As Filed With The Securities And Exchange Commission On December 29, 2000
File Nos. 33-47507 and 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. 15 (X)
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 17
JULIUS BAER INVESTMENT FUNDS
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(Exact Name of Registrant as Specified in Charter)
330 Madison Avenue, New York, New York 10017
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(Address of Principal Executive Offices) (Zip Code)
212-297-3600
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(Registrant's Telephone Number, Including Area Code)
Michael K. Quain
President
C/o Bank Julius Baer & Co. Ltd., (New York Branch)
330 Madison Avenue
New York, New York 10017
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(Name and Address of Agent for Service of Process)
With a Copy to:
Cynthia Surprise
Investors Bank & Trust Company
Mail Code LEG13
200 Clarendon Street
Boston, MA 02116
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b)
/ / On ________, pursuant to paragraph (b)
/X/ 60 days after filing, pursuant to paragraph (a)(1)
/ / On ________, pursuant to paragraph (a) (1)
/ / 75 days after filing, pursuant to paragraph (a) (2)
/ / On _________, pursuant to paragraph (a) (2) of Rule 485.
<PAGE>
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>
JULIUS BAER INVESTMENT
FUNDS
PROSPECTUS
FEBRUARY 28, 2001
JULIUS BAER INTERNATIONAL EQUITY FUND
JULIUS BAER GLOBAL INCOME FUND
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED EITHER FUND'S SHARES OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
THE FUNDS PAGE
<S> <C> <C>
JULIUS BAER INVESTMENT FUNDS.....................
WHAT EVERY INVESTOR
SHOULD KNOW ABOUT
THE FUNDS
RISK/RETURN SUMMARIES.......................
Introduction.........................
International Equity Fund............
Goal................................
Strategies..........................
Key Risks...........................
Performance.........................
Fees and Expenses...................
Global Income Fund...................
Goal................................
Strategies..........................
Key Risk............................
Performance.........................
Fees and Expenses...................
INVESTMENT STRATEGIES AND RISKS...........
International Equity Fund.........
Global Income Fund................
General...........................
THE FUNDS' MANAGEMENT.....................
INFORMATION FOR YOUR INVESTMENT
MANAGING YOUR INVESTING IN THE FUNDS....................
FUND ACCOUNT OPENING AN ACCOUNT.................
Pricing of Fund Shares.............
Purchasing Your Shares.............
Selling Your Shares................
Distribution and Shareholder
Servicing Plans-Class A Shares...
DISTRIBUTIONS AND TAXES...................
Distributions.......................
Tax Information.....................
WHERE TO FIND MORE INFORMATION FOR MORE INFORMATION
ABOUT JULIUS BAER INVESTMENT FUNDS BACK COVER
</TABLE>
<PAGE>
JULIUS BAER INVESTMENT FUNDS
RISK/RETURN SUMMARIES
INTRODUCTION
Julius Baer Investment Funds (the "Trust") currently offers two funds: Julius
Baer International Equity Fund and Julius Baer Global Income Fund (each a "Fund"
and together, the "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
goal. Each Fund's share price will fluctuate and you may lose money on
your investment.
AN INVESTMENT IN EITHER FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
<PAGE>>
JULIUS BAER INTERNATIONAL EQUITY FUND
INVESTMENT GOAL
The International Equity Fund seeks long term growth of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a wide variety of international equity securities issued
throughout the world, but normally excluding the U.S. The Adviser chooses
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 investments for the Fund, 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, often referred
to as emerging markets.
The Fund may also invest in debt securities of U.S. or foreign issuers,
including (up to 10%) 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,
regardless of how well the companies in which the Fund invests perform.
This risk also includes the risk that the stock price of one or more of the
companies in the Fund's portfolio will fall, or fail to increase. A
company's stock performance can be adversely affected by many factors,
including general financial market conditions and specific factors related
to a particular company or industry. This risk is generally increased for
small and mid-sized companies, or companies in developing industries, which
tend to be more vulnerable to adverse developments.
o Foreign Investment 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, lack of timely and reliable
financial information and other factors. These risks are increased for
investments in emerging markets.
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 in this Prospectus 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. How the Fund has performed in the past is not
necessarily an indication of how the Fund will perform in the future.
<PAGE>
INTERNATIONAL EQUITY FUND - CLASS A
(33.58%) (0.19%) 17.66% 15.33% 27.07% 76.58% [ %]
1994 1995 1996 1997 1998 1999 2000
CALENDAR YEAR
During the periods shown in the bar chart, the highest quarterly return was [ ]%
(for the quarter ended [ ]) and the lowest quarterly return was [ ]% (for the
quarter ended [ ]).
The table below shows how the Fund's average annual total returns 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.
AVERAGE ANNUAL TOTAL RETURNS
(FOR THE PERIODS ENDED DECEMBER 31, 2000)
<TABLE>
<CAPTION>
PAST ONE YEAR PAST FIVE YEARS SINCE INCEPTION*
<S> <C> <C> <C>
International Equity %
Fund - Class A [ ] % [ ] % [ ] %
International Equity Fund - Class I [ ] % [ ]% [ ] %
MSCI EAFE Index [ ] % [ ] % [ ] %
</TABLE>
* The Fund's Class A shares commenced operations on October 4, 1993. For periods
before the inception of the Fund's Class I shares, November 17, 1999, the
performance for Class I shares in the table is based on the performance of the
Fund's Class A shares, adjusted to reflect the expenses paid by Class I shares.
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, if applicable) 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 0.57% 0.28%
Total Annual Fund Operating Expenses 1.57% 1.03%
* The expense information in the table has been restated to reflect current
fees. Expenses shown reflect the termination of an expense limitation formerly
in effect.
</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. The Fund may waive the
redemption fee for certain tax-advantaged retirement plans. The Fund
reserves the right to terminate or modify the terms of the redemption fee
waiver at any time. For all redemptions, 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.
<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.
Although your actual returns and expenses may be higher or lower, based on these
assumptions your costs would be:
CLASS A SHARES CLASS I SHARES
1 Year $160 $105
3 Years $496 $328
5 Years $855 $569
10 Years $1,867 $1,259
<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.
ITS PRINCIPAL INVESTMENT STRATEGIES
The Fund invests in a non-diversified portfolio of fixed-income securities of
issuers located throughout 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
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 Investment 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 in this Prospectus under the heading
Investment Strategies and Risks and in the SAI.
<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.
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
11.47% (6.61%) 19.51% 5.73% 2.83% 9.60% (3.41%) %
1993 1994 1995 1996 1997 1998 1999 2000
CALENDAR YEAR
During the periods shown in the Bar Chart, the highest quarterly return was [ ]%
(for the quarter ended [ ]) and the lowest quarterly return was [ ]% (for the
quarter ended [ ]).
