets until at least November 15, 2000.
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, except
that the effect of the contractual fee waiver between the Adviser and the Fund
is only taken into account through November 15, 2000, when it will expire unless
renewed by the Adviser and the Fund.
12
<PAGE>
Although your actual returns and expenses may be higher or lower, based on these
assumptions your costs would be:
<TABLE>
<CAPTION>
Class A Shares Class I Shares
-------------- --------------
<S> <C> <C>
1 Year $110 $67
3 Years $410 $279
5 Years $733 $509
10 Years $1,647 $1,168
</TABLE>
13
<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.
<TABLE>
<S> <C>
The Fund may invest in American Depository Receipts DEPOSITORY RECEIPTS:
(ADRs), Global Depository Receipts (GDRs) and European Receipts, typically issued by a bank or trust company,
Depository Receipts (EDRs) issued by sponsored or representing the ownership of underlying securities
unsponsored facilities. ADRs are usually issued by a that are issued by a foreign company and held by the bank
U.S. bank or trust company and traded on a U.S. or trust company.
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.
</TABLE>
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) and the
Fund would be foregoing market advances or declines to the extent it is not
invested in equity markets.
14
<PAGE>
The Fund may at times use futures, options and forward contracts for hedging
purposes. The Fund may hedge the value of the securities in its portfolio using
currency futures contracts, forward foreign exchange contracts, foreign currency
exchange transactions, stock index futures, options on securities and options on
futures, so as to limit losses due to changes in the value of the currencies in
which the securities are denominated or in the underlying value of portfolio
securities. The Fund may, within limits, write or purchase certain put and call
options and use other types of derivative instruments. These types of
instruments may expose the Fund to increased risks.
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.
15
<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
<TABLE>
<S> <C>
The Fund seeks to achieve its goal by investing primarily in a NON-DIVERSIFIED:
non-diversified portfolio of fixed-income securities (generally Non-diversified mutual funds, like the Global
bonds, debentures and notes) of governmental, supranational and Income Fund, may invest a larger portion
corporate issuers denominated in various currencies, including of their assets in the securities of a
U.S. dollars. In addition to the strategies discussed earlier, the smaller number of issuers.
Fund may also engage in some or all of the strategies discussed Nevertheless, the Fund will buy no more
here or in the SAI. 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:
duration of approximately four years. Longer-term fixed-income Duration takes into account the pattern of a
securities can also have higher fluctuations in value. If the Fund security's cash flow over time,
holds such securities, the value of the Fund's shares may including the way cash flow is affected by
fluctuate more in value as well. prepayments and interest rate changes.
Duration provides a different view of the
expected life of a security than its
maturity, which generally measures only
the time until the debt must be repaid.
</TABLE>
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.
16
<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.
The Fund may invest in securities with ratings from a recognized rating agency
other than Moody's Investors Service, Inc. or Standard & Poor's Rating Service
if those securities have a rating that is at least equivalent to a rating that
would be acceptable for the Fund to purchase if given by Moody's Investors
Service, Inc. or Standard & Poor's Rating Service. If a security is not rated,
the Fund may invest in the security if the Adviser determines that the security
is comparable in quality to rated securities that the Fund may purchase.
The Fund may at times use futures, options and forward contracts for hedging
purposes. The Fund may hedge the value of the securities in its portfolio using
currency and interest rate futures contracts, forward foreign exchange
contracts, foreign currency exchange transactions and options on futures, so as
to limit losses due to changes in the value of the currencies in which the
securities are denominated or in interest rates. The Fund may, within limits,
write or purchase certain put and call options and use other types of derivative
instruments. These types of instruments may expose the Fund to increased risks.
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 achieve 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.
17
<PAGE>
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 may
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
WARRANTS ATTACHED o o
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.
<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>
18
<PAGE>
RISKS OF INVESTING IN THE FUNDS
Market Risk. A Fund that invests in common stocks is subject to the risk that
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. A Fund that invests in mortgage-backed
securities is subject to the risk that 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 Fund. Mortgage prepayments vary
based on several factors 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. A Fund that invests in debt securities is subject to the
risk 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
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.
Income Risk. A Fund that invests in debt securities is subject to the
risk that falling interest rates will cause the Fund's income to decline.
Income risk is generally higher for short-term bonds.
19
<PAGE>
Foreign Investing. A Fund that invests in foreign securities is subject to
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.
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 Manager and the Funds'
other service providers do not properly process and calculate date-related
information for the Year 2000 and beyond.
In addition, the Year 2000 problem may adversely affect the companies in which
the Funds invest, particularly since the Funds invest heavily outside of the
U.S. 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 Manager will continue to monitor developments relating to the
Year 2000 problem.
20
<PAGE>
EURO RISK
Several European countries are participating in the European Economic and
Monetary Union, which has established a common European currency for
participating countries. This currency is known as the "Euro." Participating
countries replaced their existing currency with the Euro on January 1, 1999. A
variety of factors, including political and economical risks, could cause market
disruptions after the conversion to the Euro, and could adversely affect the
value of securities held by the Funds. The Funds have been informed that the
Adviser, and the Funds' other service providers, as applicable, have taken steps
to minimize the risk associated with the conversion. Since the ultimate
consequences of the conversion are unknown to the Funds at this time, no
assurance can be made that such consequences will not have a material adverse
impact on the Funds. The Funds and the Adviser will continue to monitor
developments relating to the conversion.
21
<PAGE>
THE FUNDS' MANAGEMENT
INVESTMENT ADVISER
Each Fund is managed by Bank Julius Baer & Co., Ltd., New York Branch (Adviser)
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 management. As of October 31,
1999, the Adviser had approximately $2.4 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, the
distributor or administrator.
The International Equity Fund and the Global Income Fund pay the Adviser a fee
for providing investment advisory services of 0.75% and 0.50%, respectively, of
the average daily net assets of each Fund. The Funds also pay the Adviser a
co-administratorion fee for providing certain administrative and shareholder
services with respect to the Class A shares at an annual rate of 0.25% and
0.15%, respectively, of the average daily net assets of the Class A shares of
each Fund.
The fee paid by each Fund for the fiscal year ended October 31, 1999 is shown in
the table below.
<TABLE>
<S> <C>
FEE (AS A % OF AVERAGE DAILY NET ASSETS)
FUND
International Equity Fund 1.000 %
Global Income Fund 0.325 %*
</TABLE>
*Amounts represent management fees paid to the Adviser, including
the effect of waivers.
22
<PAGE>
PORTFOLIO MANAGEMENT OF THE FUNDS
Richard Pell, Chief Investment Officer and Senior Vice President of the Adviser
since January 1995, has been primarily responsible for management of the
International Equity Fund's assets since April 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, First Vice President and Head of International Equity
with the Adviser since September 1993, has been managing the International
Equity Fund 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, CFA, Vice President and Global Fixed-Income Specialist with the
Adviser since July 1, 1998, has been co-managing the Global Income Fund with Mr.
Pell since July 1, 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.
23
<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 obtain
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.
o 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 Unified at 1-800-435-4659 or write to Unified at the address shown
above.
o 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. NAV is calculated separately for each Class.
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; and
24
<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 and which class of shares you should purchase. Check below to find the
minimum investment amount required as well as to learn about the various ways
you can purchase your shares.
SHARE CLASSES
Each of the Funds offers two classes of shares: Class A and Class I. The classes
receive different services and pay different fees and expenses. Class A shares
pay a Rule 12b-1 distribution fee and a co-administration fee. Class I shares do
not pay these fees.
Class I shares are offered primarily for direct investment by institutional
investors such as pension and profit sharing plans, employee benefit trusts,
endowments, foundations, trusts, banks, brokers, companies and high net worth
individuals. Class I shares may also be offered through certain financial
intermediaries that charge their customers transaction or other fees with
respect to their customers' investments in the Funds.
INVESTMENT MINIMUMS
<TABLE>
<CAPTION>
CLASS A CLASS I
TYPE OF INVESTMENT INITIAL INVESTMENT ADDITIONAL INVESTMENT INITIAL INVESTMENT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Regular account $2,500 $1,000 $2,000,000*
Individual Retirement Account (IRA) $100 $100 $2,000,000*
Tax deferred retirement plan
other than an IRA $500 $500 $2,000,000*
</TABLE>
* $250,000 for registered investment advisers purchasing through omnibus
accounts. There is no minimum subsequent investment for Class I shares.
The following investors may purchase Class I shares with no minimum initial
investment requirement: Trustees of the Trust, the Bank Julius Baer Employees
401(k) Savings Plan and the Bank Julius Baer Co., Ltd. Retirement Plan. The
Trust and the Distributor at their discretion may waive the minimum initial
investment requirements for other categories of investors.
25
<PAGE>
You can invest in Fund shares in the following ways:
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO YOUR ACCOUNT
<S> <C> <C>
o THROUGH o You can purchase shares through a broker o You may add to an account established
A BROKER that has a relationship with the Distributor. through any broker either by contacting your
broker or directly through Unified by using
If you buy shares through a broker, the one of the methods described 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 and be invested in the Fund on that
day.
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.
o BY CHECK o Please make your check (in U.S. dollars) o Make your check payable to the Julius Baer
payable to the Julius Baer Investment Funds Investment Funds or the Fund in which you are
or the Fund in which you are investing. investing. The Funds do not accept third
party checks.
o Send your check with the completed account
application to: o Write your account number, Fund name and name of
the class in which you are investing on the
Unified Fund Services, Inc. check.
P.O. Box 6110
Indianapolis, Indiana 46206-6110 o Mail your check directly to the Fund at the
Attention: Julius Baer Investment Funds address shown at the left.
Your application will be processed subject to
your check clearing.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO YOUR ACCOUNT
<S> <C> <C>
o BY WIRE o First, telephone the Unified at o Refer to wire instructions for opening an
(800) 435-4659 to notify Unified account.
that a bank wire is being sent and to receive
an account number. A bank wire received by o If Unified receives the federal funds
4:00 p.m. (Eastern time) on a day when the before the close of regular trading of the
NYSE is open for regular trading will be NYSE on a day the NYSE is open for regular
effected that day. trading, your purchase of Fund shares will be
effected as of that day.
o Transfer funds by wire to the following
address:
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 name of the class, (3) the
account number which Unified assigned to you,
and (4) your name.
o BY EXCHANGE o First, you should follow the procedures o You may exchange your Fund shares for the
under "By Check" or "By Wire" in order to get appropriate class of shares of the other Fund
an account number for Fund(s) which you do described in the Prospectus at its respective
not currently own shares of, but which you NAV.
desire to exchange shares into.
o You should review the disclosure provided
o You may exchange shares of a Fund for the in this Prospectus relating to the other Fund
appropriate class of shares of the other Fund carefully before making an exchange of your
at its respective NAV.
Fund shares.
o You should review the disclosure provided
in this Prospectus relating to the other Fund
carefully before making an exchange of your
Fund shares.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO YOUR ACCOUNT
<S> <C> <C>
o THROUGH o You may invest in each Fund through various
RETIREMENT PLANS Retirement Plans. The Funds' shares are
designed for use with certain types of tax
qualified retirement plans including defined
benefit and defined contribution plans.
Class I shares are not appropriate for IRA
accounts other than IRA rollover accounts.
For further information about any of the
plans, agreements, applications and annual
fees, contact Unified or your financial
adviser.
</TABLE>
MORE INFORMATION ABOUT EXCHANGES:
A redemption fee of 2% of the amount redeemed may apply to shares
exchanged for shares of the other Fund if the shares redeemed were
purchased on or after November 15, 1999, and are exchanged 90 days or
less after they were purchased.
Special Tax Consideration: For federal income tax purposes, an
exchange of shares between Funds 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 Class
A shares of 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 purchase shares of each Fund through a "Processing Organization," (for
example, a mutual fund supermarket) which is a broker-dealer, bank or other
financial institution that purchases shares for its customers. The Funds have
authorized certain Processing Organizations to accept purchase and sale orders
on their behalf. Before investing in the Funds through a Processing
Organization, you should read any materials provided by the Processing
Organization in conjunction with this Prospectus.
When you purchase shares in this way, 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; and
o designate intermediaries to accept purchase and sale orders on
the Fund's behalf.
28
<PAGE>
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 REDEMPTION FEE
For shares purchased on or after November 15, 1999, a redemption fee of 2% of
the value of the shares sold will be imposed on Class A shares and Class I
shares redeemed 90 days or less after their date of purchase. The redemption fee
is intended to limit short-term trading in the Funds or, to the extent that
short-term trading persists, to impose the costs of that type of activity on the
shareholders who engage in it. The redemption fee will be paid to the
appropriate Fund.
The Funds will use the first-in, first-out (FIFO) method to determine the
holding period. Under this method, the date of the redemption will be compared
to the earliest purchase date of shares of a particular Fund held in a
shareholder's account. If this holding period is 90 days or less, the redemption
fee will be assessed.
If your shares were purchased through a Processing Organization or an omnibus
account, your Processing Organization or registered investment adviser is
required to monitor the holding period applicable to your shares and to assess
any applicable redemption fee.
o WIRE TRANSFER FEE
If you sell your shares and request your money by wire transfer, the Funds
reserve the right to impose a $12.00 fee.
29
<PAGE>
<TABLE>
<S> <C>
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.
l 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 to:
o specify the name of the Fund and Class from which the sale
is to be made;
o indicate the number of shares or dollar amount to be sold;
o include your name as it exists on the Fund's records; and
o indicate your account number.
o BY MAIL 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 and Class from which the sale is to be made;
o indicate the number of shares or dollar amount to be sold;
o include your name as it exists on the Fund's records;
o indicate your account number; and
o sign redemption request exactly as the shares are registered.
</TABLE>
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.
30
<PAGE>
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 the Trust does
not follow such procedures in a particular case it may be liable for any losses
due to unauthorized or fraudulent instructions.
o LOW ACCOUNT BALANCES
The Funds may sell your Class A shares if your account balance falls below
$1,000 as a result of redemptions you have made, but not as a result of a
reduction in value from changes in the value of the shares. The Funds may
exchange your Class I shares for Class A shares of the same Fund if your account
balance falls below the applicable minimum investment amount for Class I shares
as a result of redemptions you have made. In addition, The Funds may exchange
your Class I shares for Class A shares of the same Fund if your account
originally qualified to purchase Class I shares solely because your shares were
aggregated with other accounts and the value of the sum of all of the aggregated
accounts falls below that minimum. The Funds will let you know if your shares
are about to be sold or exchanged and you will have 60 days to increase your
account balance to more than the minimum.
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 circumstances, generally in connection with very large
redemptions.
Distribution and Shareholder Servicing Plans--Class A Shares
Each Fund has adopted a distribution and service plan under Rule 12b-1 of the
1940 Act for its Class A 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 Class A shares.
31
<PAGE>
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
Class A 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.
<TABLE>
FUND DIVIDENDS DECLARED AND PAID
- --------------------------------------------------------------
<S> <C>
International Equity Fund Annually
Global Income Fund Monthly
</TABLE>
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 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.
TAX ON SALE OF SHARES: Selling your shares may cause you to incur a taxable gain
or loss.
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 tax year.
SPECIAL TAX CONSIDERATION: You should consult with your tax adviser to address
your own tax situation.
32
<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 to
shareholders 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.
The Funds' annual report and the independent auditor's report are incorporated
by reference in this prospectus.
You can get free copies of the SAI, the Annual and Semi-Annual Reports, other
information and answers to your questions about the Funds by contacting Unified
at:
Unified Fund Services, Inc.
431 N. Pennsylvania Street
Indianapolis, Indiana 46204-1897
(800) 435-4659
The Securities and Exchange Commission (SEC) maintains an Internet website
(http://www.sec.gov) that contains the SAI, material incorporated by reference,
and other information about the Funds. You can also copy and review this
information at the SEC's Public Reference Room in Washington, D.C., or you can
obtain copies, upon payment of a duplicating fee, by writing to the Public
Reference Room of the SEC, Washington, D.C. 20549-0102 or by electronic request
at the following E-mail address: [email protected]. You can obtain information
on the operation of the Public Reference Room by calling the SEC at
1-202-942-8090.
Investment Company Act
file no. 811-6652
<PAGE>
JULIUS BAER INVESTMENT FUNDS
ACCOUNT APPLICATION PLEASE PRINT OR TYPE
- -----------------------------------------------------------------------------
1. ACCOUNT REGISTRATION
Name(s) in which account is to be registered:
Individual _________________________________________________________________
Social Security Number _____________________________________________________
Joint Owner ________________________________________________________________
(If Joint Tenancy, use Social Security Number of first Joint
Tenant shown.)
OR Uniform Transfer to Minor: ___________________________________________
Custodian Name (one custodian only)
Under the ______________________________ Uniform Transfer to Minors Act or
similar act. State
Custodian for ______________________________________________________________
Minor's Name (one minor only)
Minor's Social Security Number _____________________________________________
OR __ Trust __ Corporation __ Other _______________________________________
(please specify)
Trust/Corporate Name _______________________________________________________
Trust Date ______________ Taxpayer Identification Number __________________
Additional forms, such as a Corporate Resolution, may be required. Call
1-800-435-4659 for information.
- -------------------------------------------------------------------------------
2. MAILING ADDRESS
Address for reports and statements: ______________________________________
Street Address Apt. _____________________________________________________
City State Zip Code _________________________________________________
Telephone Number ___________________________________________________________
Non Resident Alien: __No __ Yes ____________________________________
- ------------------------------------------------------------------------------
3. FUND SELECTION AND INITIAL INVESTMENT
With as little as $2,500, you can invest in the Julius Baer Investment Funds.
Please be sure to read the current Prospectus carefully before investing or
sending money. You may request an additional Prospectus by calling
1-800-435-4659.
Allocate my investment as follows:
Investment Amount
Julius Baer Global Income Fund Class A shares
($2,500 minimum) $ ____________________
Julius Baer International Equity Fund Class A shares
($2,500 minimum) $ ___________________
Julius Baer Global Income Fund Class I shares
($2,000,000 minimum*) $ ____________________
Julius Baer International Equity Fund Class I shares
($2,000,000 minimum*) $ ____________________
Total Amount Invested: $ _____________________
<PAGE>
* $250,000 for registered investment advisers purchasing through omnibus
accounts.
__ By check (Payable to the Julius Baer Investment Funds or the Funds in which
you are investing.)
__ By wire (Call 1-800-435-4659 for wire instructions.) _____________________
(Account number
assigned by bank
from which assets
were wired.)
- ------------------------------------------------------------------------------
4. DIVIDENDS AND CAPITAL GAINS
(Check one - If none checked "A" will be assigned.)
__A. Reinvest dividends and capital gains in additional Fund shares.
__B. Pay dividends in cash, reinvest capital gains in additional Fund shares.
__C. Pay dividends and capital gains in cash.
- ------------------------------------------------------------------------------
5. TELEPHONE EXCHANGES AND REDEMPTIONS
Unless indicated below, I hereby authorize Unified Fund Services, Inc.
(Unified), Julius Baer Investment Funds' Transfer Agent, to accept and act
upon telephone instructions regarding exchange and redemption transactions for
my account(s).
__I DO NOT want shares in my account(s) to be exchanged or redeemed by
telephone.
For more information, please refer to the current Prospectus.
- ------------------------------------------------------------------------------
6. WIRE REDEMPTION PRIVILEGE (OPTIONAL)
__Wire redemptions permit proceeds of redemption requests initiated by telephone
or letter to be transmitted via Fed Wire to Fed member banks.
Account of ________________________________________________________________
Name(s) on account
Name of person(s) able to act on behalf of account ________________________
(i.e., corporation,
spouse, etc.)
<PAGE>
Bank Name ______________________________________________________________
Bank Address ___________________________________________________________
Street
_____________________________________________________________
City State Zip Code
Bank Account Number _____________________________________________________
(specify Checking or Savings)
ABA Routing Number ______________________________________________________
- ------------------------------------------------------------------------------
7. AUTOMATIC INVESTMENT PLAN
__ Please send me the necessary authorization form for the Automatic
Investment Plan, where my money can automatically be invested in my account on
a regular basis.
8. AUTHORIZATIONS, CERTIFICATIONS AND SIGNATURES
AUTHORIZATION
By signing this Application, I(we) certify that I(we) have full right, power,
authority, and legal capacity to purchase shares of the Fund and affirm that
I(we) have received a current Prospectus and agree to be bound by its terms
and understand the investment objectives and policies stated therein and that
all representations contained in this Application and any representations
accompanying this Application pursuant to regulatory authority of any State
are true.
I(We) agree not to hold Unified or Julius Baer Investment Funds responsible
for acting under the powers I(we) have given them. I(We) also agree that all
account registration information I(we) have given Unified will remain the same
unless I(we) tell Unified otherwise in writing that includes a signature
guarantee. I(We) also agree that this Application applies to any Julius Baer
Investment Funds into which I(we) may exchange.
Shares of the Funds are not bank deposits and are not insured or guaranteed
by the FDIC.
TAXPAYER IDENTIFICATION
I(We) certify under penalties of perjury that:
(1) the social security number or taxpayer identification number shown in
Part 1 is correct and may be used for any custodial or trust account
opened for me(us) by Julius Baer Investment Funds, and
(2) I(We) am(are) not subject to backup withholding because the Internal
Revenue Service (IRS) (a) has not notified me(us) that I(we) am(are), as a
result of failure to report all interest or dividends, or (b) has notified
me(us) that I(we) am(are) no longer subject to backup withholding.