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, 2000)
<TABLE>
<CAPTION>
PAST ONE YEAR PAST FIVE YEARS SINCE INCEPTION*
<S> <C> <C> <C>
Global Income Fund-Class A % % %
Global Income Fund-Class I % % %
80% Merrill Lynch 1-10 Year U.S.
Government/Corporate Index/20% J.P. Morgan
Global Government Bond (non-U.S.) Index % % %
</TABLE>
* The Fund's Class A shares commenced operations on July 1, 1992. For periods
before the inception of the Fund's Class I shares, November 17, 1999, the
performance for Class I shares in the table is based on the performance of the
Fund's Class A shares, adjusted to reflect the expenses paid by Class I shares.
<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, if applicable) 2.00%(1) 2.00%(1)
<CAPTION>
ANNUAL FUND OPERATING EXPENSES* (EXPENSES THAT ARE
DEDUCTED FROM FUND ASSETS) CLASS A SHARES CLASS I SHARES
Management Fees 0.50 % 0.50 %
Distribution and/or Service (12b-1) Fees 0.25 % None
Other Expenses 0.85 % [ ] %
Total Annual Fund Operating Expenses 1.60 % [ ] %
Fee Waiver 0.325%(2) 0.325%(2)
Net Expenses 1.275 [ ]%
</TABLE>
* Expenses have been restated to reflect current fees.
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. The Fund may waive the redemption
fee for certain tax-advantaged retirement plans. The Fund reserves the right to
terminate or modify the terms of the redemption fee waiver at any time. For all
redemptions, 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 October 31, 2001.
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 October 31, 2001, 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:
CLASS A SHARES CLASS I SHARES
1 Year $130 $[ ]
3 Years $505 $[ ]
5 Years $871 $[ ]
10 Years $1,900 $[ ]
<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. In an
effort to protect the Fund against a decline in the value of portfolio
securities due to fluctuations in currency exchange rates, the Adviser may enter
into currency hedges which may decrease or offset any losses from such
fluctuations.
The Fund may invest up to 10% of its total assets in equity warrants and
interest rate warrants. Equity warrants give the Fund the right to buy newly
issued securities of a company at a fixed price. Interest rate warrants give the
Fund the right to buy or sell a specific bond issue or interest rate index at a
set price.
The Fund may invest in American Depository Receipts (ADRs), Global Depository
Receipts (GDRs) and European Depository Receipts (EDRs) issued by sponsored or
unsponsored facilities. ADRs are usually issued by a U.S. bank or trust company
and traded on a U.S. exchange. GDRs may be issued by institutions located
anywhere in the world and traded in any securities market. EDRs are issued in
Europe and used in bearer form in European markets.
DEPOSITORY RECEIPTS:
Receipts, typically issued by a bank or trust company, representing the
ownership of underlying securities that are issued by a foreign company and held
by or trust company.
Most of the purchases and sales made by the Fund will be made in the primary
trading market for the particular security. The primary market is usually in the
country in which the issuer has its main office. The Fund will generally invest
in large and well established companies, but may also invest in smaller,
emerging growth companies.
When the Fund invests in fixed-income securities it will limit such investments
to securities of U.S. companies, the U.S. Government, foreign governments, U.S.
and foreign governmental entities and supranational organizations. When the Fund
invests in such fixed-income securities it may earn increased investment income
(which would subject shareholders to tax liability when distributed) and the
Fund would be foregoing market advances or declines to the extent it is not
invested in equity markets.
The Fund may 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.
<PAGE>
JULIUS BAER GLOBAL INCOME FUND
THE FUND'S INVESTMENT GOAL
The Global Income Fund seeks to maximize current income consistent with the
protection of principal.
THE FUND'S PRINCIPAL INVESTMENT STRATEGY
The Fund seeks to achieve its goal by investing primarily in a non-diversified
portfolio of fixed-income securities (generally bonds, debentures and notes) of
governmental, supranational and corporate issuers denominated in various
currencies, including U.S. dollars. In addition to the strategies discussed
earlier, the Fund may also engage in some or all of the strategies discussed
here or in the SAI.
NON-DIVERSIFIED:
Non-diversified mutual funds, like the Global Income Fund, may invest a larger
portion of their assets in the securities of a smaller number of issuers.
Nevertheless, the Fund will buy no more than 10% of the voting securities, no
more than 10% of the securities of any class and no more than 10% of the debt
securities of any one issuer (other than the U.S. Government).
The Adviser expects that the Global Income Fund will have a duration of
approximately four years. Longer-term fixed-income securities can also have
higher fluctuations in value. If the Fund holds such securities, the value of
the Fund's shares may fluctuate more in value as well.
DURATION:
Duration takes into account the pattern of a security's cash flow over time,
including the way cash flow is affected by 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.
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 invest a significant proportion of its
assets in mortgage-backed securities. The Fund may also 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. In an
effort 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 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, and 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.
<PAGE>
GENERAL
Each Fund may depart from its investment strategies by taking temporary
defensive positions in response to adverse market, economic, political or other
conditions. During these times, a Fund may not achieve its investment goal.
Each Fund may engage in active and frequent trading of portfolio securities to
achieve its investment goal, which may involve higher brokerage commissions and
other expenses.
THE FUNDS AT A GLANCE
The following two tables can give you a quick basic understanding of the types
of securities each Fund tends to invest in and some of the risks associated with
each Fund's investments. You should read all of the information about a Fund and
its risks before deciding to invest.
HOW CAN I TELL, AT A GLANCE, WHICH TYPES OF SECURITIES A FUND MIGHT INVEST IN?
The following table shows the main types of securities in which each Fund 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
PRE-PAYMENT RISK O
CREDIT RISK O O
BELOW-INVESTMENT GRADE SECURITIES O
INCOME RISK O
FOREIGN INVESTMENT RISK O O
DEVELOPING COUNTRY RISK O O
POLITICAL RISK O O
DERIVATIVES RISK O O
DIVERSIFICATION RISK O
</TABLE>
<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. A company's stock performance can be adversely
affected by many factors, including general financial market conditions and
specific factors related to a particular company or industry. This risk is
generally increased for small and mid-sized companies, or companies in
developing industries, which tend to be more vulnerable to adverse developments.
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.
PREPAYMENT RISK. 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.
FOREIGN INVESTMENT RISK. 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, limited legal recourse 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.
<PAGE>
EURO RISK
Several European countries have participated 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.
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 in the SAI.
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.
THE FUNDS' MANAGEMENT
INVESTMENT ADVISER
The Adviser is responsible for running all of the operations of the Funds,
except for those that are subcontracted to the custodian, transfer agent,
distributor and administrator. Prior to January 1, 2001, each Fund was managed
by Bank Julius Baer & Co., Ltd., New York Branch ("BJB-NY" or "Previous
Adviser"), located at 330 Madison Avenue, New York, NY 10017. Effective January
1, 2001, each Fund will be managed by Julius Baer Investment Management Inc.
("JBIMI" or "Adviser"), located at 330 Madison Avenue, New York, New York 10017.
The Adviser is a registered investment adviser and a majority owned subsidiary
of Julius Baer Securities Inc. ("JBS"). JBS, located at 330 Madison Avenue, New
York, NY, 10017, is a wholly owned subsidiary of Julius Baer Holding Ltd. of
Zurich, Switzerland. As of August 31, 2000, JBIMI had assets under management of
approximately $5.7 billion.
Under the advisory agreements, 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.
Under co-administration agreements, the Funds pay BJB-NY a co-administration fee
for providing certain administrative and shareholder services with
<PAGE>
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. Prior to January 1, 2001, BJB-NY acted as investment adviser of each Fund
and received the adviser's fee from Investors Bank & Trust Co. For periods after
January 1, 2001, the adviser fees will be paid to JBIMI as the Adviser.
The fee paid by each Fund to BJB-NY for the fiscal year ended October 31, 2000
is shown in the table below.
FUND FEE* (AS A % OF AVERAGE DAILY NET ASSETS)
International Equity Fund 0.850%
Global Income Fund 0.325%
*Amounts represent management fees paid to the Previous Adviser, including the
effect of waivers.
PORTFOLIO MANAGEMENT OF THE FUNDS
Richard Pell, Chief Investment Officer and Senior Vice President of JBIMI since
August 2000, and of BJB-NY 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 BJB-NY, he was Vice President and head of
Global Fixed- Fixed-Income at Bankers Trust Company.
Rudolph-Riad Younes, CFA, First Vice President and Head of International Equity
with JBIMI since August 2000, and of BJB-NY since September 1993, has been
co-managing the International Equity Fund since April 1995. Prior to joining
BJB-NY, he was an Associate Director at Swiss Bank Portfolio Management
International.
Karen Arrese, CFA, Vice President and Global Fixed-Income Specialist with JBIMI
since August 2000 and of BJB-NY since July 1, 1998, has been co-managing the
Global Income Fund with Mr. Pell since July 1, 1998. Prior to joining BJB-NY,
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.
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 Financial Securities, Inc., the Funds'
distributor (Distributor), you may be charged a transaction fee. If the broker
does not have a selling group agreement, the broker would need to enter into one
before making purchases for its clients.
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.
INVESTOR ALERT: You should consult your tax adviser about the establishment of
retirement plans.
<PAGE>
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
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. Certain
accounts may be aggregated at management's discretion.
You may purchase Class I shares only if you meet one of the above-stated
criteria under "Share Classes" and you meet the mandatory monetary minimums set
forth in the table. If you do not qualify to purchase Class I shares and you
request to purchase Class I shares, your request will be treated as a purchase
request for Class A shares or declined.
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.
You can invest in Fund shares in the following ways:
<PAGE>
<TABLE>
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 broker is one of the methods described below.
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 (in U.S. dollars) payable to
payable to the Julius Baer Investment Funds the Julius Baer Investment Funds or the
or the Fund in which you are investing. The Funds Fund in which you are investing. The Funds
do not accept third party checks. do not accept third party checks.
o Send your check with the completed account o Write your account number, Fund name and
application to: name of the class in which you are investing
on the check.
Unified Fund Services, Mail your check directly to the Fund at the
P.O. Box 6110 address shown at the left.
Indianapolis, Indiana 46206-6110
Attention: Julius Baer Investment Funds Your application will be processed subject
to your check clearing.
OPENING AN ACCOUNT ADDING TO YOUR ACCOUNT
o BY WIRE o First, telephone 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.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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
an account number for Fund(s) which you do Fund described in the Prospectus at its
not currently own shares of, but which you respective 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
appropriate class of shares of the other Fund Fund carefully before making an exchange of
at its respective NAV. your 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.
OPENING AN ACCOUNT ADDING TO YOUR ACCOUNT
o THROUGH o You may invest in each Fund through various o Please refer to directions received through
RETIREMENT PLANS Retirement Plans. The Funds' shares are your employer's plan, Unified or your
designed for use with certain types of tax financial adviser.
qualified retirement plans including defined
benefit and defined contribution plans.
Class I shares are not appropriate for IRA
accounts other than IRA rollover accounts.
o 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 will 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.
The Fund may waive the redemption fee for certain tax-advantaged retirement
plans. The Fund reserves the right to terminate or modify the terms of the
redemption fee waiver at any time.
o 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;
<PAGE>
o impose other charges and restrictions; and
o designate intermediaries to accept purchase and sale orders on
the Fund's behalf.
The Fund considers a purchase or sales order as received when an authorized
Processing Organization, or its authorized designee, accepts the order. These
orders will be priced based on the Fund's NAV determined after such order is
accepted.
Shares held through a Processing Organization may be transferred into your name
following procedures established by your Processing Organization and the Fund.
Certain Processing Organizations may receive compensation from the Fund, the
Adviser or their affiliates.
SELLING YOUR SHARES
You may sell some or all of your Fund shares on any day that the Fund calculates
its NAV. If your request is accepted before the close of regular trading on the
NYSE, you will receive a price based on that day's NAV for the shares your sell.
Otherwise, the price you receive will be based on the NAV that is next
calculated.
o 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 Fund may waive the redemption fee for certain
tax-advantaged retirement plans. The Fund reserves the right to terminate or
modify the terms of the redemption fee waiver at any time.
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.
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. 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 o To sell your Fund shares by mail you must write to Unified
at:
Unified Fund Services, Inc.
P.O. Box 6110
Indianapolis, Indiana 46206-6110
Attention: Julius Baer Investment Funds
o specify the name of the Fund 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.
<PAGE>
>> 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 that the NYSE is open for regular trading.
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 losses in 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 to avoid the sale or
exchange of your Fund shares.
>> 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 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.
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.
<PAGE>
FUND DIVIDENDS DECLARED AND PAID
---- ---------------------------
INTERNATIONAL EQUITY FUND ANNUALLY
GLOBAL INCOME FUND MONTHLY
Distributions of any capital gains earned by a Fund will be made at least
annually.
TAX INFORMATION
DISTRIBUTIONS: Each Fund will make distributions that may be taxed as ordinary
income or capital gains (which may be taxed at different rates depending on the
length of time a Fund holds its assets). Each Fund's distributions may be
subject to federal income tax whether you reinvest such dividends in additional
shares of a Fund or choose to receive cash.
ORDINARY INCOME: Income and short-term capital gains 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.