The certifications in this paragraph are required from all non-exempt
persons under the Federal income tax law.
__ Check here if you are subject to backup withholding or have not received a
notice from the IRS advising you that backup withholding has been terminated.
AUTHORIZATION:
_____________________________________________________________________________
Signature of Owner Date Title (if signing for corporation, trusts, etc.)
_____________________________________________________________________________
Signature of Joint Owner Date Title (Secretary, Co-Trustee, etc.)
- ------------------------------------------------------------------------------
9. FOR DEALER USE ONLY
We hereby authorize Unified to act as our agent in connection with
transactions authorized by this Application.
Dealer's Name _____________________________________________________________
Main Office Address - Street ______________________________________________
<PAGE>
City________________ State_________________ Zip Code___________
Representative's Name ____________________________________________________
Branch # __________________________________________________________________
Rep # _____________________________________________________________________
Branch Address - Street ____________________________________________________
City_________________ State__________________ Zip Code____________
Telephone Number __________________________________________________________
Authorized Signature of Dealer ____________________________________________
Title _____________________________________________________________________
Mail Completed Application to: Julius Baer Investment Funds, P.O. Box 6110,
Indianapolis, IN 46206-6110
<PAGE>
JULIUS BAER INVESTMENT FUNDS
Julius Baer International Equity Fund
Julius Baer Global Income Fund
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 31, 2000
This Statement of Additional Information (SAI) is not a Prospectus, but it
relates to the Prospectus of Julius Baer Investment Funds dated January 31,
2000.
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 to shareholders,
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 (SEC).
You can get text-only copies:
For a fee by writing to or calling the Public Reference Room of
the SEC, Washington, D.C. 20549-6009. Telephone: 1-202-942-8090
E-mail address: [email protected]
Free from the SEC's Internet website at http://www.sec.gov.
<PAGE>
Contents
Page
The Trust and the Funds 3
Description of the Funds, Their Investments and Risks 3
Common Investment Strategies 5
Additional Information on Investment Practices 12
Investment Limitations 23
Management of the Trust 25
Capital Stock 33
Additional Purchase and Redemption Information 35
Additional Information Concerning Exchange Privilege 36
Additional Information Concerning Taxes 36
Calculation of Performance Data 38
Independent Auditors 40
Counsel 40
Financial Statements 40
Appendix 41
2
<PAGE>
THE TRUST AND THE FUNDS
Julius Baer Investment Funds (Trust) is composed of two funds: the Julius Baer
International Equity Fund (Equity Fund) and the Julius Baer Global Income Fund
(Income Fund) (each, a Fund and together, the Funds). Each Fund currently offers
Class A shares and Class I shares (Classes).
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 (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 January 31, 2000, provides the basic information investors
should know before investing, and may be obtained without charge by calling
Unified Fund Services, Inc. (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 investment 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 (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 (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
may engage in certain hedging strategies, as described under "Common Investment
Strategies" below.
In selecting particular investments for the Income Fund, Bank Julius Baer & Co.,
Ltd., New York Branch (Adviser), will seek to mitigate investment risk by
limiting its investments to quality fixed-income securities. The Income Fund may
not invest in governmental or corporate bonds rated at the time of purchase
below "A" by Moody's Investors Service, Inc. (Moody's) or
3
<PAGE>
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 will consider disposing 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 SAI.
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 and
the Euro. The Equity Fund may also invest in 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 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
4
<PAGE>
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 may 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
U.S. 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.
COMMON INVESTMENT STRATEGIES
In attempting to achieve their investment objectives, the Funds may engage in a
variety of investment strategies.
5
<PAGE>
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 U.S. Government, its agencies or
instrumentalities (U.S. Government securities) (including repurchase agreements
with respect to such securities).
Currency Hedging Transactions
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 may 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.
6
<PAGE>
Currency, Interest Rate and Stock Index 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 and
stock-index futures contracts are standardized contracts traded on commodity
exchanges involving an obligation to purchase or sell a predetermined amount of
a debt or equity 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 and
stock-index 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 and not for the purpose
of speculation. 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 assets set aside, plus
accrued profits held at a Fund's custodian or at the commodity dealer.
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 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
assets 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.
7
<PAGE>
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).
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 affect 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
8
<PAGE>
affect 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. (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.
9
<PAGE>
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. To evaluate this risk, the Adviser has been delegated responsibility by
the Trust's Board of Trustees for monitoring the creditworthiness of those bank
and non-bank dealers with which the Funds enter into repurchase agreements. 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 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
10
<PAGE>
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 and Section 4(2) Commercial Paper
Each Fund may purchase securities that are not registered under the Securities
Act of 1933, as amended (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) or sold pursuant to Section 4(2) of
the 1933 Act (4(2) Commercial Paper). A Rule 144A Security or 4(2) Commercial
Paper 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 has adopted guidelines and delegate to the Adviser the daily
function of determining and monitoring liquidity of Rule 144A Securities and
4(2) Commercial Paper, although the Board of Trustees retains ultimate
responsibility for any determination regarding liquidity. The Board of Trustees
will consider all factors in determining the liquidity of Rule 144A Securities
and 4(2) Commercial Paper. The Board of Trustees will carefully monitor any
investments by the Funds in Rule 144A Securities and 4(2) Commercial Paper.
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) 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
11
<PAGE>
terminate the loan and regain the right to vote the securities.
If the borrower defaults on its obligation to return the securities loaned
because of insolvency or other reasons, a Fund could experience delays and costs
in recovering the securities loaned or in gaining access to the collateral.
These delays and costs could be greater for foreign securities. If a Fund is not
able to recover the securities loaned, a Fund may sell the collateral and
purchase a replacement investment in the market. The value of the collateral
could decrease below the value of the replacement investment by the time the
replacement investment is purchased. Loans will be made only to parties deemed
by the Adviser to be in good standing and when, in the Adviser's judgment, the
income earned would justify the risks. Cash received as collateral through loan
transactions may be invested in other securities eligible for purchase by the
Fund. The investment of cash collateral subjects that investment, as well as the
securities loaned, to market appreciation or depreciation.
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 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
12
<PAGE>
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 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 Equity Fund may enter into stock index futures
contracts, fixed-income securities futures contracts and foreign currency
futures contracts. The Income Fund may enter into fixed-income securities
futures contracts and foreign currency futures contracts. The Funds may also
purchase or write related options that are traded on foreign as well as U.S.
exchanges.
13
<PAGE>
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 assets,
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 value of portfolio securities will far exceed the value of the futures
contracts sold by a Fund. Therefore, 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 assets 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 the 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 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,
14
<PAGE>
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, stock index 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 or equity 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.
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
15
<PAGE>
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 (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 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
16
<PAGE>
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 (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
obligation, to assume a long or short position in the relevant underlying
currency at a predetermined price at a time in the future.
17
<PAGE>
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 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
18
<PAGE>
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 (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.
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
19
<PAGE>
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."
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
20
<PAGE>
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 U.S. 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 U.S. 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>
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.
22
<PAGE>
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 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.
23
<PAGE>
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.
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.
24
<PAGE>
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) 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
recognizedU.S. or foreign stock exchange.
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. It is the intention of the Funds,
unless otherwise indicated, that with respect to the Funds' policies that are
the result of the application of law the Funds will take advantage of the
flexibility provided by rules or interpretations of the SEC currently in
existence or promulgated in the future or changes to such laws.
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, administrator and co-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>
<CAPTION>
<S> <C> <C>
Harvey B. Kaplan* Trustee Controller (Chief Financial Officer),
80 Voice Road Easter Unlimited, Inc.(toy company).
Carle Place, New York 11514
Birthdate: 09/22/37
Robert S. Matthews Trustee Partner, 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>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Martin Vogel** Trustee Member of Management Committee, Julius Baer
Julius Baer Investment Funds Investment Fund Services, Ltd., 1996 to
Services present; Attorney, Schaufelberger & van
Freighutstrasse 40 Hoboken, 1994 - 1996;
Postfach CH - 8010 Director, The European Warrant Fund, Inc.,
Zurich, Switzerland 1997 - present; Secretary of the Board of
Birthdate: 09/29/63 Directors of the Luxembourgdomiciled
investment companies.
Peter Wolfram Trustee Partner, Kelley Drye &
101 Park Avenue Warren (law firm).
New York, New York 10178
Birthdate: 04/02/53
Bernard Spilko** Chairman General Manager and 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 Board of The European Warrant Fund, Inc.
Michael K. Quain President and First Vice President of Bank Julius Baer
Bank Julius Baer & Co., Ltd. Chief Financial & Co., Ltd., New York Branch; Vice
330 Madison Avenue Officer President of Julius Baer Securities
New York, New York 10017 Inc.; President and Chief
Birthdate: 07/06/57 Financial Officer of The European
Warrant Fund, Inc.
Richard C. Pell Vice President Senior Vice President and Chief Investment
Bank Julius Baer & Co., Ltd. Officer of Bank Julius Baer & Co., Ltd.,
330 Madison Avenue New York Branch.
New York, New York 10017
Birthdate: 09/21/54
Karen Arrese Vice President Vice President and 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 & Co., Ltd., New York Branch, 1998 - present; Proprietary
Birthdate: 10/10/70 Interest Rate and Currency Trader for
Chase Manhattan Bank, 1997 - 1998; Global Portfolio
Manager at Standish, Ayer & Wood in
Boston and Bankers Trust Company in New
York, prior to 1998.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Rudolph-Riad Younes Vice President First Vice President of Bank Julius Baer
Bank Julius Baer & Co., Ltd. & Co., Ltd., New York Branch.
330 Madison Avenue
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.
Pierre Beauport Treasurer and Assistant Vice President of Bank Julius
Bank Julius Baer & Co., Ltd. Secretary Baer & Co., Ltd. New York Branch, 1998 -
330 Madison Avenue present; Treasurer and Secretary, The
New York, New York 10017 European Warrant Fund, Inc., September
Birthdate: 08/2/69 1998 - present; Senior Analyst - Mutual
Fund Administration at AMT Capital
Services, Inc. and Investment Accountant
at Furman Selz LLC, prior to 1998.
</TABLE>
27
<PAGE>
* Trustee who has a discretionary account with Julius Baer Securities (less
than $100,000).
** "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 Distributor, the
Administrator, the Co-Administrator or any parent or subsidiary thereof receives
any compensation from the Funds for serving as an officer or Trustee. The Trust
pays each of its Trustees who is not a director, officer or employee of the
Adviser, the Distributor, the Administrator, the Co-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, 1999, 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,
1999.
Name and Position Compensation from Trust
----------------- -----------------------
Harvey B. Kaplan, $6,250
Trustee
Robert S. Matthews, $6,250
Trustee
28
<PAGE>
Gerard J.M. Vlak, $6,250
Trustee
Peter Wolfram, $6,250
Trustee
Investment Advisory and Other Services
Bank Julius Baer & Co., Ltd., New York Branch, serves as the investment
adviser and co-administrator to the Income Fund and the Equity Fund. The Adviser
is the New York branch of a Swiss bank, Bank Julius Baer, that has over 50 years
experience in international portfolio management. 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, the Administrator and, for Class A shares, the
Co-Administrator each serve pursuant to separate written agreements (Advisory
Agreement, Administration Agreement and Co-Administration Agreement,
respectively). The Co-Administration Agreement took effect on November 15, 1999,
and no fees were paid pursuant to the Co-Administration Agreement before that
date. Certain administrative and shareholder services for Class A shares of the
Funds provided prior to November 15, 1999 under the Investment Advisory
Agreement are provided under a Co-Administration Agreement between the Trust, on
behalf of the Funds, and the Adviser. The Adviser's overall compensation for its
services to the Class A shares of the Funds has not changed as a result of these
changes in the Fund's contractual arrangements.
For the last three fiscal years ended October 31, 1997, October 31, 1998 and
October 31, 1999 the Funds paid the following amounts as investment advisory
fees pursuant to each Advisory Agreement:
Global Income Fund Gross Waiver Net
Year Ended 10/31/97 $ 91,644 None $91,644
Year Ended 10/31/98 78,432 $ 7,780 70,652
Year Ended 10/31/99 112,462 56,231 56,231
International Equity Fund
Year Ended 10/31/97 $346,856 $173,428 $173,428
Year Ended 10/31/98 576,830 140,412 436,418
Year Ended 10/31/99 688,556 None 688,556
For the last three fiscal years ended October 31, 1997, October 31, 1998 and
October 31, 1999, the Funds paid the following amounts as administrative
services and custodian fees pursuant to each Administration Agreement and
Custodian Agreement:
Global Income Fund
Year Ended 10/31/97 $57,505
Year Ended 10/31/98 35,537
Year Ended 10/31/99 42,065
29
<PAGE>
International Equity Fund
Year Ended 10/31/97 $206,947
Year Ended 10/31/98 234,668
Year Ended 10/31/99 235,408
Code of Ethics
The Trust, the Adviser and the Distributor have each adopted a Code of Ethics
under Rule 17j-1 of the 1940 Act governing the personal investment activity by
investment company personnel, including portfolio managers, and other persons
affiliated with the Funds who may be in a position to obtain information
regarding investment recommendations or purchases and sales of securities for a
Fund. These Codes permit persons covered by the Codes to invest in securities
for their own accounts, including securities that may be purchased or held by a
Fund, subject to restrictions on investment practices that may conflict with the
interests of the Funds.
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 each Fund. The Adviser seeks to obtain the best net price and
the most favorable execution of orders. In evaluating prices and executions, the
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, the 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 the
Adviser exercises investment discretion. Research and other services received
may be useful to the 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 agreements 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 law, the Funds' Adviser may aggregate the securities to be sold or
purchased
30
<PAGE>
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 (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, 1997, October 31, 1998 and October 31,
1999, the Equity Fund paid $3,534, $31,750 and $26,667, respectively, in
brokerage commissions to BJB-Frankfurt and BJB-Zurich, affiliates of the Adviser
or 1.8%, 10.1% and 11.84 % of the total brokerage commissions paid.
BJB-Frankfurt and BJB-Zurich executed 3.5%, 12.6% and 17.7% of the aggregate
dollar amount of transactions involving commissions during the last three fiscal
years ended October 31, 1997, October 31, 1998 and October 31, 1999,
respectively. For the last three fiscal years ended October 31, 1997, October
31, 1998 and October 31, 1999, the Equity Fund paid total brokerage commissions
of $200,701, $313,361 and $225,208, respectively. For each of the last three
fiscal years ended October 31, 1997, October 31, 1998 and October 31, 1999, the
Income Fund paid $0 in brokerage commissions. Significant differences in the
amounts of brokerage commissions paid by the Funds from year to year may occur
as a result of increases or decreases in the Funds' asset levels. The Funds may
pay both commissions and spreads when effecting portfolio transactions.
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
in the absence of an exemptive order from the SEC.
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.
High rates of portfolio turnover can lead to increased taxable gains and higher
expenses. Certain practices and circumstances could result in high portfolio
turnover. For example, the volume of shareholder purchase and redemption orders,
market conditions, or the Adviser's investment outlook may change over time. In
addition, 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, 1998 and October 31, 1999,
the Income Fund's portfolio turnover rate was 269% and 136%, respectively. For
each of the two fiscal years ended October 31, 1998 and October 31, 1999, the
Equity Fund's portfolio turnover rate was 134% and 73%, 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 underthe Securities Exchange Act of 1934 and is a member of the
NASD.
31
<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 Plan
Each Fund has adopted a Distribution Plan (each, a Plan) pursuant to Rule 12b-1
under the 1940 Act (Rule 12b-1) with respect to that Fund's Class A shares.
Pursuant to each Plan, a Fund may expend an aggregate amount on an annual basis
of up to 0.25% of a Fund's average daily net assets attributable to Class A
shares for services provided under such Plan and under any Shareholder Services
Plan. Because of the Plan, long-term Class A shareholders may pay more than the
economic equivalent of the maximum sales charge permitted by the National
Association of Securities Dealers, Inc.
The Distributor may pay up to the entire fee under each Plan to its own
representatives or to other dealers for providing services in connection with
the sale of a Fund's shares. To the extent this fee is not paid to others, the
Distributor may retain this fee as compensation for its services and expenses
incurred in accordance with such Plan. In accordance with the terms of each
Plan, the Distributor provides to the Trust for review by the Trustees a
quarterly written report of the amounts
expended under such Plan and the purposes for which such expenditures were made.
The Trustees consider the continued appropriateness of each Plan and the level
of reimbursement or compensation such Plan provides. The Board of Trustees
believes that there is a reasonable likelihood that each Plan will benefit the
Trust and its current and future shareholders.
Each 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 such Plan. Each 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 such Plan. Neither Plan may be amended to increase
materially the annual percentage limitation of average net assets which may be
spent for the services described therein without approval of the shareholders of
the Fund affected thereby. Material amendments of either Plan must also be
approved by the Trustees as provided in Rule 12b-1.
No interested person of the Trust, nor any Trustee of the Trust who is not an
interested person of the Trust, has any direct or indirect financial interest in
the operation of either Plan except to the extent that the Distributor and
certain of its employees may be deemed to have such an interest as a result of
receiving a portion of the amounts expended under a Plan by the Trust.
32
<PAGE>
The Adviser and the Administrator may also pay for distribution-related costs
out of their revenues. For the fiscal year ended October 31, 1999, the Income
Fund paid $43,254 in distribution fees. For the fiscal year ended October 31,
1999, the Equity Fund paid $172,139 in distribution fees. All such distribution
fees were used to compensate sales personnel.
Co-Administrator
The Trust has entered into Co-Administration Agreements on behalf of each of the
Funds with Bank Julius Baer & Co., Inc., New York Branch (Co-Administrator),
under which the Co-Administrator will perform certain administrative and
shareholder services for Class A shares of the Funds. For its services under the
Co-Administration Agreement, International Equity Fund and Global Income Fund
pay the Co-Administrator 0.25% and 0.15%, respectively, of the average daily net
assets of Class A shares of the Funds.
Custodian and Transfer Agent
Investors Bank is custodian of each Fund's assets pursuant to a custodian
agreement (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 0.11% 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 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 in 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. The 1940 Act requires a shareholder
vote under certain circumstances, including changing any fundamental policy of a
Fund. The Trustees shall cause each matter required or permitted to be voted
upon at a meeting or by written consent of shareholders to be submitted to a
vote of all classes of outstanding shares entitled to vote, irrespective of
class, unless the 1940 Act or other applicable laws or regulations require that
the actions of the shareholders be taken by a separate vote of one or more
classes, or the Trustees determine that any matters to be submitted to a vote of
shareholders affects only the rights or interests of one or more classes of
outstanding shares. In that case, only the shareholders of the class or classes
so affected shall be entitled to vote on the matter.
33
<PAGE>
Each Fund share representing interests in a Fund, when issued and paid for in
accordance with the terms of the offering, will be fully paid and
non-assessable. Upon liquidation of a Fund, the shareholders of that Fund shall
be entitled to share, pro rata, in any assets of the Fund after the discharge of
all charges, taxes, expenses and liabilities. 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 redeemable and 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 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 31, 1999, Bank Julius Baer - Zurich was record owner of 33.65% of
Class A shares and 0.00% of Class I shares of the Equity Fund on behalf of their
clients, and Bank Julius Baer & Co., Ltd. Employee 401K was record owner of 100%
of Class I shares of the Income Fund and as such, could be deemed to control
those Funds 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. Bank Julius Baer is a wholly-owned subsidiary of Baer Holdings, Ltd.
Shareholders owning more than 10% or more of the outstanding shares of a
Portfolio may be able to call meetings without the approval of other investors
in the Funds.
As of December 31, 1999, the Trustees and officers of the Trust as a group owned
less than 1% of the Trust's total shares outstanding.
As of December 31, 1999, the following individuals or entities beneficially
owned more than 5% of the outstanding shares of the Equity Fund:
<TABLE>
<CAPTION>
Name and Address Number of Percent of Class A Percent of Class I
of Owner Shares Owned Fund Shares Owned Fund Shares Owned
<S> <C> <C> <C>
Steven F Udvar-Hazy Separate 102,620.719 0.00% 22.2%
(beneficial owner)
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
Trust U Art Eleventh A
w/o Stanley Granat 93,730.952 0.00 20.3%
(beneficial owner)
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
the Jewel of the Diadem Ltd 99,996.046 0.00 21.6%
(beneficial owner)
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
Porchester Ltd. 101,543 0.00 22.0%
(beneficial owner)
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
Bank Julius Baer & Co., Ltd.
Employee 401K 58,051.569 0.00 12.6%
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
</TABLE>
34
<PAGE>
As of December 31, 1999, the following individuals or entities beneficially
owned more than 5% of the outstanding shares of the Income Fund:
<TABLE>
<CAPTION>
Name and Address Number of Percent of Class A Percent of Class I
of Owner Shares Owned Fund Shares Owned Fund Shares Owned
<S> <C> <C> <C>
Robert C. Wetenhall
(beneficial owner)
c/o Bank Julius Baer & Co., Ltd. 87,188.246 18.86% 0.00%
330 Madison Avenue
New York, New York 10017
Harry Frisch and Lilo Frisch 108,891.102 23.56% 0.00%
(beneficial owner)
c/o Bank Julius Baer & Co., Inc.
330 Madison Avenue
New York, New York 10017
Bank Julius Baer & Co., Ltd. 54,912.285 0.00% 100%
Employee 401K
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
</TABLE>
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
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 or under the direction of 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 (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.
35
<PAGE>
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. (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.