<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, request
other information about the Funds, and receive 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
FEBRUARY 28, 2001
This Statement of Additional Information (SAI) is not a Prospectus, but it
relates to the Prospectus of Julius Baer Investment Funds dated February 28,
2001.
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
Description of the Funds, Their Investments and Risks
Common Investment Strategies
Additional Information on Investment Practices
Investment Limitations
Management of the Trust
Capital Stock
Additional Purchase and Redemption Information
Additional Information Concerning Exchange Privilege
Additional Information Concerning Taxes
Calculation of Performance Data
Independent Auditors
Counsel
Financial Statements
Appendix
2
<PAGE>
THE TRUST AND THE FUNDS
Julius Baer Investment Funds (the "Trust"") is composed of two funds: the Julius
Baer International Equity Fund (the Equity Fund") and the Julius Baer Global
Income Fund (the " Income Fund") (each, a "Fund" and together, the "Funds").
Each Fund currently offers Class A shares and Class I shares (the " 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 (the "Trust Agreement"). On July 1, 1998, the Trust changed its
name from BJB Investment Funds to Julius Baer Investment Funds. At the same
time, the name of each of the BJB International Equity Fund and the BJB Global
Income Fund was changed to Julius Baer International Equity Fund and the Julius
Baer Global Income Fund, respectively.
The Prospectus, dated February 28, 2001, provides the basic information
investors should know before investing, and may be obtained without charge by
calling Unified Fund Services, Inc. (the "Transfer Agent"), at the telephone
number listed on the cover. This SAI, which is not a prospectus, is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Prospectus. This SAI is not an
offer of any Fund for which an investor has not received a Prospectus.
DESCRIPTION OF THE FUNDS, THEIR INVESTMENTS AND RISKS
CLASSIFICATION
The Income Fund is a non-diversified, open-end management investment company.
The Equity Fund is a diversified open-end management 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, Egypt, Finland, France, Germany, Greece, Hong Kong, Hungary, India,
Indonesia, Italy, Japan, Mexico, the Netherlands, New Zealand, Norway, Poland,
Portugal, South Africa, Spain, Sweden, Switzerland, Taiwan, Turkey, 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, Julius Baer Investment
Management Inc. (the "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 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
3
<PAGE>
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, Hungary, Hong
Kong, India, Israel, Italy, Japan, Korea, Malaysia, Mauritius, Mexico, the
Netherlands, New Zealand, Pakistan, Peru, Poland, Portugal, Russia, Singapore,
Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, 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 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.
4
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COMMON INVESTMENT STRATEGIES
In attempting to achieve their investment objectives, the Funds may engage in a
variety of investment strategies.
CONVERTIBLE SECURITIES AND BONDS WITH WARRANTS ATTACHED
Each Fund may invest in fixed-income obligations convertible into equity
securities, and bonds issued as a unit with warrants. Convertible securities in
which a Fund may invest, comprised of both convertible debt and convertible
preferred stock, may be converted at either a stated price or at a stated rate
into underlying shares of common stock. Because of this feature, convertible
securities enable an investor to benefit from increases in the market price of
the underlying common stock. Convertible securities provide higher yields than
the underlying equity securities, but generally offer lower yields than
non-convertible securities of similar quality. The value of convertible
securities fluctuates in relation to changes in interest rates like bonds, and,
in addition, fluctuates in relation to the underlying common stock. Neither Fund
intends to retain in its portfolio the common stock received upon conversion of
a convertible security or exercise of a warrant and will sell such stocks as
promptly as it can and in a manner that it believes will reduce the risk to the
Fund of a loss in connection with the sale. Neither Fund intends to retain in
its portfolio any warrant acquired as a unit with bonds if the warrant begins to
trade separately from the related bond.
MONEY MARKET INVESTMENTS
Each Fund may invest up to 20% of its total assets in short-term investment
grade money market obligations. In addition, on occasion, the Adviser may deem
it advisable to adopt a temporary defensive posture by investing a larger
percentage of its assets in short-term money market obligations. These
short-term instruments, which may be denominated in various currencies, consist
of obligations of U.S. and foreign governments, their agencies or
instrumentalities; obligations of foreign and U.S. banks; and commercial paper
of corporations that, at the time of purchase, have a class of debt securities
outstanding that is rated A-2 or higher by S&P or Prime-2 or higher by Moody's
or is determined by the Adviser to be of equivalent quality. Any short-term
obligation rated A-1 or A-2 by S&P, Prime-1 or Prime-2 by Moody's, the
equivalent from another rating service or, if unrated, in the opinion of the
Adviser determined to be an issue of comparable quality, will be a permitted
investment. For temporary defensive purposes, including during times of
international political or economic uncertainty, each Fund could also invest
without limit in securities denominated in U.S. dollars through investment in
obligations issued or guaranteed by the 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.
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 purposes 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
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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.
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 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
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<PAGE>
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.
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 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
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obligation and the interest rate that will be received in when-issued and
delayed-delivery transactions are fixed at the time the buyer enters into the
commitment. Due to fluctuations in the value of securities purchased or sold on
a when-issued or delayed-delivery basis, the yields obtained on such securities
may be higher or lower than the yields available in the market on the dates when
the investments are actually delivered to the buyers. A Fund will not accrue
income with respect to a debt security it has purchased on a when-issued or
delayed-delivery basis prior to its stated delivery date but will continue to
accrue income on a delayed-delivery security it has sold. When-issued securities
may include securities purchased on a "when, as and if issued" basis under which
the issuance of the security depends on the occurrence of a subsequent event,
such as approval of a merger, corporate reorganization or debt restructuring. A
Fund will establish a segregated account with its custodian consisting of cash,
U.S. Government securities or other liquid assets in an amount equal to the
amount of its when-issued and delayed-delivery purchase commitments, and will
segregate the securities underlying commitments to sell securities for delayed
delivery. Placing securities rather than cash in the segregated account may have
a leveraging effect on a Fund's net assets.
RULE 144A SECURITIES AND SECTION 4(2) COMMERCIAL PAPER
Each Fund may purchase securities that are not registered under the Securities
Act of 1933, as amended (1933 Ac), 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 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
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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 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
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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.
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, 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.
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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 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.
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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 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.
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
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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 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
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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
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
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
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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 U.S. 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.
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
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the covered warrant is entitled on its exercise to delivery of the underlying
security, but in some cases the entitlement of the holder is to be paid in cash
the difference between the value of the underlying security on the date of
exercise and the strike price. The securities in respect of which covered
warrants are issued are usually common stock, although they may entitle the
holder to acquire warrants to acquire common stock. Covered warrants may be
fully covered or partially covered. In the case of a fully covered warrant, the
issuer of the warrant will beneficially own all of the underlying securities or
will itself own warrants (which are typically issued by the issuer of the
underlying securities in a separate transaction) to acquire the securities. The
underlying securities or warrants are, in some cases, held by another member of
the issuer's group or by a custodian or other fiduciary for the holders of the
covered warrants.