ADDITIONAL INFORMATION CONCERNING EXCHANGE PRIVILEGE
Shares of one Fund may be exchanged for the same class of 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. However, a
redemption fee of 2.00% of the amount exchanged will apply to shares of a Fund
exchanged within 90 days of their date of purchase.
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.
Any dividend declared by a Fund in October, November or December as of a record
date in such a month and paid the following January will be treated for federal
income tax purposes as received by shareholders on December 31 of the year in
which it is declared. 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
36
<PAGE>
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.
If a Fund acquires any equity interest in certain foreign corporations that
receive at least 75% of their annual gross income from passive sources (such as
interest, dividends, certain rents and royalties, or capital gains) or hold at
least 50% of their assets in investments producing such passive income ("passive
foreign investment companies"), that Fund could be subject to federal income tax
and additional interest charges on "excess distributions" received from such
companies or gain from the sale of stock in such companies, even if all income
or gain actually received by the Fund is timely distributed to its shareholders.
The Fund would not be able to pass through to its shareholders any credit or
deduction for such a tax. Certain elections may ameliorate these adverse tax
consequences, but any such election could require the applicable Fund to
recognize taxable income or gain, subject to tax distribution requirements,
without the concurrent receipt of cash. These investments could also result in
the treatment of associated capital gains as ordinary income. Each of the Funds
may limit or manage its holdings in passive foreign investment companies to
minimize its tax liability or maximize its return from these investments.
A Fund may be subject to withholding and other taxes imposed by foreign
countries with respect to its investments in foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes in
some cases.
Investments in debt obligations that are at risk of default may present special
tax issues. Tax rules may not be entirely clear about issues such as when a Fund
may cease to accrue interest, original issue discount, or market discount, when
and to what extent deductions may be taken for bad debts or worthless
securities, how payments received on obligations in default should be allocated
between principal and income, and whether exchanges of debt obligations in a
workout context are taxable. These and any other issues will be addressed by a
Fund, in the event that it invests in such securities, to seek to ensure that it
distributes sufficient income to preserve its status as a regulated investment
company and does not become subject to federal income or excise tax. 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.
Any gain or loss realized by a shareholder upon the sale or other disposition of
any class of shares of a Fund, or upon receipt of a distribution in complete
liquidation of a Fund, generally will be a capital gain or loss which will be
long-term or short-term, generally depending upon the shareholder's holding
period for the shares. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced (including shares
acquired pursuant to a dividend reinvestment plan) within a period of 61 days
beginning 30 days before and ending 30 days after disposition of the shares. In
such a case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on a disposition of Fund
shares held by the shareholder for six months or less will be treated as a
long-term capital loss to the extent of any distributions of net capital gains
received by the shareholder with respect to such shares.
The Trust is organized as a Massachusetts business trust and, under current law,
neither the Trust nor any Fund is liable for any income or franchise tax in the
Commonwealth of Massachusetts, provided that the Fund continues to qualify as a
regulated investment company under Subchapter M of the Code.
37
<PAGE>
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.
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, 1999 was 4.92%.
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 Unified at
1-800-435-4659.
38
<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 period 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, 1999 and for the period beginning July 1, 1992 (inception of
the Fund) through October 31, 1999, was -2.17%, 6.38% and 5.59%, respectively.
The Equity Fund's average annual total return for the one and five year periods
ended October 31, 1999 and for the period beginning October 4, 1993 (inception
of the Fund) through October 31, 1999 was 44.84%, 14.86% and 11.02%,
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
39
<PAGE>
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.
The Income Fund's aggregate total return for the one and five year periods ended
October 31, 1999 and for the period beginning July 1, 1992 (inception of the
Fund) through October 31, 1999 was -2.17%, 36.29% and 49.09%, respectively. The
Equity Fund's aggregate total return for the one and five year periods ended
October 31, 1999 and for the period beginning October 4, 1993 (inception of the
Fund) through October 31, 1999 was 44.84%, 100.06% and 88.85%, respectively.
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.
INDEPENDENT AUDITORS
KPMG LLP, 99 High Street, Boston, Massachusetts 02110, serves as auditors of the
Trust and performs annual audits 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 year ended October 31, 1999, are incorporated by reference into this
SAI. Copies of the Trust's 1999 Annual Report may be obtained by calling the
Trust at the telephone number on the first page of the SAI.
40
<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
41
<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.
42
<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.
43
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
(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, is
incorporated by reference to Post-Effective Amendment No. 11 as filed with
the SEC via Edgar on December 30, 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, is incorporated by
reference to Post-Effective Amendment No. 11 as filed with the SEC via
EDGAR on December 30, 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, is incorporated by reference to Post-Effective Amendment No.
11 as filed with the SEC via EDGAR on December 30, 1998.
(d2) Amended Investment Advisory Agreement between the Registrant and Bank
Julius Baer & Co., Ltd., New York Branch on behalf of Julius Baer Global
Income Fund dated September 15, 1999, is filed herewith as Exhibit D2.
(d3) Amended Investment Advisory Agreement between the Registrant and Bank
Julius Baer & Co., Ltd., New York Branch on behalf of Julius Baer
International Equity Fund dated September 15, 1999, is filed herewith as
Exhibit D3.
(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, is incorporated by
reference to Post-Effective Amendment No. 11 as filed with the SEC via
EDGAR on December 30, 1998.
(f) Not applicable.
(g) Custodian Agreement between the Registrant and Investors Bank & Trust
Company dated December 28, 1999 is filed herewith as Exhibit G.
(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 December 28, 1999 is filed herewith as Exhibit H1.
<PAGE>
(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, is incorporated by reference to
Post-Effective Amendment No. 11 as filed with the SEC via EDGAR on December
30, 1998.
(i) Opinion of Counsel is incorporated by reference to Post-Effective
Amendment No. 9 as filed with the SEC via EDGAR on February 19, 1998.
(j) Consent of Auditors dated January 28, 2000, is filed herewith as
Exhibit J.
(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.
(m2) Co-Administration Agreement between the Registrant and Bank Julius
Baer & Co., Ltd., New York Branch on behalf of Julius Baer Global Income
Fund dated September 15, 1999, is filed herewith as Exhibit M2. .
(m3) Co-Administration Agreement between the Registrant and Bank Julius
Baer & Co., Ltd., New York Branch on behalf of Julius Baer International
Equity Fund dated September 15, 1999, is filed herewith as Exhibit M3.
(n) Not applicable.
(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.
(o1) Amended Multi-Class Plan pursuant to Rule 18f-3 under the Investment
Company Act of 1940 for Julius Baer Investment Funds, dated September 15,
1999, is filed herewith as Exhibit O1.
(p) Powers of Attorney by each of the Trustees of Julius Baer Investment
Funds dated December 2, 1998, are incorporated by reference to
Post-Effective Amendment No. 13 as filed with the SEC via EDGAR on
September 16, 1999.
(q) Code of Ethics of Julius Baer Investment Funds and Bank Julius Baer &
Co., Ltd., New York Branch is filed herewith as Exhibit Q1.
Item 24. Persons Controlled by or Under Common Control with Registrant
None
Item 25. Indemnification
<PAGE>
The Trust is a Massachusetts business trust. As a Massachusetts business trust,
the Trust's operations are governed by a Master Trust Agreement (Declaration of
Trust). The Declaration of Trust provides that persons extending credit to,
contracting with or having any claim against the Trust shall look only to the
assets of the Sub-Trust with which such person dealt for the payment of such
credit, contract or claim and that neither the shareholders of any Sub-Trust nor
the Trustees nor any of the officers, employees or agents of the Trust, nor any
other Sub-Trust of the Trust shall be personally liable for such credit,
contract or claim. The Trust indemnifies each of the Trustees and officers and
other persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise, against all liabilities and expenses
incurred in connection with the defense or disposition of any action, suit or
other proceeding before any court or administrative or legislative body in which
such person may be involved as a party or with which such person may have been
threatened, while in office or thereafter, by reason of being or having been
such a Trustee or officer, director or trustee, except with respect to any
matter in which such person did not act in good faith in the reasonable belief
that their actions were in or not opposed to the best interests of the Trust or
had acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such person's office. The
Declaration of Trust further provides that a Trustee shall not be liable for
errors of judgment or mistakes of fact or law, for any neglect or wrongdoing of
any officer, agent, employee, consultant, adviser, administrator, distributor or
principal underwriter, custodian or transfer, dividend disbursing, shareholder
servicing or accounting agent of the Trust, or for any act or omission of any
other Trustee. The Trustees may take advice of counsel or other experts with
respect to the meaning and operation of the Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for railing to follow such advice. The Trustees,
when acting in good faith in discharging their duties, shall be entitled to rely
upon the books of account of the Trust and upon written reports made to the
Trustees. However, nothing in the Declaration of Trust protects any Trustee or
officer against any liability to the Trust or its shareholders to which such
Trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of their office.
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 (the "Funds"). BJB-NY also provides the Funds with certain
administrative services that are not provided by the Administrator. 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 31, 1999
is set forth below. The address of the following individuals is 330 Madison
Avenue, New York, New York.
Officers of BJB-NY are Brian Ach (Vice President), Pia Alvarez (Vice President),
Karen Arrese (Vice President), Jeanette Attina (Vice President), Nuri Benturk
(First Vice President), Stefan Betschart (Management Committee), Francoise
Birnholz (Senior Vice President), Robin Bloom (Vice President), John Boys (First
Vice President), David Broder (Vice President), Keith Christopher (Vice
President), Philip Ciriello (Senior Vice President), Edward Clapp (First Vice
President), Louis Dempsey (Vice President), Michael Di Leo (Vice President),
Michael Doujak (Vice President), Denise Downey (First Vice President), David
Durrant (Vice President), Balthasar Eggimann (Management Committee), Peter
Embiricos (Vice President), Frederick Ethcart (Vice President), Brett Gallagher
(Vice President), Cono Gallo (First Vice President), Gary Goldschmidt (First
Vice President), Barbara Hahn (First Vice President), Martin Hirlemann (Vice
President), Anita Hlibczuk (Vice President), Josef Huber (First Vice President),
David Kreisa (Vice President), Hanson Liang (First Vice President), Mark Linnan
(Management Committee), Maria Lipton (First Vice President), Lisa Markowitz
(Vice President), William Marr (Senior Vice President), Elliot Mayerhoff (First
Vice President), Gina Mendoza (Vice President), Larry Millman (First Vice
President), Ernesto Nazar (Vice President), Richard Pell (Senior Vice
President), Brenda Pimentel (Vice President), Alphonse Pugliesi (Vice
President), Michael Quain (First Vice President), Manuel Reyes (First Vice
President), Terrence Reynolds (Vice President), Ashley Richards (First Vice
President), Sadakichi Robbins (Vice President), Michael Rosen (Vice President),
Hector Santiago (Vice President), Susan Scarborough (Vice President), Urs
Schwytter (Deputy Branch Manager/Senior Vice President), Paolo Seiferle (Vice
President), Walter Simon (First Vice President), Bernard Spilko (General
Manager/Senior Vice President), Dominique Spillman (Vice President), Benjamin
Strauss (Vice President), Elaine Taranto (Vice President), David Taylor (First
Vice President), Michael Testorf (Vice President), Vasili Tsamis (First Vice
President), Keith Walter (Vice President), Oskar Weiss (First Vice President),
Rudolf-Riad Younes (First Vice President), Christopher Zias (Vice President),
Nicholas Zografos (Vice President).
Item 27. Principal Underwriter.
(a) Unified Management Corporation (the "Distributor") acts
as principal underwriter for the following investment
companies.
Firstar Select Funds
Industry Leaders Fund
Labrador Mutual Fund
The Milestone Funds
Regional Opportunity Fund
Securities Management & Timing Funds
Sparrow Growth Funds
The Unified Funds
<PAGE>
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 co-administrator)
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(b) under the Securities Act
of 1933, as amended, and has duly caused this Post-Effective Amendment No. 14 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
January 31, 2000.
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 and Chief January 31, 2000
- ------------------- Financial Officer
Michael K. Quain
/s/ Harvey B. Kaplan* Trustee January 31, 2000
- ---------------------
Harvey B. Kaplan
/s/ Robert S. Matthews* Trustee January 31, 2000
- -----------------------
Robert S. Matthews
/s/ Gerard J.M. Vlak* Trustee January 31, 2000
- --------------------
Gerard J.M. Vlak
/s/ Martin Vogel* Trustee January 31, 2000
- ----------------
Martin Vogel
/s/ Peter Wolfram* Trustee January 31, 2000
- -----------------
Peter Wolfram
</TABLE>
*By /s/ Paul J. Jasinski
--------------------
(As Attorney-in-Fact pursuant
to Powers of Attorney
filed herewith)
<PAGE>
EXHIBIT INDEX
(EX.D2) Amended Investment Advisory Agreement (Julius Baer Global
Income Fund)dated September 15, 1999
(EX.D3) Amended Investment Advisory Agreement (Julius
Baer International Equity Fund) dated September 15, 1999
(EX. G) Custodian Agreement dated December 28, 1999
(EX.H1) Administration Agreement dated December 28, 1999
(EX.J) Consent of Auditors dated January 28, 2000
(EX.M2) Co-Administration Agreement (Julius Baer Global Income Fund)
dated September 15, 1999
(EX.M3) Co-Administration Agreement (Julius Baer International Equity
Fund) dated September 15, 1999
(EX.01) Amended Rule 18f-3 Plan dated September 15, 1999
(EX.Q) Code of Ethics of Julius Baer Investment Funds and Bank Julius
Baer & Co., Ltd., New York Branch
AMENDED INVESTMENT 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,
dated as of July 1, 1998, and amended September 15, 1999, on behalf of Julius
Baer Global Income Fund (the "Fund") (the "Agreement"). The Trust herewith
confirms its agreement with the Adviser to amend such agreement in its entirety
regarding investment advisory services to be provided by the Adviser on behalf
of 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 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.
Subject to the supervision and direction of the Board of Trustees of the
Trust, the Adviser undertakes to perform the following administrative services
to the extent that no other party is obligated to perform them on behalf of the
Fund: (a) providing the Fund with office space (which may be the Adviser's own
offices), stationery and office supplies, (b) furnishing certain corporate
secretarial services, including assisting in the preparation of materials for
meetings of the Board of Trustees, (c) coordinating and preparation of proxy
statements and annual and semi-annual reports to the Fund's shareholders, (d)
assisting in the preparation of the Fund's tax returns, (e) 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, and (f) 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.
1
<PAGE>
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 investment objective, investment policies
and other practices and policies set forth in the Trust's Registration
Statement, as such Registration Statement and practices and policies may be
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 also to 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.
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.
2
<PAGE>
6. COMPENSATION
In consideration of the services rendered pursuant to Section 2 of this
Agreement, the Fund will pay the Adviser after the end of each calendar quarter
while this Agreement is in effect a fee for the previous quarter calculated at
an annual rate of 0.50 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; 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 meetings 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 fees pursuant to any Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, as amended (the "1940 Act"), and pursuant to
any Shareholder Services Plan.
8. 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 or nature.
3
<PAGE>
9. TERM OF AGREEMENT
This Agreement shall become effective on November 15, 1999, and 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 1940 Act) 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 the 1940 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 the 1940
Act).
10. REPRESENTATION BY THE TRUST
The Trust represents that a 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.
11. 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.
12. MISCELLANEOUS
If the Adviser ceases to act as investment adviser to the Fund, the Trust
agrees that, at the request of the Adviser, the Trust's license to use "Julius
Baer" 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 "Julius
Baer" or any such variation.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto.
14. 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.
4
<PAGE>
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
On Behalf on Julius Baer Global Income Fund
By: /s/ Michael K. Quain
---------------------------
Name: Michael K. Quain
Title: President
Accepted:
BANK JULIUS BAER & CO., LTD., NEW YORK BRANCH
By: /s/ Urs Schwytter
-----------------------------------
Name: Urs Schwytter
Title: Deputy General Manager
5
AMENDED INVESTMENT 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,
dated as of October 4, 1993, and amended on September 15, 1999, on behalf of
Julius Baer International Equity Fund (the "Fund") (the "Agreement"). The Trust
herewith confirms its agreement with the Adviser to amend such agreement in its
entirety regarding investment advisory services to be provided by the Adviser on
behalf of 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 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.
Subject to the supervision and direction of the Board of Trustees of the
Trust, the Adviser undertakes to perform the following administrative services
to the extent that no other party is obligated to perform them on behalf of the
Fund: (a) providing the Fund with office space (which may be the Adviser's own
offices), stationery and office supplies, (b) furnishing certain corporate
secretarial services, including assisting in the preparation of materials for
meetings of the Board of Trustees, (c) coordinating and preparation of proxy
statements and annual and semi-annual reports to the Fund's shareholders, (d)
assisting in the preparation of the Fund's tax returns, (e) 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, and (f) 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.
1
<PAGE>
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 investment objective, investment policies
and other practices and policies set forth in the Trust's Registration
Statement, as such Registration Statement and practices and policies may be
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 also to 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.
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.
2
<PAGE>
6. COMPENSATION
In consideration of the services rendered pursuant to Section 2 of this
Agreement, the Fund will pay the Adviser after the end of each calendar quarter
while this Agreement is in effect a fee for the previous quarter calculated at
an annual rate of 0.75 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; 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 meetings 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 fees pursuant to any Distribution Plan adopted under Rule 12b-1 of
the Investment Company Act of 1940, as amended (the "1940 Act"), and pursuant to
any Shareholder Services Plan.
8. 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 or nature.
3
<PAGE>
9. TERM OF AGREEMENT
This Agreement shall become effective on November 15, 1999, and 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 1940 Act) 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 the 1940 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 the 1940
Act).
10. REPRESENTATION BY THE TRUST
The Trust represents that a 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.
11. 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 the 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.
12. MISCELLANEOUS
If the Adviser ceases to act as investment adviser to the Fund, the Trust
agrees that, at the request of the Adviser, the Trust's license to use "Julius
Baer", 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 "Julius
Baer" or any such variation.
13. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties hereto.
14. 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.
4
<PAGE>
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
On behalf of Julius Baer International Equity Fund
By: /s/ Michael K. Quain
---------------------------
Name: Michael K. Quain
Title: President
Accepted:
BANK JULIUS BAER & CO., LTD., NEW YORK BRANCH
By: /s/ Urs Schwytter
---------------------------------
Name: Urs Schwytter
Title: Deputy General Manager
5
CUSTODIAN AGREEMENT
AGREEMENT made as of this 28th day of December, 1999, between JULIUS BAER
INVESTMENT FUNDS, a Massachusetts business trust (the "Fund"), and INVESTORS
BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Fund is registered as a open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Bank has at least the minimum qualifications required by
Section 17(f)(1) of the 1940 Act to act as custodian of the portfolio securities
and cash of the Fund;
WHEREAS, the Fund desires to place and maintain all of its portfolio
securities and cash in the custody of the Bank; and
WHEREAS, the Bank is willing to act as custodian for the Fund, subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
it is agreed between the parties hereto as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as custodian
of its portfolio securities and cash delivered to the Bank as hereinafter
described and the Bank agrees to act as such upon the terms and conditions
hereinafter set forth. For the services rendered pursuant to this Agreement the
Fund agrees to pay to the Bank the fees set forth on Appendix A hereto.
2. DEFINITIONS. Whenever used herein, the terms listed below will have the
following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 BOARD. Board will mean the Board of Directors or the Board of
Trustees of the Fund, as the case may be.
2.3 SECURITY. The term security as used herein will have the same meaning
assigned to such term in the Securities Act of 1933, as amended, including,
without limitation, any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust certificate,
certificate of deposit for a security, fractional undivided interest in oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege on
any security, certificate of deposit, or group or index of securities (including
any interest therein or based on the value thereof), or any put, call, straddle,
option, or privilege entered into on a national securities exchange relating to
a foreign currency, or, in general, any interest or instrument commonly known as
a "security," or any certificate of interest or participation in, temporary or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing, and
futures, forward contracts and options thereon.
2.4 PORTFOLIO SECURITY. Portfolio Security will mean any Security owned
by the Fund.
2.5 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification in
writing signed by any two Authorized Persons of the Fund.
1
<PAGE>
2.6 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank, its
successor or successors and its nominee or nominees.
2.7 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 PROPER INSTRUCTIONS. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person, such
instructions to be given in such form and manner as the Bank and the Fund shall
agree upon from time to time, and (ii) instructions (which may be continuing
instructions) regarding other matters signed or initialed by an Authorized
Person. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by an Authorized Person. The Fund
shall cause all oral instructions to be promptly confirmed in writing. The Bank
shall act upon and comply with any subsequent Proper Instruction which modifies
a prior instruction and the sole obligation of the Bank with respect to any
follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Fund. The Fund shall be responsible, at
the Fund's expense, for taking any action, including any reprocessing, necessary
to correct any such discrepancy or error, and to the extent such action requires
the Bank to act, the Fund shall give the Bank specific Proper Instructions as to
the action required. Upon receipt by the Bank of an Officers' Certificate as to
the authorization by the Board accompanied by a detailed description of
procedures approved by the Fund, Proper Instructions may include communication
effected directly between electro-mechanical or electronic devices provided that
the Board and the Bank agree in writing that such procedures afford adequate
safeguards for the Fund's assets.