Interest rate warrants are rights that are created by an issuer, typically a
financial institution, entitling the holder to purchase, in the case of a call,
or sell, in the case of a put, a specific bond issue or an interest rate index
(Bond Index) at a certain level over a fixed time period. Interest rate warrants
can typically be exercised in the underlying instrument or settle in cash.
Long term options operate much like covered warrants. Like covered warrants,
long term options are call options created by an issuer, typically a financial
institution, entitling the holder to purchase from the issuer outstanding
securities of another issuer. Long term options have an initial 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 14
may be changed by a vote of the Board of Trustees at any time.
A Fund may not:
1. Borrow money or issue senior securities except that a Fund may borrow from
banks for temporary or emergency purposes, and not for leveraging, and then in
amounts not in excess of 30% of the value of the Fund's total assets at the time
of such borrowing; or mortgage, pledge or hypothecate any assets except in
connection with any bank borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed or 10% of the value of the Fund's total assets at
the time of such borrowing. Whenever such borrowings exceed 5% of the value of
the Fund's total assets, the Fund will not make any investments (including
roll-overs). For purposes of this restriction, (a) the deposit of assets in
escrow in connection with the purchase of securities on a when-issued or
delayed-delivery basis and (b) collateral arrangements with respect to options,
futures or forward currency contracts will not be deemed to be borrowings or
pledges of the Fund's assets.
2. Purchase any securities which would cause 25% or more of the value of the
Fund's total assets at the time of purchase to be invested in the securities of
issuers conducting their principal business activities in the same industry;
provided that there shall be no limit on the purchase of U.S. Government
securities.
3. Make loans, except that the Fund may purchase or hold publicly distributed
fixed-income securities, lend portfolio securities in an amount not exceeding
33-1/3% of the Fund's net assets and enter into repurchase agreements.
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
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currencies. The entry into forward foreign currency exchange contracts is not
and shall not be deemed to involve investing in commodities.
6. Make short sales of securities or maintain a short position, except that the
Fund may maintain short positions in forward currency contracts, options and
futures contracts and make short sales "against the box."
7. Purchase, write or sell puts, calls, straddles, spreads or combinations
thereof, except that the Fund may (a) purchase or write options on securities,
indices and currencies and (b) purchase or write options on futures contracts.
8. Purchase securities of other investment companies except in connection with a
merger, consolidation, acquisition, reorganization or offer of exchange, or as
otherwise permitted under the 1940 Act.
9. Purchase more than 10% of the voting securities of any one issuer, more than
10% of the securities of any class of any one issuer or more than 10% of the
outstanding debt securities of any one issuer; provided that this limitation
shall not apply to investments in U.S. Government securities.
10. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the maintenance of margin in
connection with options, forward contracts and futures contracts or related
options will not be deemed to be a purchase of securities on margin.
11. Invest more than 15% of the value of the Fund's total assets in securities
which may be illiquid because of legal or contractual restrictions on resale or
securities for which there are no readily available market quotations. For
purposes of this limitation, (a) repurchase agreements with maturities greater
than seven days and (b) time deposits maturing in more than seven calendar days
shall be considered illiquid.
12. Purchase any security if as a result the Fund would then have more than 5%
of its total assets invested in securities of companies (including predecessors)
that have been in continuous operation for fewer than three years.
13. Purchase or retain securities of any company if, to the knowledge of the
Fund, any of the Fund's officers or Trustees or any officer or director of its
Adviser individually owns more than 1/2 of 1% of the outstanding securities of
such company and together they own beneficially more than 5% of the securities.
14. Invest in warrants (other than warrants acquired by the Fund as part of a
unit or attached to securities at the time of purchase) if, as a result, the
investments (valued at the lower of cost or market) would exceed 5% of the value
of each Fund's net assets (10% in the case of the Equity Fund) of which not more
than 2% of each Fund's net assets may be invested in warrants not listed on a
recognized U.S. or foreign stock exchange.
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 the Adviser. The SAI
contains background information regarding each of the Trustees and executive
officers of the Trust.
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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>
Bernard Spilko* Trustee and General Manager and Senior Vice President of Bank Julius Baer
Bank Julius Baer & Co., Ltd. Chairman & Co., Ltd., New York Branch; Managing Director of Julius
330 Madison Avenue Baer Securities Inc.; Chairman of the Board of The European
New York, New York 10017 Warrant Fund, Inc.
Birthdate: 08/11/41
Harvey B. Kaplan Trustee Controller (Chief Financial Officer), Easter Unlimited, Inc.
80 Voice Road (toy company); Director of The European Warrant Fund, Inc.
Carle Place, New York 11514
Birthdate: 09/22/37
Robert S. Matthews Trustee Partner, Matthews & Co. (certified public accountants).
331 Madison Avenue, 8th Fl.
New York, New York 10017
Birthdate: 10/16/43
Gerard J.M. Vlak Trustee Retired; Director, The Rouse Company (1996 - present).
181 Turn of the River Road #7
Stamford, Connecticut 06905
Birthdate: 09/28/33
Martin Vogel* Trustee Member of Management Committee, Julius Baer Investment Fund
Julius Baer Investment Fund Services, Ltd., 1996 to present; Attorney, Schaufelberger & van
Services Hoboken, 1994 - 1996; Director, The European Warrant Fund, Inc.,
Freighutstrasse 12 1997 - present; Secretary of the Board of Directors of the
Zurich, Switzerland Luxembourg domiciled investment companies and of Julius Baer
Birthdate: 09/29/63 Investment Fund Services, Ltd. (1996-present).
Peter Wolfram Trustee Partner, Kelley Drye & Warren (law firm).
101 Park Avenue
New York, New York 10178
Birthdate: 04/02/53
Michael K. Quain President and First Vice President of Bank Julius Baer & Co., Ltd., New York
Bank Julius Baer & Co., Ltd. Chief Financial Officer Branch; Vice President of Julius Baer Securities Inc.;
330 Madison Avenue President and Chief Financial Officer of The European
New York, New York 10017 Warrant Fund, Inc.
Birthdate: 07/06/57
Richard C. Pell Vice President Senior Vice President and Chief Investment Officer of Bank Julius
Bank Julius Baer & Co., Ltd. Baer & Co., Ltd., New York Branch; Chief Investment Officer
330 Madison Avenue and Co-Manager of Julius Baer International Equity Fund;
New York, New York 10017 Senior Vice President, Julius Baer Investment Management Inc.,
Birthdate: 09/21/54 2000-present.
Karen Arrese Vice President Vice President and Co-Manager for the Julius Baer Global
Bank Julius Baer & Co., Ltd. Income Fund and Global Fixed-Income Specialist for Bank
330 Madison Avenue Julius Baer & Co., Ltd., New York Branch, 1998- 2000;
New York, New York 10017 and for Julius Baer Investment Management Inc., 2000 - present;
Birthdate: 10/10/70 Proprietary Interest Rate and Currency Trader for Chase Manhattan
Bank, 1997 - 1998; prior to 1998, Global Portfolio Manager at
Standish, Ayer & Wood in Boston and Bankers Trust Company in
New York.
Rudolph-Riad Younes Vice President Head of International Equity Management, Bank Julius Baer
330 Madison Avenue & Co., Ltd., New York Branch, 1993-present; Co-Manager of Julius
New York, New York 10017 Baer International Equity Fund; First Vice President of Bank
Birthdate : 09/25/61 Julius Baer & Co., Ltd. New York Branch, 2000-present; First Vice
President of Julius Baer Investment Management Inc., 2000-present;
Vice President, Bank Julius Baer & Co., Ltd., New York Branch,
1993-1999.
Hector Santiago Vice President Vice President of Bank Julius Baer & Co., Ltd., New York
Bank Julius Baer & Co., Ltd. Branch and Julius Baer Securities, 1998 - present; Vice
330 Madison Avenue President, The European Warrant Fund, Inc., June 1998 - present;
New York, New York 10017 Assistant Vice President - Accounting, Operations & Trading
Birthdate: 01/14/69 Manager, 1996 - 1998, Assistant Vice President - Trading
Manager/Treasurer, 1992 - 1996.
Pierre Beauport Treasurer and Secretary Assistant Vice President of Bank Julius Baer & Co., Ltd. New York
Bank Julius Baer & Co., Ltd. Branch, 1998 - present; Treasurer and Secretary, The European
330 Madison Avenue Warrant Fund, Inc., September 1998 - present; Senior Analyst -
New York, New York 10017 Mutual Fund Administration at AMT Capital Services, Inc. and
Birthdate: 08/2/69 Investment Accountant at Furman Selz LLC, prior to 1998.
</TABLE>
* "Interested person" of the Trust.
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Messrs. Matthews, Vlak, Kaplan 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, Kaplan 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 $6,000 plus $500 for each Board of Trustees
meeting attended and reimburses them for travel and out-of-pocket expenses. For
the fiscal year ended October 31, 2000, such fees and expenses totaled
approximately $ 28,180.36 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,
2000.
NAME AND POSITION COMPENSATION FROM TRUST
Harvey B. Kaplan, $ 7,000
Trustee
Robert S. Matthews, $ 7,000
Trustee
Gerard J.M. Vlak, $ 7,000
Trustee
Peter Wolfram, $ 7,000
Trustee
INVESTMENT ADVISORY AND OTHER SERVICES
Prior to January 1, 2001, each Fund was managed by Bank Julius Baer & Co., Ltd.,
New York Branch ("BJB-NY" or "Previous Adviser"), located at 330 Madison Avenue,
New York, NY 10017. At a shareholder meeting of Julius Baer Investment Funds on
December 6, 2000, shareholders of each Fund approved new investment advisory
contracts between their Fund and Julius Baer Investment Management Inc. ("JBIMI"
or "Adviser"), located at 330 Madison Avenue, New York, New York 10017. The
personnel providing research and rendering investment advice to each Fund were
transferred as a business unit from the Previous Adviser to the Adviser so that
there would be no material changes in the advisory personnel who manage the
Funds. Also, the terms of the new advisory agreements between each of the Funds
and the Adviser are substantially identical to the terms of the advisory
agreements with the Previous Adviser, except for different effective and
termination dates. Specifically, the new advisory agreements approved by
shareholders on December 6, 2000 did not result in a change in advisory fees
paid by the Funds. Prior to July 1, 1998, Julius Baer Investment Management,
Inc. served as the investment adviser to the Income Fund.
The Adviser is a registered investment adviser and a majority owned subsidiary
of Julius Baer Securities Inc. ("JBS"). JBS, located at 330 Madison Avenue, New
York, NY, 10017, is a wholly owned subsidiary of Julius Baer Holding Ltd. of
Zurich, Switzerland. As of August 31, 2000, JBIMI had assets under management of
approximately $5.7 billion.
BJB-NY also serves as Co-Administrator for the Class A shares of both the Income
Fund and the Equity 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
the Co-Administrator each serve pursuant to separate written agreements
("Advisory Agreement", "the Administration Agreement" and "the 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.
19
<PAGE>
For the last three fiscal years ended October 31, 1998, October 31, 1999, and
October 31, 2000 the Funds paid the following amounts as investment advisory
fees pursuant to each Advisory Agreement:
Global Income Fund Gross Waiver Net
Year Ended 10/31/98 $78,432 $7,780 $70,652
Year Ended 10/31/99 112,462 56,231 56,231
Year Ended 10/31/00 102,306 65,452 36,854
International Equity Fund
Year Ended 10/31/98 $576,830 $140,412 $436,418
Year Ended 10/31/99 688,556 None 688,556
Year Ended 10/31/00 2,305,801 452,656 1,853,145
For the last three fiscal years ended October 31, 1998, October 31, 1999 and
October 31, 2000, 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 10/31/98 $35,537
Year Ended 10/31/99 42,065
Year Ended 10/31/00 46,505
International Equity Fund
Year Ended 10/31/98 $234,668
Year Ended 10/31/99 235,408
Year Ended 10/31/00 597,036
CODE OF ETHICS
The Trust and the Adviser 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.
20
<PAGE>
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 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 Financial
Securities, Inc., 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, 1998, October 31, 1999 and October 31,
2000 the Equity Fund paid and $31,750, $26,667 and $285,266 respectively, in
brokerage commissions to affiliates of the Adviser or 10.1% ,11.84 % and 19.27%
of the total brokerage commissions paid. Affiliates of the Adviser executed
12.6% ,17.7% and 22.10% of the aggregate dollar amount of transactions involving
commissions during the last three fiscal years ended October 31, 1998, October
31, 1999, and October 31, 2000, respectively. For the last three fiscal years
ended and October 31, 1998, October 31, 1999 and October 31, 2000, the Equity
Fund paid total brokerage commissions of and $313,361, $225,208, and $1,480,266,
respectively. For each of the last three fiscal years ended October 31, 1998,
October 31, 1999 and October 31, 2000, 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, 1999 and October 31, 2000,
the Income Fund's portfolio turnover rate was 136% and 79%, respectively. For
each of the two fiscal years ended October 31, 1999 and October 31, 2000, the
Equity Fund's portfolio turnover rate was 73% and 72%, respectively.