3. [RESERVED]
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names of the
members of the Board, it being understood that upon the occurrence of any change
in the information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is no
longer an Authorized Person as designated therein), the Secretary or Assistant
Secretary of the Fund will sign a new or amended certification setting forth the
change and the new, additional or omitted names or signatures. The Bank will be
entitled to rely and act upon any Officers' Certificate given to it by the Fund
which has been signed by Authorized Persons named in the most recent
certification received by the Bank.
5. CUSTODY OF CASH. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Fund into a separate savings deposit account
upon which the Bank reserves the right to require seven (7) days notice prior to
withdrawal of cash from such an account. Upon receipt by the Bank of Proper
Instructions (which may be continuing instructions) or in the case of payments
for repurchases of outstanding shares of common stock of the Fund, notification
from the Fund's transfer agent as provided in Section 7, requesting such
payment, designating the payee or the account or accounts to which the Bank will
release funds for deposit, and stating that it is for a purpose permitted under
the terms of this Section 5, specifying the applicable subsection, the Bank will
make payments of cash held for the accounts of the Fund, insofar as funds are
available for that purpose, only as permitted in subsections 5.1-5.9 below.
2
<PAGE>
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for the Fund,
against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper (as
that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 [RESERVED]
5.3 DISTRIBUTIONS AND EXPENSES OF THE FUND. For the payment on the
account of the Fund of dividends or other distributions to shareholders as may
from time to time be declared by the Board, interest, taxes, management or
supervisory fees, distribution fees, fees of the Bank for its services hereunder
and reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Fund, but, in
the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 FOREIGN EXCHANGE TRANSACTIONS.
(a) For payments in connection with foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements") which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may be
the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Fund deals or for their failure to comply with the terms of any
contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party acting
on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books.
3
<PAGE>
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made, setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper corporate purpose.
5.9 TERMINATION: Upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 16 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed pursuant
to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive and hold
pursuant to the provisions hereof, in a separate account or accounts and
physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for the
account of the Fund. All such Portfolio Securities will be held or disposed of
by the Bank for, and subject at all times to the instructions of, the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise directed
by Proper Instructions or an Officers' Certificate), in the name of a registered
nominee of the Bank as defined in the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, and will execute and deliver all
such certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank will
vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices, proxies
and proxy soliciting materials delivered to the Bank with respect to such
Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
6.3 CORPORATE ACTION. If at any time the Bank is notified that an issuer
of any Portfolio Security has taken or intends to take a corporate action (a
"Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or stock
dividend, which Corporate Action requires an affirmative response or action on
the part of the holder of such Portfolio Security (a "Response"), the Bank shall
notify the Fund promptly of the Corporate Action, the Response required in
connection with the Corporate Action and the Bank's deadline for receipt from
the Fund of Proper Instructions regarding the Response (the "Response
Deadline"). The Bank shall forward to the Fund via telecopier and/or overnight
courier all notices, information statements or other materials relating to the
Corporate Action promptly after receipt of such materials by the Bank.
4
<PAGE>
(a) The Bank shall act upon a required Response only after receipt
by the Bank of Proper Instructions from the Fund no later than 5:00 p.m. on the
date specified as the Response Deadline and only if the Bank (or its agent or
subcustodian hereunder) has actual possession of all necessary Securities,
consents and other materials no later than 5:00 p.m. on the date specified as
the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response if
Proper Instructions relating to such Response and all necessary Securities,
consents and other materials are not received by and in the possession of the
Bank no later than 5:00 p.m. on the date specified as the Response Deadline.
Notwithstanding, the Bank may, in its sole discretion, use its best efforts to
act upon a Response for which Proper Instructions and/or necessary Securities,
consents or other materials are received by the Bank after 5:00 p.m. on the date
specified as the Response Deadline, it being acknowledged and agreed by the
parties that any undertaking by the Bank to use its best efforts in such
circumstances shall in no way create any duty upon the Bank to complete such
Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the Response
expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(c) of this Agreement shall govern any Corporate
Action involving Foreign Portfolio Securities held by an Eligible Foreign
Sub-Custodian (as defined below).
6.4 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits of Fund assets
in the Book-Entry System, and (ii) for any subsequent changes to such
arrangements following such approval, the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not include
any assets of the Bank (or such agent) other than assets held as a fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection by
duly authorized officers, employees or agents of the Fund. Where securities are
transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in a
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for
the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account, and
(ii) the making of an entry on the records of the Bank (or its agent) to reflect
such payment and transfer for the account of the Fund. The Bank (or its agent)
shall transfer securities sold or loaned for the account of the Fund upon:
5
<PAGE>
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the delivery
of securities loaned by the Fund has been transferred to the Account; and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the Fund. Copies
of all advices from the Book-Entry System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund by the
Bank and shall be provided to the Fund at its request. The Bank shall send the
Fund a confirmation, as defined by Rule 17f-4 of the 1940 Act, of any transfers
to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System;
6.5 USE OF A DEPOSITORY. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and remit
to the Bank on behalf of the Fund all income and other payments thereon and to
take all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of
any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through
the clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
the Fund shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund only upon delivery of the Securities to or for the account of
the Fund; and upon any sale of Portfolio Securities, delivery of the Securities
will be made only against payment therefor or, in the event Portfolio Securities
are loaned, delivery of Securities will be made only against receipt of the
initial cash collateral to or for the account of the Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately to
the Bank for prompt transmittal to the Fund;
(iii) Such Depository promptly forwards to the Bank confirmation
of any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to the Fund's account;
6
<PAGE>
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Fund to comply with the recordkeeping
requirements of Section 31(a) of the 1940 Act and Rule 31(a) thereunder; and
(v) Such Depository delivers to the Bank all internal accounting
control reports, whether or not audited by an independent public accountant, as
well as such other reports as the Fund may reasonably request in order to verify
the Portfolio Securities held by such Depository.
6.6 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each year
following such approval the Board has received and approved the arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-Entry
Paper, the Bank shall hold in book-entry form, on behalf of the Fund, commercial
paper issued by issuers with whom the Bank has entered into a book-entry
agreement (the "Issuers"). In maintaining procedures for Book-Entry Paper, the
Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the Fund in
an account of the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Fund's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, commercial paper
belonging to the Fund which is included in the Book-Entry System and shall at
all times during the regular business hours of the Bank be open for inspection
by duly authorized officers, employees or agents of the Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the
account of the Fund upon contemporaneous (i) receipt of advice from the Issuer
that such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) making of an
entry on the records of the Bank to reflect such payment for the account of the
Fund; and
(e) The Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the Fund may
reasonably request from time to time.
6.7 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 EURODOLLAR CDS. Any Portfolio Securities which are Eurodollar CDs may
be physically held by the European branch of the U.S. banking institution that
is the issuer of such Eurodollar CD (a "European Branch"), provided that such
Portfolio Securities are identified on the books of the Bank as belonging to the
Fund and that the books of the Bank identify the European Branch holding such
Portfolio Securities. Notwithstanding any other provision of this Agreement to
the contrary, except as stated in the first sentence of this subsection 6.8, the
Bank shall be under no other duty with respect to such Eurodollar CDs belonging
to the Fund.
7
<PAGE>
6.9 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
(i) The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund regarding escrow
or other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions among the Bank, any
broker-dealer registered with the National Association of Securities Dealers,
Inc. (the "NASD"), and, if necessary, the Fund, relating to the compliance with
the rules of the Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations.
(ii) Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with any
option, nor shall the Bank be under duty or obligation to present such option to
the broker for exercise unless it receives Proper Instructions from the Fund.
The Bank shall have no responsibility for the legality of any put or call
purchased or sold on behalf of the Fund, the propriety of any such purchase or
sale, or the adequacy of any collateral delivered to a broker in connection with
an option or deposited to or withdrawn from a Segregated Account (as defined in
subsection 6.10 below). The Bank specifically, but not by way of limitation,
shall not be under any duty or obligation to: (i) periodically check or notify
the Fund that the amount of such collateral held by a broker or held in a
Segregated Account is sufficient to protect such broker or the Fund again any
loss; (ii) effect the return of any collateral delivered to a broker; or (iii)
advise the Fund that any option it holds, has or is about to expire. Such duties
or obligations shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) The Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement entered into upon the receipt of Proper Instructions
among the Fund, the Bank and a Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any Contract Market, or any similar
organization or organizations, regarding account deposits in connection with
transactions by the Fund.
(ii) The responsibilities of the Bank as to futures, puts and
calls traded on commodities exchanges, any Futures Commission Merchant account
and the Segregated Account shall be limited as set forth in subparagraph (a)(ii)
of this Section 6.9 as if such subparagraph referred to Futures Commission
Merchants rather than brokers, and Futures and puts and calls thereon instead of
options.
6.10 SEGREGATED ACCOUNT. The Bank shall, upon receipt of Proper
Instructions, establish and maintain a Segregated Account or Accounts for and on
behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
8
<PAGE>
(iii) for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding commitments
under reverse repurchase agreements entered into with broker-dealer firms;
(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the case of
this clause (v), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the executive committee of
the Board signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such Segregated
Account and declaring such purposes to be proper corporate purposes.
(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(ii) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Fund's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment
or when-issued agreements for the purchase of portfolio securities or reverse
repurchase agreements are sold to other parties or the Fund's obligations
thereunder are met from assets of the Fund other than those in the Segregated
Account;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (a)(v) above,
in accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Fund of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect of
other Portfolio Securities of the Fund.
9
<PAGE>
6.12 TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section only upon receipt of Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.12, and
shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank will
transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the Fund,
against contemporaneous receipt by the Bank of payment therefor in full, or
against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such payment
is made;
(b) In exchange for or upon conversion into other securities alone
or other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided,
however, that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank (or
its agent or subcustodian hereunder) has actual possession of such Security at
least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their terms
into other securities;
(d) For the purpose of repurchasing in-kind shares of the Fund upon
authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or retired
or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the Bank in order to collateralize loans made to the Fund by
any bank, including the Bank; provided, however, that such Portfolio Securities
will be released only upon payment to the Bank for the account of the Fund of
the moneys borrowed, provided further, however, that in cases where additional
collateral is required to secure a borrowing already made, and such fact is made
to appear in the Proper Instructions, Portfolio Securities may be released for
that purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender that an event of deficiency or default on the loan has occurred, the Bank
may deliver such pledged Portfolio Securities to or for the account of th
lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market value
of such security, as set forth in the Proper Instructions received by the Bank
before such payment is made;
10
<PAGE>
(i) for the purpose of delivering securities lent by the Fund to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper corporate purposes; provided that before making such transfer, the Bank
will also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. REPURCHASES. In the case of payment of assets of the Fund held by the
Bank in connection with repurchases by the Fund of outstanding common shares,
the Bank will rely on notification by the Fund's transfer agent of a repurchase
of shares and certificates, if issued, in proper form for repurchase before such
payment is made. Payment shall be made in accordance with the Articles of
Incorporation or Declaration of Trust and By-laws of the Fund (the "Articles"),
from assets available for said purpose.
8. MERGER, DISSOLUTION, ETC. OF FUND. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees through
the end of the then current term of this Agreement, and disbursements and
expenses of the Bank, this Agreement will terminate and the Bank shall be
released from any and all obligations hereunder.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the Fund
and hold for the account of the Fund all income, dividends, interest and other
payments or distributions of cash with respect to the Portfolio Securities held
thereunder;
9.2 Present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation and hold the
cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities received
as a distribution on Portfolio Securities as a result of a stock dividend, share
split-up, reorganization, recapitalization, merger, consolidation, readjustment,
distribution of rights and similar securities issued with respect to any
Portfolio Securities held by it hereunder.
11
<PAGE>
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
The Bank will execute and deliver such certificates in connection with Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for definitive
securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay within
two business days from the day on which it receives knowledge of such default or
refusal.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act. The books and records of the
Bank pertaining to its actions under this Agreement and reports by the Bank or
its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Fund and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by the
Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. FUND EVALUATION AND YIELD CALCULATION
12.1 FUND EVALUATION. The Bank shall compute and, unless otherwise
directed by the Board, determine as of the close of regular trading on the New
York Stock Exchange on the last day of each week [and the last day of each
month], on which said Exchange is open for unrestricted trading and as of such
other days, or hours, if any, as may be authorized by the Board and agreed to by
the Bank, the net asset value of a share of capital stock of the Fund, such
determination to be made in accordance with the provisions of the Articles and
By-laws of the Fund and the Prospectus and Statement of Additional Information
relating to the Fund, as they may from time to time be amended, and any
applicable resolutions of the Board at the time in force and applicable; and
promptly to notify the Fund, the proper exchange and the NASD or such other
persons as the Fund may request of the results of such computation and
determination. In computing the net asset value hereunder, the Bank may rely in
good faith upon information furnished to it by any Authorized Person in respect
of (i) the manner of accrual of the liabilities of the Fund and in respect of
liabilities of the Fund not appearing on its books of account kept by the Bank,
(ii) reserves, if any, authorized by the Board or that no such reserves have
been authorized, (iii) the source of the quotations to be used in computing the
net asset value and (iv) the value to be assigned to any security for which no
price quotations are available, and the Bank shall not be responsible for any
loss occasioned by such reliance or for any good faith reliance on any
quotations received from a source pursuant to (iii) above.
12
<PAGE>
12.2. YIELD CALCULATION. The Bank will compute the performance results of
the Fund (the "Yield Calculation") in accordance with the provisions of Release
No. 33-6753 and Release No. IC-16245 (February 2, 1988) (the "Releases")
promulgated by the Securities and Exchange Commission, any subsequent amendments
thereto, and published interpretations of or general conventions accepted by the
staff of the Securities and Exchange Commission with respect to such releases or
the subject matter thereof ("Subsequent Staff Positions"), subject to the terms
set forth below:
(a) The Bank shall compute the Yield Calculation for the Fund for
the stated periods of time as shall be mutually agreed upon, and communicate in
a timely manner the result of such computation to the Fund.
(b) In performing the Yield Calculation, the Bank will derive the
items of data necessary for the computation from the records it generates and
maintains for the Fund pursuant Section 11 hereof. The Bank shall have no
responsibility to review, confirm, or otherwise assume any duty or liability
with respect to the accuracy or correctness of any such data supplied to it by
the Fund, any of the Fund's designated agents or any of the Fund's designated
third party providers.
(c) At the request of the Bank, the Fund shall provide, and the Bank
shall be entitled to rely on, written standards and guidelines to be followed by
the Bank in interpreting and applying the computation methods set forth in the
Releases or any Subsequent Staff Positions as they specifically apply to the
Fund. In the event that the computation methods in the Releases or the
Subsequent Staff Positions or the application to the Fund of a standard or
guideline is not free from doubt or in the event there is any question of
interpretation as to the characterization of a particular security or any aspect
of a security or a payment with respect thereto (e.g., original issue discount,
participating debt security, income or return of capital, etc.) or otherwise or
as to any other element of the computation which is pertinent to the Fund, the
Fund or its designated agent shall have the full responsibility for making the
determination of how the security or payment is to be treated for purposes of
computation and how the computation is to be made and shall inform the Bank
thereof on a timely basis. The Bank shall have no responsibility to make
independent determinations with respect to any item which is covered by this
Section, and shall not be responsible for its computations made in accordance
with such determinations so long as such computations are mathematically
correct.
(d) The Fund shall keep the Bank informed of all publicly available
information and of any non-public advice, or information obtained by the Fund
from its independent auditors or by its personnel or the personnel of its
investment adviser, or Subsequent Staff Positions related to the computations to
be undertaken by the Bank pursuant to this Agreement and the Bank shall not be
deemed to have knowledge of such information (except as contained in the
Releases) unless it has been furnished to the Bank in writing.
13. ADDITIONAL SERVICES. The Bank shall perform the additional services for
the Fund as are set forth on Appendix B hereto. Appendix B may be amended from
time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix A shall be appropriately increased.
14. DUTIES OF THE BANK.
14.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE. In performing its duties
hereunder and any other duties listed on any Schedule hereto, if any, the Bank
will be entitled to receive and act upon the advice of independent counsel of
its own selection, which may be counsel for the Fund, and will be without
liability for any action taken or thing done or omitted to be done in accordance
with this Agreement in good faith in conformity with such advice.
13
<PAGE>
The Bank will be under no duty or obligation to inquire into and will not
be liable for:
(a) the validity of the issue of any Portfolio Securities purchased
by or for the Fund, the legality of the purchases thereof or the propriety of
the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for
the Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the
Fund or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the Fund
or the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund or
the legality of the distribution of any Portfolio Securities as payment in kind
of such dividend; and
(f) any property or moneys of the Fund unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
14.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE FUND HELD
IN THE UNITED STATES. The Bank may employ agents of its own selection in the
performance of its duties hereunder and shall be responsible for the acts and
omissions of such agents as if performed by the Bank hereunder. Without limiting
the foregoing, certain duties of the Bank hereunder may be performed by one or
more affiliates of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by or at the direction of the Fund, provided that any such subcustodian
meets at least the minimum qualifications required by Section 17(f)(1) of the
1940 Act to act as a custodian of the Fund's assets with respect to property of
the Fund held in the United States. The Bank shall have no liability to the Fund
or any other person by reason of any act or omission of any such subcustodian
and the Fund shall indemnify the Bank and hold it harmless from and against any
and all actions, suits and claims, arising directly or indirectly out of the
performance of any subcustodian. Upon request of the Bank, the Fund shall assume
the entire defense of any action, suit, or claim subject to the foregoing
indemnity. The Fund shall pay all fees and expenses of any subcustodian.
14.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN CUSTODY MANAGER. If the Fund has
appointed any person or entity other than the Bank Foreign Custody Manager (as
that term is defined in Rule 17f-5 under the 1940 Act), the Bank shall act only
upon Proper Instructions from the Fund with regard to any of the Fund's
Portfolio Securities or other assets held or to be held outside of the United
States, and the Bank shall be without liability for any Claim (as that term is
defined in Section 15 hereof) arising out of maintenance of the Fund's Portfolio
Securities or other assets outside of the United States. The Fund also agrees
that it shall enter into a written agreement with such Foreign Custody Manager
that shall obligate such Foreign Custody Manager to provide to the Bank in a
timely manner all information required by the Bank in order to complete its
obligations hereunder. The Bank shall not be liable for any Claim arising out of
the failure of such Foreign Custody Manager to provide such information to the B
14
<PAGE>
(b) SEGREGATION OF SECURITIES. The Bank shall identify on its books
as belonging to the Fund the Foreign Portfolio Securities held by each foreign
sub-custodian (each an "Eligible Foreign Custodian," as that term is defined in
Rule 17f-5 under the 1940 Act) selected by the Foreign Custody Manager, subject
to receipt by the Bank of the necessary information from such Eligible Foreign
Custodian if the Foreign Custody Manager is not the Bank.
(c) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect to the assets of the Fund held by an Eligible Foreign Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and shall be
effected in accordance with the applicable agreement between the Foreign Custody
Manager and such Eligible Foreign Custodian. If at any time any Foreign
Portfolio Securities shall be registered in the name of the nominee of the
Eligible Foreign Custodian, the Fund agrees to hold any such nominee harmless
from any liability by reason of the registration of such securities in the name
of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary established
securities trading or securities processing practices and procedures in the
jurisdiction or market in which the transaction occurs, including, without
limitation, delivering securities to the purchaser thereof or to a dealer
therefor (or an agent for such purchaser or dealer) against a receipt with the
expectation of receiving later payment for such securities from such purchaser
or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the actions to be taken
in connection therewith, as the Bank shall receive from the Fund pursuant to
Proper Instructions. Notwithstanding the foregoing, the Bank shall have no
further duty or obligation with respect to such Rights, including, without
limitation, the determination of whether the Fund is entitled to participate in
such Rights under applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such Rights by the Fund
or by the applicable Eligible Foreign Custodian will comply with all applicable
terms and conditions of any such Rights or any applicable laws or regulations,
or market practices within the market in which such action is to be taken or
omitted.
(d) TAX LAW. The Bank shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Bank as custodian of
the Fund by the tax laws of any jurisdiction, and it shall be the responsibility
of the Fund to notify the Bank of the obligations imposed on the Fund or the
Bank as the custodian of the Fund by the tax law of any non-U.S. jurisdiction,
including responsibility for withholding and other taxes, assessments or other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Eligible Foreign Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
14.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund.
15
<PAGE>
14.5. FEES AND EXPENSES OF THE BANK. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements, expenses
and charges made or incurred by the Bank in the performance of this Agreement
(including any duties listed on any Schedule hereto, if any) including any
indemnities for any loss, liabilities or expense to the Bank as provided above.
For the services rendered by the Bank hereunder, the Fund will pay to the Bank
such compensation or fees at such rate and at such times as shall be agreed upon
in writing by the parties from time to time. The Bank will also be entitled to
reimbursement by the Fund for all reasonable expenses incurred in conjunction
with termination of this Agreement.
14.6 ADVANCES BY THE BANK. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such payments
by the Fund. Should such a payment or payments, with advanced funds, result in
an overdraft (due to insufficiencies of the Fund's account with the Bank, or for
any other reason) this Agreement deems any such overdraft or related
indebtedness a loan made by the Bank to the Fund payable on demand. Such
overdraft shall bear interest at the current rate charged by the Bank for such
loans unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness and to the
extent required by law, in and to any property at any time held by it for the
Fund's benefit or in which the Fund has an interest and which is then in the
Bank's possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any overdraft or indebtedness, together with
interest due thereon, against any balance of account standing to the credit of
the Fund on the Bank's books.