DISTRIBUTOR
Unified Financial Securities, Inc. is a wholly-owned subsidiary of Unified
Financial Services, Inc. The principal executive offices of Unified Financial
Securities Inc. are located at 431 North Pennsylvania Street, Indianapolis,
Indiana 46204-1806. The Distributor is registered with the SEC as a
broker-dealer under the Securities Exchange Act of 1934 and is a member of the
NASD.
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
21
<PAGE>
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.
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.
The Adviser and the Administrator may also pay for distribution-related costs
out of their revenues. For the fiscal year ended October 31, 2000, the Income
Fund paid $49,227 in distribution fees. For the fiscal year ended October 31,
2000, the Equity Fund paid $435,978 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, the International Equity Fund and the 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
22
<PAGE>
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.
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 October 31, 2000, Bank Julius Baer - Zurich was record owner of 18.95% of
Class A shares of the Equity Fund on behalf of its clients, and Bank Julius Baer
& Co., Ltd. Employee 401K was record owner of 84.24% 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% 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.
23
<PAGE>
As of October 31, 2000, the following individuals or entities beneficially owned
more than 5% of the outstanding shares of the respective Funds:
<TABLE>
<CAPTION>
JULIUS BAER GLOBAL INCOME FUND
NAME AND ADDRESS OF OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------------- ---------------- ----------------
<S> <C> <C>
Harry Frisch and Lilo Frisch, 112,440.979 Class A 5.76%
(beneficial owner)
c/o Bank Julius Baer & Co., Inc.
330 Madison Avenue
New York, NY 10017
Investors Bank & Trust Co., fbo 49,953.794 Class I 84.24%
Bank Julius Baer & Co., Ltd. Employee 401K
(beneficial owner)
P.O. Box 9130
Boston, MA 02117
</TABLE>
<TABLE>
<CAPTION>
JULIUS BAER INTERNATIONAL EQUITY FUND
NAME AND ADDRESS OF OWNER NUMBER OF SHARES PERCENT OF CLASS
------------------------- ---------------- ----------------
<S> <C> <C>
Bank Julius Baer- Zurich* 1,773,288.760 Class A 18.95%
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
Charles Schwab & Co.,* 4,128,823.393 Class A 44.13%
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Co.,* 1,354,287.375 Class I 20.69%
101 Montgomery Street
San Francisco, CA 94104
Bankers Trust fbo 1,682,558.050 Class I 25.71%
The Nature Conservancy
(beneficial owner)
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
Archstone Foundation 757,400.515 Class I 11.57%
(beneficial owner)
c/o Bank Julius Baer & Co., Ltd.
330 Madison Avenue
New York, NY 10017
Christel Dehaan Trust 633,090.637 Class I 9.67%
(beneficial owner)
P.O. Box 92956
Chicago, IL 60675
</TABLE>
--------------
* Each of these entities is the shareholder of record for its customers, and may
disclaim any beneficial ownership therein.
As of October 31, 2000, the Trustees and officers of the Trust as a group owned
less than 1% of the Trust's total shares outstanding.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Information on how to purchase and redeem shares and how such shares are priced
is included in the Prospectus.
PORTFOLIO VALUATION
The Prospectus discusses the time at which the net asset value of the Funds is
determined for purposes of sales and redemptions. The following is a description
of the procedures used by the Funds in valuing their assets.
Because of the need to obtain prices as of the close of trading on various
exchanges throughout the world, the calculation of a Fund's net asset value may
not take place contemporaneously with the determination of the prices of certain
of its portfolio securities used in
24
<PAGE>
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.
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. This redemption fee may be
waived for certain tax advantaged retirement plans. The Fund may terminate or
modify the terms of the redemption fee waiver at any time. Please consult your
investment advisor concerning the availability of the redemption waiver before
purchasing shares.
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.
25
<PAGE>
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 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.
26
<PAGE>
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.
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:
6
Yield = 2[(a-b + 1) -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, 2000 was 4.06%.
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
27
<PAGE>
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.
"Average annual total return" figures are computed according to a
formula prescribed by the SEC. The formula can be expressed as
follows:
n
P(1+T) = 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, 2000 and for the
period beginning July 1, 1992 (inception of the Fund)
through October 31, 2000, for Class A Shares, was 0.82%,
3.82% and 5.01%, respectively.
The Equity Fund's average annual total return for the one
and five year periods ended October 31, 2000 and for the
period beginning October 4, 1993 (inception of the Fund)
through October 31, 2000, for Class A Shares, was 24.60%,
22.67% and 12.84%, respectively.
Each Fund's performance will vary from time to time
depending upon market conditions, the composition of the
Fund's portfolio and its operating expenses. As described
above, total return is based on historical earnings and is
not intended to indicate future performance. Consequently,
any given performance quotation should not be considered as
representative of a Fund's performance for any specified
period in the future. Performance information may be useful
as a basis for comparison with other investment
alternatives. However, a Fund's performance will fluctuate,
unlike certain bank deposits or other investments which pay
a fixed yield for a stated period of time.
AGGREGATE TOTAL RETURN
"Aggregate total return" figures represent the cumulative
change in the value of an investment for the specified
period and are computed by the following formula:
ERV-P
-----
P
Where: P = a hypothetical initial payment of $10,000.
ERV = Ending Redeemable Value of a hypothetical
$10,000 investment made at the beginning of a 1-, 5-
or 10-year period at the end of the 1-, 5- or 10-year
period (or fractional portion thereof), assuming
reinvestment of all dividends and distributions.
The Income Fund's aggregate total return for the one
and five year periods ended October 31, 2000 and for
the period beginning July 1, 1992 (inception of the
Fund) through October 31, 2000, for Class A Shares,
was 0.82%, 20.63% and 50.31%, respectively. The
Equity Fund's aggregate total return
28
<PAGE>
for the one and five year periods ended October 31,
2000 and for the period beginning October 4, 1993
(inception of the Fund) through October 31, 2000, for
Class A Shares, was 24.60%, 178.06% and 135.31%,
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, 2000, are incorporated by reference into this
SAI. Copies of the Trust's 2000 Annual Report may be obtained by calling the
Trust at the telephone number on the first page of the SAI.
29
<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 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.
30
<PAGE>
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.
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.
31
<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 incorporated by
reference to Post-Effective Amendment No. 14 as filed with the SEC via
EDGAR on January 31, 2000.
(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 incorporated by
reference to Post-Effective Amendment No. 14 as filed with the SEC via
EDGAR on January 31, 2000.
(d4) Form of Investment Advisory Agreement between the Registrant and
Julius Baer Investment Management Inc., on behalf of Julius Baer Global
Income Fund, is filed herewith as Exhibit D4.
(d5) Form of Investment Advisory Agreement between the Registrant and
Julius Baer Investment Management Inc., on behalf of Julius Baer
International Equity Fund, is filed herewith as Exhibit D5.