15. LIMITATION OF LIABILITY.
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shall the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except for any Claim resulting solely from the gross negligence,
willful misfeasance or bad faith of the Bank or any Indemnified Party. Without
limiting the foregoing, neither the Bank nor the Indemnified Parties shall be
liable for, and the Bank and the Indemnified Parties shall be indemnified
against, any Claim arising as a result of:
(a) Any act or omission by the Bank or any Indemnified Party in good
faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
(b) Any act or omission of any subcustodian selected by or at the
direction of the Fund;
(c) Any act or omission of any Foreign Custody Manager other than
the Bank or any act or omission of any Eligible Foreign Custodian if the Bank is
not the Foreign Custody Manager;
(d) Any Corporate Action, distribution or other event related to
Portfolio Securities which, at the direction of the Fund, have not been
registered in the name of the Bank or its nominee;
16
<PAGE>
(e) Any Corporate Action requiring a Response for which the Bank has
not received Proper Instructions or obtained actual possession of all necessary
Securities, consents or other materials by 5:00 p.m. on the date specified as
the Response Deadline;
(f) Any act or omission of any European Branch of a U.S. banking
institution that is the issuer of Eurodollar CDs in connection with any
Eurodollar CDs held by such European Branch;
(g) Information relied on in good faith by the Bank and supplied by
any Authorized Person in connection with the calculation of (i) the net asset
value of the shares of capital stock of the Fund or (ii) the Yield Calculation;
or
(h) Any acts of God, strikes, legal constraint, government actions,
war, emergency conditions, earthquakes, fires, floods, storms or other
disturbances of nature, epidemics, riots, nationalization, expropriation,
currency restrictions, interruption, loss or malfunction of electrical power or
other utilities, transportation, or telecommunication systems, or computers and
computer facilities (hardware or software), equipment or transmission failure,
damage reasonably beyond its control or other causes reasonably beyond its
control.
15.2 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank or the Indemnified Parties be liable to the Fund or any
third party for lost profits or lost revenues or any special, consequential,
punitive or incidental damages of any kind whatsoever in connection with this
Agreement or any activities hereunder.
15.3 The indemnification contained herein shall survive the termination
of this Agreement.
16. TERMINATION.
16.1 The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive three-year terms (each a "Renewal Term")
unless notice of non-renewal is delivered by the non-renewing party to the other
party no later than ninety days prior to the expiration of the Initial Term or
any Renewal Term, as the case may be.
Either party hereto may terminate this Agreement prior to the expiration
of the Initial Term or any Renewal Term in the event the other party violates
any material provision of this Agreement, provided that the non-violating party
gives written notice of such violation to the violating party and the violating
party does not cure such violation within 90 days of receipt of such notice.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of all
cash and the delivery of all Portfolio Securities duly endorsed and all records
maintained under Section 11 to the successor custodian when appointed by the
Fund. The obligation of the Bank to deliver and transfer over the assets of the
Fund held by it directly to such successor custodian will commence as soon as
such successor is appointed and will continue until completed as aforesaid. If
the Fund does not select a successor custodian within ninety (90) days from the
date of delivery of notice of termination the Bank may, subject to the
provisions of subsection 16.3, deliver the Portfolio Securities and cash of the
Fund held by the Bank to a bank or trust company of the Bank's own selection
which meets the requirements of Section 17(f)(1) of the 1940 Act and has a
reported capital, surplus and undivided profits aggregating not less than
$2,000,000, to be held as the property of the Fund under terms similar to those
on which they were held by the Bank, whereupon such bank or trust company so
selected by the Bank will become the successor custodian of such assets of the
Fund with the same effect as though selected by the Board. Thereafter, the Bank
shall be released from any and all obligations under this Agreement.
17
<PAGE>
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to act
upon reasonable and customary terms and that there has been submitted to the
shareholders of the Fund the question of whether the Fund will be liquidated or
will function without a custodian for the assets of the Fund held by the Bank.
In that event the Bank will deliver the Portfolio Securities and cash of the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders, upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank. Thereafter,
the Bank shall be released from any and all obligations under this Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the Bank relating
to its performance of its duties as custodian.
17. CONFIDENTIALITY. Both parties hereto agree that any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in addition
to all other remedies at law or in equity to an injunction or injunctions
without bond or other security to prevent breaches of this provision.
18. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (i) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
Julius Baer Investment Funds
c/o Bank Julius Baer
330 Madison Avenue
New York, NY 10017
Attn: Mike Quain
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
200 Clarendon Street, P.O. Box 9130
Boston, Massachusetts 02117-9130
Attention: Andy Nesvet, Senior Director - Client Management
With a copy to: John E. Henry, General Counsel
or at such other place as such party may from time to time designate
in writing.
19. AMENDMENTS. This Agreement may not be altered or amended, except by an
instrument in writing, executed by both parties.
18
<PAGE>
20. PARTIES. This Agreement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed to
be an assignment within the meaning of this provision.
21. GOVERNING LAW. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
23. ENTIRE AGREEMENT. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. LIMITATION OF LIABILITY. The Bank agrees that the obligations assumed
by the Fund hereunder shall be limited in all cases to the assets of the Fund
and that the Bank shall not seek satisfaction of any such obligation from the
officers, agents, employees, trustees, or shareholders of the Fund.
25. NON-EXCLUSIVE SERVICES. The Fund understands that the Bank now acts and
will continue to act as custodian of various investment companies and fiduciary
of other managed accounts, and the Fund has no objection to the Bank's so
acting. In addition, it is understood that the persons employed by the Bank to
assist in the performance of its duties hereunder may not devote their full time
to such services and nothing herein contained shall be deemed to limit or
restrict the right of the Bank or any affiliate of the Bank to engage in and
devote time and attention to other businesses or to render services of whatever
kind or nature.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
JULIUS BAER INVESTMENT FUNDS
By: /s/ Michael Quain
-----------------
Name: Michael Quain
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Andrew M. Nesvet
--------------------
Name: Andrew M. Nesvet
Title: Senior Director
20
<PAGE>
APPENDICES
Appendix A Fee Schedule
Appendix B Additional Services
21
<PAGE>
APPENDIX A
JULIUS BAER INVESTMENT FUNDS
ANNUAL FEE SCHEDULE (REVISED)*
December 7, 1999
FUND ACCOUNTING, CUSTODY, ADMINISTRATION & NAV CALCULATION
A. Fund Accounting, Custody, Administration & NAV Calculation
o The following asset based fees will be charged on a per fund basis:
First $250 Million in Assets 11 Basis Points (plus $25,000)
Next $250 Million in Assets 8 Basis Points
Over $500 Million in Assets 6 Basis Points
o There will be a monthly minimum fee of $11,000.00 for both funds
o There will be a $7,500.00 anuual charge for each share class in excess of
one
B. FOREIGN CUSTODY
o The attached asset based fees and transactions fees vary by country, based
upon the attached global custody fee schedule. Local duties, scrip fees,
registration, proxies and exchange fees are out-of-pocket.
o Investors Bank will require the fund to hold all international assets at
the subcustodian of our choice.
C. DOMESTIC TRANSACTION COSTS
o DTC/Fed Book Entry $12
o Physical Securities 35
o Options and Futures 18
o SWAPS 18
o GNMA Securities 40
o Government Paydowns 5
o Foreign Currency 18**
o Cross Border 50
o Outgoing Wires 8
o Incoming Wires 6
** THERE ARE NO TRANSACTION CHARGES FOR F/X CONTRACTS EXECUTED BY INVESTORS
BANK.
22
<PAGE>
MISCELLANEOUS
A. OUT-OF-POCKET
o These charges will consist of actual and reasonable expenses incurred by the
Bank in providing services associated with:
-Pricing & Verification Services -Forms & Supplies
-Systems Development Costs -Third Party Review
-Printing, Delivery & Postage -Ad Hoc Reporting
-Telecommunication -Proxy Receipt & Tabulation
-Legal Expenses -Data Transmissions
-Micro Rental -Customized Extracts or Reporting
-Extraordinary Travel Expense
B. DOMESTIC BALANCE CREDIT
o We allow use of balance credit against fees (excluding out-of-pocket
charges) for fund balances arising out of the custody relationship. The
credit is based on collected balances reduced by balances required to
support the activity charges of the accounts. The monthly earnings
allowance is equal to 75% of the 90-day T-bill rate.
C. SECURITIES LENDING, FOREIGN EXCHANGE AND CASH MANAGEMENT
o The assumption was made that Investors Bank would perform securities lending,
foreign exchange and cash management for the portfolio. Securities lending
revenue is split with the fund and Investors Bank on a 60/40% basis: 60%
going to the fund.
D. PAYMENT
o The above fees will be charged against the fund's custodial checking account
five business days after the invoice is mailed.
*This fee schedule is valid for 60 days from date of issue and assumes the
execution of our standard contractual agreements for custody services for a
minimum of three years.
*This fee schedule is confidential information of the parties and shall not be
disclosed to any third party without prior written consent of both parties.
Accepted and approved by: /s/ Michael Quain
---------------------
Print Name: Michael Quain
Title: President
Julius Baer Investment Funds
Date: December 28, 1999
Accepted and approved by: /s/ Andrew M. Nesvet
----------------------
Print Name: Andrew M. Nesvet
Title: Senior Director
Investors Bank & Trust
Date: December 29, 1999
23
<PAGE>
Global Custody Fees Schedule
- -----------------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- -----------------------------------------------------------
ARGENTINA (1) 17.00 $75.00
AUSTRALIA 5.00 $60.00
AUSTRIA 7.00 $60.00
BANGLADESH 41.00 $150.00
BELGIUM 7.00 $60.00
BERMUDA 20.00 $100.00
BAHRAIN 41.00 $140.00
BOTSWANA 50.00 $175.00
BRAZIL (2) 29.00 $80.00
BULGARIA 40.00 $100.00
CANADA 5.00 $30.00
CEDEL 5.00 $20.00
CHILE (2) 45.00 $100.00
CHINA 20.00 $75.00
COLOMBIA (3) 45.00 $140.00
CROATIA 45.00 $125.00
CYPRUS 50.00 $150.00
CZECH REPUBLIC 17.00 $75.00
DENMARK 5.00 $60.00
ECUADOR 45.00 $100.00
EGYPT 41.00 $100.00
ESTONIA 30.00 $125.00
EUROCLEAR INTERNAL 5.00 $20.00
EUROCLEAR CROSS BORDER 5.00 $50.00
FINLAND 7.00 $70.00
FRANCE 5.00 $60.00
GERMANY 5.00 $30.00
GHANA 50.00 $200.00
GREECE-EQUITY FUND (4) 20.00 $100.00
GREECE-FIXED INCOME (4) 15.00 $100.00
HONG KONG 10.00 $65.00
HUNGARY 25.00 $100.00
INDIA 40.00 $600.00
INDONESIA 13.00 $65.00
IRELAND 7.00 $60.00
ISRAEL 20.00 $60.00
ITALY 5.00 $50.00
JAPAN 5.00 $30.00
JORDAN 41.00 $120.00
24
<PAGE>
- -----------------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- -----------------------------------------------------------
KAZAKHSTAN (5) 45.00 $150.00
KENYA 50.00 $200.00
KOREA 10.00 $65.00
LATVIA 30.00 $125.00
LEBANON 41.00 $140.00
LITHUANIA 20.00 $75.00
LITHUANIA T BILLS 25.00 $75.00
LUXEMBOURG 7.00 $60.00
MALAYSIA 10.00 $70.00
MAURITIUS 41.00 $140.00
MEXICO 10.00 $40.00
MOROCCO 40.00 $150.00
NAMIBIA 50.00 $200.00
NETHERLANDS 5.00 $40.00
NEW ZEALAND 5.00 $60.00
NORWAY 7.00 $90.00
OMAN 41.00 $140.00
PAKISTAN 41.00 $140.00
PERU 35.00 $100.00
PHILIPPINES 13.00 $65.00
POLAND 20.00 $85.00
POLAND T BILLS 29.00 $110.00
PORTUGAL 15.00 $125.00
ROMANIA 45.00 $125.00
RUSSIA-EQUITY FUND (4) 50.00 $250.00
RUSSIA-FIXED INCOME(1)(4) 35.00 $140.00
SINGAPORE 10.00 $65.00
SLOVAKIA 20.00 $75.00
SLOVENIA 41.00 $100.00
SOUTH AFRICA 7.00 $40.00
SPAIN EQ & CORP DEBT 7.00 $60.00
SPAIN GVT DEBT 5.00 $60.00
SRI LANKA 13.00 $65.00
SWAZILAND 50.00 $200.00
SWEDEN 5.00 $40.00
SWITZERLAND 5.00 $50.00
TAIWAN 13.00 $65.00
THAILAND 10.00 $65.00
TURKEY 15.00 $100.00
25
<PAGE>
- -----------------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- -----------------------------------------------------------
UK 5.00 $50.00
URUGUAY 50.00 $150.00
VENEZUELA (2) 45.00 $140.00
ZAMBIA 50.00 $200.00
ZIMBABWE 50.00 $175.00
EUROCLEAR CHARGES APPLY TO ONLY APPROVED CONTINENTAL EUROPEAN COUNTRIES
(1) BONDS BILLED AT FACE VALUE.
(2) LOCAL ADMINISTRATOR FEES PASSED THROUGH AS ACTUALS.
(3) 20 BP LOCAL ADMINISTRATION CHARGE ON MONTH END MARKET VALUE.
($400 MINIMUM, $400 MAXIUM PER ACCOUNT)
(4) THE DESIGNATION AS AN EQUITY OR FIXED INCOME FUND SHALL BE DETERMINED
BASED ON 50% OR GREATER OF FUND ASSETS INVESTED IN EQUITY OR
FIXED INCOME SECURITIES.
(5) TRANSACTION FEES ARE CHARGED FOR CORPORATE ACTIONS. DEPOSITORY FEES ARE
CHARGED AS ACTUALS. OUT-OF POCKET CHARGES, INCLUDING EUROCLEAR CROSS
BORDER FEES, ARE PASSED THROUGH AS ACTUALS IN THE MARKET.
26
<PAGE>
APPENDIX B
ADDITIONAL SERVICES:
NONE
27
ADMINISTRATION AGREEMENT
AGREEMENT made as of December 28, 1999 by and between JULIUS BAER
INVESTMENT FUNDS, a Massachusetts business trust (the "Fund"), and INVESTORS
BANK & TRUST COMPANY, a Massachusetts trust company (the "Bank").
WHEREAS, the Fund, a registered investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"), consisting of the separate
portfolios listed on APPENDIX A hereto; and
WHEREAS, the Fund desires to retain the Bank to render certain
administrative services to the Fund and the Bank is willing to render such
services.
NOW, THEREFORE, in consideration of the mutual covenants herein set forth,
it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints the Bank to act as Administrator
of the Fund on the terms set forth in this Agreement. The Bank accepts such
appointment and agrees to render the services herein set forth for the
compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Fund has furnished the Bank with copies
properly certified or authenticated of each of the following:
(a) RESOLUTIONS of the Fund's Board of Directors authorizing the
appointment of the Bank to provide certain administrative services to the Fund
and approving this Agreement;
(b) The Fund's incorporating documents filed with the state of [state]
on [date] and all amendments thereto (the "Articles");
(c) The Fund's by-laws and all amendments thereto (the "By-Laws");
(d) The Fund's agreements with all service providers which include any
investment advisory agreements, sub-investment advisory agreements, custody
agreements, distribution agreements and transfer agency agreements
(collectively, the "Agreements");
(e) The Fund's most recent Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 and under the 1940
Act and all amendments thereto; and
(f) The Fund's most recent prospectus and statement of additional
information (the "Prospectus"); and
(g) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for the Bank in the proper performance of its
duties hereunder.
The Fund will immediately furnish the Bank with copies of all amendments
of or supplements to the foregoing. Furthermore, the Fund will notify the Bank
as soon as possible of any matter which may materially affect the performance by
the Bank of its services under this Agreement.
3. DUTIES OF ADMINISTRATOR. Subject to the supervision and direction of the
Board of Directors of the Fund, the Bank, as Administrator, will assist in
conducting various aspects of the Fund's administrative operations and
undertakes to perform the services described in APPENDIX B hereto. The Bank may,
from time to time, perform additional duties and functions which shall be set
forth in an amendment to such APPENDIX B executed by both parties. At such time,
the fee schedule included in APPENDIX C hereto shall be appropriately amended.
1
<PAGE>
In performing all services under this Agreement, the Bank shall act in
conformity with the Fund's Articles and By-Laws and the 1940 Act, as the same
may be amended from time to time, and the investment objectives, investment
policies and other practices and policies set forth in the Fund's Registration
Statement, as the same may be amended from time to time. Notwithstanding any
item discussed herein, the Bank has no discretion over the Fund's assets or
choice of investments and cannot be held liable for any problem relating to such
investments.
4. DUTIES OF THE FUND.
(a) The Fund is solely responsible (through its transfer agent or
otherwise) for (i) providing timely and accurate reports ("Daily Sales Reports")
which will enable the Bank as Administrator to monitor the total number of
shares sold in each state on a daily basis and (ii) identifying any exempt
transactions ("Exempt Transactions") which are to be excluded from the Daily
Sales Reports.
(b) The Fund agrees to make its legal counsel available to the Bank for
instruction with respect to any matter of law arising in connection with the
Bank's duties hereunder, and the Fund further agrees that the Bank shall be
entitled to rely on such instruction without further investigation on the part
of the Bank.
5. FEES AND EXPENSES.
(a) For the services to be rendered and the facilities to be furnished
by the Bank, as provided for in this Agreement, the Fund will compensate the
Bank in accordance with the fee schedule attached as APPENDIX C hereto. Such
fees do not include out-of-pocket disbursements (as delineated on the fee
schedule or other expenses with the prior approval of the Fund's management) of
the Bank for which the Bank shall be entitled to bill the Fund separately and
for which the Fund shall reimburse the Bank.
(b) The Bank shall not be required to pay any expenses incurred by the
Fund.
6. LIMITATION OF LIABILITY.
(a) The Bank, its directors, officers, employees and agents 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 performance of its obligations and duties under
this Agreement, except a loss resulting from willful misfeasance, bad faith or
gross negligence in the performance of such obligations and duties, or by reason
of its reckless disregard thereof. The Fund will indemnify the Bank, its
directors, officers, employees and agents against and hold it and them harmless
from any and all losses, claims, damages, liabilities or expenses (including
legal fees and expenses) resulting from any claim, demand, action or suit (i)
arising out of the actions or omissions of the Fund, including, but not limited
to, inaccurate Daily Sales Reports and misidentification of Exempt Transactions;
(ii) arising out of the offer or sale of any securities of the Fund in violation
of (x) any requirement under the federal securities laws or regulations, (y) any
requirement under the securities laws or regulations of any state, or (z) any
stop order or other determination or ruling by any federal or state agency with
respect to the offer or sale of such securities; or (iii) not resulting from the
willful misfeasance, bad faith or gross negligence of the Bank in the
performance of such obligations and duties or by reason of its reckless
disregard thereof.
(b) The Bank may apply to the Fund at any time for instructions and may
consult counsel for the Fund, or its own counsel, and with accountants and other
experts with respect to any matter arising in connection with its duties
hereunder, and the Bank shall not be liable or accountable for any action taken
or omitted by it in good faith in accordance with such instruction, or with the
opinion of such counsel, accountants, or other experts. The Bank shall not be
liable for any act or omission taken or not taken in reliance upon any document,
certificate or instrument which it reasonably believes to be genuine and to be
signed or presented by the proper person or persons. The Bank shall not be held
to have notice of any change of authority of any officers, employees, or agents
of the Fund until receipt of written notice thereof has been received by the
Bank from the Fund.
2
<PAGE>
(c) In the event the Bank is unable to perform, or is delayed in
performing, its obligations under the terms of this Agreement because of acts of
God, strikes, legal constraint, government actions, war, emergency conditions,
interruption of electrical power or other utilities, equipment or transmission
failure or damage reasonably beyond its control or other causes reasonably
beyond its control, the Bank shall not be liable to the Fund for any damages
resulting from such failure to perform, delay in performance, or otherwise from
such causes.
(d) Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank be liable for special, incidental or consequential damages,
even if advised of the possibility of such damages.
7. TERMINATION OF AGREEMENT.
(a) The term of this Agreement shall be three years commencing upon the
date hereof (the "Initial Term"), unless earlier terminated as provided herein.
After the expiration of the Initial Term, the term of this Agreement shall
automatically renew for successive three-year terms (each a "Renewal Term")
unless notice of non-renewal is delivered by the non-renewing party to the other
party no later than ninety days prior to the expiration of the Initial Term or
any Renewal Term, as the case may be.
(i) Either party hereto may terminate this Agreement prior to the
expiration of the Initial Term in the event the other party violates any
material provision of this Agreement, provided that the violating party does not
cure such violation within ninety days of receipt of written notice from the
non-violating party of such violation.
(ii) Either party may terminate this Agreement during any Renewal
Term upon ninety days written notice to the other party. Any termination
pursuant to this paragraph 7(a)(ii) shall be effective upon expiration of such
ninety days, provided, however, that the effective date of such termination may
be postponed, at the request of the Fund, to a date not more than one hundred
twenty days after delivery of the written notice in order to give the Fund an
opportunity to make suitable arrangements for a successor administrator.
(b) At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the Bank relating
to its performance of its duties as Administrator.
8. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or the Bank shall be sufficiently
given if addressed to that party and received by it at its office set forth
below or at such other place as it may from time to time designate in writing.
3
<PAGE>
To the Fund:
Julius Baer Investment Funds
c/o Bank Julius Baer
330 Madison Avenue
New York, NY 10017
Attn: Mike Quain
To the Bank:
Investors Bank & Trust Company
200 Clarendon Street, P.O. Box 9130
Boston, MA 02117-9130
Attention: Andy Nesvet, Senior Director, Client Management
With a copy to: John E. Henry, General Counsel
(b) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable without the written consent of the other
party.
(c) This Agreement shall be construed in accordance with the laws of the
Commonwealth of Massachusetts, without regard to its conflict of laws
provisions.
(d) This Agreement may be executed in any number of counterparts each of
which shall be deemed to be an original and which collectively shall be deemed
to constitute only one instrument.
(e) The captions of 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.
9. CONFIDENTIALITY. All books, records, information and data pertaining
to the business of the other party which are exchanged or received pursuant to
the negotiation or the carrying out of this Agreement shall remain confidential,
and shall not be voluntarily disclosed to any other person, except as may be
required in the performance of duties hereunder or as otherwise required by law.
10. USE OF NAME. The Fund shall not use the name of the Bank or any of
its affiliates in any prospectus, sales literature or other material relating to
the Fund in a manner not approved by the Bank prior thereto in writing; provided
however, that the approval of the Bank shall not be required for any use of its
name which merely refers in accurate and factual terms to its appointment
hereunder or which is required by the Securities and Exchange Commission or any
state securities authority or any other appropriate regulatory, governmental or
judicial authority; PROVIDED FURTHER, that in no event shall such approval be
unreasonably withheld or delayed.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
JULIUS BAER INVESTMENT FUNDS
By: /s/ Michael Quain
------------------------
Name: Michael Quain
Title: President
INVESTORS BANK & TRUST COMPANY
By: /s/ Andrew M. Nesvet
-------------------------
Name: Andrew M. Nesvet
Title: Senior Director
5
<PAGE>
APPENDICES
Appendix A.................................... Portfolios
Appendix B.................................... Services
Appendix C......................................Fee Schedule
6
<PAGE>
Appendix A
PORTFOLIOS UNDER THIS AGREEMENT:
Julius Baer Global Income Fund
Julius Baer International Equity Fund
7
<PAGE>
Appendix B
SERVICES UNDER THIS AGREEMENT:
Investors Bank & Trust Co., as Administrator, will assist in supervising various
aspects of the Fund's administrative operations and undertakes to perform the
following specific services:
1. Maintaining office facilities (which may be in the offices of
Investors Bank & Trust Co. or a corporate affiliate;
2. Furnishing internal executive and administrative services and clerical
services;
3. Furnishing corporate secretarial services including preparation and
distribution of materials for Board of Directors meetings;
4. Accumulating information for and, subject to approval by the Fund's
treasurer and legal counsel, coordination of the preparation, filing,
printing and dissemination of reports to the Fund's shareholders of
record and the SEC including, but not necessarily limited to,
post-effective amendments to the Fund's registration statement, annual
reports, semi-annual reports, Form N-SAR, 24f-2 notices and proxy
material;
5. Participating in the preparation and filing of various reports or
other documents required by federal, state, and other applicable laws
and regulations, other than those filed or required to be filed by the
Fund's investment adviser or transfer agent;
6. Coordinating the preparation and filing of the Fund's tax returns;
7. Other services, as may be detailed as an update to this appendix from
time to time, at such time, the fee schedule included in APPENDIX C
hereto shall be appropriately amended.
8
<PAGE>
APPENDIX C
JULIUS BAER INVESTMENT FUNDS
ANNUAL FEE SCHEDULE (REVISED)*
December 7, 1999
FUND ACCOUNTING, CUSTODY, ADMINISTRATION & NAV CALCULATION
A. Fund Accounting, Custody, Administration & NAV Calculation
o The following asset based fees will be charged on a per fund basis:
First $250 Million in Assets 11 Basis Points (plus $25,000)
Next $250 Million in Assets 8 Basis Points
Over $500 Million in Assets 6 Basis Points
o There will be a monthly minimum fee of $11,000.00 for both funds
o There will be a $7,500.00 anuual charge for each share class in excess of
one
B. FOREIGN CUSTODY
o The attached asset based fees and transactions fees vary by country, based
upon the attached global custody fee schedule. Local duties, scrip fees,
registration, proxies and exchange fees are out-of-pocket.
o Investors Bank will require the fund to hold all international assets at
the subcustodian of our choice.
C. DOMESTIC TRANSACTION COSTS
o DTC/Fed Book Entry $12
o Physical Securities 35
o Options and Futures 18
o SWAPS 18
o GNMA Securities 40
o Government Paydowns 5
o Foreign Currency 18**
o Cross Border 50
o Outgoing Wires 8
o Incoming Wires 6
** THERE ARE NO TRANSACTION CHARGES FOR F/X CONTRACTS EXECUTED BY INVESTORS
BANK.
9
<PAGE>
MISCELLANEOUS
A. OUT-OF-POCKET
o These charges will consist of actual and reasonable expenses incurred by the
Bank in providing services associated with:
-Pricing & Verification Services -Forms & Supplies
-Systems Development Costs -Third Party Review
-Printing, Delivery & Postage -Ad Hoc Reporting
-Telecommunication -Proxy Receipt & Tabulation
-Legal Expenses -Data Transmissions
-Micro Rental -Customized Extracts or Reporting
-Extraordinary Travel Expense
B. DOMESTIC BALANCE CREDIT
o We allow use of balance credit against fees (excluding out-of-pocket
charges) for fund balances arising out of the custody relationship. The
credit is based on collected balances reduced by balances required to
support the activity charges of the accounts. The monthly earnings
allowance is equal to 75% of the 90-day T-bill rate.
C. SECURITIES LENDING, FOREIGN EXCHANGE AND CASH MANAGEMENT
o The assumption was made that Investors Bank would perform securities lending,
foreign exchange and cash management for the portfolio. Securities lending
revenue is split with the fund and Investors Bank on a 60/40% basis: 60%
going to the fund.
D. PAYMENT
o The above fees will be charged against the fund's custodial checking account
five business days after the invoice is mailed.
*This fee schedule is valid for 60 days from date of issue and assumes the
execution of our standard contractual agreements for custody services for a
minimum of three years.
*This fee schedule is confidential information of the parties and shall not be
disclosed to any third party without prior written consent of both parties.
Accepted and approved by: /s/ Michael Quain
----------------------
Print Name: Michael Quain
Title: President
Julius Baer Investment Funds
Date: December 28, 1999
Accepted and approved by: /s/ Andrew M. Nesvet
----------------------
Print Name: Andrew M. Nesvet
Title: Senior Director
Investors Bank & Trust
Date: December 29, 1999
10
<PAGE>
Global Custody Fees Schedule
- -----------------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- -----------------------------------------------------------
ARGENTINA (1) 17.00 $75.00
AUSTRALIA 5.00 $60.00
AUSTRIA 7.00 $60.00
BANGLADESH 41.00 $150.00
BELGIUM 7.00 $60.00
BERMUDA 20.00 $100.00
BAHRAIN 41.00 $140.00
BOTSWANA 50.00 $175.00
BRAZIL (2) 29.00 $80.00
BULGARIA 40.00 $100.00
CANADA 5.00 $30.00
CEDEL 5.00 $20.00
CHILE (2) 45.00 $100.00
CHINA 20.00 $75.00
COLOMBIA (3) 45.00 $140.00
CROATIA 45.00 $125.00
CYPRUS 50.00 $150.00
CZECH REPUBLIC 17.00 $75.00
DENMARK 5.00 $60.00
ECUADOR 45.00 $100.00
EGYPT 41.00 $100.00
ESTONIA 30.00 $125.00
EUROCLEAR INTERNAL 5.00 $20.00
EUROCLEAR CROSS BORDER 5.00 $50.00
FINLAND 7.00 $70.00
FRANCE 5.00 $60.00
GERMANY 5.00 $30.00
GHANA 50.00 $200.00
GREECE-EQUITY FUND (4) 20.00 $100.00
GREECE-FIXED INCOME (4) 15.00 $100.00
HONG KONG 10.00 $65.00
HUNGARY 25.00 $100.00
INDIA 40.00 $600.00
INDONESIA 13.00 $65.00
IRELAND 7.00 $60.00
ISRAEL 20.00 $60.00
ITALY 5.00 $50.00
JAPAN 5.00 $30.00
JORDAN 41.00 $120.00
11
<PAGE>
- -----------------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- -----------------------------------------------------------
KAZAKHSTAN (5) 45.00 $150.00
KENYA 50.00 $200.00
KOREA 10.00 $65.00
LATVIA 30.00 $125.00
LEBANON 41.00 $140.00
LITHUANIA 20.00 $75.00
LITHUANIA T BILLS 25.00 $75.00
LUXEMBOURG 7.00 $60.00
MALAYSIA 10.00 $70.00
MAURITIUS 41.00 $140.00
MEXICO 10.00 $40.00
MOROCCO 40.00 $150.00
NAMIBIA 50.00 $200.00
NETHERLANDS 5.00 $40.00
NEW ZEALAND 5.00 $60.00
NORWAY 7.00 $90.00
OMAN 41.00 $140.00
PAKISTAN 41.00 $140.00
PERU 35.00 $100.00
PHILIPPINES 13.00 $65.00
POLAND 20.00 $85.00
POLAND T BILLS 29.00 $110.00
PORTUGAL 15.00 $125.00
ROMANIA 45.00 $125.00
RUSSIA-EQUITY FUND (4) 50.00 $250.00
RUSSIA-FIXED INCOME(1)(4) 35.00 $140.00
SINGAPORE 10.00 $65.00
SLOVAKIA 20.00 $75.00
SLOVENIA 41.00 $100.00
SOUTH AFRICA 7.00 $40.00
SPAIN EQ & CORP DEBT 7.00 $60.00
SPAIN GVT DEBT 5.00 $60.00
SRI LANKA 13.00 $65.00
SWAZILAND 50.00 $200.00
SWEDEN 5.00 $40.00
SWITZERLAND 5.00 $50.00
TAIWAN 13.00 $65.00
THAILAND 10.00 $65.00
TURKEY 15.00 $100.00
12
<PAGE>
- -----------------------------------------------------------
COUNTRY BP CHARGE TRADE CHARGE
- -----------------------------------------------------------
UK 5.00 $50.00
URUGUAY 50.00 $150.00
VENEZUELA (2) 45.00 $140.00
ZAMBIA 50.00 $200.00
ZIMBABWE 50.00 $175.00
EUROCLEAR CHARGES APPLY TO ONLY APPROVED CONTINENTAL EUROPEAN COUNTRIES
(1) BONDS BILLED AT FACE VALUE.
(2) LOCAL ADMINISTRATOR FEES PASSED THROUGH AS ACTUALS.
(3) 20 BP LOCAL ADMINISTRATION CHARGE ON MONTH END MARKET VALUE.
($400 MINIMUM, $400 MAXIUM PER ACCOUNT)
(4) THE DESIGNATION AS AN EQUITY OR FIXED INCOME FUND SHALL BE DETERMINED
BASED ON 50% OR GREATER OF FUND ASSETS INVESTED IN EQUITY OR
FIXED INCOME SECURITIES.
(5) TRANSACTION FEES ARE CHARGED FOR CORPORATE ACTIONS. DEPOSITORY FEES ARE
CHARGED AS ACTUALS. OUT-OF POCKET CHARGES, INCLUDING EUROCLEAR CROSS
BORDER FEES, ARE PASSED THROUGH AS ACTUALS IN THE MARKET.
13
Consent of Independent Auditors
The Board of Trustees
Julius Baer Investment Funds:
We consent to the use or our report dated December 10, 1999 incorporated herein
by reference for the Julius Baer Global Income Fund and Julius Baer
International Equity Fund, portfolios of Julius Baer Investment Funds and to the
reference to our Firm under the heading "Independent Auditors" in the statement
of additional information.
Boston, Massachusetts
January 28, 2000
Julius Baer Global Income Fund
Co-Administration Agreement
Gentlemen or Madams:
Julius Baer Investment Funds, a business trust organized under the law of
The Commonwealth of Massachusetts ("we" or the "Trust") hereby invite Bank
Julius Baer & Co., Ltd., New York branch ("you"), on behalf of Julius Baer
Global Income Fund (the "Fund") and subject to the terms and conditions set
forth below, to enter into this Co-Administrative Agreement (the "Agreement") to
serve as the administrative and shareholder servicing agent of the shareholders
of the Fund ("Shareholders") for purposes of performing certain administrative
and shareholder servicing functions in connection with purchases and redemptions
of Class A shares of beneficial interest of the Fund ("Shares"), from time to
time upon the order and for the account of Shareholders, and to provide related
services to Shareholders in connection with their investments in the Fund.
1. APPOINTMENT. You hereby agree to perform certain services for
Shareholders as hereinafter set forth. Your appointment hereunder is
non-exclusive, and the parties recognize and agree that, from time to time, the
Fund may enter into other shareholder servicing agreements with other parties.
2. SERVICES TO BE PERFORMED AS ADMINISTRATIVE AGENT FOR CLASS A SHARES.
Subject to the supervision and direction of the Board of Trustees of the Trust,
you undertake 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 and shareholders: (i) maintain shareholder accounts which shall include
name, address, taxpayer identification number, and number of shares; (ii)
prepare shareholder statements; (iii) prepare confirmations; (iv) prepare
shareholder lists when reasonably requested by us; (v) mail shareholder
communications, including, but not limited to, shareholder statements,
confirmations, prospectuses, statements of additional information, annual and
semi-annual reports and proxy statements (collectively, "Shareholder
Communications"); (vi) tabulate proxies; (vii) disburse dividends and other
distributions; (viii) withhold taxes on U.S. resident and non-resident accounts
where applicable; (ix) prepare and file U.S. Treasury Department Forms 1099 and
other appropriate forms required by applicable statutes, rules and regulations
resulting from your role hereunder; (x) furnish 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; and (xi) provide such other similar services directly to
accounts as we may reasonably request to the extent you are permitted to do so
under applicable statutes, rules and regulations. You shall provide all
personnel and facilities necessary in order for you to perform one or more of
the functions described in this paragraph with respect to your Shareholders.
1
<PAGE>
In performing all services under this Agreement, you 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. FEES.
3.1. FEES FROM THE FUND. In consideration for the services described
in section 2 hereof and the incurring of expenses in connection therewith,
the Fund shall pay you a fee at an annual rate of up to 0.15% of the
average daily net asset value of all Shares owned by or for all
Shareholders with whom you maintain a servicing relationship, such fee to
be paid in arrears at the end of each calendar quarter.
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.
3.2. FEES FROM SHAREHOLDERS. It is agreed that you may impose certain
conditions on Shareholders, in addition to or different from those imposed by
the Fund, such as requiring a minimum initial investment or charging
Shareholders direct fees for the same or similar services as are provided
hereunder by you. These fees may either relate specifically to your services
with respect to the Fund or generally cover services not limited to those with
respect to the Fund. You shall bill Shareholders directly for such fees. In the
event you charge Shareholders such fees, you shall make appropriate prior
written disclosure, in accordance with all applicable laws, to Shareholders both
of any direct fees charged to the Shareholder and of the fees received or to be
received by you from the Fund pursuant to section 3.1 of this Agreement. It is
understood, however, that in no event shall you have recourse or access to the
account of any shareholder of the Fund except to the extent expressly authorize
by law or by the Fund or by such shareholder for payment of any direct fees
referred to in this section 3.2.
4. SECURITY. You represent and warrant that, to the best of your knowledge,
the various procedures and systems which you have implemented (including
provision for twenty-four hours a day restricted access) with regard to
safeguarding from loss or damage attributable to fire, theft or any other cause
the Fund's records and other data and your records, data, equipment, facilities
and other property used in the performance of your obligations hereunder are
adequate and that you will make such changes therein from time to time as in its
judgment are required for the secure performance of your obligations hereunder.
The parties shall review such systems and procedures on a periodic basis, and
the Fund may from time to time specify the types of records and other data of
the Fund to be safeguarded in accordance with this section 4.
2
<PAGE>
5. COMPLIANCE WITH LAWS; ETC. You shall comply with all applicable federal
and state laws and regulations, including securities laws. You hereby agree to
maintain all records required by law relating to transactions on the Shares, and
upon our request, or of the Fund, promptly make such of these records available
to us or the Fund's administrator as are requested. In addition, you hereby
agree to establish appropriate procedures and reporting forms and/or mechanisms
and schedules in conjunction with us and the Fund's administrator, to enable the
Fund to identify the location, type of, and sales to all accounts opened and
maintained by your Shareholders or by you on behalf of your Shareholders. You
represent and warrant to the Fund that the performance of all its obligations
hereunder will comply with all applicable laws and regulations, the provisions
of your charter documents and by-laws and all material contractual obligations
binding upon you. You furthermore undertakes that you will promptly inform the
Fund of any change in applicable laws or regulations (or interpretations
thereof) or in your charter or by-laws or material contracts which would prevent
or impair full performance of any of your obligations hereunder.
6. REPORTS. To the extent requested by the Fund from time to time, you
agree that you will provide the Fund with a written report of the amounts
expended by you pursuant to this Agreement and the purposes for which such
expenditures were made. Such written reports shall be in a form satisfactory to
the Fund and shall supply all information necessary for the Fund to discharge
its responsibilities under applicable laws and regulations.
7. RECORD KEEPING.
7.1. SECTION 31(A), ETC. You shall maintain records in a form acceptable to
the Fund and in compliance with applicable laws. Such records shall be deemed to
be the property of the Fund and will be made available, at the Fund's reasonable
request, for inspection and use by the Fund, representatives of the Fund and
governmental authorities.
7.2. TRANSFER OF SHAREHOLDER DATA. In the event this Agreement is
terminated or a successor to you are appointed, you shall, at the expense
of the Fund, transfer to such designee as the Fund may direct a certified
list of the shareholders of the Fund serviced by you (with name, address
and Social Security number), a complete record of the account of each such
shareholder and the status thereof, and all other relevant books, records,
correspondence and other data established or maintained by you under this
Agreement. In the event this Agreement is terminated, you will use your
best efforts to cooperate in the orderly transfer of such duties and
responsibilities, including assistance in the establishment of books,
records and other data by the successor.
7.3. SURVIVAL OF RECORD-KEEPING OBLIGATIONS. The record-keeping
obligations imposed in this section 7 shall survive the termination of this
Agreement.
8. FORCE MAJEURE. You shall not be liable or responsible for delays or
errors by reason of circumstances beyond its control, including, but not limited
to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.
3
<PAGE>
9. STANDARD OF CARE
The Adviser shall exercise its best judgment in rendering the services
described 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").
10. INDEMNIFICATION
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.
10.1. SURVIVAL OF INDEMNITIES. The indemnities granted by the parties
in this section 10 shall survive the termination of this Agreement.
11. INSURANCE. You shall maintain reasonable insurance coverage against any
and all liabilities which may arise in connection with the performance of its
duties hereunder. You shall provide information with respect to the extent of
such coverage upon our request.
12. NOTICES. All notices or other communications hereunder to either party
shall be in writing and shall be deemed sufficient if mailed to such party at
the address of such party set forth in this Agreement or at such other address
as such party may have designated by written notice to the other.
13. FURTHER ASSURANCES. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
4
<PAGE>
14. TERM AND TERMINATION. This Agreement shall become effective on November
15, 1999, and continue 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. This Agreement may be terminated upon not
more than 60 days' nor less than 30 days' notice to the Fund. Notwithstanding
anything herein to the contrary, this Agreement may not be assigned and shall
terminate automatically without notice to either party upon any assignment. Upon
termination hereof, the Fund shall pay such compensation as may be due you as of
the date of such termination.
15. CHANGES; AMENDMENTS. This Agreement may be changed or amended only by
written instrument signed by both parties.
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement has been executed on behalf of the Fund by the undersigned not
individually, but in the capacity indicated. This Agreement shall be effective
when accepted by you below.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement with
respect to the services described in Section 2 between the parties hereto.
18. WAIVER OF JURY TRIAL. The parties hereby waive the right to a jury
trial.
19. 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.
5
<PAGE>
Please confirm your agreement hereto by signing and returning the enclosed
counterpart of this Agreement at once to: Julius Baer Investment Funds, c/o
Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116. Upon receipt thereof, this Agreement and such signed duplicate copy will
evidence the agreement between us.
JULIUS BAER GLOBAL INCOME FUND
By: /s/ Michael K. Quain
--------------------------
Name: Michael K. Quain
Title: President
ACCEPTED:
BANK JULIUS BAER & CO., LTD., NEW YORK BRANCH
By: /s/ Urs Schwytter
----------------------
Name: Urs Schwytter
Title: Deputy General Manager
Dated: November 3, 1999
6
Julius Baer International Equity Fund
Co-Administration Agreement
Gentlemen or Madams:
Julius Baer Investment Funds, a business trust organized under the law of
The Commonwealth of Massachusetts ("we" or the "Trust") hereby invite Bank
Julius Baer & Co., Ltd., New York branch ("you"), on behalf of Julius Baer
International Equity Fund (the "Fund") and subject to the terms and conditions
set forth below, to enter into this Co-Administrative Agreement (the
"Agreement") to serve as the administrative and shareholder servicing agent of
the shareholders of the Fund ("Shareholders") for purposes of performing certain
administrative and shareholder servicing functions in connection with purchases
and redemptions of Class A shares of beneficial interest of the Fund ("Shares"),
from time to time upon the order and for the account of Shareholders, and to
provide related services to Shareholders in connection with their investments in
the Fund.
1. APPOINTMENT. You hereby agree to perform certain services for
Shareholders as hereinafter set forth. Your appointment hereunder is
non-exclusive, and the parties recognize and agree that, from time to time, the
Fund may enter into other shareholder servicing agreements with other parties.
2. SERVICES TO BE PERFORMED AS ADMINISTRATIVE AGENT FOR CLASS A SHARES.
Subject to the supervision and direction of the Board of Trustees of the Trust,
you undertake 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 and shareholders: (i) maintain shareholder accounts which shall include
name, address, taxpayer identification number, and number of shares; (ii)
prepare shareholder statements; (iii) prepare confirmations; (iv) prepare
shareholder lists when reasonably requested by us; (v) mail shareholder
communications, including, but not limited to, shareholder statements,
confirmations, prospectuses, statements of additional information, annual and
semi-annual reports and proxy statements (collectively, "Shareholder
Communications"); (vi) tabulate proxies; (vii) disburse dividends and other
distributions; (viii) withhold taxes on U.S. resident and non-resident accounts
where applicable; (ix) prepare and file U.S. Treasury Department Forms 1099 and
other appropriate forms required by applicable statutes, rules and regulations
resulting from your role hereunder; (x) furnish 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; and (xi) provide such other similar services directly to
accounts as we may reasonably request to the extent you are permitted to do so
under applicable statutes, rules and regulations. You shall provide all
personnel and facilities necessary in order for you to perform one or more of
the functions described in this paragraph with respect to your Shareholders.
1
<PAGE>
In performing all services under this Agreement, you 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. FEES.
3.1. FEES FROM THE FUND. In consideration for the services described
in section 2 hereof and the incurring of expenses in connection therewith,
the Fund shall pay you a fee at an annual rate of up to 0.25% of the
average daily net asset value of all Shares owned by or for all
Shareholders with whom you maintain a servicing relationship, such fee to
be paid in arrears at the end of each calendar quarter.
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.
3.2. FEES FROM SHAREHOLDERS. It is agreed that you may impose certain
conditions on Shareholders, in addition to or different from those imposed by
the Fund, such as requiring a minimum initial investment or charging
Shareholders direct fees for the same or similar services as are provided
hereunder by you. These fees may either relate specifically to your services
with respect to the Fund or generally cover services not limited to those with
respect to the Fund. You shall bill Shareholders directly for such fees. In the
event you charge Shareholders such fees, you shall make appropriate prior
written disclosure, in accordance with all applicable laws, to Shareholders both
of any direct fees charged to the Shareholder and of the fees received or to be
received by you from the Fund pursuant to section 3.1 of this Agreement. It is
understood, however, that in no event shall you have recourse or access to the
account of any shareholder of the Fund except to the extent expressly authorize
by law or by the Fund or by such shareholder for payment of any direct fees
referred to in this section 3.2.
4. SECURITY. You represent and warrant that, to the best of your knowledge,
the various procedures and systems which you have implemented (including
provision for twenty-four hours a day restricted access) with regard to
safeguarding from loss or damage attributable to fire, theft or any other cause
the Fund's records and other data and your records, data, equipment, facilities
and other property used in the performance of your obligations hereunder are
adequate and that you will make such changes therein from time to time as in its
judgment are required for the secure performance of your obligations hereunder.
The parties shall review such systems and procedures on a periodic basis, and
the Fund may from time to time specify the types of records and other data of
the Fund to be safeguarded in accordance with this section 4.
2
<PAGE>
5. COMPLIANCE WITH LAWS; ETC. You shall comply with all applicable federal
and state laws and regulations, including securities laws. You hereby agree to
maintain all records required by law relating to transactions on the Shares, and
upon our request, or of the Fund, promptly make such of these records available
to us or the Fund's administrator as are requested. In addition, you hereby
agree to establish appropriate procedures and reporting forms and/or mechanisms
and schedules in conjunction with us and the Fund's administrator, to enable the
Fund to identify the location, type of, and sales to all accounts opened and
maintained by your Shareholders or by you on behalf of your Shareholders. You
represent and warrant to the Fund that the performance of all its obligations
hereunder will comply with all applicable laws and regulations, the provisions
of your charter documents and by-laws and all material contractual obligations
binding upon you. You furthermore undertakes that you will promptly inform the
Fund of any change in applicable laws or regulations (or interpretations
thereof) or in your charter or by-laws or material contracts which would prevent
or impair full performance of any of your obligations hereunder.
6. REPORTS. To the extent requested by the Fund from time to time, you
agree that you will provide the Fund with a written report of the amounts
expended by you pursuant to this Agreement and the purposes for which such
expenditures were made. Such written reports shall be in a form satisfactory to
the Fund and shall supply all information necessary for the Fund to discharge
its responsibilities under applicable laws and regulations.
7. RECORD KEEPING.
7.1. SECTION 31(A), ETC. You shall maintain records in a form acceptable
to the Fund and in compliance with applicable laws. Such records shall be
deemed to be the property of the Fund and will be made available, at the Fund's
reasonable request, for inspection and use by the Fund, representatives of
the Fund and governmental authorities.
7.2. TRANSFER OF SHAREHOLDER DATA. In the event this Agreement is
terminated or a successor to you are appointed, you shall, at the expense
of the Fund, transfer to such designee as the Fund may direct a certified
list of the shareholders of the Fund serviced by you (with name, address
and Social Security number), a complete record of the account of each such
shareholder and the status thereof, and all other relevant books, records,
correspondence and other data established or maintained by you under this
Agreement. In the event this Agreement is terminated, you will use your
best efforts to cooperate in the orderly transfer of such duties and
responsibilities, including assistance in the establishment of books,
records and other data by the successor.
7.3. SURVIVAL OF RECORD-KEEPING OBLIGATIONS. The record-keeping
obligations imposed in this section 7 shall survive the termination of this
Agreement.
8. FORCE MAJEURE. You shall not be liable or responsible for delays or
errors by reason of circumstances beyond its control, including, but not limited
to, acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, Acts of God,
insurrection, war, riots or failure of communication or power supply.
3
<PAGE>
9. STANDARD OF CARE
The Adviser shall exercise its best judgment in rendering the services
described 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").
10. INDEMNIFICATION
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.
10.1. SURVIVAL OF INDEMNITIES. The indemnities granted by the parties
in this section 10 shall survive the termination of this Agreement.
11. INSURANCE. You shall maintain reasonable insurance coverage against any
and all liabilities which may arise in connection with the performance of its
duties hereunder. You shall provide information with respect to the extent of
such coverage upon our request.
12. NOTICES. All notices or other communications hereunder to either party
shall be in writing and shall be deemed sufficient if mailed to such party at
the address of such party set forth in this Agreement or at such other address
as such party may have designated by written notice to the other.
13. FURTHER ASSURANCES. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
4
<PAGE>
14. TERM AND TERMINATION. This Agreement shall become effective on November
15, 1999, and continue 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. This Agreement may be terminated upon not
more than 60 days' nor less than 30 days' notice to the Fund. Notwithstanding
anything herein to the contrary, this Agreement may not be assigned and shall
terminate automatically without notice to either party upon any assignment. Upon
termination hereof, the Fund shall pay such compensation as may be due you as of
the date of such termination.
15. CHANGES; AMENDMENTS. This Agreement may be changed or amended only by
written instrument signed by both parties.
16. MISCELLANEOUS. The captions in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement has been executed on behalf of the Fund by the undersigned not
individually, but in the capacity indicated. This Agreement shall be effective
when accepted by you below.
17. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement with
respect to the services described in Section 2 between the parties hereto.
18. WAIVER OF JURY TRIAL. The parties hereby waive the right to a jury
trial.
19. 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.
5
<PAGE>
Please confirm your agreement hereto by signing and returning the enclosed
counterpart of this Agreement at once to: Julius Baer Investment Funds, c/o
Investors Bank & Trust Company, 200 Clarendon Street, Boston, Massachusetts
02116. Upon receipt thereof, this Agreement and such signed duplicate copy will
evidence the agreement between us.
JULIUS BAER INTERNATIONAL EQUITY FUND
By: /s/ Michael K. Quain
--------------------
Name: Michael K. Quain
Title: President
ACCEPTED:
BANK JULIUS BAER & CO., LTD., NEW YORK BRANCH
By: /s/ Urs Schwytter
-----------------
Name: Urs Schwytter
Title: Deputy General Manager
Dated: November 3, 1999
6
JULIUS BAER INVESTMENT FUNDS
AMENDED RULE 18F-3 PLAN
RULE 18F-3
Pursuant to Rule 18f-3 ("Rule 18f-3") of the Investment Company Act of
1940, as amended (the "1940 Act"), an open-end investment company whose shares
are registered on Form N-1A may issue more than one class of voting stock
(hereinafter referred to as "shares"), provided that such multiple classes of
shares differ either in the manner of distribution, or in services they provide
to shareholders, or both. Julius Baer Investment Funds (the "Trust"), a
registered open-end investment management company whose shares are registered on
Form N-1A, consisting of the Julius Baer International Equity Fund and the
Julius Baer Global Income Fund and any future fund or series of the Trust (each
a "Fund"), may offer to shareholders multiple classes of shares in the Funds in
accordance with Rule 18f-3 and this Amended Rule 18f-3 Plan (or as further
amended) as described herein, upon approval of the Board of Trustees of the
Trust.
AUTHORIZED CLASSES
Each Fund may issue two classes of shares: Class A and Class I shares (each
a "Class"). Class A shares will be offered at net asset value and will be
subject to (i) a Rule 12b-1 distribution fee and shareholder services fee
payable at an annual rate of up to 0.25% of each Fund's average daily net assets
attributable to the Class A shares of each Fund for services related to the
distribution of Class A shares of each Fund and the provision of certain
shareholder services to Class A shares of each Fund and (ii) a co-administration
fee payable at an annual rate of up to 0.25% for Julius Baer International
Equity Fund, and up to 0.15% for Julius Baer Global Income Fund, of the average
daily net assets attributable to Class A shares of each Fund for the provision
of certain administrative and shareholder services to the Class A shares of each
Fund. Class I shares will be offered at net asset value and will not be subject
to distribution fees, shareholder servicing fees or co-administration fees.
The Classes of shares issued by each Fund shall have the same rights,
preferences, obligations, voting powers, restrictions and limitations, except as
follows: (i) each Class will have exclusive voting rights on any matter
submitted to shareholders that relate solely to the arrangement of that Class,
(ii) each Class will have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
the other Class, (iii) each Class will bear a different name or designation,
(iv) each Class will have different investment minimums, and (v) each Class will
bear different Class Expenses (as defined below).
1
<PAGE>
CLASS EXPENSES
Each Class of shares shall bear expenses, not including advisory or
custodial fees or other expenses related to the management of the Fund's assets,
that are actually incurred in a different amount by that Class or are directly
attributable to the kind or degree of services rendered to that Class ("Class
Expenses"). Class Expenses may be waived or reimbursed by the Fund's investment
adviser, underwriter or any other provider of services to the Fund.
ALLOCATION OF FUND INCOME AND FUND EXPENSES
For each Fund, income, realized gains and losses, unrealized appreciation
and depreciation, and expenses that are not Class Expenses shall be allocated to
each Class based on (i) the net assets of that Class in relation to the net
assets of the Fund, (ii) the "Simultaneous Equations Method" (as that term is
defined under the 1940 Act), or (iii) any other appropriate method that a
majority of the Trustees of the Fund, and a majority of the Trustees who are not
interested persons of the Fund, determine is fair to the shareholders of each
Class and will result in an annualized rate of return of each Class that differs
from that of the other Class only by the expense differentials between the
Classes.
EXCHANGE AND CONVERSION PRIVILEGES
Shares of each Fund may be exchanged for shares of the same Class of the
other Fund. Class A shares may be converted into Class I shares of the same
Fund, subject to the minimum investment requirements and other eligibility
requirements of Class I shares. Class I shares of a Fund may be converted into
Class A shares of the same Fund if the investor becomes ineligible to
participate in Class I shares. Conversions are effected on the basis of the
relative net asset values of the two Classes, no sales loads, fees or other
charges are imposed, and, in the case of conversions from Class I to Class A,
the investor is given prior notice of the proposed conversion.
2
CODE OF ETHICS
I. APPLICABILITY
This Code of Ethics ("Code") establishes rules of conduct for "Covered
Persons" (as defined herein) of Bank Julius Baer & Co. Ltd., New York Branch
("BJB-NY"), Julius Baer Securities Inc. ("JBS") and each registered investment
company that adopts this Code (a "Covered Investment Company") (BJB-NY, JBS and
the Covered Investment Companies being herein referred to collectively as the
"Covered Companies"). For purposes of this Code "Covered Person" shall mean:
(A) Any officer, director or Advisory Person (as defined below) of any
Funds or the Fund's investment adviser; and
(B) Any director, officer or general partner of a principal underwriter
who, in the ordinary course of business, makes, participates in or obtains
information regarding, the purchase or sale of Securities by the Fund or whose
functions or duties in the ordinary course of business relate to the making of
any recommendation to the Fund regarding the purchase or sale of Securities.
For purposes of this Code, Covered Persons shall not include any person who
is a disinterested director of a Fund, or for purposes of this Code other than
Sections V(B), (C) and (D), an officer of the Fund (other than an officer of the
Fund employed by the adviser) unless such person knew or should have known in
the course of his duties as an officer or director of the Fund that the Fund has
made or makes a purchase or sale of the same security or a related security
within 15 days before or after the purchase or sale of such security or a
related security by such officer or director.
Except where the context otherwise requires, the provisions of this Code
shall also apply to activities of "Access Persons" (as defined in Rule 17j-1
under the Act) of BJB-NY and JBS as they relate to any registered investment
company for which BJB-NY or JBS serves as investment adviser or JBS serves as
selling agent.
1
<PAGE>
II. STATEMENT OF GENERAL PRINCIPLES
In performing their daily responsibilities, Covered Persons may have access
to information about impending fund transactions. Like all insiders, these
individuals may not use material nonpublic information to benefit themselves or
others.
Conflicts of interest can arise whenever Covered Persons buy and sell
securities for their personal accounts. This Code of Ethics is intended to
ensure that all personal securities transactions be conducted in such a manner
as to avoid any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility.
All Covered Persons, particularly those who manage or make recommendations
to the Funds, should scrupulously avoid any conduct that appears to take
advantage of this relationship. Accordingly, in addition to complying with the
specific prohibitions set forth below, all Covered Persons shall conduct their
personal investment activities in a manner consistent with the following general
fiduciary principles: (1) the duty at all times to place the interests of a Fund
first; (2) the requirement that all personal securities transactions be
conducted in such a manner as to avoid any actual or potential conflict of
interest or any abuse of an individual's position of trust and responsibility;
and (3) the fundamental standard that Covered Persons should not take
inappropriate advantage of their positions.
No Covered Person shall, in connection with the purchase or sale, directly
or indirectly, by such person of a security held or to be acquired by the Funds:
o employ any device, scheme or artifice to defraud the Funds;
o make to the Funds any untrue statement of a material fact or omit to
the Funds a material fact necessary in order to make the statement
made, in light of the circumstances under which they are made, not
misleading;
o engage in any act, practice or course of business which would operate
as a fraud or deceit upon the Funds;
o engage in any manipulative practice with respect to the Funds;
o trade while in possession of material non-public information for
personal or BJB-NY or JBS investment accounts, or disclose such
information to others in or outside BJB-NY or JBS who have no need for
this information.
2
<PAGE>
It is a violation of federal securities laws to buy or sell securities
while in possession of material non-public information and illegal to
communicate such information to a third party who buys or sells.
III. PROHIBITIONS
A. GENERAL PROHIBITION - NO PURCHASES OR SALES IF BEING CONSIDERED FOR
PURCHASE OR SALE BY A COVERED INESTMENT COMPANY.
No Covered Person shall purchase or sell, directly or indirectly, any
security (or related security) in which he has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership (as defined in Attachment
A hereto) and that he knows or should have know at the time of such purchase or
sale:
(1) is being considered for purchase or sale by a Fund; or
(2) is being purchased or sold by a Fund.
B. NO PARTICIPATION IN IPOs.
No Investment Personnel shall acquire any direct or indirect beneficial
ownership of securities in an initial public offering of securities without the
prior written approval of a supervisory person designated by BJB-NY, JBS or the
relevant Fund, whichever is most appropriate under the circumstances (the
"Designated Supervisory Person"). This prior approval will take into account,
among other factors, whether the investment opportunity should be reserved for a
Fund, and whether the opportunity is being offered to an individual by virtue of
his position with a Fund or its adviser or distributor. Investment Personnel who
have been authorized to acquire securities in an initial public offering must
DISCLOSE that investment when they play a part in any Fund's subsequent
consideration of an investment in the issuer. In such circumstances, the Fund's
decision to purchase securities of the issuer will be subject to an INDEPENDENT
REVIEW by personnel of BJB-NY or JBS, as the case may be, with no beneficial
ownership interest in the issuer.
3
<PAGE>
C. LIMITED PARTICIPATION IN PRIVATE PLACEMENTS.
No Investment Personnel shall acquire any direct or indirect beneficial
ownership of securities in a private placement without the prior written
approval of the relevant Designated Supervisory Person. This prior approval will
take into account, among other factors, whether the investment opportunity
should be reserved for a Fund, and whether the opportunity is being offered to
an individual by virtue of his position with a Fund or its adviser or
distributor. Investment Personnel who have been authorized to acquire securities
in a private placement must DISCLOSE that investment when they play a part in
any Fund's subsequent consideration of an investment in the issuer. In such
circumstances, the Fund's decision to purchase securities of the issuer will be
subject to an INDEPENDENT REVIEW by personnel of BJB-NY or JBS, as the case may
be, with no beneficial ownership interest in the issuer.
D. BLACKOUT PERIODS.
No Covered Person shall execute a securities transaction on a day during
which any Fund has a pending "buy" or "sell" order in that same security (or a
related security) until that order is fully executed or withdrawn, nor may any
Portfolio Manager for a Fund buy or sell a security (or a related security)
within seven calendar days before or after that Fund trades in that security (or
related security). Trades within the prescribed periods shall be unwound, if
possible; if impractical, all profits from the trading shall be disgorged to the
relevant Fund or a charitable organization as directed by the relevant
Designated Supervisory Person.
E. BAN ON SHORT-TERM TRADING PROFITS.
(1) BJB-NY, JBS and the Covered Investment Companies encourage Investment
Personnel to refrain from short-term trading (i.e., purchases and sales within a
60-day period) for accounts in which they have a beneficial interest. Each of
the Covered Companies reserves the right to impose a ban on the short-term
trading activities of Investment Personnel if they determine that such
activities are being conducted in a manner that may be perceived to be
detrimental to a Covered Investment Company.
4
<PAGE>
(2) No security (or related security) may within a 60-day period be bought
and sold or sold and bought at a profit by any Investment Personnel if the
security or related security was held at any time during that period by any
Fund; provided, however, that, subject to the prohibitions set forth in Article
III, paragraph D, such prohibition shall cease to apply immediately following
the sale of such security (and all related securities) by all Funds. Trades made
in violation of this prohibition shall be unwound; if impractical, any profits
realized on such short-term trades shall be disgorged to the appropriate Fund or
a charitable organization as directed by the relevant Designated Supervisory
Person.
F. DISCLOSURE OF INTEREST IN TRANSACTION.
No Covered Person shall recommend any securities transaction by any Fund
without having disclosed his interest, if any, in such securities or the issuer
thereof, including without limitation:
(1) his direct or indirect beneficial ownership of any securities of such
issuer;
(2) any contemplated transaction by such person in such securities;
(3) any position with such issuer or its affiliates;
(4) any present or proposed business relationship between such issuer
or its affiliates and such person or any party in which such person has a
significant interest; and
(5) any factors about the transaction that are potentially relevant to
a conflicts of interest analysis.
Required disclosure shall be made to the relevant Designated Supervisory
Person, and a Fund's decision to engage in the securities transaction will be
subject to an independent review by personnel of BJB-NY or JBS, as the case may
be, with no beneficial ownership interest in the securities or the issuer
thereof.
5
<PAGE>
G. GIFTS.
Covered Persons shall not seek or accept any gift, favor, preferential
treatment or valuable consideration or other thing of more than a DE MINIMIS
value (currently $100) from any person or entity that does business with or on
behalf of a Fund.
Receipts of expense payments, gifts or favors are to be reported by all
Covered Persons, in the form appended hereto as Attachment E to the appropriate
Julius Baer Compliance Officer.
H. SERVICE AS A DIRECTOR.
Investment Personnel shall not serve on the board of directors of
publicly-traded companies, absent prior written authorization by the relevant
Designated Supervisory Person based upon a determination that the board service
would be consistent with the interests of the Funds. Where board service is
authorized, Investment Personnel serving as directors shall be isolated from
those making investment decisions with respect to the securities of that issuer
through "Chinese Wall" or other procedures specified by the relevant Designated
Supervisory Person, absent a determination by the Designated Supervisory Person
to the contrary for good cause shown.
I. DEFINITIONS.
For purposes of this Code, the term security shall include any "security" as
defined in Section 2(a)(36) of the Act, but shall not include securities issued
by the Government of the United States, short-term debt securities that are
"government securities" within the meaning of Section 2(a)(16) of the Act,
bankers' acceptances, bank certificates of deposit, commercial paper and shares
of registered open-end investment companies (except in the case of a Portfolio
Manager that wishes to purchase or sell shares of his/her open-end registered
investment company). For purposes of this Code, "security" shall also include
futures contracts and options thereon and other derivatives. A "related
security" to a security shall be broadly interpreted to include any instrument
the price of which would tend to be affected by a change in the price of the
subject security, such as a warrant or option on a subject security or a
securityconvertible into or exchangeable for the subject security.
6
<PAGE>
For purposes of this Code, Investment Personnel means any employee of the
Fund or investment adviser (or of any company in a control relationship to the
Fund or investment adviser) who, in connection with his or her regular functions
or duties, makes or participates in making recommendations regarding the
purchase or sale of securities by the Fund; or (ii) any natural person who
controls the Fund or investment adviser and who obtains information concerning
recommendations made to the Fund regarding the purchase or sale of securities by
the Fund.
For purposes of this Code, Advisory Person is any employee of the Fund or
investment adviser (or of any company in a control relationship to the Fund or
investment adviser) who, in connection with his or her regular functions or
duties, makes, participates in, or obtains information regarding the purchase or
sale of Securities by a Fund, or whose functions relate to the making of any
recommendations with respect to the purchases or sales; or any natural person in
a control relationship to the Fund or investment adviser who obtains information
concerning recommendations made to the Fund with regard to the purchase or sale
of Securities by the Fund.
For purposes of the prohibitions set forth in Article III and the
preclearance and reporting requirements set forth in Article V of this Code, the
term security shall not include securities issued by governments of countries
that are members of the Organization for Economic Co-operation and Development.
IV. EXEMPT TRANSACTIONS
(A) The prohibitions described in paragraphs A, B, D and E of Article III
shall not apply to:
(1) Purchases or sales effected in any account over which the
Covered Person has no direct or indirect influence or control;
(2) Purchases or sales that are non-volitional on the part of the
Covered Person;
(3) Purchases that are part of an automatic dividend reinvestment
plan;
7
<PAGE>
(4) Any transaction, or series of related transactions during the
course of a calendar quarter, involving an aggregate of not more than
ten options or ten futures contracts, as the case may be, provided
that the aggregate amount of initial margin (in the case of futures
contracts) and option premiums (in the case of options on futures,
securities or securities indexes) payable with respect to any one
underlying security or security index, as the case may be, does not
exceed $10,000;
(5) A purchase or sale transaction in a security which, when
combined with all transactions in that security or related securities
during the course of a calendar quarter, does not exceed $10,000;
(6) Purchases or sales of U.S. Government securities, commercial
paper, bank CDs, banker's acceptances, securities issued by member
governments of the OECD and shares of open-end registered investment
companies (other than the Funds);
(7) Purchase or sales during the course of a calendar quarter of
1,000 shares or less of an issuer with in excess of $1 billion market
capitalization and average daily reported volume of trading exceeding
100,000 shares;
(8) Purchases effected upon the exercise of rights issued by an
issuer PRO RATA to all holders of a class of its securities, to the
extent such rights were acquired from the issuer, and sales of such
rights so acquired;
(9) Purchases or sales for which the Covered Person has received
prior written approval from the relevant Designated Supervisory
Person. Prior approval shall be granted only if a purchase or sale of
securities is consistent with the purposes of this Code and Section
17(j) of the Act and the rules thereunder. To illustrate, a purchase
or sale shall be considered consistent with those purposes if such
purchase or sale is only remotely potentially harmful to the Funds
because such purchase or sale would be unlikely to affect a highly
institutional market, or because such purchase or sale is clearly not
related economically to the securities held, purchased or sold by the
Funds.
B. The preclearance requirement described in paragraph A of Article V of
this Code shall not be required with respect to (1) through (8) above.
8
<PAGE>
V. PRECLEARANCE, REPORTING AND OTHER COMPLIANCE PROCEDURES
A. PRECLEARANCE.
(1) No Covered Person may purchase or sell securities for an account in
which he has a beneficial interest other than through the JBS trading desk,
unless prior written approval has been obtained from the relevant Designated
Supervisory Person. If such approval is obtained, the broker or futures
commission merchant through which the transaction was effected shall be directed
by that Covered Person to supply the appropriate Julius Baer Compliance Officer,
on a timely basis, duplicate copies of confirmations of all securities
transactions and copies of periodic statements for all securities accounts.
(2) All Investment Personnel shall also disclose to the relevant Designated
Supervisory Person all personal securities holdings upon the commencement of his
or her employment by BJB-NY, JBS or the Funds or any company in a control
relationship to BJB-NY, JBS or the Funds, and thereafter on an annual basis.
(3) Before any Covered Person purchases or sells any security for any
account in which he or she has a beneficial interest, prior written
authorization shall be obtained from the relevant Designated Supervisory Person.
Prior written authorization shall involve disclosure necessary for a conflict of
interest analysis. If prior written authorization is given for a purchase or
sale and the transaction is not consummated within 48 hours thereafter, a new
prior written authorization request must be obtained. The appropriate Julius
Baer Compliance Officer shall review not less frequently than weekly reports
from the trading desk (or, if applicable, confirmations from brokers or futures
commission merchants) to assure that all transactions effected by Covered
Persons for accounts in which they have a beneficial interest were effected only
after receiving prior written authorization hereunder.
(4) The prior authorization form appended to this Code as Attachment B
shall be used for all securities transactions for which Designated Supervisory
Person approval is necessary.
9
<PAGE>
B. ANNUAL CERTIFICATION.
All Covered Persons shall certify annually to the Julius Baer Compliance
Officer in New York that they have read and understand this Code of Ethics and
recognize that they are subject thereto. Further, Covered Persons shall certify
annually to the Julius Baer Compliance Officer in New York that during the prior
year they have complied with the requirements of this Code of Ethics and that
they have disclosed or reported all personal securities transactions required to
be disclosed or reported pursuant to the requirements of this Code during the
prior year. A form of this certification is appended as Attachment D.
C. REPORTING.
Every Covered Person must submit reports (forms of which is appended as
Attachment C) containing the information set forth below with respect to EACH
transaction by which the Covered Person has, or by reason of such transaction,
acquires, ANY direct or indirect beneficial ownership of a security, PROVIDED,
HOWEVER, that:
(A) a Covered Person shall not be required to make a report with respect to
any transaction effected for any account over which such person does not have
any direct or indirect influence or control;
(B) Outside Directors shall be required to report a transaction only if
such person, at the time of that transaction, knew, or in the ordinary course of
fulfilling his official duties as a director or trustee of such company should
have known, that during the 15-day period immediately preceding or after the
date of the transaction by such person, the security such person purchased or
sold is or was purchased or sold by such company or was being considered for
purchase or sale by such company or its investment adviser(s); and
(C) A Covered Person need not make a quarterly report where the report
would duplicate information recorded pursuant to Rules 204-2(a)(12) or
204-2(a)(13) under the Investment Advisers Act of 1940.
10
<PAGE>
(i) INITIAL HOLDINGS REPORTS. No later than 10 calendar days after
the person becomes a Covered Person, the following information:
(1) The title, number of shares and principal amount of each
Covered Security in which the Covered Person had any direct
or indirect beneficial ownership when the person became a
Covered Person;
(2) The name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were
held for the direct or indirect benefit of the Covered
Person as of the date the person became a Covered Person;
and
(3) The date that the report is submitted by the Covered Person.
(ii) QUARTERLY TRANSACTIONS REPORT. A Covered Person must submit the
report required by this Article V to the relevant Designated
Supervisory Person no later than 10 days after the end of the
calendar quarter in which the transaction to which the report
relates was effected. A report must contain the following
information:
(1) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(2) The nature of the transaction (i.e., purchase, sale or other
acquisition or disposition including, without limitation,
the receipt or giving of any gift);
(3) The price at which the transaction was effected;
(4) The name of the broker, dealer or bank with or through whom
the transaction was effected; and
11
<PAGE>
(5) Any facts potentially relevant to a conflicts of interest
analysis of which the Covered Person is aware, including the
existence of any substantial economic relationship between
the Covered Person's transactions and securities held or to
be acquired by a Fund.
(6) The date the report is submitted by the Covered Person.
(7) With respect to any account established by the Access Person
in which any securities were held during the quarter for the
direct or indirect benefit of the Access Person:
(a) The name of the broker, dealer or bank with whom the
Covered Person established the account;
(b) The date the account was established; and
(c) The date that the report is submitted by the Covered
Person.
(iii)ANNUAL HOLDINGS REPORTS. Annually, the following information
(which information must be current as of a date no more than 30
calendar days before the report is submitted):
(1) The title, number of shares and principal amount of each
Security in which the Covered Person had any direct or
indirect beneficial ownership;
(2) The name of any broker, dealer or bank with whom the Covered
Person maintains an account in which any securities are held
for the direct or indirect benefit of the Covered Person;
and
(3) The date that the report is submitted by the Covered Person.
12
<PAGE>
Any report submitted to comply with the requirements of this Article V may
contain a statement that the report shall not be construed as an admission by
the person making such report that he has any direct or indirect beneficial
ownership in the security to which the report relates.
A Covered Person will be deemed to have complied with the requirements of
this paragraph (C) by causing duplicate monthly brokerage statements on which
all transactions required to be reported hereunder are described to be sent on a
timely basis to the Julius Baer Compliance Officer.
VI. SANCTIONS
Upon discovering that a Covered Person has not complied with the
requirements of this Code, the board of directors or trustees, as the case may
be, of BJB-NY, JBS or the relevant Fund, as most appropriate under the
circumstances, may impose on that person whatever sanctions the board deems
appropriate, including, among other things, censure, suspension or termination
of employment.
Material violations of the requirements of this Code by employees of BJB-NY
or JBS and the sanctions imposed in connection therewith insofar as they relate
to a Fund shall be reported not less frequently than quarterly to the board of
directors/trustees of the relevant Fund. A material violation is one which
results in a compensation adjustment exceeding $10,000, suspension or
termination of employment.
VII. REVIEW BY THE BOARD OF DIRECTORS/TRUSTEES
Management of each Fund that adopts this Code of Ethics shall prepare an
annual report to the board of directors/trustees of each such Fund that:
o summarizes existing procedures concerning personal investing and any
changes in the procedures made during the past year;
o identifies any violations relating to the relevant Fund requiring
significant remedial action during the past year not previously
reported to the board; and
13
<PAGE>
o identifies any recommended changes in existing restrictions or
procedures based upon each Fund's experience under this Code of
Ethics, evolving industry practices or developments in applicable laws
or regulations.
o certifies that it has adopted procedures reasonably necessary to
prevent Access Persons from violating the Code.
VIII. CONFIDENTIALITY
All information obtained from any Covered Person or any affiliate of such
Covered Person hereunder shall be kept in strict confidence, except that reports
of securities transactions hereunder will be made available to the Securities
and Exchange Commission or any other regulatory or self-regulatory organization
to the extent required by law or regulation.
IX. OTHER LAWS, RULES AND STATEMENTS OF POLICY
Nothing contained in this Code shall be interpreted as relieving any
Covered Person or any affiliate of such Covered Person from acting in accordance
with the provision of any applicable law, rule or regulation or any other
statement of policy or procedure governing the conduct of such person adopted by
any such Covered Person or its affiliates.
X. FURTHER INFORMATION
If any person has any question with regard to the applicability of the
provisions of this Code generally or with regard to any securities transaction
or transactions, he should consult the relevant Designated Supervisory Person.
XI. DESIGNATED SUPERVISORY PERSONS
As of the date hereof, the Designated Supervisory Persons are the following
individuals:
o If the Covered Person is an officer, trustee, director or employee of
a Fund, the Designated Supervisory Person is the Chief Financial
Officer of the relevant Fund
14
<PAGE>
o If the Covered Person is an officer or employee of BJB-NY, the
Designated Supervisory Person is the General Manager of BJB-NY
o If the Covered Person is a director, officer or employee of JBS, the
Designated Supervisory Person is the Managing Director of JBS
o If the Covered Person is a non-U.S. resident the Designated
Supervisory Person is the Local Compliance Officer of the Baer Group
o If there is an overlap, the Local Compliance Officer will designate
the appropriate Designated Supervisory Person.
15
<PAGE>
ATTACHMENT A
The term "beneficial ownership" as used in the attached Code of Ethics (the
"Code") is to be interpreted by reference to Rule 16a-1(a)(2) under the
Securities Exchange Act of 1934 (the "Rule"), except that the determination of
direct or indirect beneficial ownership for purposes of the Code must be made
with respect to all securities that a Covered Person has or acquires. Under the
Rule, a person is generally deemed to have beneficial ownership of securities if
the person, directly or indirectly, through any contract, arrangement,
understanding, relationship or otherwise, has or shares a direct or indirect
pecuniary interest in the securities.
The term "pecuniary interest" in particular securities is generally defined
in the Rule to mean the opportunity, directly or indirectly, to profit or share
in any profit derived from a transaction in the securities. A person is deemed
to have an "indirect pecuniary interest" within the meaning of the Rule in any
securities held by members of the person's immediate family sharing the same
household, the term "immediate family" including any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, as
well as adoptive relationships. Under the Rule, an indirect pecuniary interest
also includes, among other things: a general partner's proportionate interest in
the portfolio securities held by a general or limited partnership; a person's
right to dividends that is separated or separable from the underlying
securities; a person's interest in certain trusts; and a person's right to
acquire equity securities through the exercise or conversion of any derivative
security, whether or not presently exercisable, the term "derivative security"
being generally defined as any option, warrant, convertible security, stock
appreciation right, or similar right with an exercise or conversion privilege at
a price related to an equity security, or similar securities with, a value
derived form the value of an equity security. For purposes of the Rule, a person
who is a shareholder of a corporation or similar entity is NOT deemed to have a
pecuniary interest in portfolio securities held by the corporation or entity, so
long as the shareholder is not a controlling shareholder of the corporation or
the entity and does not have or share investment control over the corporation's
or the entity's portfolio. The term "control" means the power to exercise a
controlling influence over the management or policies of a company, unless such
power is solely the result of an official position with such company.
16
<PAGE>
ATTACHMENT B
REQUEST FOR PRIOR APPROVAL OF PERSONAL SECURITY
RECOMMENDATIONS OR TRANSACTIONS
Request to: buy --- sell ---
name of issuer/security: -------------------------
type of security (e.g., equity, bond, option, future):
----------------------------------------------
amount of security/number of shares: ----------------
price: ------------------
for my own account: --------------------
for an account in which I have a beneficial interest
(describe):------------------------------------
for both of the above: ----------------------------
proposed transaction date: ------------------------
broker/dealer/bank through whom transaction to be
effected: ----------------------------------------
(1) I learned about this security in the following manner:
-----------------------------------------
(2) I do -- do not -- serve as a director or have any relatives
serving as a director or officer of the issuer. If so, please discuss:
-------------------------------------------------
(3) Set forth below are any facts which may be relevant to a conflict of
interest analysis of which I am aware, including the existence of any
substantial economic relationship between my transaction(s) and securities
held or to be required by a client:
-------------------------------------------------------
I have read and understand the Code of Ethics of Bank Julius Baer & Co.,
Ltd., New York Branch, Julius Baer Securities Inc. and certain registered
investment companies and recognize that the proposed transaction is subject
thereto. I further understand that any prior written authorization obtained
shall be valid for a period not to exceed 48 hours.
*As Portfolio Manager for the European Warrant Fund ("EWF") I certify that
this transaction is permissible in terms of its proximity to EWF transactions
and holdings.
Date: ---- Signature: ---------------- Print Name: ----------------------
Instructions: PREPARE AND FORWARD TO THE RELEVANT DESIGNATED SUPERVISORY
PERSON, WHO WILL INFORM YOU WHETHER THE TRANSACTION IS APPROVED
OR DISAPPROVED.
The proposed (purchase)(sale)(recommendation) described above is approved
(disapproved).
Name: ------------- Title: ---------------- Date/Time: -------------
*Only applicable to EWF Portfolio Managers
17
<PAGE>
EXHIBIT C
ATTACHMENT C
INITIAL TRANSACTION REPORT
Report Submitted by: -------------------------------------
Print Your Name
The following table supplies the information required by Section IV(B) of
the Code of Ethics for the period specified below.
Name of the Broker
/Dealer With or
Securities through whom the Nature of
(Name and Quantity of Price Per Share Transaction Ownership of
Symbol) Securities or Other Unit Was Effected Securities
- -----------------------------------------------------------------------------
THIS REPORT MUST BE SUBMITTED TO THE APPROPRIATE COMPLIANCE OFFICER WITHIN
10 DAYS OF BECOMING A COVERED PERSON IN WHICH ANY REPORTED TRANSACTION WAS
EFFECTED.
To the extent specified above, I hereby disclaim beneficial ownership of
any security listed in this Report or in brokerage statements or transaction
confirmations provided by you.
- -----------------------------------------------------------------------------
I CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND THAT TO THE
BEST OF MY KNOWLEDGE THE INFORMATION FURNISHED IN THIS REPORT IS TRUE AND
CORRECT FOR THE PERIOD OF --------, 199- THROUGH 199-.
Date: -------
Signature: -----------------------
Print Name: ----------------------
Position: ------------------------
18
<PAGE>
Page 2
ATTACHMENT C
REPORT OF QUARTERLY SECURITIES TRANSACTIONS
On the dates indicated, the following transactions were effected in
securities of which I participated or acquired a direct or indirect "beneficial
ownership" interest and which are required to be reported pursuant to the Code
of Ethics of Bank Julius Baer & Co., Ltd., New York Branch, Julius Baer
Securities Inc. and/or the applicable Funds.
Title & Nature of By Whom
Date Principal Number Dollar Transaction Transaction Broker
of Amount of of Amount (Purchase, Was Dealer/
Trans- each Shares of Sale, Gift,) Effected Bank
Action Security Transaction and Other
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Any facts which may be relevant to a conflict of interest analysis of which
I am aware, including the existence of any substantial economic relationship
between my transaction(s) and securities held or to be required by a Fund:
- -----------------------------------
- -----------------------------------
This report (i) excludes transactions with respect to which I had no direct
or indirect influence or control, (ii) other transactions not required to be
reported, and (iii) is not an admission that I have or had any direct or
indirect beneficial ownership in the securities listed above.
THIS REPORT MUST BE SUBMITTED TO THE APPROPRIATE COMPLIANCE OFFICER WITHIN
10 DAYS AFTER THE END OF THE CALENDAR QUARTER IN WHICH ANY REPORTED TRANSACTION
WAS EFFECTED.
Date: ---------------
Signature: ----------------------
Print Name: ---------------------
Position: -----------------------
19
<PAGE>
ANNUAL TRANSACTION REPORT
Report Submitted by: ---------------------------------------------
Print Your Name
The following table supplies the information required by Section IV(D) of
the Code of Ethics for the period specified below.
Name of the Broker
/Dealer With or
Securities through whom the Nature of
(Name and Quantity of Price Per Share Transaction Ownership of
Symbol) Securities or Other Unit Was Effected Securities
- -----------------------------------------------------------------------------
THIS REPORT MUST BE SUBMITTED TO THE APPROPRIATE COMPLIANCE OFFICER WITHIN
30 DAYS AFTER THE END OF THE CALENDAR YEAR IN WHICH ANY REPORTED TRANSACTION WAS
EFFECTED.
To the extent specified above, I hereby disclaim beneficial ownership
of any security listed in this Report or in brokerage statements or transaction
confirmations provided by you.
- ---------------------------------------------------------------------------
I CERTIFY THAT I AM FULLY FAMILIAR WITH THE CODE OF ETHICS AND THAT TO THE
BEST OF MY KNOWLEDGE THE INFORMATION FURNISHED IN THIS REPORT IS TRUE AND
CORRECT FOR THE PERIOD OF ------, 199- THROUGH 199-.
Date: ---------
Signature: --------------------
Print Name: -------------------
Position: ---------------------
20
<PAGE>
ATTACHMENT D
I HEREBY CERTIFY THAT:
1. I have read and I understand the Code of Ethics adopted by Bank Julius Baer &
Co., Ltd., New York Branch, Julius Baer Securities Inc. and certain registered
investment companies (the "Code of Ethics");
2. I recognize that I am subject to the Code of Ehtics;
3. I have complied with the requirements of the Code of Ethics during the
calendar year ending December 31, 199_; and
4. I have disclosed or reported all personal securities transactions required to
be disclosed or reported pursuant to the requirements of the Code during the
calendar year ending December 31, 199_.
Set forth below exceptions to items (3) and (4), if any:
Print Name: ----------------------
Signature: ----------------------
Date; ----------------------
21
<PAGE>
ATTACHMENT E
REPORT OF BUSINESS EXPENSES PAID BY OTHER FIRMS
AND
GIFTS AND FAVORS
CONFIDENTIAL
FOR THE MONTH OF ----, 19-- NAME -------------- OFFICE -----------
I am reporting the following gifts or favors received:
! Purpose
Date! Gift or Favor ! Approx.! Host ! Other ! (both professional
! (please be specific)! Value ! & Firm! BJB Guests ! and social)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Signature: ---------------------
INSTRUCTIONS: COMPLETE AND FORWARD TO THE APPROPRIATE JULIUS BAER
COMPLIANCE OFFICER
22