(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 incorporated by reference to
Post-Effective Amendment No. 14 as filed with the SEC via EDGAR on
January 31, 2000.
<PAGE>
(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 incorporated by
reference to Post-Effective Amendment No. 14 as filed with the SEC via
EDGAR on January 31, 2000.
(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.
(h5) Amended Transfer Agency fee schedule between the Registrant and
Unified Fund Services, Inc., dated October 2000, is filed hereunder as
Exhibit H5.
(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 to be filed in subsequent amendment.
(k) Not applicable.
(l) Purchase Agreement between the Registrant and Funds Distributor,
Inc. on behalf of BJB Global Income Fund dated June 18, 1992, is
incorporated by reference to Post-Effective Amendment No. 10 as filed
with the SEC via EDGAR on July 10, 1998.
(m) Distribution Plan on behalf of BJB Global Income Fund and BJB
International Equity Fund, dated October 4, 1993, is incorporated by
reference to Post-Effective Amendment No. 10 as filed with the SEC via
EDGAR on July 10, 1998.
(m1) Shareholder Services Plan on behalf of BJB Global Income Fund and
BJB International Equity Fund, dated October 4, 1993, is incorporated by
reference to Post-Effective Amendment No. 10 as filed with the SEC via
EDGAR on July 10, 1998.
(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 incorporated by reference to
Post-Effective Amendment No. 14 as filed with the SEC via EDGAR on
January 31, 2000.
(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 incorporated by reference to
Post-Effective Amendment No. 14 as filed with the SEC via EDGAR on
January 31, 2000.
(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 incorporated by reference to Post-Effective
Amendment No. 14 as filed with the SEC via EDGAR on January 31, 2000.
(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 incorporated by reference to
Post-Effective Amendment No. 14 as filed with the SEC via EDGAR on
January 31, 2000.
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
None
Item 25. Indemnification
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
Prior to January 1, 2001, each Fund was managed by Bank Julius Baer & Co., Ltd.,
New York Branch ("BJB-NY"), located at 330 Madison Avenue, New York, NY 10017.
At a shareholder meeting of Julius Baer Investment Funds on December 6, 2000,
shareholders of each Fund approved new investment advisory contracts between
their Fund and Julius Baer Investment Management Inc. ("JBIMI"), located at 330
Madison Avenue, New York, NY 10017. The personnel providing research and
rendering investment advice to each Fund were transferred as a business unit
from BJB-NY to JBIMI so there would be no material changes in the advisory
personnel who manage the Funds. A list of officers and directors of JBIMI as of
January 1, 2001 is set forth below. The address of the following individuals is
330 Madison Avenue, New York, New York.
Officers of JBIMI are: Dr. Leo T. Schrutt (Director and Chairman); Peter Widmer
(Director); Jay Dirnberger (Director and Senior Vice President); Jonathan C.
Minter (Director and Senior Vice President), Alessandro E. Fusina (Director);
Edward C. Dove (Chief Investment Officer and Senior Vice President); Francoise
M. Birnholz (Senior Vice President, Secretary and General Counsel); Edward A.
Clapp (First Vice President); Richard Pell (Senior Vice President); Andrew R.
Parry (Director); Rudolph Riad Younes (Senior Vice President); Karen Arrese
(Vice President); Richard MMN Howard, (Director of Research), Tim Haywood
(Senior Portfolio Manager), Glen F. Wisher (First Vice President).
<PAGE>
Item 27. Principal Underwriter.
(a) Unified Financial Securities, Inc. (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
Unified Financial Securities, Inc. is registered with the Securities and
Exchange Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. Unified Financial Securities, Inc. is located
at 431 North Pennsylvania Street, Indianapolis, Indiana 46204-1806.
(b) The following is a list of the executive officers, directors and partners
Unified Financial Services, Inc.
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 Julius Baer Investment Management Inc.
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 Financial Services, Inc.
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 prior to January 1, 2001
and records relating to its function as
co-administrator)
<PAGE>
(6) Julius Baer Investment Management Inc.
330 Madison Avenue
New York, New York 10017
(records relating to its function as
investment adviser as of January 1, 2001)
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 has duly caused this
Post-Effective Amendment No. 15 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 December 28, 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.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ MICHAEL K. QUAIN President and Chief December 28, 2000
-------------------- Financial Officer
Michael K. Quain
/s/ HARVEY B. KAPLAN* Trustee December 28, 2000
---------------------
Harvey B. Kaplan
/s/ ROBERT S. MATTHEWS* Trustee December 28, 2000
-----------------------
Robert S. Matthews
/s/ GERARD J.M. VLAK* Trustee December 28, 2000
---------------------
Gerard J.M. Vlak
/s/ MARTIN VOGEL* Trustee December 28, 2000
-----------------
Martin Vogel
/s/ PETER WOLFRAM* Trustee December 28, 2000
------------------
Peter Wolfram
*By /s/ PAUL J. JASINSKI
------------------------
Paul Jasinski
(As Attorney-in-Fact pursuant
to Powers of Attorney
filed herewith)
<PAGE>
EXHIBIT INDEX
(EX.D4) Investment Advisory Agreement (Julius Baer Global Income Fund)
dated January 1, 2001
(EX.D5) Investment Advisory Agreement (Julius Baer International Equity
Fund) dated January 1, 2001
(EX.H5) Amendment to Transfer Agency Fee Schedule, dated October 2000
<PAGE>
FORM OF NEW ADVISORY AGREEMENT
JULIUS BAER GLOBAL INCOME FUND
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 Julius Baer Investment Management Inc. (the "Adviser"),
a corporation organized under the laws of the state of Delaware, dated as of
January 1, 2001, 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
<PAGE>
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.
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.
<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
<PAGE>
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.
9. TERM OF AGREEMENT
This Agreement shall become effective on January 1, 2001, 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.
<PAGE>
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.
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: _______________________________
Name: Michael K. Quain
Title: President
Accepted:
JULIUS BAER INVESTMENT MANAGEMENT INC.
By: _________________________________
Name:
Title:
<PAGE>
FORM OF NEW ADVISORY AGREEMENT
JULIUS BAER INTERNATIONAL EQUITY FUND
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 Julius Baer Investment Management Inc. (the "Adviser"),
a corporation organized under the laws of the state of Delaware, dated as of
January 1, 2001, 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
<PAGE>
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.
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.
<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
<PAGE>
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.
9. TERM OF AGREEMENT
This Agreement shall become effective on January 1, 2001, 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.
<PAGE>
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.
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: _______________________________
Name: Michael K. Quain
Title: President
Accepted:
JULIUS BAER INVESTMENT MANAGEMENT INC.
By: _________________________________
Name:
Title:
