<PAGE>
REMBRANDT FUNDS (R)
APRIL 30, 1997
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Equity Funds Fixed Income Funds
. VALUE FUND . FIXED INCOME FUND
. GROWTH FUND . INTERMEDIATE GOVERNMENT FIXED INCOME FUND
. SMALL CAP FUND . TAX-EXEMPT FIXED INCOME FUND
. INTERNATIONAL EQUITY FUND
. TRANSEUROPE FUND . INTERNATIONAL FIXED INCOME FUND
. LIMITED VOLATILITY FIXED INCOME FUND
. ASIAN TIGERS FUND Money Market Funds
. LATIN AMERICA EQUITY FUND . TREASURY MONEY MARKET FUND
. GOVERNMENT MONEY MARKET FUND
Balanced Fund . MONEY MARKET FUND
. BALANCED FUND . TAX-EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
Please read this Prospectus carefully before investing, and keep it on file for
future reference. It concisely sets forth information that can help you decide
if a Fund's investment goals match your own.
A Statement of Additional Information dated April 30, 1997 has been filed with
the Securities and Exchange Commission (the "SEC") and is available upon
request and without charge by calling 1-800-443-4725. The Statement of
Additional Information is incorporated into this Prospectus by reference.
Trust Class shares of the Rembrandt Funds(R) (the "Trust") are offered
primarily to customers of LaSalle National Bank, its affiliates and
correspondents, for the investment of their own funds or funds for which they
act in a fiduciary, agency or custodial capacity.
Investor Class shares are offered primarily to individuals and institutional
investors that meet the minimum investment requirement but for whom LaSalle
National Bank does not act in a fiduciary, agency or custodial capacity.
Investors in the Trust Class shares and investors in the Investor Class shares
are referred to hereinafter as "Shareholders."
AN INVESTMENT IN ANY OF THE TRUST'S MONEY MARKET FUNDS IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT ANY MONEY
MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, INCLUDING LASALLE NATIONAL BANK, OR ANY OF
ITS AFFILIATES OR CORRESPONDENTS, INCLUDING LASALLE NATIONAL
CORPORATION. THE TRUST'S SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR
ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THE SHARES INVOLVES RISK,
INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE>
TABLE OF
CONTENTS
<TABLE>
<S> <C>
Fund Highlights........................................... 2
Annual Operating Expenses................................. 5
Financial Highlights...................................... 9
Your Account and Doing Business
with Us.................................................. 14
Investment Objective and Policies......................... 20
General Investment Policies............................... 31
Certain Risk Factors...................................... 33
Investment Limitations.................................... 34
The Advisor............................................... 35
The Sub-Advisor........................................... 37
The Administrator......................................... 38
The Transfer Agent........................................ 38
The Distributor........................................... 38
Performance............................................... 39
Taxes..................................................... 40
Additional Information
About Doing Business with Us............................. 43
General Information....................................... 45
Description of Permitted
Investments and Risk Factors............................. 47
</TABLE>
HOW TO READ THIS PROSPECTUS
This Prospectus gives you information that you should know about the Funds
before investing. Brief descriptions are also provided throughout the
Prospectus to better explain certain key points. To find these helpful guides,
look for this symbol.
[LOGO OF REMBRANDT FUNDS APPEARS HERE]
FUND HIGHLIGHTS
The following summary provides basic information about the Trust Class and
Investor Class shares of the following Funds: Value Fund, Growth Fund, Small
Cap Fund, International Equity Fund, TransEurope Fund, Asian Tigers Fund, Latin
America Equity Fund (collectively, the "Equity Funds"), Balanced Fund
("Balanced Fund"), Fixed Income Fund, Intermediate Government Fixed Income
Fund, Tax-Exempt Fixed Income Fund, International Fixed Income Fund, Limited
Volatility Fixed Income Fund (collectively, the "Fixed Income Funds"), Treasury
Money Market Fund, Government Money Market Fund, Money Market Fund and Tax-
Exempt Money Market Fund (collectively, the "Money Market Funds," and together
with the Equity Funds, the Balanced Fund and the Fixed Income Funds, the
"Funds"). This summary is qualified in its entirety by reference to the more
detailed information provided elsewhere in this Prospectus and in the Statement
of Additional Information.
INVESTMENT OBJECTIVE Below are the investment objectives and some basic
AND POLICIES investment policies of each Fund. For more
information, see "Investment Objective and
Policies," "General Investment Policies" and
"Description of Permitted Investments and Risk
Factors."
EQUITY AND The Growth Fund and Small Cap Fund both seek a high
BALANCED FUNDS level of total return primarily through capital
appreciation. The Value Fund, International Equity
Fund and TransEurope Fund all seek a high level of
total return through capital appreciation and
current income. The TransEurope Fund currently is
not offering its shares to the public.
The Asian Tigers Fund seeks to achieve capital
appreciation through investments within the
economies of the Far East, with the exception of
Japan. The Latin America Equity Fund seeks long-term
capital appreciation.
The Balanced Fund seeks to obtain a favorable total
rate of return through current income and capital
appreciation consistent with the preservation of
capital, derived from investing in a portfolio
comprised of fixed income and equity securities.
2
<PAGE>
FIXED INCOME The Fixed Income Fund seeks a high level of total return
FUNDS relative to funds with like investment objectives from
income and, to a lesser degree, capital appreciation derived
from investing in a portfolio consisting primarily of
quality intermediate- and long-term fixed income securities.
The Intermediate Government Fixed Income Fund seeks a
high level of total return relative to funds with like
investment objectives, consistent with preservation of
capital, from income and, to a lesser degree, capital
appreciation, derived from investing in a portfolio
consisting of primarily short- and intermediate-term U.S.
Government securities.
The Tax-Exempt Fixed Income Fund seeks a high level of
total return, relative to funds with like investment
objectives, consistent with preservation of capital, from
income derived from investing in a portfolio consisting
primarily of securities that are exempt from federal income
tax and not subject to taxation as a preference item for
purposes of the federal alternative minimum tax.
The International Fixed Income Fund (formerly the Global
Fixed Income Fund) seeks a high level of total return,
relative to funds with like objectives, measured in U.S.
dollar terms, from income and capital appreciation derived
from investing in a portfolio consisting of quality fixed
income securities denominated in foreign currencies.
The Limited Volatility Fixed Income Fund seeks a high
level of current income, consistent with relative stability
of principal, derived from investing in a portfolio
consisting primarily of short- and intermediate-term fixed
income securities. The Limited Volatility Fund currently is
not offering its shares to the public.
MONEY MARKET The Treasury Money Market Fund seeks to preserve principal
FUNDS value and maintain a high degree of liquidity while
providing current income.
The Government Money Market Fund and the Money Market
Fund seek to provide as high a level of current income as is
consistent with preservation of capital and liquidity.
The Tax-Exempt Money Market Fund seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income exempt from federal income
taxes.
UNDERSTANDING Each Fund invests in different securities. Values of equity
RISK securities may be affected by the financial markets as well
as by developments impacting specific issuers. Values of
fixed income securities tend to vary inversely with interest
rates and may be affected by other market and economic
factors as well. The International Equity, TransEurope,
Asian Tigers, International Fixed Income, and Latin America
Equity Funds will, and certain other Funds may invest in
securities of foreign issuers. Securities of foreign issuers
are subject to certain risks not typically associated with
domestic securities, including, among other risks, changes
in currency rates and in exchange control regulations, costs
in connection with conversions between various currencies,
limited publicly available information regarding foreign
issuers, lack of uniformity in accounting, auditing and
financial standards and requirements, greater securities
market volatility, less liquidity of securities, less
3
<PAGE>
government supervision and regulation of securities markets,
withholding taxes and changes in taxes on income on
securities, and possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits.
Investments in certain Latin American countries also may
involve additional risks of political instability, high
inflation rates, and limited trading markets. See "General
Investment Policies," "Risk Factors" and "Description of
Permitted Investments and Risk Factors" in this prospectus,
and the Statement of Additional Information.
MANAGEMENT LaSalle Street Capital Management, Ltd. (the "Advisor")
PROFILE serves as the Advisor to the Funds. ABN AMRO-NSM
International Funds Management B.V. (the "Sub-Advisor")
serves as the investment sub-advisor to the International
Equity Fund, TransEurope Fund, Asian Tigers Fund, Latin
America Equity Fund and International Fixed Income Fund. SEI
Fund Resources (the "Administrator") serves as the
Administrator and shareholder servicing agent of the Trust.
DST Systems, Inc. ("DST") serves as transfer agent
("Transfer Agent") and dividend disbursing agent for the
Trust. Rembrandt(R) Financial Services Company, an affiliate
of the Administrator (the "Distributor"), serves as
distributor of the Trust's shares. See "The Advisor," "The
Sub-Advisor," "The Administrator" and "The Distributor."
YOUR ACCOUNT You may open an Investor Class account with a minimum amount
AND DOING of $2,000 per Fund and make additional investments with as
BUSINESS WITH little as $100. A Trust Class account may be opened by
US contacting LaSalle National Bank, its affiliates and
correspondents. Redemptions of a Fund's shares are made at
net asset value per share. See "Your Account and Doing
Business With Us."
DIVIDENDS Substantially all of the net investment income (exclusive of
capital gains) of each of the Equity, Balanced and Fixed
Income Funds is distributed in the form of periodic
dividends. Substantially all of the net investment income
(exclusive of capital gains) of each of the Money Market
Funds is distributed in the form of daily dividends. Any
capital gain is distributed at least annually. Distributions
are paid in additional shares unless the shareholder elects
to take the payment in cash. See "General Information--
Dividends."
INFORMATION/ For more information, call 1-800-443-4725.
SERVICE
CONTACTS
4
<PAGE>
PORTFOLIO EXPENSES _____________________________________________________________
The purpose of the following table is to help you understand the various cost
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in TRUST CLASS SHARES.
ANNUAL OPERATING EXPENSES (As a percentage of average net assets) TRUST CLASS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY/BALANCED FUNDS
---------------------
SMALL INT'L TRANS ASIAN LATIN AMERICA
VALUE GROWTH CAP EQUITY EUROPE TIGERS EQUITY BALANCED
----- ------ ----- ------ ------ ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers, if applicable) .80% .80% .80% 1.00% 1.00% 1.00% 1.00% .70%
Other Expenses (after
fee waivers, if
applicable)(1) .23% .22% .25% .36% .54% .54% .70% .24%
- ------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers, if
applicable) 1.03% 1.02% 1.05% 1.36% 1.54% 1.54% 1.70% .94%
- ------------------------------------------------------------------------------------------
</TABLE>
(1) "Other Expenses" for the TransEurope Fund are based on estimated amounts
for the current fiscal year.
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<TABLE>
<CAPTION>
FIXED INCOME FUNDS
------------------
INTERMEDIATE LIMITED
GOVERNMENT TAX-EXEMPT INTERNATIONAL VOLATILITY
FIXED INCOME FIXED INCOME FIXED INCOME FIXED INCOME FIXED INCOME
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Advisory Fees
(after fee waivers, if
applicable)(1) .50% .50% .48% .80% .50%
Other Expenses (after
fee waivers, if
applicable)(2) .23% .24% .73% .31% .24%
- -------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers, if
applicable)(3) .73% .74% .75% 1.11% .74%
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</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fixed Income Fund (except the International Fixed Income Fund). The
Advisor reserves the right to terminate its waiver at any time in its sole
discretion. Absent such waiver, Advisory Fees for the other Funds would be
as follows: Fixed Income Fund--.60%, Intermediate Government Fixed Income
Fund--.60%, Tax-Exempt Fixed Income Fund--.60%, and Limited Volatility
Fixed Income Fund--.60%. See "The Advisor."
(2) "Other Expenses" for the Limited Volatility Fixed Income Fund are based on
estimated amounts for the current fiscal year.
(3) Absent the voluntary waivers described above, Total Operating Expenses for
the Funds would be as follows: Fixed Income Fund--.83%, Intermediate
Government Fixed Income Fund--.84%, Tax-Exempt Fixed Income Fund--.85%, and
Limited Volatility Fixed Income Fund--.84%.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUNDS
------------------
TREASURY GOVERNMENT TAX-EXEMPT
MONEY MONEY MONEY MONEY
MARKET MARKET MARKET MARKET
-------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Advisory Fees (after fee waivers, if
applicable)(1) .20% .20% .20% .19%
Other Expenses (after fee waivers, if
applicable)(2) .16% .16% .15% .13%
- ----------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers, if applicable)(3) .36% .36% .35% .32%
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</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fee from
each Money Market Fund (except the Government Money Market Fund). The
Advisor reserves the right to terminate its waiver at any time in its sole
discretion. Absent such waiver, Advisory Fees for the Funds would be as
follows: Treasury Money Market Fund--.35%, Money Market Fund--.35% and Tax-
Exempt Money Market Fund--.35%. Additional information may be found under
"The Advisor."
(2) The Administrator is waiving, on a voluntary basis, a portion of its fee
from each Money Market Fund. The Administrator reserves the right to change
the amount of or terminate its waiver at any time in its sole discretion.
"Other Expenses" have been restated to reflect current administrative fee
waivers. Absent such current waivers, "Other Expenses" for the Funds would
be as follows: Treasury Money Market Fund--.24%, Government Money Market
Fund--.24%, Money Market Fund--.23% and Tax-Exempt Money Market Fund--.21%.
(3) Absent the voluntary waivers described above, Total Operating Expenses for
the Funds would be as follows: Treasury Money Market Fund--.59%, Money
Market Fund--.58% and Tax-Exempt Money Market Fund--.56%.
5
<PAGE>
EXAMPLE TRUST CLASS
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<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on
a $1,000 investment assuming (1) 5% annual re-
turn and (2) redemption at the end of each
time period:
Value Fund $11 $33 $57 $126
Growth Fund 10 32 56 125
Small Cap Fund 11 33 58 128
International Equity Fund 14 43 74 164
TransEurope Fund 16 49 -- --
Asian Tigers Fund 16 49 84 183
Latin America Equity Fund 17 54 92 201
Balanced Fund 10 30 52 115
Fixed Income Fund 7 23 41 91
Intermediate Government Fixed Income Fund 8 24 41 92
Tax-Exempt Fixed Income Fund 7 23 41 91
International Fixed Income Fund 11 35 61 135
Limited Volatility Fixed Income Fund 8 24 -- --
Treasury Money Market Fund 4 12 20 46
Government Money Market Fund 4 12 20 46
Money Market Fund 4 11 20 44
Tax-Exempt Money Market Fund 3 10 18 41
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</TABLE>
THE EXAMPLE IS BASED UPON TOTAL OPERATING EXPENSES, EXCEPT WITH RESPECT TO THE
TRANSEUROPE FUND AND LIMITED VOLATILITY FIXED INCOME FUND, FOR WHICH IT IS
BASED ON ESTIMATED EXPENSES, FOR THE CURRENT FISCAL YEAR. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist
the investor in understanding the various costs and expenses that may be
directly or indirectly borne by investors in the Trust Class shares of the
Funds. A person who purchases shares through a financial institution may be
charged separate fees by the financial institution. See "The Advisor," "The
Administrator" and "The Distributor."
6
<PAGE>
PORTFOLIO EXPENSES _____________________________________________________________
The purpose of the following table is to help you understand the various cost
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in INVESTOR CLASS SHARES.
SHAREHOLDER TRANSACTION EXPENSES (As a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases. 4.50%
Redemption Fee(*) None
- --------------------------------------------------------------------------------
</TABLE>
(*) A charge, currently $10.00, is imposed on wires of redemption proceeds.
ANNUAL OPERATING EXPENSES (As a percentage of average net assets) INVESTOR CLASS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY/BALANCED FUNDS
---------------------
SMALL INT'L TRANS ASIAN LATIN AMERICA
VALUE GROWTH CAP EQUITY EUROPE TIGERS EQUITY BALANCED
----- ------ ----- ------ ------ ------ ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers, if applicable) .80% .80% .80% 1.00% 1.00% 1.00% 1.00% .70%
12b-1 Fees .25% .25% .25% .25% .25% .25% .25% .25%
Other Expenses (after
fee waivers, if
applicable)(1) .23% .22% .25% .36% .54% .54% .70% .24%
- ----------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers, if
applicable) 1.28% 1.27% 1.30% 1.61% 1.79% 1.79% 1.95% 1.19%
- ----------------------------------------------------------------------------------------
</TABLE>
(1) "Other Expenses" for the TransEurope and Latin America Equity Funds are
based on estimated amounts for the current fiscal year.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
FIXED INCOME FUNDS
------------------
INTERMEDIATE INTERNATIONAL LIMITED
FIXED GOVERNMENT TAX-EXEMPT FIXED VOLATILITY
INCOME FIXED INCOME FIXED INCOME INCOME FIXED INCOME
------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers, if
applicable)(1) .50% .50% .48% .80% .50%
12b-1 Fees .25% .25% .25% .25% .25%
Other Expenses (after
fee waivers if
applicable)(2) .23% .24% .25% .31% .24%
- -------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers, if
applicable)(3) .98% .99% .98% 1.36% .99%
- -------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor is waiving on a voluntary basis a portion of its fee from each
Fixed Income Fund (except the International Fixed Income Fund). The Advisor
reserves the right to terminate its waiver at any time in its sole
discretion. Absent such waiver, Advisory Fees for the Funds would be as
follows: Fixed Income Fund--.60%, Intermediate Government Fixed Income
Fund--.60%, Tax-Exempt Fixed Income Fund-- .60% and Limited Volatility
Fixed Income Fund-- .60%. See "The Advisor."
(2) "Other Expenses" for the Limited Volatility Fixed Income Fund are based on
estimated amounts for the current fiscal year.
(3) Absent the voluntary waivers described above, Total Operating Expenses for
the Funds would be as follows: Fixed Income Fund--1.08%, Intermediate
Government Fixed Income Fund--1.09%, Tax-Exempt Fixed Income Fund--1.10%,
and Limited Volatility Fixed Income Fund--1.09%.
7
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MONEY MARKET FUNDS
------------------
TREASURY GOVERNMENT TAX-EXEMPT
MONEY MONEY MONEY MONEY
MARKET MARKET MARKET MARKET
-------- ---------- ------ ----------
<S> <C> <C> <C> <C>
Advisory Fees (after fee waivers, if
applicable)(1) .20% .20% .20% .19%
12b-1 Fees .25% .25% .25% .25%
Other Expenses (after fee waivers, if
applicable)(2) .16% .16% .15% .13%
- ----------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers, if applicable)(3) .61% .61% .60% .57%
- ----------------------------------------------------------------------------
</TABLE>
(1) The Advisor has waived, on a voluntary basis, a portion of its fees from
each Fund (except the Government Money Market Fund). The Advisor reserves
the right to terminate its waiver at any time in its sole discretion.
Absent such waiver, Advisory Fees would be as follows: Treasury Money
Market Fund--.35%, Money Market Fund--.35% and Tax-Exempt Money Market
Fund--.35%. See "The Advisor."
(2) The Administrator is waiving, on a voluntary basis, a portion of its fee
from each Money Market Fund. The Administrator reserves the right to change
the amount of or terminate its waiver at any time in its sole discretion.
"Other Expenses" have been restated to reflect current administrative fee
waivers. Absent such current waivers, "Other Expenses" for the Funds would
be as follows: Treasury Money Market Fund--.24%, Government Money Market
Fund--.24%, Money Market Fund,--.23% and Tax-Exempt Money Market Fund--
.21%.
(3) Absent the voluntary waivers described above, Total Operating Expenses for
the Funds would be as follows: Treasury Money Market Fund--.84%, Money
Market Fund--.83% and Tax-Exempt Money Market Fund--.81%.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on
a $1,000 investment assuming (1) imposition of
the maximum sales charge; (2) 5% annual return
and
(3) redemption at the end of each time period:
Value Fund $57 $84 $112 $193
Growth Fund 57 83 112 191
Small Cap Fund 58 84 113 195
International Equity Fund 61 94 129 228
TransEurope Fund 62 99 -- --
Asian Tigers Fund 62 99 138 246
Latin America Equity Fund 64 103 -- --
Balanced Fund 57 81 107 183
Fixed Income Fund 55 75 97 160
Intermediate Government Fixed Income Fund 55 75 97 161
Tax-Exempt Fixed Income Fund 55 75 97 160
International Fixed Income Fund 58 86 116 201
Limited Volatility Fixed Income Fund 55 75 -- --
Treasury Money Market Fund 6 20 34 76
Government Money Market Fund 6 20 34 76
Money Market Fund 6 19 33 75
Tax-Exempt Money Market Fund 6 18 32 71
- ----------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED ON TOTAL OPERATING EXPENSES, EXCEPT FOR THE TRANSEUROPE
FUND AND LIMITED VOLATILITY FIXED INCOME FUND, FOR WHICH IT IS BASED ON
ESTIMATED EXPENSES FOR THE CURRENT FISCAL YEAR. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist the
investor in understanding the various costs and expenses that may be directly
or indirectly borne by investors in the Investor Class shares of the Funds. A
person who purchases shares through a financial institution may be charged
separate fees by the financial institution. See "The Advisor," "The
Administrator" and "The Distributor."
The rules of the Securities and Exchange Commission require that the maximum
sales charge be reflected in the above table. However, certain investors may
qualify for reduced sales charges. See "Purchase of Shares," "Redemption of
Shares" and "Eligibility For Reduced Sales Charge."
Long-term Shareholders in the Investor Class shares of the Funds (other than
the Money Market Funds) may eventually pay more than the economic equivalent of
the maximum front-end sales charge otherwise permitted by the Conduct Rules of
the National Association of Securities Dealers, Inc.
8
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following information has been audited by Ernst & Young LLP, the Trust's
independent auditors, as indicated in their report dated January 24, 1997 on
the Trust's financial statements as of December 31, 1996 incorporated by
reference to the Trust's Statement of Additional Information under "Financial
Information." This table should be read in conjunction with the Trust's
financial statements and related notes thereto. As of December 31, 1996, the
TransEurope Fund and Limited Volatility Fixed Income Fund had not yet commenced
operations. Additional performance information is set forth in the Trust's 1997
Annual Report to Shareholders and is available upon request and without charge
by calling 1-800-443-4725.
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Ratio of Ratio of
Net Expenses
Realized Net Ratio of Investment to
Net Net and Distri- Asset Net Expenses Income Average
Asset Invest- Unrealized Dividends butions Contri- Value Assets to (Loss) to Net
Value ment Gains from Net from bution End End of Average Average Assets
Beginning Income/ (Losses )on Investment Capital of of Total Period Net Net (Excluding
of Period (Loss) Securities Income Gains Capital Period Return (000) Assets Assets Waivers)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VALUE FUND
----------
TRUST CLASS
1996 $12.26 $ 0.29 $ 2.18 $(0.29) $(1.20) $0.00 $13.24 20.43% $164,710 1.01% 2.19 % 1.03%
1995 9.79 0.34 2.74 (0.35) (0.26) 0.00 12.26 32.02 131,243 1.03 3.07 1.05
1994 10.30 0.35 (0.35) (0.34) (0.17) 0.00 9.79 0.00 61,557 1.06 3.45 1.06
1993(1) 10.00 0.28 0.38 (0.28) (0.08) 0.00 10.30 6.73 54,340 1.10 2.85 1.10
INVESTOR CLASS
1996 $12.28 $ 0.25 $ 2.18 $(0.25) $(1.20) $0.00 $13.26 20.09%* $ 1,672 1.28% 1.94 % 1.28%
1995 9.80 0.32 2.74 (0.32) (0.26) 0.00 12.28 31.72 * 1,497 1.33 2.79 1.33
1994 10.30 0.31 (0.33) (0.31) (0.17) 0.00 9.80 (0.21)* 731 1.37 3.13 1.37
1993(2) 10.41 0.21 (0.03) (0.21) (0.08) 0.00 10.30 1.95 * 435 1.48 2.51 8.99
GROWTH FUND
-----------
TRUST CLASS
1996 $11.61 $ 0.17 $ 2.31 $(0.17) $(0.86) $0.00 $13.06 21.69% $ 95,215 1.02% 1.36 % 1.02%
1995 9.73 0.16 2.88 (0.16) (1.00) 0.00 11.61 31.60 78,216 1.02 1.37 1.02
1994 10.21 0.16 (0.36) (0.16) (0.12) 0.00 9.73 (2.05) 82,710 1.02 1.58 1.03
1993(1) 10.00 0.17 0.33 (0.17) (0.12) 0.00 10.21 5.07 98,581 1.06 1.70 1.07
INVESTOR CLASS
1996 $11.62 $ 0.14 $ 2.33 $(0.14) $(0.86) $0.00 $13.09 21.41%* $ 3,031 1.27% 1.11 % 1.27%
1995 9.74 0.12 2.89 (0.13) (1.00) 0.00 11.62 31.29 * 2,681 1.31 1.10 1.31
1994 10.23 0.13 (0.37) (0.13) (0.12) 0.00 9.74 (2.42)* 1,530 1.33 1.30 1.33
1993(3) 10.44 0.10 (0.08) (0.11) (0.12) 0.00 10.23 (0.23)* 840 1.43 1.24 6.55**
SMALL CAP FUND
--------------
TRUST CLASS
1996 $12.46 $(0.03) $ 2.38 $ 0.00 $(1.78) $0.00 $13.03 19.42% $ 36,375 1.05% (0.27)% 1.05%
1995 9.57 0.02 3.05 (0.02) (0.16) 0.00 12.46 32.13 23,844 1.10 0.18 1.10
1994 10.24 0.03 (0.67) (0.03) 0.00 0.00 9.57 (6.27) 31,527 1.06 0.27 1.06
1993(1) 10.00 0.04 0.24 (0.04) 0.00 0.00 10.24 2.82 53,357 1.09 0.40 1.10
INVESTOR CLASS
1996 $12.46 $(0.07) $ 2.39 $ 0.00 $(1.78) $0.00 $13.00 19.18%* $ 579 1.30% (0.52)% 1.30%
1995 9.58 (0.01) 3.05 0.00 (0.16) 0.00 12.46 31.73 * 553 1.39 (0.08) 1.39
1994 10.25 0.00 (0.67) 0.00 0.00 0.00 9.58 (6.54)* 294 1.38 0.02 1.38
1993(4) 9.51 0.00 0.75 (0.01) 0.00 0.00 10.25 10.55 * 124 1.57 (0.10) 33.84**
<CAPTION>
Ratio of
Net
Investment
Income
(Loss) to
Average
Net Assets Portfolio Average
(Excluding Turnover Commission
Waivers) Rate Rate+++
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
VALUE FUND
----------
TRUST CLASS
1996 2.19 % 58% $0.0493
1995 3.07 37 N/A
1994 3.45 38 N/A
1993(1) 2.85 40 N/A
INVESTOR CLASS
1996 1.94 % 58% $0.0493
1995 2.79 37 N/A
1994 3.13 38 N/A
1993(2) (5.00)** 40 N/A
GROWTH FUND
-----------
TRUST CLASS
1996 1.36 % 58% $0.0600
1995 1.37 71 N/A
1994 1.57 68 N/A
1993(1) 1.69 82 N/A
INVESTOR CLASS
1996 1.11 % 58% $0.0600
1995 1.10 71 N/A
1994 1.30 68 N/A
1993(3) (3.88)** 82 N/A
SMALL CAP FUND
--------------
TRUST CLASS
1996 (0.27)% 158% $0.0599
1995 0.18 142 N/A
1994 0.27 43 N/A
1993(1) 0.39 27 N/A
INVESTOR CLASS
1996 (0.52)% 158% $0.0599
1995 (0.08) 142 N/A
1994 0.02 43 N/A
1993(4) (32.37)** 27 N/A
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Sales load is not included in total return.
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Classes' initial year of operations.
+++ Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is required for fiscal years
beginning after 09/01/95.
1. Commenced operations on January 4, 1993. All ratios and total returns for
the period have been annualized.
2. Commenced operations on March 26, 1993. All ratios and total returns for the
period have been annualized.
3. Commenced operations on March 8, 1993. All ratios and total returns for the
period have been annualized.
4. Commenced operations on April 12, 1993. All ratios and total returns for the
period have been annualized.
9
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
Ratio of
Realized Net
and Net Ratio of Investment
Net Net Unrealized Distri- Asset Net Expenses Income
Asset Invest- Gains Dividends butions Contri- Value Assets to (Loss) to
Value ment (Losses) from Net from bution End End of Average Average
Beginning Income on Investment Capital of of Total Period Net Net
of Period (Loss) Securities Income Gains Capital Period Return (000) Assets Assets
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
-------------------------
TRUST CLASS
1996 $14.56 $ 0.06 $ 1.37 $(0.04) $(0.15) $0.03 $15.83 10.09%+ $96,442 1.36% 0.44 %
1995 13.00 0.07 1.75 (0.06) (0.20) 0.00 14.56 14.03 77,519 1.38 0.70
1994 12.59 0.02 0.40 0.00 (0.01) 0.00 13.00 3.32 41,324 1.43 0.21
1993(1) 10.00 0.00 2.63 0.00 (0.04) 0.00 12.59 26.55 23,457 1.64 0.03
INVESTOR CLASS
1996 $14.52 $ 0.04 $ 1.35 $ 0.00 $(0.15) $0.03 $15.79 9.85%*+ $ 1,608 1.61% 0.20 %
1995 12.96 0.05 1.73 (0.02) (0.20) 0.00 14.52 13.79 * 1,686 1.68 0.42
1994 12.58 0.02 0.37 0.00 (0.01) 0.00 12.96 3.08 * 1,179 1.73 0.03
1993(2) 10.93 (0.01) 1.70 0.00 (0.04) 0.00 12.58 23.52 * 321 1.92 (0.38)
ASIAN TIGERS FUND
-----------------
TRUST CLASS
1996 $10.45 $ 0.02 $ 1.48 $(0.04) $(0.02) $0.02 $11.91 14.55%++ $33,602 1.54% 0.23 %
1995 9.47 0.12 0.98 (0.12) 0.00 0.00 10.45 11.61 23,145 1.52 1.38
1994(3) 10.00 0.03 (0.53) (0.02) (0.01) 0.00 9.47 (5.07) 17,860 1.60 0.45
INVESTOR CLASS
1996 $10.44 $(0.02) $ 1.48 $(0.01) $(0.02) $0.02 $11.89 14.21%*++ $ 840 1.79% (0.15)%
1995 9.47 0.11 0.95 (0.09) 0.00 0.00 10.44 11.18 * 733 1.81 1.05
1994(4) 10.00 0.01 (0.53) 0.00 (0.01) 0.00 9.47 (5.37)* 705 1.90 0.15
LATIN AMERICA EQUITY FUND
-------------------------
TRUST CLASS
1996(5) $10.00 $(0.02) $ 0.26 $ 0.00 $ 0.00 $0.00 $10.24 2.40% $11,490 2.09% (0.55)%
<CAPTION>
Ratio of
Net
Ratio of Investment
Expenses Income
to (Loss) to
Average Average
Net Net
Assets Assets Portfolio Average
(Excluding (Excluding Turnover Commission
Waivers) Waivers) Rate Rate+++
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
-------------------------
TRUST CLASS
1996 1.36% 0.44 % 9% $0.0561
1995 1.38 0.70 11 N/A
1994 1.46 0.18 6 N/A
1993(1) 1.64 0.03 13 N/A
INVESTOR CLASS
1996 1.61% 0.20 % 9% $0.0561
1995 1.68 0.42 11 N/A
1994 2.22 (0.46) 6 N/A
1993(2) 20.12** (18.58)** 13 N/A
ASIAN TIGERS FUND
-----------------
TRUST CLASS
1996 1.54% 0.23 % 24% $0.0106
1995 1.60 1.30 28 N/A
1994(3) 1.71 0.34 13 N/A
INVESTOR CLASS
1996 1.79% (0.15)% 24% $0.0106
1995 1.88 0.98 28 N/A
1994(4) 2.75** (0.70)** 13 N/A
LATIN AMERICA EQUITY FUND
-------------------------
TRUST CLASS
1996(5) 2.09% (0.55)% 10% $0.0004
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Sales load is not included in total return.
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Classes' initial year of operations.
+ The total return for the period ended December 31, 1996 includes the effect
of a capital contribution from an affiliate of the Advisor. Without the
capital contribution, the total return for the Trust Class and Investor
Class would have been 9.87% and 9.64%, respectively.
++ The total return for the period ended December 31, 1996 includes the effect
of a capital contribution from an affiliate of the Advisor. Without the
capital contribution, the total return for the Trust Class and Investor
Class would have been 14.36% and 14.02%, respectively.
+++ Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is required for fiscal years
beginning after 09/01/95.
1. Commenced operations on January 4, 1993. All ratios and total returns for
the period have been annualized.
2. Commenced operations on April 12, 1993. All ratios and total returns for
the period have been annualized.
3. Commenced operations on January 3, 1994. All ratios and total returns for
the period have been annualized.
4. Commenced operations on January 12, 1994. All ratios and total returns for
the period have been annualized.
5. Commenced operations on July 1, 1996. All ratios and total returns for the
period have been annualized.
10
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
Ratio of Ratio of
Realized Net Expenses
and Net Ratio of Investment to
Unrealized Distri- Asset Net Expenses Income Average
Net Asset Net Gains Dividends butions Value Assets to to Net
Value Invest- (Losses) from Net from End End of Average Average Assets
Beginning ment on Investment Capital of Total Period Net Net (Excluding
of Period Income Securities Income Gains Period Return (000) Assets Assets Waivers)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
-------------
TRUST CLASS
1996 $10.75 $0.35 $ 1.02 $(0.35) $(0.79) $10.98 13.15 % $ 54,546 0.94% 3.14% 0.94%
1995 9.53 0.39 1.65 (0.39) (0.43) 10.75 21.85 49,899 0.92 3.74 0.92
1994 10.04 0.30 (0.50) (0.30) (0.01) 9.53 (2.11) 72,086 0.94 3.11 0.94
1993(1) 10.00 0.29 0.39 (0.29) (0.35) 10.04 7.09 58,510 0.97 2.88 0.97
INVESTOR CLASS
1996 $10.75 $0.30 $ 1.04 $(0.32) $(0.79) $10.98 12.86 %* $ 3,710 1.19% 2.89% 1.19%
1995 9.53 0.34 1.67 (0.36) (0.43) 10.75 21.52* 3,949 1.22 3.36 1.22
1994 10.03 0.27 (0.49) (0.27) (0.01) 9.53 (2.29)* 2,894 1.24 2.86 1.34
1993(4) 10.28 0.20 0.12 (0.22) (0.35) 10.03 4.07* 1,265 1.30 2.30 5.06**
FIXED INCOME FUND
-----------------
TRUST CLASS
1996 $10.32 $0.59 $(0.26) $(0.59) $ 0.00 $10.06 3.42 % $123,930 0.73% 5.92% 0.83%
1995 9.30 0.59 $ 1.02 (0.59) 0.00 10.32 17.75 125,563 0.74 5.97 0.84
1994 10.23 0.54 $(0.93) (0.54) 0.00 9.30 (3.82) 92,402 0.72 5.45 0.82
1993(1) 10.00 0.47 $ 0.50 (0.47) (0.27) 10.23 9.92 131,002 0.77 4.60 0.87
INVESTOR CLASS
1996 $10.35 $0.57 $(0.26) $(0.57) $ 0.00 $10.09 3.24 %* $ 459 0.98% 5.65% 1.08%
1995 9.32 0.55 1.04 (0.56) 0.00 10.35 17.40* 646 0.99 5.72 1.09
1994 10.24 0.50 (0.90) (0.52) 0.00 9.32 (3.97)* 442 0.98 5.38 1.08
1993(2) 10.30 0.35 0.23 (0.37) (0.27) 10.24 7.44* 86 1.06 4.08 42.44**
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
TRUST CLASS
1996 $10.06 $0.54 $(0.21) $(0.54) $ 0.00 $ 9.85 3.51 % $ 56,895 0.74% 5.38% 0.84%
1995 9.33 0.54 0.73 (0.54) 0.00 10.06 13.86 73,466 0.73 5.48 0.83
1994 10.08 0.47 (0.75) (0.47) 0.00 9.33 (2.78) 91,002 0.74 4.88 0.84
1993(1) 10.00 0.41 0.18 (0.41) (0.10) 10.08 6.04 104,826 0.76 4.15 0.86
INVESTOR CLASS
1996 $10.05 $0.49 $(0.18) $(0.51) $ 0.00 $ 9.85 3.30 %* $ 251 0.99% 4.87% 1.09%
1995 9.32 0.49 0.76 (0.52) 0.00 10.05 13.59* 2,946 0.98 5.18 1.08
1994 10.07 0.43 (0.73) (0.45) 0.00 9.32 (3.03)* 1,133 1.02 5.05 1.12
1993(3) 10.21 0.28 (0.02) (0.30) (0.10) 10.07 3.42* 46 1.04 3.85 77.08**
<CAPTION>
Ratio of
Net
Investment
Income
(Loss) to
Average
Net
Assets Portfolio Average
(Excluding Turnover Commission
Waivers) Rate Rate+++
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BALANCED FUND
-------------
TRUST CLASS
1996 3.14 % 104% $0.0496
1995 3.74 85 N/A
1994 3.11 85 N/A
1993(1) 2.88 126 N/A
INVESTOR CLASS
1996 2.89 % 104% $0.0496
1995 3.36 85 N/A
1994 2.76 85 N/A
1993(4) (1.46)** 126 N/A
FIXED INCOME FUND
-----------------
TRUST CLASS
1996 5.82 % 194% N/A
1995 5.87 59 N/A
1994 5.35 126 N/A
1993(1) 4.50 163 N/A
INVESTOR CLASS
1996 5.55 % 194% N/A
1995 5.62 59 N/A
1994 5.28 126 N/A
1993(2) (37.30)** 163 N/A
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
TRUST CLASS
1996 5.28 % 179% N/A
1995 5.38 115 N/A
1994 4.78 124 N/A
1993(1) 4.05 81 N/A
INVESTOR CLASS
1996 4.77 % 179% N/A
1995 5.08 115 N/A
1994 4.95 124 N/A
1993(3) (72.19)** 81 N/A
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Sales load is not included in total return.
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Classes' initial year of operations.
+++ Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is required for fiscal years
beginning after 09/01/95.
1. Commenced operations on January 4, 1993. All ratios and total returns for
the period have been annualized.
2. Commenced operations on March 12, 1993. All ratios and total returns for
the period have been annualized.
3. Commenced operations on April 12, 1993. All ratios and total returns for
the period have been annualized.
4. Commenced operations on March 9, 1993. All ratios and total returns for the
period have been annualized.
11
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
Ratio of
Net
Investment
Ratio of Ratio of Income
Realized Net Expenses (Loss)
and Net Ratio of Investment to to
Net Unrealized Distri- Asset Net Expenses Income Average Average
Asset Net Gains Dividends butions Value Assets to to Net Net
Value Invest- (Losses) from Net from End End of Average Average Assets Assets
Beginning ment on Investment Capital of Total Period Net Net (Excluding (Excluding
of Period Income Securities Income Gains Period Return (000) Assets Assets Waivers) Waivers)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
TAX-EXEMPT FIXED INCOME FUND
----------------------------
TRUST CLASS
1996 $10.20 $0.50 $(0.21) $(0.50) $ 0.00 $ 9.99 2.96% $ 39,756 0.73% 4.95% 0.85% 4.83%
1995 9.26 0.48 0.94 (0.48) 0.00 10.20 15.67 50,079 0.75 4.84 0.87 4.72
1994 10.23 0.44 (0.94) (0.44) (0.03) 9.26 (4.93) 53,588 0.71 4.54 0.84 4.41
1993(1) 10.00 0.42 0.42 (0.42) (0.19) 10.23 8.64 67,162 0.75 4.17 0.85 4.07
INVESTOR CLASS
1996 $10.18 $0.43 $(0.17) $(0.47) $ 0.00 $ 9.97 2.70%* $ 680 0.98% 4.70% 1.10% 4.58%
1995 9.24 0.43 0.97 (0.46) 0.00 0.18 15.43 * 1,131 1.00 4.59 1.12 4.47
1994 10.22 0.40 (0.93) (0.42) (0.03) 9.24 (5.27)* 1,059 0.97 4.35 1.10 4.22
1993(2) 10.29 0.32 0.14 (0.34) (0.19) 10.22 5.73 * 428 1.05 3.88 11.86** (6.93)**
INTERNATIONAL FIXED INCOME FUND
-------------------------------
TRUST CLASS
1996 $10.58 $0.48 $(0.18) $(0.64) $ 0.00 $10.24 2.82% $ 17,561 1.11% 4.66% 1.11% 4.66%
1995 9.54 0.62 1.38 (0.96) 0.00 10.58 20.99 17,433 1.10 5.86 1.16 5.80
1994 10.43 0.56 (0.72) (0.55) (0.18) 9.54 (1.47) 15,021 1.16 5.09 1.22 5.03
1993(3) 10.00 0.54 0.94 (0.64) (0.41) 10.43 16.33 16,488 1.21 5.95 1.21 5.95
INVESTOR CLASS
1996 $10.56 $0.54 $(0.27) $(0.60) $ 0.00 $10.23 2.62%* $ 112 1.36% 4.43% 1.36% 4.43%
1995 9.53 0.52 1.45 (0.94) 0.00 10.56 20.68 * 125 1.35 5.57 1.41 5.51
1994 10.42 0.46 (0.64) (0.53) (0.18) 9.53 (1.71)* 87 1.41 5.03 7.54 (1.10)
1993(1) 10.88 0.40 0.12 (0.57) (0.41) 10.42 6.61 * 17 1.56 5.85 319.45** (312.04)**
TREASURY MONEY MARKET FUND
--------------------------
TRUST CLASS
1996 $ 1.00 $0.05 $ 0.00 $(0.05) $ 0.00 $ 1.00 4.80% $156,455 0.44% 4.70% 0.59% 4.55%
1995 1.00 0.05 0.00 (0.05) 0.00 1.00 5.28 110,475 0.44 5.16 0.59 5.01
1994 1.00 0.04 0.00 (0.04) 0.00 1.00 3.58 111,545 0.45 3.50 0.61 3.34
1993(1) 1.00 0.03 0.00 (0.03) 0.00 1.00 2.56 108,495 0.47 2.53 0.62 2.38
INVESTOR CLASS
1996 $ 1.00 $0.04 $ 0.00 $(0.04) $ 0.00 $ 1.00 4.54% $ 10,910 0.69% 4.45% 0.84% 4.30%
1995 1.00 0.05 0.00 (0.05) 0.00 1.00 5.02 7,931 0.69 4.89 0.84 4.74
1994 1.00 0.03 0.00 (0.03) 0.00 1.00 3.32 3,231 0.70 3.52 0.86 3.36
1993(2) 1.00 0.02 0.00 (0.02) 0.00 1.00 2.29 1,347 0.75 2.28 5.23** (2.20)**
<CAPTION>
Portfolio Average
Turnover Commission
Rate Rate+++
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
TAX-EXEMPT FIXED INCOME FUND
----------------------------
TRUST CLASS
1996 98% N/A
1995 129 N/A
1994 146 N/A
1993(1) 149 N/A
INVESTOR CLASS
1996 98% N/A
1995 129 N/A
1994 146 N/A
1993(2) 149 N/A
INTERNATIONAL FIXED INCOME FUND
-------------------------------
TRUST CLASS
1996 85% N/A
1995 105 N/A
1994 138 N/A
1993(3) 146 N/A
INVESTOR CLASS
1996 85% N/A
1995 105 N/A
1994 138 N/A
1993(1) 146 N/A
TREASURY MONEY MARKET FUND
--------------------------
TRUST CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
INVESTOR CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(2) N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Sales load is not included in total return.
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Classes' initial year of operations.
+++ Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is required for fiscal years
beginning after 09/01/95.
1. Commenced operations on January 4, 1993. All ratios and total returns for
the period have been annualized.
2. Commenced operations on March 9, 1993. All ratios and total returns for the
period have been annualized.
3. Commenced operations on February 7, 1993. All ratios and total returns for
the period have been annualized.
4. Commenced operations on April 26, 1993. All ratios and total returns for the
period have been annualized.
12
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
Ratio of
Net
Investment
Net Ratio of Ratio of Income/
Realized Net Expenses (Loss)
and Distri- Net Ratio of Investment to to
Net Unrealized butions Asset Net Expenses Income Average Average
Asset Net Gains Dividends from Value Assets to to Net Net
Value Invest- (Losses) from Net Realized End End of Average Average Assets Assets
Beginning ment on Investment Capital of Total Period Net Net (Excluding (Excluding
of Period Income Securities Income Gains Period Return (000) Assets Assets Waivers) Waivers)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOVERNMENT MONEY MARKET FUND
----------------------------
TRUST CLASS
1996 $1.00 $0.05 $0.00 (0.05) $0.00 $1.00 5.08% $256,392 0.44% 4.96% 0.44% 4.96%
1995 1.00 0.05 0.00 (0.05) 0.00 $1.00 5.59 207,615 0.42 5.45 0.42 5.45
1994 1.00 0.04 0.00 (0.04) 0.00 $1.00 3.89 157,140 0.42 3.81 0.42 3.81
1993(1) 1.00 0.03 0.00 (0.03) 0.00 $1.00 3.00 159,401 0.45 2.92 0.45 2.92
INVESTOR CLASS
1996 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 4.82% $ 5,093 0.69% 4.71% 0.69% 4.71%
1995 1.00 0.05 0.00 (0.05) 0.00 $1.00 5.33 3,002 0.67 5.18 0.67 5.18
1994 1.00 0.04 0.00 (0.04) 0.00 $1.00 3.63 2,739 0.67 3.62 0.67 3.62
1993(4) 1.00 0.02 0.00 (0.02) 0.00 $1.00 2.78 1,814 0.72 2.69 2.37 1.04**
MONEY MARKET FUND
-----------------
TRUST CLASS
1996 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 5.13% $598,715 0.43% 5.02% 0.58% 4.87%
1995 1.00 0.06 0.00 (0.06) 0.00 $1.00 5.64 475,688 0.41 5.50 0.56 5.35
1994 1.00 0.04 0.00 (0.04) 0.00 $1.00 3.97 460,583 0.41 3.93 0.56 3.78
1993(1) 1.00 0.03 0.00 (0.03) 0.00 $1.00 3.01 367,110 0.46 2.92 0.61 2.77
INVESTOR CLASS
1996 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 4.87% $ 1,466 0.68% 4.77% 0.83% 4.62%
1995 1.00 0.05 0.00 (0.05) 0.00 $1.00 5.38 1,358 0.66 5.22 0.81 5.07
1994 1.00 0.04 0.00 (0.04) 0.00 $1.00 3.71 605 0.66 4.13 0.81 3.98
1993(2) 1.00 0.02 0.00 (0.02) 0.00 $1.00 2.76 118 0.72 2.69 10.48 (7.09)**
TAX-EXEMPT MONEY MARKET FUND
----------------------------
TRUST CLASS
1996 $1.00 $0.03 $0.00 $(0.03) $0.00 $1.00 3.14% $187,629 0.40% 3.10% 0.56% 2.94%
1995 1.00 0.03 0.00 (0.03) 0.00 $1.00 3.49 167,945 0.41 3.44 0.56 3.29
1994 1.00 0.02 0.00 (0.02) 0.00 $1.00 2.50 161,054 0.43 2.52 0.59 2.36
1993(1) 1.00 0.02 0.00 (0.02) 0.00 $1.00 1.98 116,000 0.45 1.97 0.60 1.82
INVESTOR CLASS
1996 $1.00 $0.03 $0.00 $(0.03) $0.00 $1.00 2.88% $ 2,807 0.65% 2.85% 0.81% 2.69%
1995 1.00 0.03 0.00 (0.03) 0.00 $1.00 3.24 3,244 0.66 3.19 0.81 3.04
1994 1.00 0.02 0.00 (0.02) 0.00 $1.00 2.24 4,204 0.68 2.31 0.84 2.15
1993(3) 1.00 0.01 0.00 (0.01) 0.00 $1.00 1.65 1,394 0.74 1.81 4.88 (2.33)**
<CAPTION>
Portfolio Average
Turnover Commission
Rate Rate+++
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT MONEY MARKET FUND
----------------------------
TRUST CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
INVESTOR CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(4) N/A N/A
MONEY MARKET FUND
-----------------
TRUST CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
INVESTOR CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(2) N/A N/A
TAX-EXEMPT MONEY MARKET FUND
----------------------------
TRUST CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
INVESTOR CLASS
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(3) N/A N/A
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Classes' initial year of operations.
+++ Average commission rate paid per share for security purchases and sales
during the period. Presentation of the rate is required for fiscal years
beginning after 09/01/95.
1. Commenced operations on January 4, 1993. All ratios and total returns for
the period have been annualized.
2. Commenced operations on March 31, 1993. All ratios and total returns for
the period have been annualized.
3. Commenced operations on April 13, 1993. All ratios and total returns for the
period have been annualized.
4. Commenced operations on April 22, 1993. All ratios and total returns for the
period have been annualized.
13
<PAGE>
................................................................................
[SYMBOL WHAT IS AN
APPEARS INTERMEDIARY?
HERE]
........................................
Any entity, such as a bank, broker-
dealer, other financial institution,
association or organization that
has entered into an arrangement with
the Distributor to sell Investor Class
shares to its customers.
........................................
YOUR ACCOUNT AND DOING BUSINESS WITH US
Trust Class and Investor Class shares of a Fund are sold on a continuous basis
and may be purchased directly from the Trust's Transfer Agent, DST Systems,
Inc., 1004 Baltimore Avenue, Kansas City, Missouri 64105, either by mail,
telephone or by wire. Shares may also be purchased through financial
institutions or broker-dealers which have established a dealer agreement with
the Distributor ("Intermediaries"). Shares of each Fund are offered only to
residents of states in which the shares are eligible for purchase. For more
information about the following topics, see "Additional Information About Doing
Business with Us."
- --------------------------------------------------------------------------------
HOW TO BUY,
SELL AND Trust Class shares of the Funds may be purchased through
EXCHANGE accounts established with LaSalle National Bank ("LaSalle"),
SHARES THROUGH its affiliates and correspondents.
INTERMEDIARIES Investor Class shares of the Funds may be purchased through
Intermediaries (including LaSalle) which provide various
services to their customers ("Customers"). Contact your
Intermediary for information about the services available to
you and for specific instructions on how to buy, sell and
exchange shares. To allow for processing and transmittal of
orders to the Transfer Agent on the same day, Intermediaries
may impose earlier cut-off times for receipt of purchase
orders. Certain Intermediaries may charge account fees.
Information concerning shareholder services and any charges
will be provided to the customer by the Intermediary. Certain
of these Intermediaries may be required to register as broker-
dealers under state law.
The shares you purchase through an Intermediary may be
held "of record" by that Intermediary. If you want to
transfer the registration of shares beneficially owned by
you, but held "of record" by an Intermediary, you should call
the Intermediary to request this change.
HOW TO BUY
INVESTOR CLASS
SHARES FROM
THE TRANSFER
AGENT
Opening an
Account Investors may purchase Investor Class shares of any Fund by
By Mail completing and signing an Account Application form and
mailing it, along with a check (or other negotiable bank
instrument or money order) payable to "Rembrandt Funds(R),
[Fund Name]," to Rembrandt Funds, P.O. Box 419402, Kansas
City, Missouri 64141-6402. Subsequent purchases of shares may
be made at any time by mailing a check (or other negotiable
bank draft or money order) to the Transfer Agent.
All purchases made by check should be in U.S. dollars and
made payable to the Rembrandt Funds(R). Third party checks,
credit cards, credit card checks and cash will not be
accepted. When purchases are made by check, redemptions will
not be allowed until the investment being redeemed has been
in the account for 15 days.
Account Application forms can be obtained by calling 1-
800-443-4725.
14
<PAGE>
By Telephone If an Account Application has been previously received, an
investor may also purchase shares by telephone by calling 1-
800-443-4725. With respect to the Investor Class shares,
orders by telephone will not be executed until payment has
been received. If a check received for purchase of Investor
Class shares does not clear, the purchase will be canceled
and the investor could be liable for any losses or fees
incurred.
By Wire
Shareholders having an account with a commercial bank that
is a member of the Federal Reserve System may purchase
shares of any Fund by requesting their bank to transmit
funds by wire to: United Missouri Bank, N.A.; ABA #10-10-
00695; for Account Number 98-7052-349-3; Further Credit:
[Name of Fund]. The Shareholder's name and account number
must be specified in the wire.
Initial Purchases: Before making an initial investment by
wire, an investor must first telephone 1-800-443-4725 to be
assigned an account number. The investor's name, account
number, taxpayer identification number or Social Security
number, and address must be specified in the wire. In
addition, an Account Application should be promptly
forwarded to: Rembrandt Funds, P.O. Box 419402, Kansas City,
Missouri 64141-6402.
Subsequent Purchases: Additional investments may be made
at any time through the wire procedures described above,
which must include a Shareholder's name and account number.
The investor's bank may impose a fee for investments by
wire.
Other Other Shareholders who desire to transfer the registration
Information of their shares should contact the Administrator.
Regarding
Purchases Purchases of Investor Class shares may be made by direct
deposit or Automated Clearing House transactions.
No certificates representing shares will be issued.
SALES CHARGES The following table shows the regular sales charge on
Investor Class shares of the Equity, Balanced and Fixed
Income Funds payable by a "single purchaser" (defined below)
together with the sales charge reallowed to certain
financial institutions (the "reallowance").
<TABLE>
-----------------------------------------------------------------
<CAPTION>
SALES CHARGE AS SALES CHARGE AS REALLOWANCE AS
A PERCENTAGE OF A PERCENTAGE OF PERCENTAGE OF
AMOUNT OF OFFERING PRICE NET AMOUNT OFFERING PRICE
PURCHASE PER SHARE INVESTED PER SHARE
-----------------------------------------------------------------
<S> <C> <C> <C>
Less than $100,000 4.50% 4.71% 4.05%
$100,000 but less than
$250,000 3.50% 3.63% 3.15%
$250,000 but less than
$500,000 3.00% 3.09% 2.70%
$500,000 and above 1.00% 1.01% 0.90%
-----------------------------------------------------------------
</TABLE>
The sales charge shown in the table is the maximum sales
charge that applies to sales of Investor Class shares. Under
certain circumstances, reallowances of up to the entire
amount of the sales charge may be paid to certain financial
institutions, who might then be deemed to be "underwriters"
under the Securities Act of 1933.
15
<PAGE>
The Distributor may, from time to time in its sole
discretion, institute one or more promotional incentive
programs for dealers, which will be paid for by the
Distributor from the sales charge it receives or from any
other source available to it. Under any such program, the
Distributor may provide incentives, in the form of cash or
other compensation, including merchandise, airline vouchers,
trips and vacation packages, to dealers selling shares of
the Funds.
ELIGIBILITY FOR Investors in Investor Class shares of the Equity and Fixed
REDUCED SALES Income Funds will be entitled to lower, graduated sales
CHARGE charges if the investors' total investment in a Fund exceeds
certain thresholds. In calculating the sales charge rates
applicable to current purchases of Investor Class shares of
Rights of the Equity, Balanced and Fixed Income Funds, a "single
Accumulation purchaser" is entitled to accumulate current purchases with
the current market value of previously purchased shares of
the Fund and the other eligible Funds of the Trust which are
sold subject to a comparable sales charge (the "Eligible
Funds").
The term "single purchaser" refers to (i) an individual,
(ii) an individual and spouse purchasing shares for their
own account or for trust or custodial accounts for their
minor children, or (iii) a fiduciary purchasing for any one
trust, estate or fiduciary account, including employee
benefit plans created under Sections 401 or 457 of the
Internal Revenue Code of 1986, as amended (the "Code"),
including related plans of the same employer.
To be entitled to a reduced sales charge based upon
shares already owned, the investor (or the Intermediary)
must ask the Transfer Agent for such reduction at the time
of purchase and provide the account number(s) of the
investor, and, as applicable, the investor and spouse,
and/or their minor children. The Funds may amend or
terminate this right of accumulation at any time as to
purchases made thereafter.
Letter of By submitting a Letter of Intent (the "Letter") to the
Intent Transfer Agent, a "single purchaser" may purchase Investor
Class shares of the Fund and the other Eligible Funds during
a 13-month period at the sales charge rates applicable to
the aggregate amount of the intended purchases stated in the
Letter. The Letter may apply to purchases made up to 90 days
before the date of the Letter. To receive credit for such
prior purchases, the Shareholder must notify the Transfer
Agent at the time the Letter is submitted that there are
prior purchases that may apply, and, at the time of later
purchases, notify the Transfer Agent that such purchases are
applicable under the Letter.
Other No sales charge is imposed on Investor Class shares of the
Circumstances Funds: (i) issued in plans of reorganization, such as
mergers, asset acquisitions and exchange offers, to which
the Trust is a party; (ii) sold to dealers or brokers that
have a sales agreement with the Distributor, for their own
account or for retirement plans for their employees; (iii)
sold to employees (and their spouses) of dealers or brokers
that certify to the Transfer Agent at the time of purchase
that such purchase is for their own account (or for the
benefit of such employees' minor children); (iv) in
aggregate purchases of $1 million or more by tax
16
<PAGE>
.......................................
HOW DOES
[SYMBOL AN
APPEARS EXCHANGE TAKE
HERE] PLACE?
When making an exchange, you
authorize the sale of your
shares of one or more Funds in
order to purchase the shares
of another Fund. In other words,
you are executing a sell order
and then a buy order. This sale
of your shares is a taxable
event which could result in
a taxable gain or loss.
.......................................
exempt organizations enumerated in Section 501(c) of the
Code, or employee benefit plans created under Sections 401 or
457 of the Code; (v) sold to employees (and immediate family
members) of the Advisor and its affiliates or sold to retired
employees (and immediate family members) of ABN AMRO Holding
N.V. and its affiliates and subsidiaries; (vi) purchased with
the proceeds of trust or employee benefit plan distributions
for which the Advisor and its affiliates act in a fiduciary
capacity (vii) purchased with the proceeds of any
distribution made by a qualified employee benefit plan
(including a 401(k) Plan), or rollovers from individual
Retirement Accounts ("IRAs"); (viii) sold to the participants
in a 401(k) Plan that is a shareholder of any Fund; (ix)
acquired in any exchange of Trust Class shares for Investor
Class shares of the same Fund; (x) sold through broker-
dealers who provide mutual fund transaction services, and who
have entered into an arrangement with the Distributor
relating to waivers of sales charges (for more information,
please see the Statement of Additional Information); or (xi)
sold to existing customers of LaSalle National Bank and its
banking affiliates. Certain broker-dealers who provide such
mutual fund transaction services may charge a fee for this
service.
Automatic You may systematically buy Investor Class shares through
Investment deductions from your checking account, provided these
Plan ("AIP") accounts are maintained through banks which are part of the
Automated Clearing House system. Upon notice, the amount you
commit to the AIP may be changed or canceled at any time. The
minimum pre-authorized investment amount is $50 per month.You
may obtain an AIP application form by calling 1-800-443-4725.
EXCHANGING
SHARES
When Can You Once payment for your shares has been received and accepted
Exchange (i.e., an account has been established), you may exchange
Shares? some or all of your Investor Class or Trust Class shares for
Investor Class or Trust Class shares of other Funds within
the Trust. Exchanges are made at net asset value plus any
applicable sales charge. Any Shareholder or Customer who wishes
to make an exchange must have received a current prospectus of
the Fund in which he or she wishes to invest before the
exchange will be effected. For an established account,
exchanges will be made only after instructions in writing or by
telephone (an "Exchange Request") are received by the Transfer
Agent.
When Do Sales Non-Money Market Funds currently impose a sales charge on
Charges Apply Investor Class shares. If you exchange your Investor Class
to an shares into one of these Funds, you will have to pay a sales
Exchange? charge on any portion of your exchanged Investor Class shares
for which you have not previously paid a sales charge.
17
<PAGE>
................................................................................
[SYMBOL WHAT IS A
APPEARS SIGNATURE
HERE] GUARANTEE?
A signature guarantee verifies the
authenticity of your signature and
may be obtained from any of the
following: banks, brokers, dealers,
certain credit unions, securities
exchange or association, clearing
agency or savings association. A
notary public cannot provide a
signature guarantee.
........................................
If you buy Investor Class shares of a "non-money market"
fund and you receive a sales charge waiver, you will be
deemed to have paid the sales charge for purposes of this
exchange privilege.
The Trust reserves the right to change the terms and
conditions of the exchange privilege discussed herein, or to
terminate the exchange privilege, upon 60 days' notice.
Requesting an To request an exchange, you must provide proper written
Exchange of instructions to the Transfer Agent. Telephone exchanges will
Shares also be accepted if you previously elected this option on
your account application.
To exchange shares beneficially owned by a Customer, but
held of record by an Intermediary or, LaSalle, the Customer
should contact the Intermediary or, where applicable,
LaSalle, who will contact the Transfer Agent and effect the
exchange on behalf of the Customer.
If an Exchange Request in good order is received by the
Transfer Agent by 4:00 p.m., Eastern time, on any Business
Day, the exchange usually will occur on that day.
REDEMPTION OF Shareholders may redeem their shares on any Business Day.
SHARES Redemption requests may be made directly to the Customer's
Intermediary. Shareholders may also redeem their shares by
mail or by telephone. Redemption proceeds may not be
transmitted by Federal Reserve wire on federal holidays
restricting wire transfers. Redemption orders for the Equity,
Balanced and Fixed Income Funds must be received by 4:00
p.m., Eastern time. Redemption orders for the Money Market
Funds must be received by 1:00 p.m., Eastern time.
By Mail A written request for redemption must be received by the
Transfer Agent in order to constitute a valid request for
redemption. The Transfer Agent may require that the signature
on the written request be guaranteed by a bank which is a
member of the Federal Deposit Insurance Corporation, a trust
company, broker, dealer, credit union (if authorized under
state law), securities exchange or association, clearing
agency or savings association. The signature guarantee
requirement will be waived if all of the following conditions
apply: (1) the redemption is for $5,000 worth of shares or
less, (2) the redemption check is payable to the
Shareholder(s) of record, and (3) the redemption check is
mailed to the Shareholder(s) at the address of record. The
Shareholder may also have the proceeds mailed to a commercial
bank account previously designated on the Account Application
or by written instruction to the Transfer Agent. There is no
charge for having redemption requests mailed to a designated
bank account.
18
<PAGE>
By Telephone Shares may be redeemed by telephone if the Shareholder
elects that option on the Account Application. The
Shareholder may have the proceeds mailed to his or her
address or mailed or wired to a commercial bank account
previously designated on the Account Application. Under most
circumstances, payments will be transmitted on the next
Business Day following receipt of a valid request for
redemption. Wire transfer redemption requests may be made by
the Shareholder by calling the Transfer Agent at 1-800-443-
4725, who will deduct a wire charge of $10.00 from the
amount of the redemption. Trust Class Shareholders may have
proceeds of redemptions wired without payment of the wire
charge.
Neither the Trust nor the Transfer Agent will be
responsible for any loss, liability, cost or expense for
acting upon wire instructions or upon telephone instructions
that it reasonably believes to be genuine. The Trust and the
Transfer Agent will each employ reasonable procedures to
confirm that instructions communicated by telephone are
genuine, including requiring a form of personal
identification prior to acting upon instructions received by
telephone and recording telephone instructions. If market
conditions are extraordinarily active, or other
extraordinary circumstances exist, and a Shareholder
experiences difficulties placing redemption orders by
telephone, the Shareholder may wish to consider placing the
order by other means. Shareholders may not close their
accounts by telephone.
Other All redemption orders are effected at the net asset value
Information per share next determined after receipt of a valid request
Regarding for redemption, as described above. Payment to Shareholders
Redemptions for shares redeemed will be made within seven days after
receipt by the Transfer Agent of the valid request for
redemption.
At various times, a Fund may be requested to redeem
shares for which it has not yet received good payment. In
such circumstances, the forwarding of proceeds will be
delayed for at least 15 days from the date of purchase or
until payment has been collected for the purchase of such
shares. The Funds intend to pay cash for all shares
redeemed, but under conditions which make payment in cash
unwise, payment may be made wholly or partly in portfolio
securities with a market value equal to the redemption
price. In such cases, a Shareholder may incur brokerage
costs in converting such securities to cash.
See "Purchase and Redemption of Shares" in the Statement
of Additional Information for examples of when the right of
redemption may be suspended.
Systematic The Funds offer a Systematic Withdrawal Plan ("SWP") which
Withdrawal Plan may be utilized by Investor Class Shareholders who wish to
receive regular distributions from their account. Upon
commencement of the SWP, the account must have a current
value of $5,000 or more. Shareholders may elect to receive
automatic payments via check or Automated Clearing House of
$50 or more on a monthly, quarterly, semi-annual or annual
basis. A SWP Application Form may be obtained by calling
1-800-443-4725.
Shareholders should realize that if withdrawals exceed
income dividends, their invested principal in the account
will be depleted. Thus, depending on the frequency and
19
<PAGE>
amounts of the withdrawal payments and/or any fluctuations in
the net asset value per share, their original investment
could be exhausted entirely. To participate in the SWP,
Shareholders must have their dividends automatically
reinvested. Shareholders may change or cancel the SWP at any
time, upon written notice to the Transfer Agent.
CHECKWRITING Checkwriting is offered free of charge to Investor Class
SERVICE Shareholders in the Money Market Funds. An Investor Class
Shareholder in any Money Market Fund may redeem shares by
(Money Market writing checks on his or her account for $100 or more. Once a
Funds) Shareholder has signed and returned a signature card, he or
she will receive a supply of checks. A check may be made
payable to any person, and the Shareholder's account will
continue to earn dividends until the check clears.
Because of the difficulty of determining in advance the
exact value of a Fund account, a Shareholder may not use a
check to close his or her account. The checks are free, but a
Shareholder's account will be charged a fee for stopping
payment of a check upon a Shareholder's request or if the
check cannot be honored because of insufficient funds or
other valid reasons.
INVESTMENT OBJECTIVE AND POLICIES ______________________________________________
VALUE FUND The Value Fund seeks a high level of total return through
capital appreciation and current income.
The Value Fund will invest at least 65% of its total assets
in U.S. common stocks that the Advisor believes are
undervalued and present the opportunity to increase
shareholder value.
The Value Fund will invest in common stocks that are traded
on a national securities exchange or are actively traded in
the over-the-counter market and that: (i) are priced below
their intrinsic value as determined by the Advisor's dividend
discount model; (ii) have consistently paid dividends; and
(iii) are issued by companies that the Advisor believes are
financially sound.
Any remaining assets of the Fund may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks rated in the highest four
rating categories by a nationally recognized statistical
rating organization ("NRSRO") or determined by the Advisor to
be of comparable quality at the time of purchase; (iii)
preferred stock convertible into common stocks; and (iv) U.S.
dollar denominated equity securities of foreign issuers
(including sponsored American Depositary Receipts ("ADRs")).
..........................................
[SYMBOL WHAT ARE
APPEARS INVESTMENT
HERE] OBJECTIVES AND
POLICIES?
Each Fund's investment objec-
tive is a statement of what it
seeks to achieve. It is
important to make sure that
the investment objective
matches your own financial needs
and circumstances. The invest-
ment policies section spells
out the types of securities in
which each Fund invests.
.........................................
20
<PAGE>
The Fund will invest in securities of foreign issuers only
if they are listed on national securities exchanges or
actively traded in the over-the-counter market. The Fund
will invest in options and futures for hedging purposes
only.
GROWTH FUND The Growth Fund seeks a high level of total return primarily
through capital appreciation.
The Growth Fund will invest at least 65% of its total
assets in the common stock of corporations of any size that,
in the Advisor's opinion, have strong prospects for
appreciation through growth in earnings. The Growth Fund
invests primarily in common stocks that: (i) are traded on a
national securities exchange or are actively traded in the
over-the-counter market and have an average trading volume
of more than $1 million per day; (ii) have sales and
earnings growth rates that exceed the growth rate of the
Gross Domestic Product; and (iii) maintain a positive return
on equity and total assets.
Any remaining Fund assets may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks; (iii) preferred stock
convertible into common stocks; and (iv) U.S. dollar
denominated equity securities of foreign issuers (including
sponsored ADRs). The Fund will invest in securities of
foreign issuers only if they are listed on national
securities exchanges or actively traded in the over-the-
counter market. The Fund will invest in options and futures
for hedging purposes only.
SMALL CAP FUND The Small Cap Fund seeks a high level of total return
primarily through capital appreciation.
The Small Cap Fund will invest at least 65% of its total
assets in the common stocks of corporations with smaller
capitalization levels that the Advisor believes have strong
prospects for appreciation through growth in earnings. The
Advisor's emphasis will be on a diversified portfolio of
common stocks of companies with aggregate market
capitalization of less than $1 billion. In selecting stocks
for the Fund, factors reviewed will include sales and
earnings growth rates and the strength of the issuer's
balance sheet.
Because the Fund invests primarily in common stocks of
smaller capitalization companies, the Fund's shares may
fluctuate significantly in value, and thus may be more
suitable for long-term investors who can bear the risk of
short-term fluctuations.
Any remaining Fund assets may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks; (iii) preferred stock
convertible into common stocks; and (iv) U.S. dollar
denominated equity securities of foreign issuers (including
sponsored ADRs). The Fund will invest in equity securities
of foreign issuers that satisfy in substance the criteria
for investing in smaller capitalization stocks set forth
above. The Fund will invest in equity securities of foreign
issuers only if they are listed on national securities
exchanges or actively traded in the over-the-counter market.
The Fund will invest in options and futures for hedging
purposes only.
INTERNATIONAL The International Equity Fund seeks a high level of total
EQUITY FUND return through capital appreciation and current income.
21
<PAGE>
The International Equity Fund will invest at least 65% of
its total assets in equity securities of issuers in at least
three countries other than the U.S.
While the Fund will not necessarily spread its
investments among more than three countries other than the
U.S., the Advisor intends to diversify its investments among
countries to reduce currency risk. Investments will be made
primarily in common stocks of companies domiciled in
developed countries, but may be made in the securities of
companies domiciled in developing countries, as well.
Although the Fund will invest primarily in securities listed
on national stock exchanges, it will also invest in
securities actively traded in over-the-counter markets.
Securities of companies in developing countries may pose
liquidity risks.
Any remaining Fund assets will be invested in common
stocks of closed-end management investment companies that
invest primarily in international common stocks, stocks of
U.S. issuers listed on national securities exchanges or
actively traded in the over-the-counter market, convertible
securities of U.S. issuers (whether or not they are listed
on national securities exchanges) and money market
instruments. The Fund will invest in options and futures for
hedging purposes only.
TRANSEUROPE The TransEurope Fund seeks a high level of total return
FUND through capital appreciation and current income.
The TransEurope Fund will invest as fully as feasible
(and at least 65% of its total assets) in equity securities
of European issuers located in Belgium, Denmark, Finland,
France, Germany, Italy, the Netherlands, Norway, Spain,
Sweden, Switzerland and the United Kingdom. Investments may
also be made in the equity securities of issuers located in
the smaller and emerging markets of Europe. The Fund may
also invest in the equity securities of issuers in the
following Eastern European countries: the Czech Republic,
Hungary, Poland and Slovakia. Emerging markets are subject
to special risks not associated with domestic markets. See
"Certain Risk Factors."
The Fund's remaining assets will be invested in money
market instruments of European issuers. The Fund will invest
in options and futures for hedging purposes only.
ASIAN TIGERS The Asian Tigers Fund seeks to achieve capital appreciation.
FUND The Asian Tigers Fund will invest primarily in equity
securities that are traded on recognized stock exchanges of
the countries of Asia and in equity securities of companies
organized under the laws of an Asian country. The Fund may
also invest in sponsored ADRs of Asian issuers that are
traded on stock exchanges in the United States. The Fund
does not intend to invest in securities which are
principally traded in markets in Japan or in companies
organized under the laws of Japan.
Under normal circumstances, at least 65% of the total
assets of the Fund will be invested in equity securities of
issuers located in some or all of the following Asian
countries: China, Hong Kong, Indonesia, Malaysia, the
Philippines, Singapore and Thailand. The Fund may also
invest in common stocks traded on markets in India,
Pakistan, Sri
<PAGE>
Lanka, South Korea and Taiwan, and may invest up to 5% of
its net assets in other developing markets. The Fund has no
set policy for allocating investments among the several
Asian countries. Allocation of investments among the various
countries will depend on the relative attractiveness of the
stocks of issuers in the respective countries. Government
regulation and restrictions in many of the countries of
interest may limit the amount, mode, and extent of
investment in companies of such countries.
Any of the Fund's remaining assets will be invested in
common stocks of closed-end management investment companies
that invest primarily in common stocks of Asian countries or
money market instruments of Asian and European issuers.
In selecting industries and particular issuers, the
Advisor will evaluate costs of labor and raw materials,
access to technology, export of products and government
regulation. Although the Fund seeks to invest in larger
companies, it may invest in medium and small companies that,
in the Advisor's opinion, have potential for growth.
While the Fund intends to invest primarily in securities
listed on stock exchanges, it may also invest in securities
traded in over-the-counter markets, which may pose liquidity
risks. No more than 5% of the Fund's net assets will be
invested in unlisted securities. The Fund will invest in
options and futures for hedging purposes only.
LATIN AMERICA The Latin America Equity Fund seeks long-term capital
EQUITY FUND appreciation.
The Fund will invest primarily in equity securities of
(i) companies organized in, or for which the principal
securities trading market is in Latin America, and (ii)
companies, wherever organized, that, in one of the last two
fiscal years derived more than 50% of their annual revenues
or profits from goods produced, sales made or services
performed in Latin America ("Latin American issuers"). Under
normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities of Latin
American issuers.
The Fund seeks to benefit from economic and other
developments in Latin America. The Advisor and Sub-Advisor
believe that investment opportunities may be present in
Latin America as a result of an evolving long-term
international trend encouraging greater market orientation
and diminishing governmental intervention in economic
affairs. This trend may be facilitated by local or
international political, economic or financial developments
that could benefit the capital markets of certain Latin
American countries. For the purpose of this prospectus,
Latin America includes Argentina, Bolivia, Brazil, Chile,
Colombia, Costa Rica, the Dominican Republic, Ecuador, El
Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru, Uruguay, Venezuela, and the Spanish-speaking
island nations of the Caribbean (not including Cuba and
Haiti). Although the Fund has no set policy for allocating
investments among Latin American countries, it is currently
contemplated that the Fund will emphasize investments in
issuers located in Argentina, Brazil, Chile, Colombia,
Mexico, Peru and Venezuela. The Fund may be precluded from
investing in certain of the remaining eleven countries and
certain Spanish-speaking islands until such time as adequate
custodial arrangements can be established. Government
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regulation and restrictions may limit the amount, mode and
extent of investment in companies in such countries.
Although the Fund intends to invest primarily in equity
securities listed on stock exchanges, it may also invest in
securities traded in over-the-counter markets and in
securities for which there is no organized market.
The Fund may invest in investment grade debt securities,
including debt securities issued or guaranteed by a Latin
American government or governmental entity ("Sovereign
Debt"), obligations of supranational entities, Brady Bonds
and money market instruments.
For hedging purposes only, the Fund may also enter into
options, futures, interest rate swaps, currency
transactions, caps, collars and floors. The Fund may also
write (i.e., sell) covered call options on the securities in
which it may invest.
The Fund is non-diversified for purposes of the
Investment Company Act of 1940, as amended (the "1940 Act"),
which means that it is not limited by the 1940 Act in the
proportion of its assets that it may invest in the
obligations of a single issuer. The Fund may be more
susceptible to any single economic, political or regulatory
occurrence than a diversified investment company. The
investment of a large percentage of the Fund's assets in the
securities of a small number of issuers may cause the Fund's
share price to fluctuate more than that of a diversified
investment company.
BALANCED FUND The Balanced Fund seeks a favorable total rate of return
through current income and capital appreciation consistent
with preservation of capital, by investing in a portfolio
comprised of fixed income and equity securities.
The Balanced Fund will invest at least 80% of its net
assets in fixed income and equity securities, with at least
25% of its assets in fixed income senior securities.
Permissible investments for the Fund include: (i) corporate
bonds and debentures of U.S. or foreign issuers rated in the
highest four rating categories by an NRSRO or determined by
the Advisor to be of comparable quality at the time of
purchase; (ii) securities denominated in U.S. dollars or in
foreign currencies, issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or
instrumentalities or issued or guaranteed by foreign
governments, their political subdivisions, agencies or
instrumentalities; (iii) short-term commercial paper of U.S.
or foreign issuers rated in the highest two rating
categories by an NRSRO or determined by the Advisor to be of
comparable quality at the time of investment; (iv) short-
term bank obligations consisting of certificates of deposit,
time deposits and bankers' acceptances of U.S. or foreign
commercial banks or savings and loan institutions with
assets as of the end of their most recent fiscal year of at
least $500 million, or its equivalent in appropriate foreign
currency measured using currency exchange rates in effect at
the time of investment; (v) obligations denominated in U.S.
dollars or foreign currencies of supranational entities
rated in the highest three rating categories by an NRSRO;
(vi) mortgage-backed securities rated in the highest two
rating categories by an NRSRO; (vii) asset-backed securities
rated in the highest three rating categories by an NRSRO;
(viii) STRIPS and receipts; (ix) repurchase
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<PAGE>
agreements involving such securities; (x) loan
participations, in which the Fund will not invest more than
5% of its total assets; (xi) guaranteed investment contracts
("GICs") and bank investment contracts ("BICs") deemed by
the Advisor to be of investment grade; (xii) swaps; (xiii)
municipal notes rated in the highest two rating categories
by an NRSRO or, if unrated, determined by the Advisor to be
of comparable quality; and (xiv) municipal bonds rated in
the highest three rating categories by an NRSRO or, if
unrated, determined by the Advisor to be of comparable
quality. The Balanced Fund is not subject to maturity
restrictions. The Balanced Fund may invest up to 15% of its
assets in fixed income securities that are either
denominated in foreign currencies or issued by foreign
issuers, provided that assets invested in such securities
will not constitute more than 50% of the assets of the
Balanced Fund invested in fixed income securities.
The remainder of the Fund's assets will be invested in:
(i) common stocks; (ii) warrants to purchase common stocks;
(iii) debt securities convertible into common stocks; (iv)
preferred stocks convertible into common stocks; (v) U.S.
dollar denominated equity securities of foreign issuers
(including sponsored ADRs); (vi) foreign securities; and
(vii) equity options. The equity securities in which the
Fund will invest are listed on national securities exchanges
or actively traded in the over-the-counter market. The Fund
will invest, based on dividend paying characteristics and
growth potential, in equity securities of companies of all
sizes. There are no minimum rating criteria applicable to
convertible securities.
The Balanced Fund is also permitted to invest in options
and futures (for hedging purposes only), engage in
securities lending, acquire floating and variable rate
securities, enter into dollar roll transactions with
selected banks and broker-dealers and purchase securities on
a when-issued basis where the purchase is for investment in
the securities, not for leveraging, and subject to the
investment restrictions described above.
FIXED INCOME The Fixed Income Fund seeks a high level of total return
FUND relative to funds with like investment objectives, from
income and, to a lesser degree, capital appreciation by
investing in a portfolio consisting primarily of quality
intermediate- and long-term fixed income securities.
The Fixed Income Fund will invest as fully as feasible
(and at least 65% of its total assets) in the following
fixed income securities: (i) corporate bonds and debentures
rated in the highest four rating categories by an NRSRO or,
if unrated, determined by the Advisor to be of comparable
quality at the time of purchase; (ii) obligations issued or
guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities; (iii) short-
term commercial paper rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality at the time of
investment; (iv) short-term bank obligations rated in the
highest two rating categories by an NRSRO, including
certificates of deposit, time deposits, and bankers'
acceptances of U.S. commercial banks or savings and loan
institutions with assets of at least $500 million as of the
end of their most recent fiscal year; (v) U.S. dollar
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denominated securities issued or guaranteed by foreign
governments, their political subdivisions, agencies or
instrumentalities; (vi) U.S. dollar denominated obligations
of supranational entities rated in the highest three rating
categories by an NRSRO; (vii) mortgage-backed securities
rated in the highest two rating categories by an NRSRO;
(viii) asset-backed securities rated in the highest three
rating categories of an NRSRO; (ix) STRIPS and receipts
evidencing separately traded interest and principal
component parts of U.S. Government obligations ("Receipts");
(x) repurchase agreements involving such securities; (xi)
loan participations, in which the Fund will not invest more
than 5% of its total assets; (xii) GICs; (xiii) BICs; (xiv)
swaps; (xv) municipal notes rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality; and (xvi) municipal
bonds rated in the highest three rating categories by an
NRSRO or, if unrated, determined by the Advisor to be of
comparable quality.
There are no restrictions on the average maturity of the
Fund or on the maturity of any single instrument. Maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market factors.
The estimated dollar-weighted average portfolio maturity of
the Fund is approximately eight years.
Any remaining assets of the Fund may be invested in
variable and floating rate obligations, dollar rolls,
forward commitments, when-issued securities, and securities
of foreign issuers. In addition, the Fund may lend the
securities in which it is invested. The Fund may invest in
options and futures for hedging purposes only.
INTERMEDIATE The Intermediate Government Fixed Income Fund seeks a high
GOVERNMENT level of total return relative to funds with like investment
FIXED INCOME objectives, consistent with preservation of capital from
FUND income and, to a lesser degree, capital appreciation, by
investing in a portfolio consisting of short- and
intermediate-term U.S. Government securities.
The Intermediate Government Fixed Income Fund will invest
100% of its total assets in government securities, which
include obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or
instrumentalities.
Normally, the Fund will maintain an average weighted
maturity of three to ten years; under certain circumstances,
however, the average weighted maturity may fall below three
years. The Fund may invest in options and futures for
hedging purposes only.
TAX-EXEMPT The Tax-Exempt Fixed Income Fund seeks a high level of total
FIXED INCOME return, relative to funds with like investment objectives,
FUND consistent with preservation of capital, from income by
investing in a portfolio consisting primarily of securities
that are exempt from federal income tax and not subject to
taxation as a preference item for purposes of the federal
alternative minimum tax.
The Tax-Exempt Fixed Income Fund will invest as fully as
feasible (at least 65% of the value of its total assets) in
fixed income securities issued by or on behalf of the
states, territories and possessions of the United States and
the District of Columbia and their political subdivisions,
agencies and instrumentalities, rated in the highest four
rating
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<PAGE>
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality, and will invest at
least 80% of its net assets in comparably-rated fixed income
securities the interest on which is exempt from federal
income tax and which are not subject to taxation as a
preference item for purposes of the federal alternative
minimum tax.
The remainder of the Fund's assets may be invested in:
(i) short-term, tax-exempt commercial paper rated in the
highest two rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality at the
time of investment; (ii) municipal notes rated in the
highest two rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality; (iii)
fixed income options and futures; (iv) asset-backed
securities; (v) Receipts; (vi) securities issued or
guaranteed by the U.S. Government or its agencies; and (vii)
corporate bonds rated in one of the three highest categories
by an NRSRO.
There are no restrictions on the average maturity of the
Fund or the maturity of any single instrument. Maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market factors.
The Fund may invest in options and futures for hedging
purposes only.
INTERNATIONAL The International Fixed Income Fund, formerly the Global
FIXED INCOME Fixed Income Fund, seeks a high level of total return
FUND relative to funds with like investment objectives, measured
in U.S. dollar terms, from income and capital appreciation
by investing in a portfolio consisting of investment quality
fixed income securities denominated in foreign currencies.
The International Fixed Income Fund will invest as fully
as feasible (at least 65% of its total assets) in investment
quality fixed income securities of issuers in at least three
of the following countries: Austria, Australia, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, The Netherlands, New Zealand, Norway,
Spain, Sweden, Switzerland and the United Kingdom.
The Fund strives to take maximum advantage of financial
and economic developments and currency fluctuations. All
investments will be in high quality securities denominated
in various currencies, including the European Currency Unit,
and listed on stock exchanges of major industrialized
countries. At least 50% of investments will be made in
government bonds or in bonds issued by government-backed
institutions (but no more than 25% of the Fund's assets will
be invested in securities of governmental issuers in any one
country). Investments in non-government bonds will be rated
in one of the highest four rating categories by an NRSRO.
Fixed income securities consist of: (i) corporate bonds
and debentures rated in the highest four rating categories
by an NRSRO or, if unrated, determined by the Advisor to be
of comparable quality at the time of purchase; (ii) short-
term commercial paper rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality at the time of
investment; (iii) securities issued or guaranteed by foreign
governments, their political subdivisions, agencies or
instrumentalities;
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<PAGE>
(iv) obligations of supranational entities; (v) repurchase
agreements involving such securities; (vi) loan
participations, in which the Fund will not invest more than
5% of its total assets; and (vii) swaps, fixed income
options and futures.
Any remaining Fund assets will be invested in: (i)
securities denominated in U.S. dollars or foreign currencies
comparable in quality to the fixed income instruments
described above; (ii) obligations issued or guaranteed as to
principal and interest by the U.S. Government or its
agencies and instrumentalities; (iii) short-term bank
obligations, including certificates of deposit, time
deposits, and bankers' acceptances of U.S. or foreign
commercial banks or savings and loans institutions with
assets as of the end of their most recent fiscal year of at
least $500 million or its equivalent in appropriate foreign
currency measured using currency exchange rates in effect at
the time of investment; (iv) mortgage-backed securities
rated in the highest two rating categories by an NRSRO; (v)
asset-backed securities rated in the highest three rating
categories by an NRSRO; (vi) Receipts; (vii) GICs; and
(viii) BICs.
There are no restrictions on the average maturity of the
Fund or on the maturity of any single instrument. Maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market factors.
The Fund may invest in options and futures for hedging
purposes only.
LIMITED The Limited Volatility Fixed Income Fund seeks a high level
VOLATILITY of current income, consistent with relative stability of
FIXED INCOME principal, by investing primarily in a portfolio consisting
FUND of short- and intermediate-term fixed income securities.
The Limited Volatility Fixed Income Fund will invest as
fully as feasible (at least 65% of its total assets) in the
following short- and intermediate-term taxable fixed income
obligations: (i) corporate bonds and debentures rated in the
highest four rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality at the
time of purchase; (ii) obligations issued or guaranteed as
to principal and interest by the U.S. Government, its
agencies or instrumentalities; (iii) short-term commercial
paper rated in the highest two rating categories by an NRSRO
or, if unrated, determined by the Advisor to be of
comparable quality at the time of purchase; (iv) short-term
bank obligations: certificates of deposit, time deposits,
and bankers' acceptances of U.S. commercial banks or savings
and loans institutions with assets of at least $500 million
as of the end of their most recent fiscal year; (v) U.S.
dollar denominated securities issued or guaranteed by
foreign governments, their political subdivisions, agencies
or instrumentalities; (vi) U.S. dollar denominated
obligations of supranational entities rated in the highest
three rating categories by an NRSRO; (vii) mortgage-backed
securities rated in the highest two rating categories by an
NRSRO; (viii) asset-backed securities rated in the highest
three rating categories by an NRSRO; (ix) Receipts; (x)
repurchase agreements involving such securities; (xi) swaps;
(xii) municipal notes rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality; and (xiii) municipal
bonds rated in the highest three rating categories by an
NRSRO
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<PAGE>
or, if unrated, determined by the Advisor to be of
comparable quality. The Fund will also invest in fixed
income options and futures for hedging purposes only.
The Fund may also invest in dollar roll transactions,
variable and floating rate obligations, forward commitments,
when-issued securities, and securities of foreign issuers.
In addition, the Fund may lend the securities in which it is
invested under certain conditions.
The dollar-weighted average maturity of the Fund will be
less than six years. The Advisor may shorten the average
maturity substantially, as a temporary defensive position,
in anticipation of a change in the interest rate
environment.
TREASURY MONEY The Treasury Money Market Fund seeks to preserve principal
MARKET FUND value and maintain a high degree of liquidity while
providing current income by investing exclusively in U.S.
Treasury obligations.
The Treasury Money Market Fund invests in bills, notes,
and bonds issued by the U.S. Treasury and separately traded
interest and principal component parts of such obligations
that are transferable through the Federal Book Entry System
(such component parts of obligations are commonly known as
"STRIPS" and all of the foregoing obligations are referred
to herein collectively as "U.S. Treasury Obligations").
The Fund's investments in STRIPS will be limited to
components with maturities of less than 397 days. Investing
in these securities entails certain risks, including that
interest components may be more volatile in value than
comparable maturity Treasury bills, as further described in
"Description of Permitted Investments and Risk Factors." The
Fund will invest primarily in U.S. Treasury Obligations
other than STRIPS.
GOVERNMENT The Government Money Market Fund seeks to provide as high a
MONEY MARKET level of current income as is consistent with preservation
FUND of capital and liquidity by investing in obligations of the
U.S. Government, its agencies or instrumentalities.
The Government Money Market Fund invests exclusively in
high quality money market instruments denominated in U.S.
dollars consisting of (i) U.S. Treasury Obligations; (ii)
securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (e.g., Government National
Mortgage Association ("GNMA"), Fannie Mae, Federal Home Loan
Mortgage Corporation ("FHLMC"), Federal Land Bank); and
(iii) repurchase agreements involving such obligations.
MONEY MARKET The Money Market Fund seeks to provide as high a level of
FUND current income as is consistent with the preservation of
capital and liquidity by investing exclusively in high
quality money market instruments.
The Money Market Fund invests exclusively in the
following: (i) U.S. Treasury Obligations; (ii) obligations
issued or guaranteed as to principal and interest by the
U.S. Government or its agencies and instrumentalities; (iii)
commercial paper of U.S. and foreign issuers rated in the
highest two short-term rating categories of an NRSRO at the
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<PAGE>
time of investment or, if unrated, determined by the Advisor
to be of comparable quality; (iv) obligations (certificates
of deposit, time deposits, and bankers' acceptances) of U.S.
commercial banks, U.S. savings and loan institutions, and
U.S. and London branches of foreign banks that have total
assets of $500 million or more as shown on their last
published financial statements at the time of investment;
(v) short-term corporate obligations of U.S. and foreign
issuers whose commercial paper the Fund may purchase; (vi)
repurchase agreements involving such obligations; (vii)
obligations of supranational entities; (viii) loan
participations; (ix) receipts evidencing separately traded
interest and principal component parts of U.S. Government
obligations; (x) standby commitments; and (xi) municipal
securities. The Fund may not invest more than 25% of its
total assets in obligations issued by foreign branches of
U.S. banks and London branches of foreign banks.
TAX-EXEMPT The Tax-Exempt Money Market Fund seeks to preserve principal
MONEY MARKET value and maintain a high degree of liquidity while
FUND providing current income exempt from federal income tax and
not included as a preference item under the alternative
minimum tax.
The Tax-Exempt Money Market Fund invests at least 80% of
its total assets in eligible securities issued by or on
behalf of the states, territories and possessions of the
United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the
interest of which, in the opinion of bond counsel for the
issuer, is exempt from federal income tax (collectively,
"Municipal Securities"). In pursuing this policy, the Fund
may purchase municipal bonds, municipal notes, tax-exempt
commercial paper rated in the highest two short-term rating
categories by an NRSRO in accordance with SEC regulations at
the time of investment or, if unrated, determined by the
Advisor to be of comparable quality, and shares of tax-
exempt money market funds.
The Advisor has discretion to invest up to 20% of the
Fund's assets in the aggregate in taxable money market
instruments (including repurchase agreements) and securities
subject to the alternative minimum tax.
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GENERAL
INVESTMENT
POLICIES ______________________________________________________________________
THE EQUITY AND Each Fund will invest in equity securities only if they are
BALANCED FUNDS listed on national securities exchanges or actively traded
in the over-the-counter market. Each Fund may invest in
convertible securities whether or not they are listed on
national securities exchanges.
Each Fund will invest not more than 10% of its total
assets in restricted securities. In addition, a Fund may
invest up to 5% of its assets in restricted securities that
the Advisor determines are liquid. Each Fund will not invest
more than 15% of its total assets in illiquid securities.
A Fund may enter into futures contract transactions only
to the extent that obligations under such contracts
represent less than 20% of the Fund's assets. The aggregate
value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a
Fund.
THE FIXED Each Fund may purchase mortgage-backed securities issued or
INCOME AND guaranteed as to payment of principal and interest by the
BALANCED FUNDS U.S. Government, its agencies or instrumentalities and
mortgage-backed securities issued by non-governmental
issuers that are rated in the highest two rating categories
of an NRSRO.
The Fixed Income Fund, Intermediate Government Fixed
Income Fund, Limited Volatility Fixed Income Fund and
Balanced Fund may enter into dollar roll transactions with
selected banks and broker-dealers.
The quality standards of debt securities and other
obligations as described for the Funds must be satisfied at
the time an investment is made. In the event that an
investment held by a Fund is assigned a lower rating or
ceases to be rated, the Advisor will promptly reassess
whether such security presents suitable credit risks and
whether the Fund should continue to hold the security or
obligation in its portfolio. If a portfolio security or
obligation no longer presents suitable credit risks or is in
default, the Fund will dispose of the security or obligation
as soon as reasonably practicable unless the Trustees of the
Trust determine that to do so is not in the best interest of
the Fund.
Each Fund will invest not more than 10% of its total
assets in restricted securities. In addition, a Fund may
invest up to 5% of its assets in restricted securities that
the Advisor determines are liquid. Each Fund will not invest
more than 15% of its total assets in illiquid securities.
A Fund may enter into futures contract transactions only
to the extent that obligations under such contracts
represent less than 20% of the Fund's assets. The aggregate
value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a
Fund.
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<PAGE>
THE MONEY Each Money Market Fund intends to comply with regulations of
MARKET FUNDS the SEC applicable to funds using the amortized cost method
for calculating net asset value found in Rule 2a-7 under the
1940 Act. These regulations impose certain quality, maturity
and diversification restraints on investments by the Funds.
Under these regulations, the Funds will invest only in U.S.
dollar denominated securities, will maintain an average
maturity on a dollar-weighted basis of 90 days or less, and
will acquire only "eligible securities" that present minimal
credit risks and have a maturity of 397 days or less. These
constraints effectively preclude the Funds from investing in
securities with interest rates as high as those of
securities that may be acquired by Funds that are permitted
to buy lower rated or longer term securities. For a further
discussion of these rules, see the "Description of Permitted
Investments and Risk Factors--Restraints on Investments by
Money Market Funds".
Each Money Market Fund will not invest more than 10% of
its net assets in illiquid securities.
ALL FUNDS All Funds may invest in variable and floating rate
obligations and may purchase securities on a when-issued
basis. A Fund (except the Money Market Funds) may enter into
futures contracts and options on futures for bona fide
hedging purposes only.
In addition, each Fund (with the exception of the
Treasury Money Market Fund) reserves the right to engage in
securities lending.
There will be no limit to the percentage of portfolio
securities that a Fund may purchase subject to a standby
commitment, but the amount paid directly or indirectly for a
standby commitment held by the Fund will not exceed 1/2 of
1% of the value of the total assets of the Fund.
For temporary defensive purposes when the Advisor
determines that market conditions warrant, the Equity Funds,
Fixed Income Funds and Balanced Fund may invest up to 100%
of its assets in money market instruments. To the extent a
Fund is investing for temporary defensive purposes, the Fund
will not be pursuing its investment objective.
RATINGS NRSROs provide ratings for certain instruments in which the
Funds may invest. For example, bonds rated in the fourth
highest rating category have an adequate capacity to pay
principal and interest but may have speculative
characteristics as well.
For a description of ratings, see the Statement of
Additional Information.
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<PAGE>
CERTAIN RISK FACTORS ___________________________________________________________
The investment policies of each Fund entail certain risks
and considerations of which an investor should be aware.
Foreign The International Equity, TransEurope, Latin America Equity,
Securities Asian Tigers and International Fixed Income Funds will, and
certain other Funds may, invest in securities of foreign
issuers. Securities of foreign issuers are subject to
certain risks not typically associated with domestic
securities, including, among other risks, changes in
currency rates and in exchange control regulations, costs in
connection with conversions between various currencies,
limited publicly available information regarding foreign
issuers, lack of uniformity in accounting, auditing and
financial standards and requirements, greater securities
market volatility, less liquidity of securities, less
government supervision and regulations of securities
markets, withholding taxes and changes in taxes on income on
securities, and possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits.
Certain Latin American countries are among the largest
debtors to commercial banks and foreign governments. Trading
in Sovereign Debt involves a high degree of risk, since the
governmental entity that controls the repayment of Sovereign
Debt may not be willing or able to repay the principal
and/or interest of such debt obligations when it becomes
due, due to factors such as debt service burden, political
constraints, cash flow problems and other national economic
factors. As a result, Latin American governments may default
on their Sovereign Debt, which may require holders of such
Sovereign Debt to participate in debt rescheduling or
additional lending to defaulting governments. There is no
bankruptcy proceeding by which defaulted Sovereign Debt may
be collected in whole or in part.
Investments in securities of foreign issuers are
frequently denominated in foreign currencies and the value
of the Fund's assets measured in U.S. dollars may be
affected favorably or unfavorably by changes in currency
rates and in exchange control regulations, and the Fund may
incur costs in connection with conversions between various
currencies. The Fund may enter into forward foreign currency
contracts as a hedge against possible variations in foreign
exchange rates or to hedge a specific security transaction
or portfolio position. Currently, only a limited market, if
any, exists for hedging transactions relating to currencies
in most Latin American markets. This may limit a Fund's
ability to effectively hedge its investments in Latin
American markets.
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INVESTMENT LIMITATIONS _________________________________________________________
No Equity, Fixed Income or Balanced Fund may:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States, its agencies
or instrumentalities and repurchase agreements involving
such securities) if as a result more than 5% of the total
assets of the Fund would be invested in the securities of
such issuer or more than 10% of the outstanding voting
securities of such issuer would be owned by the Fund.
This restriction applies to 75% of the Fund's assets, and
does not apply to the Latin America Equity or
International Fixed Income Funds.
2. Purchase any securities which would cause more than 25%
of the total assets of the Fund to be invested in the
securities of one or more issuers conducting their
principal business activities in the same industry,
provided that this limitation does not apply to
investments in the obligations issued or guaranteed by
the U.S. Government or its agencies and instrumentalities
and repurchase agreements involving such securities. For
purposes of this limitation (i) utility companies will be
divided according to their services, for example, gas,
gas transmission, electric and telephone will each be
considered a separate industry; (ii) financial service
companies will be classified according to the end users
of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a
separate industry; and (iii) supranational entities will
be considered to be a separate industry.
3. Make loans, except that a Fund may (i) purchase or hold
debt instruments in accordance with its investment
objective and policies; (ii) enter into repurchase
agreements; and (iii) engage in securities lending.
No Money Market Fund may:
1. Purchase securities of any issuer (except securities
issued or guaranteed by the United States, its agencies
or instrumentalities and repurchase agreements involving
such securities) if, as a result, more than 5% of the
total assets of the Fund would be invested in the
securities of such issuer or more than 10% of the
outstanding voting securities of such issuer would be
owned by the Fund. Each Money Market Fund, except the
Tax-Exempt Money Market Fund, may invest up to 25% of its
assets in securities of a single issuer for a period of
up to three business days if such securities qualify as
"first tier securities" under applicable SEC Rules.
2. Purchase any securities which would cause more than 25%
of the total assets of the Fund to be invested in the
securities of one or more issuers conducting their
principal business activities in the same industry or
securities the interest upon which is paid from revenue
of similar type industrial development projects, provided
that this limitation does not apply to (i) investments in
obligations issued or guaranteed by the U.S. Government
or its agencies and instrumentalities and in repurchase
agreements involving such securities; and (ii)
obligations issued by domestic branches of U.S. banks or
U.S.
34
<PAGE>
branches of foreign banks subject to the same regulations as
U.S. banks; or (iii) tax-exempt securities issued by
governments or political subdivisions of governments. For
purposes of this limitation, (i) loan participations are
considered to be issued by both the issuing bank and the
underlying corporate borrower; (ii) utility companies will
be divided according to their services, for example, gas,
gas transmission, electric and telephone will each be
considered a separate industry; (iii) financial service
companies will be classified according to the end users of
their services, for example, automobile finance, bank
finance and diversified finance will each be considered a
separate industry; and (iv) supranational entities will be
considered to be a separate industry.
3. Make loans, except that a Fund may (i) purchase or hold
debt instruments in accordance with its investment
objective and policies; (ii) enter into repurchase
agreements, and (iii) engage in securities lending.
The foregoing percentages will apply at the time of the
purchase of a security. Additional fundamental and non-
fundamental investment limitations are set forth in the
Statement of Additional Information.
THE ADVISOR ____________________________________________________________________
The Trust and LaSalle Street Capital Management, Ltd. (the
"Advisor"), 10 South LaSalle Street, Suite 3701, Chicago,
Illinois 60603 have entered into an advisory agreement (the
"Advisory Agreement"). Under the Advisory Agreement, the
Advisor makes the investment decisions for the assets of the
Funds and continuously reviews, supervises and administers the
Funds' investment programs, subject to the supervision of, and
policies established by, the Trustees of the Trust.
The Advisor is entitled to a fee, which is calculated daily
and paid monthly, at an annual rate of .80% of the average
daily net assets of the Value, Growth, Small Cap and
International Fixed Income Funds; 1.00% of the average daily
net assets of the International Equity, TransEurope, Latin
America Equity and Asian Tigers Funds; .70% of the average
daily net assets of the Balanced Fund; .60% of the average
daily net assets of the Fixed Income, Intermediate Government
Fixed Income, Tax-Exempt Fixed Income and Limited Volatility
Fixed Income Funds; .35% of the average daily net assets of the
Treasury Money Market, Money Market and Tax-Exempt Money Market
Funds; and .20% of the average daily net assets of the
Government Money Market Fund. The Advisor may voluntarily waive
a portion of its fee in order to limit the total operating
expenses of the Funds. The Advisor reserves the right, in its
sole discretion, to terminate this voluntary fee waiver at any
time.
......................................
[SYMBOL INVESTMENT
APPEARS ADVISOR
HERE]
A Fund's investment advisor manages
the investment activities and is
responsible for the performance of
the Fund. The advisor conducts
investment research, executes
investment strategies based on an
assessment of economic and market
conditions, and determines which
securities to buy, hold or sell.
......................................
35
<PAGE>
For the fiscal year ended December 31, 1996, the Advisor
received an advisory fee of .80% for the Value Fund, .80%
for the Growth Fund, .80% for the Small Cap Fund, .70% for
the Balanced Fund, 1.00% for the International Equity Fund,
1.00% for the Asian Tigers Fund, 1.00% for the Latin America
Equity Fund, .50% for the Fixed Income Fund, .50% for the
Intermediate Government Fixed Income Fund, .50% for the Tax-
Exempt Fixed Income Fund, .80% for the International Fixed
Income Fund, .20% for the Tax-Exempt Money Market Fund, .20%
for the Treasury Money Market Fund, .20% for the Government
Money Market Fund and .20% for the Money Market Fund. The
TransEurope Fund and Limited Volatility Fixed Income Fund
had not commenced operations at fiscal year end.
LaSalle Street Capital Management, Ltd. was organized in
March, 1991 under the laws of the State of Delaware. The
Advisor manages assets for corporations, unions,
governments, insurance companies and charitable
organizations. As of December 31, 1996, total assets under
management by the Advisor were approximately $3.4 billion.
The Advisor is a direct, wholly-owned subsidiary of ABN
AMRO North America, Inc., which is an indirect, wholly-owned
subsidiary of ABN AMRO Holding N.V., a Netherlands company.
Jac A. Cerney, Senior Vice President of the Advisor, has
served as portfolio manager for the Value and Balanced Funds
since their inception. Mr. Cerney has been associated with
the Advisor and its predecessor since April, 1990.
Keith Dibble, Senior Vice President of the Advisor, has
served as portfolio manager for the Growth Fund since its
inception. Mr. Dibble has been associated with the Advisor
and its predecessor since 1987.
John F. Bonetti, Vice President of the Advisor, has
served as portfolio manager for the Small Cap Fund Since
February, 1995 and co-portfolio manager for the Small Cap
Fund since March, 1997. Mr. Bonetti has been associated with
the Advisor and its predecessor since 1989.
Marc G. Borghans, Vice President of the Advisor, has
served as co-manager of the Small Cap Fund since March,
1997. Mr. Borghans has been associated with the Advisor or
its affiliates since 1988.
Mark W. Karstrom, Vice President of the Advisor, has
served as portfolio manager for the Intermediate Government
Fixed Income Fund and the Limited Volatility Fixed Income
Fund since September, 1996. Mr. Karstrom joined the Advisor
in August 1996. He served as a Vice President, Portfolio
Manager with Norwest Investment Management and Trust and a
predecessor firm from May, 1985 to July, 1996.
Charles H. Self, III, Senior Vice President of the
Advisor, has served as portfolio manager for the Fixed
Income Fund since October, 1995 and the Tax-Exempt Fixed
Income Fund since September, 1996 and co-manager of the Tax-
Exempt Fixed Income Fund since April, 1997. Mr. Self joined
the Advisor in October, 1995. He served as a Vice President
with CSI Asset Management from December, 1988 to July, 1995.
36
<PAGE>
Phillip P. Mierzwa, Assistant Vice President of the
Advisor, has served as co-manager of the Tax-Exempt Fixed
Income Fund since April, 1997. He has been associated with
the Advisor or its affiliates since February, 1990.
Gregory D. Boal, Vice President of the Advisor, has
served as portfolio manager of the fixed income portion of
the Balanced Fund since April, 1997. Mr. Boal joined the
Advisor in March, 1997. He served as Manager, Fixed Income
Division of First Citizens Bank from November, 1989 to
March, 1997.
THE SUB-ADVISOR ________________________________________________________________
ABN AMRO-NSM International Funds Management B.V. (the "Sub-
Advisor"), Foppingadreef 22, P.O. Box 246, 1000 EA
Amsterdam, The Netherlands, serves as the investment sub-
advisor of the International Equity Fund, TransEurope Fund,
Asian Tigers Fund, International Fixed Income Fund and Latin
America Equity Fund pursuant to a Sub-Advisory Agreement
with the Advisor. The Sub-Advisor is a holding company
affiliate of the Advisor. Under the Sub-Advisory Agreement,
the Sub-Advisor manages the Funds, selects investments and
places all orders for purchases and sales of the Funds'
securities, subject to the general supervision of the
Trustees of the Trust and the Advisor. The Sub-Advisor has
approximately $828 million under management, and manages two
non-U.S. investment companies.
Wypke Postma fund manager with the Sub-Advisor, has
served as portfolio manager for the International Equity
Fund since March, 1997. Mr. Postma has been associated with
the Sub-Advisor and/or its affiliates since 1984.
Alex Ng has served as portfolio manager for the Asian
Tigers Fund since July, 1995. Mr. Ng has been associated
with the Sub-Advisor and/or its parent since 1988. Mr. Ng
also serves as the Far East Director of Asset Management for
a Hong Kong-based affiliate of the Advisor.
Felix Lanters, portfolio manager for the TransEurope
Fund, has been associated with the Sub-Advisor and/or its
parent since 1987.
Rogier Crijns, an officer of the Sub-Advisor has served
as portfolio manager for the International Fixed Income Fund
since June, 1996. Mr. Crijns has worked as a Portfolio
Manager with ABN AMRO and/or its affiliates since 1990.
Jan-Wim Derks, an officer of the Sub-Advisor, has served
as portfolio manager for the Latin America Equity Fund since
its inception. Mr. Derks has served as a Portfolio Manager
with ABN AMRO and/or its affiliates since 1989.
For services provided and expenses incurred pursuant to
the Sub-Advisory Agreement, AANIFM is entitled to receive
from the Advisor a fee, which is computed daily and paid
quarterly, at the annual rate of .50% of the average daily
net assets of each of the International Equity Fund,
TransEurope Fund, Latin America Equity Fund and Asian Tigers
Fund, and .40% of the average daily net assets of the
International Fixed Income Fund. The Sub-Advisor received
fees from the Advisor of .50% for the Asian Tigers Fund,
.50% for the Latin America Equity Fund and International
Equity Fund and .40% for the International Fixed Income Fund
for the fiscal year ended December 31, 1996.
37
<PAGE>
THE ADMINISTRATOR ______________________________________________________________
SEI Fund Resources (the "Administrator"), Oaks,
Pennsylvania, 19456, a Delaware business trust, provides the
Trust with administrative services, including fund
accounting, regulatory reporting, necessary office space,
equipment, personnel and facilities. SEI
Financial Management Corporation, a wholly-owned subsidiary
of SEI Corporation ("SEI"), is the owner of all beneficial
interest in the Administrator.
The Administrator is entitled to a fee, which is
calculated daily and paid monthly, at an annual rate of .15%
of the average daily net assets of the Funds.
THE TRANSFERAGENT ______________________________________________________________
DST Systems, Inc., 1004 Baltimore Avenue, Kansas City,
Missouri 64105, serves as the transfer agent, and dividend
disbursing agent for the Trust. Compensation for these
services is paid under a transfer agency agreement with the
Trust.
THE DISTRIBUTOR ________________________________________________________________
Rembrandt(R) Financial Services Company (the "Distributor"),
Oaks, Pennsylvania 19456, a subsidiary of SEI Financial
Services Company, and the Trust are parties to a
distribution agreement (the "Distribution Agreement"). The
Investor Class shares of the Trust have a distribution plan
dated December 31, 1992 (the "Investor Class Plan"). As
provided in the Investor Class Plan, the Trust pays a fee of
.25% of the average daily net assets of the Investor Class
shares of the Funds to the Distributor as compensation for
its services. From this amount, the Distributor may make
payments to financial institutions and intermediaries such
as banks (including LaSalle National Bank), savings and loan
associations, insurance companies, and investment
counselors, broker-dealers, and the Distributor's affiliates
and subsidiaries as compensation for services, reimbursement
of expenses incurred in connection with distribution
assistance, or provision of shareholder services. The
Investor Class Plan is characterized as a compensation plan
since the distribution fee is paid to the Distributor
without regard to the distribution or shareholder service
expenses incurred by the Distributor or the amount of
payments made to financial institutions and intermediaries.
The Funds may also execute brokerage or other agency
transactions through an affiliate of the Advisor or through
the Distributor for which the affiliate or the Distributor
receives compensation.
It is possible that a financial institution may offer
different classes of shares of the Funds to its customers
and the shares of such customers may be assessed for
different distribution expenses with respect to different
classes of shares.
38
<PAGE>
PERFORMANCE ____________________________________________________________________
THE EQUITY, From time to time, the Funds may advertise yield and total
BALANCED AND return. These figures will be based on historical earnings
FIXED INCOME and are not intended to indicate future performance. The
FUNDS yield of a Fund refers to the annualized income generated by
an investment in the Fund over a specified 30-day period.
The yield is calculated by assuming that the same amount of
income generated by the investment during that period is
generated in each 30-day period over one year, and is shown
as a percentage of the investment.
The total return of a Fund refers to the average
compounded rate of return on a hypothetical investment, net
of any sales charge imposed on Investor Class shares, for
designated time periods (including, but not limited to, the
period from which the Fund commenced operations through the
specified date), assuming that the entire investment is
redeemed at the end of each period and assuming the
reinvestment of all dividend and capital gain distributions.
The total return of a Fund may also be quoted as a dollar
amount or on an aggregate basis, an actual basis, without
inclusion of any sales charge, or with a reduced sales
charge in advertisements distributed to investors entitled
to a reduced sales charge.
THE MONEY From time to time a Fund may advertise its current yield and
MARKET FUNDS effective compound yield. Both yield figures are based on
historical earnings and are not intended to indicate future
performance. The current yield of a Fund refers to the
income generated by an investment in the Fund over a seven-
day period (which period will be stated in the
advertisement). This income is then annualized. That is, the
amount of income generated by the investment during that
week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The
effective compound yield is calculated similarly, but when
annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The effective compound yield will
be slightly higher than the current yield because of the
compounding effect of this assumed reinvestment. The Tax-
Exempt Money Market Fund may also advertise a tax-equivalent
yield, which is calculated by determining the rate of return
that would have to be achieved on a fully taxable investment
to produce the after-tax equivalent of the Tax-Exempt Money
Market Fund's yield, assuming certain tax brackets for a
Shareholder.
ALL FUNDS A Fund may periodically compare its performance to that of
other mutual funds tracked by mutual fund rating services
(such as Lipper Analytical Securities Corp.) or by financial
and business publications and periodicals, broad groups of
comparable mutual funds or unmanaged indices which may
assume investment of dividends but generally do not reflect
deductions for administrative and management costs. A Fund
may quote services such as Morningstar, Inc., a service that
ranks mutual funds on the basis of risk-adjusted
performance, and Ibbotson Associates of Chicago, Illinois,
which provides historical returns of the capital markets in
the U.S. A Fund may use long-term performance of these
capital markets to demonstrate general long-term risk versus
reward scenarios and could include
39
<PAGE>
the value of a hypothetical investment in any of the capital
markets. A Fund may also quote financial and business
publications and periodicals as they relate to fund
management, investment philosophy, and investment techniques.
A Fund may quote various measures of volatility and
benchmark correlation in advertising, and may compare these
measures to those of other funds. Measures of volatility
attempt to compare historical share price fluctuations or
total returns to a benchmark while measures of benchmark
correlation indicate the validity of a comparative benchmark.
Measures of volatility and correlation are calculated using
averages of historical data and cannot be precisely
calculated.
The performance of Trust Class shares will normally be
higher than for Investor Class shares because the Trust Class
is not subject to distribution expenses charged to the
Investor Class shares.
Additional performance information is set forth in the
1996 Annual Report to Shareholders, and is available upon
request and without charge by calling 1-800-443-4725.
The portfolio turnover rates for the Small Cap,
Intermediate Government Fixed Income, Fixed Income and
Balanced Funds for the fiscal year ended December 31, 1996
were 158%, 179%, 194% and 104%, respectively. A high turnover
rate will result in higher transaction costs and may result
in additional tax consequences for shareholders.
TAXES __________________________________________________________________________
The following summary of federal income tax consequences is
based on current tax laws and regulations, which may be
changed by legislative, judicial, or administrative action.
No attempt has been made to present a detailed explanation of
the federal, state, or local income tax treatment of a Fund
or its Shareholders. Accordingly, Shareholders are urged to
consult their tax advisors regarding specific questions as to
federal, state, and local income taxes. State and local tax
consequences on an investment in a Fund may differ from the
federal income tax consequences described below. Additional
information concerning taxes is set forth in the Statement of
Additional Information.
Tax Status of Each Fund is treated as a separate entity for federal income
the Funds tax purposes and is not combined with the Trust's other Funds.
Each Fund intends to qualify for the special tax treatment
afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code of 1986, as amended.
As long as each Fund qualifies for this special tax treatment,
it will be relieved of federal income tax on that part of its
net investment income and net capital gains (the
..............................
[SYMBOL TAXES
APPEARS
HERE]
You must pay taxes on your
Fund's earnings, whether
you take your payments in
cash or additional shares.
..............................
40
<PAGE>
.....................................
[SYMBOL DISTRIBUTIONS
APPEARS
HERE]
The Fund distributes income
dividends and capital gains.
Income dividends represent the
earnings from the Fund's
investments; capital gains
distributions occur when
investments in the Fund are
sold for more than the
original purchase price.
....................................
excess of net long-term capital gain over net short-term
capital loss) which is distributed to Shareholders.
Tax Status of Each Fund will distribute all of its net investment income
Distributions (including, for this purpose, net short-term capital gain) to
Shareholders. Dividends from net investment income will be
taxable to Shareholders as ordinary income whether received in
cash or in additional shares. Any net capital gains will be
distributed annually and will be taxed to Shareholders as long-
term capital gains, regardless of how long the Shareholder has
held shares and regardless of whether the distributions
are received in cash or in additional shares. Each Fund will
notify annually Shareholders of the federal income tax
character of all distributions.
Certain securities purchased by a Fund (such as STRIPS,
TRs, TIGRs and CATS, defined in "Description of Permitted
Investments and Risk Factors"), are sold at original issue
discount, and thus do not make periodic cash interest
payments. Each Fund will be required to include as part of
its current income the imputed interest on such obligations
even though the Fund has not received any interest payments
on such obligations during that period. Because each Fund
distributes all of its net investment income to its
Shareholders, a Fund may have to sell portfolio securities to
distribute such imputed income, which may occur at a time
when the Advisor would not have chosen to sell such
securities and which may result in a taxable gain or loss.
Income received on U.S. obligations is exempt from tax at
the state level when received directly by a Fund and may be
exempt, depending on the state, when received by a
Shareholder as income dividends from the Fund, provided
certain State-specific conditions are satisfied. Each Fund
will inform Shareholders annually of the percentage of income
and distributions derived from U.S. obligations. Shareholders
should consult their tax advisor to determine whether any
portion of the income dividends received from a Fund is
considered tax exempt in their particular state.
Dividends declared by a Fund in October, November or
December of any year and payable to Shareholders of record on
a date in that month will be deemed to have been paid by the
Fund and received by the Shareholder on December 31 of that
year, if paid by the Fund at any time during the following
January.
Each Fund intends to make sufficient distributions prior
to the end of each calendar year to avoid liability for the
federal excise tax applicable to regulated investment
companies.
Investment income received by a Fund from sources within
foreign countries may be subject to foreign income taxes
withheld at the source. The International Equity Fund,
TransEurope Fund, Latin America Equity Fund, Asian Tigers
Fund and International Fixed
41
<PAGE>
Income Fund expect to be able to elect to treat Shareholders
as having paid their proportionate share of such foreign
taxes withheld.
As a general rule, dividends (not capital gain
distributions) paid by a Fund, to the extent derived from
dividends received from domestic corporations, will,
provided certain conditions are met, qualify for the
dividends received deduction for corporate Shareholders.
Distributions of net capital gains from any Fund do not
qualify for the dividends received deduction.
Dividends paid by the Fixed Income Funds will not qualify
for the dividends received deduction for corporate
Shareholders.
Each of the Tax-Exempt Fixed Income Fund and Tax-Exempt
Money Market Fund intends to qualify to pay "exempt interest
dividends" by satisfying the Code's requirement that at the
close of each quarter of its taxable year at least 50
percent of the value of its total assets consists of
obligations, the interest on which is exempt from federal
income tax. So long as this and certain other requirements
are met, dividends consisting of such Funds' net tax-exempt
interest income will be exempt interest dividends, which are
exempt from federal income tax in the hands of the
Shareholders of the Fund, but may have alternative minimum
tax consequences. See the Statement of Additional
Information.
Current federal income tax laws limit the types and
volume of bonds qualifying for the federal income tax
exemption of interest, which may have an effect on the
ability of the Tax-Exempt Fixed Income Fund and the Tax-
Exempt Money Market Fund to purchase sufficient amounts of
tax-exempt securities to satisfy the Code's requirements for
the payment of "exempt interest dividends." Accordingly,
municipal funds may not be an appropriate investment for
persons (including corporations and other business entities)
who are "substantial users" (or persons related to
"substantial users") of facilities financed by private
activity bonds or certain industrial development bonds.
"Substantial user" is defined generally as including a "non-
exempt person" who regularly uses in a trade or business a
part of a facility financed from the proceeds of industrial
development bonds. Current federal tax law also makes
interest on certain tax-exempt bonds a tax preference item
for purposes of the individual and corporate alternative
minimum tax.
Interest on indebtedness incurred by Shareholders to
purchase or carry shares of the Tax-Exempt Fixed Income Fund
and the Tax-Exempt Money Market Fund is generally not
deductible for federal income tax purposes.
Each sale, exchange, or redemption of Fund shares is a
taxable event to the Shareholder.
42
<PAGE>
........................................
[SYMBOL BUY, EXCHANGE AND
APPEARS SELL REQUESTS ARE IN
HERE] "GOOD ORDER" WHEN:
. The account number and Fund
name are shown
. The amount of the transaction
is specified in dollars or
shares
. Signatures of all owners
appear exactly as they are
registered on the account
. Any required signature
guarantees (if applicable)
are included
. Other supporting legal
documents (as necessary) are
present
......................................
ADDITIONAL INFORMATION ABOUT DOING BUSINESS WITH US ____________________________
Business Days You may buy, sell or exchange shares on days on which the New
York Stock Exchange is open for business (a "Business Day").
However, shares of a Money Market Fund cannot be purchased by
Federal Reserve wire on federal holidays restricting wire
transfers.
A purchase order for Trust Class shares of the Equity,
Balanced and Fixed Income Funds will be effective as of the day
received by the Transfer Agent if the Transfer Agent receives
the order before 4:00 p.m., Eastern time. The purchase price of
Trust Class shares of the Fund is the net asset value next
determined after a purchase order is effective. An investor in
Trust Class shares of a Fund may not purchase shares by check.
A purchase order for Investor Class shares of the Equity,
Balanced and Fixed Income Funds will be effective as of the
Business Day received by the Transfer Agent if the Transfer
Agent receives the order and payment before 4:00 p.m., Eastern
time.
However, an order may be canceled if the Custodian does not
receive federal funds before 4:00 p.m., Eastern time on the
next Business Day, and the investor could be liable for any
fees or expenses incurred by the Trust. The purchase price of
Investor Class shares of a Fund is the net asset value next
determined after a purchase order is effective plus a sales
load.
A purchase order for Trust Class shares or Investor Class
shares of the Money Market Funds will be effective as of the
day received by the Transfer Agent and eligible to receive
dividends declared the same day if the Transfer Agent
receives the order and the Custodian receives federal funds
payment before 1:00 p.m., Eastern time on such day.
Otherwise, the purchase order will be effective the next
Business Day.
Minimum The minimum initial investment in the Investor Class shares
Investment is $2,000; however, the minimum investment may be waived at
the Distributor's discretion. All subsequent purchases must
be at least $100. The Funds are intended to be long-term
investment vehicles and are not designed to provide investors
with a means of speculating on short-term movements.
Consequently, the Trust reserves the right to reject a
purchase order for Trust Class shares or Investor Class
shares when the Trust or the Transfer Agent determines that
it is not in the best interest of the Trust or its
shareholders to accept such order.
43
<PAGE>
Maintaining a Due to the relatively high cost of handling small
Minimum Account investments, each Fund reserves the right to redeem, at net
Balance asset value, the shares of any Shareholder if, because of
redemptions of shares by or on behalf of any Shareholder,
the account of such Shareholder in any Fund has a value of
less than $1,000, the minimum initial purchase amount.
Accordingly, an investor purchasing shares of any Fund in
only the minimum investment amount may be subject to such
involuntary redemption if he or she thereafter redeems any
of these shares. Before any Fund exercises its right to
redeem such shares and to send the proceeds to the
Shareholder, the Shareholder will be given notice that the
value of the shares in his or her account is less than the
minimum amount and will be allowed 60 days to make an
additional investment in such Fund in an amount that will
increase the value of the account to at least $1,000. See
"Purchase and Redemption of Shares" in the Statement of
Additional Information for examples of when the right of
redemption may be suspended.
Net Asset Value The purchase price of a share of the Funds is the net asset
value per share next computed after the order is received
and accepted by the Trust, plus any applicable sales charge.
The selling price of a share of the Funds is the net asset
value per share next determined after receipt of the request
for redemption in good order. The net asset value per share
of the Money Market Funds is calculated as of 1:00 p.m.,
Eastern time, each Business Day. The net asset value of the
Equity, Balanced and Fixed Income Funds is determined as of
the regular close of business of the New York Stock Exchange
(currently 4:00 p.m. Eastern time) each Business Day.
How the Net The net asset value per share of a Fund is determined by
Asset Value is dividing the total market value of the Fund's investments
Determined and other assets, less any liabilities, by the total number
of outstanding shares of the Fund. The Equity, Balanced and
Fixed Income Funds value their portfolio securities at the
last quoted sales price for such securities, or, if there is
no such reported sales price on the valuation date, at the
most recent quoted bid price. The investments of the Money
Market Funds will be valued using the amortized cost method
described in the Statement of Additional Information.
Pursuant to guidelines adopted and monitored by the Trustees
of the Trust, the Funds may use a pricing service to provide
market quotations. A pricing service may use a matrix system
of valuation to value fixed income securities which
considers factors such as securities prices, call features,
ratings, and developments related to a specific security.
Although the methodology and procedures for determining
net asset value are identical for both classes of a Fund,
the net asset value per share of such classes may differ
because of the distribution expenses charged to Investor
Class shares.
44
<PAGE>
GENERAL
INFORMATION ___________________________________________________________________
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated September 17, 1992, and
amended September 28, 1992 and October 20, 1992. The
Declaration of Trust permits the Trust to offer shares of
separate funds and different classes of each fund. The Trust
consists of the following funds: Money Market Fund,
Government Money Market Fund, Treasury Money Market Fund,
Tax-Exempt Money Market Fund, Fixed Income Fund,
Intermediate Government Fixed Income Fund, Tax-Exempt Fixed
Income Fund, International Fixed Income Fund, Limited
Volatility Fixed Income Fund, Latin America Equity Fund,
Value Fund, Growth Fund, Small Cap Fund, International
Equity Fund, TransEurope Fund, Asian Tigers Fund and
Balanced Fund. All consideration received by the Trust for
shares of any Fund and all assets of such Fund belong to
that fund, and would be subject to liabilities related
thereto. The Trust reserves the right to create and issue
shares of additional funds. As of December 31, 1996, the
Limited Volatility Fixed Income Fund and TransEurope Fund
had not commenced operations.
The Trust pays its expenses, including fees of its
service providers, audit and legal expenses, expenses of
preparing prospectuses, proxy solicitation material and
reports to Shareholders, costs of custodial services and
registering the shares under federal and state securities
laws, pricing, insurance expenses, litigation and other
extraordinary expenses, brokerage costs, interest charges,
taxes and organization expenses. See "Financial Highlights"
for more information regarding the Trust's expenses.
Trustees of the The management and affairs of the Trust are supervised by
Trust the Trustees under the laws governing business trusts in the
Commonwealth of Massachusetts. The Trustees have approved
contracts under which, as described above, certain companies
provide essential management, administrative and Shareholder
services to the Trust.
Voting Rights Each share held entitles the Shareholder of record to one
vote. Shareholders of each Fund or class will vote
separately on matters relating solely to that Fund or class.
As a Massachusetts business trust, the Trust is not required
to hold annual meetings of Shareholders, but meetings of
Shareholders will be held from time to time to seek approval
for certain changes in the operation of the Trust and for
the election of Trustees under certain circumstances. In
addition, a Trustee may be removed by the remaining Trustees
or by Shareholders at a special meeting called upon written
request of Shareholders owning at least 10% of the
outstanding shares of the Trust. In the event that such a
meeting is requested, the Trust will provide appropriate
assistance and information to the Shareholders requesting
the meeting.
Reporting The Trust issues unaudited financial information semi-
annually and audited financial statements annually. The
Trust furnishes periodic reports to Shareholders of record,
and, as necessary, proxy statements for Shareholder
meetings.
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Shareholder Shareholder inquiries should be directed to the
Inquiries Administrator, Oaks, Pennsylvania, 19456, at 1-800-443-4725.
Dividends Substantially all of the net investment income (not
including capital gains) of the Value, Growth, Small Cap,
Balanced, Fixed Income, Intermediate Government Fixed
Income, Tax-Exempt Fixed Income and Limited Volatility Fixed
Income Funds is distributed in the form of monthly
dividends, and that of the International Equity, Latin
America Equity, TransEurope, Asian Tigers and International
Fixed Income Funds is distributed in the form of dividends
at least annually. Shareholders who own shares at the close
of business on the record date will be entitled to receive
the dividend. Currently, capital gains of the Funds, if any,
will be distributed at least annually.
The net investment income (exclusive of capital gains) of
each of the Money Market Funds is distributed in the form of
dividends, which are declared daily and distributed monthly
to Shareholders. Currently, capital gains of the Funds, if
any, will be distributed at least annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the Shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to the Transfer Agent at least 15 days prior
to the distribution.
Dividends and distributions of the Funds are paid on a
per-share basis. The value of each share will be reduced by
the amount of the payment. If shares are purchased shortly
before the record date for a dividend or the distribution of
capital gains, a Shareholder will pay the full price for the
shares and receive some portion of the price back as a
taxable dividend or distribution. The amount of dividends
payable on Trust Class shares will typically be higher than
the dividends payable on the Investor Class shares because
of the distribution expenses charged to Investor Class
shares.
The Trust believes that as of April 1, 1997, LaSalle
National Bank and its affiliates owned of record or
beneficially, substantially all of the Trust Class shares of
the Value, Growth, Small Cap, International Equity, Asian
Tigers, Balanced, Fixed Income, Intermediate Government
Fixed Income, Tax-Exempt Fixed Income, International Fixed
Income, Treasury Money Market, Government Money Market,
Money Market and Tax-Exempt Money Market Funds. As a
consequence, LaSalle National Bank may be deemed to
"control" these Funds within the meaning of the 1940 Act.
Counsel and Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Auditors Ernst & Young LLP serves as the independent auditors of the
Trust.
Custodians CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, acts as Custodian of
the Trust. Morgan Stanley Trust Company, serves as foreign
Sub-Custodian of the Trust. The Custodians hold cash,
securities and other assets of the Trust as required by the
1940 Act.
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DESCRIPTION OF
PERMITTED
INVESTMENTS AND RISK FACTORS ___________________________________________________
The following is a description of certain of the permitted
investments and risk factors for the Funds:
American ADRs are securities, typically issued by a U.S. financial
Depositary institution (a "depositary"), that evidence ownership
Receipts interests in a security or a pool of securities issued by a
("ADRs") foreign issuer and deposited with the depositary. ADRs may
be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by
the issuer of the security underlying the receipt and a
depositary, whereas an unsponsored facility may be
established by a depositary without participation by the
issuer of the underlying security. Holders of unsponsored
depositary receipts generally bear all the costs of the
unsponsored facility. The depositary 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, to the holders of the
receipts, voting rights with respect to the deposited
securities.
Asset-Backed Asset-backed securities consist of securities secured by
Securities company receivables, truck and auto loans, leases and credit
(Non-mortgage) card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which
are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity,
such as a trust, organized solely for purpose of owning such
assets and issuing such debt. A Fund may invest in other
asset-backed securities that may be created in the future if
the Advisor determines they are suitable.
Bankers' Bankers' acceptances are bills of exchange or time drafts
Acceptances drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the shipment
and storage of goods. Maturities are generally six months or
less.
Bank Investment BICs are contracts issued by U.S. banks and savings and loan
Contracts institutions. Pursuant to such contracts, a Fund makes cash
("BICs") contributions to a deposit fund of the general account of
the bank or savings and loan institution. The bank or
savings and loan institution then credits to the Fund on a
monthly basis guaranteed interest at either a fixed,
variable or floating rate. Generally, BICs are not
assignable or transferable without the permission of the
issuing bank or savings and loan institution. For this
reason, BICs are considered to be illiquid investments.
Certificates of Certificates of deposit are interest bearing instrument with
Deposit a specific maturity. Certificates of deposit are issued by
banks and savings and loan institutions in exchange for the
deposit of funds and normally can be traded in the secondary
market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
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Commercial Commercial paper is a term used to describe unsecured short-
Paper term promissory notes issued by banks, municipalities,
corporations and other entities. Maturities on these issues
vary from a few to 270 days.
Convertible Convertible securities are corporate securities that are
Securities exchangeable for a set number of shares of another security
at a prestated price. Convertible securities have
characteristics similar to both fixed income and equity
securities. Because of the conversion feature, the market
value of convertible securities tends to move together with
the market value of the underlying stock. The value of
convertible securities is also affected by prevailing
interest rates, the credit quality of the issuer, and any
call provisions.
Dollar Rolls Dollar roll transactions consist of the sale of mortgage-
backed securities to a bank or broker-dealer, together with
a commitment to purchase similar, but not necessarily
identical, securities at a future date. Any difference
between the sale price and the purchase price is netted
against the interest income foregone on the securities to
arrive at an implied borrowing (reverse repurchase) rate.
Alternatively, the sale and purchase transactions which
constitute the dollar roll can be executed at the same
price, with the Fund being paid a fee as consideration for
entering into the commitment to purchase. Dollar rolls may
be renewed after cash settlement and initially may involve
only a firm commitment agreement by the Fund to buy a
security.
If the broker-dealer to whom the Fund sells the security
becomes insolvent, the Fund's right to purchase or
repurchase the security may be restricted. Also, the value
of the security may change adversely over the term of the
dollar roll, such that the security that the Fund is
required to repurchase may be worth less than the security
that the Fund originally held.
Equity Equity securities are common stocks and common stock
Securities equivalents consisting of securities convertible into common
stocks and securities having common stock characteristics
(i.e., rights and warrants to purchase common stocks,
sponsored and unsponsored ADRs and equity securities of
closed-end investment companies. Investments in common
stocks are subject to market risks which may cause their
prices to fluctuate over time. Changes in the value of
portfolio securities will not necessarily affect cash income
derived from these securities but will not affect a Fund's
net asset value.
Fixed Income The market value of fixed income investments will change in
Securities response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities
with longer maturities tend to produce higher yields, the
prices of securities with longer maturities are also subject
to greater market fluctuations as a result of changes in
interest rates. Changes by NRSROs in the rating of any fixed
income security and in the ability of an issuer to make
payments of interest and principal also affect the value of
these investments.
Forward Foreign A forward contract involves an obligation to purchase or
Currency sell a specific currency amount at a future date, agreed
Contracts upon by the parties, at a price set at the time of the
contract.
At the maturity of a forward contract, a Fund may either
sell a portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its
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contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract with the same currency
trader, obligating it to purchase, on the same maturity
date, the same amount of the foreign currency. A Fund may
realize a gain or loss from currency transactions.
Futures Futures contracts provide for the future sale by one party
Contracts and and purchase by another party of a specified amount of a
Options on specific security at a specified future time and at a
Futures specified price. An option on a futures contract gives the
Contracts purchaser the right, in exchange for a premium, to assume a
position in a futures contract at a specified exercise price
during the term of the option. A Fund may use futures
contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held
or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to a
particular market or instrument. A Fund will minimize the
risk that it will be unable to close out a futures contract
by only entering into futures contracts which are traded on
national futures exchanges. In addition, a Fund will only
sell covered futures contracts and options on futures
contracts.
Stock and bond index futures are futures contracts for
various stock and bond indices that are traded on registered
securities exchanges. Stock and bond index futures contracts
obligate the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock or bond
index at the close of the last trading day of the contract
and the price at which the agreement is made.
Eurodollar futures are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London
Interbank Offered Rate ("LIBOR"), although foreign currency
denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of the funds and sellers to
obtain a fixed rate for borrowings.
No price is paid upon entering into futures contracts.
Instead, a Fund is required to deposit an amount of cash or
U.S. Treasury securities known as "initial margin."
Subsequent payments, called "variation margin," to and from
the broker, are made on a daily basis as the value of the
futures position varies (a process known as "marking to
market"). The margin is in the nature of a performance bond
or good-faith deposit on a futures contract.
In order to avoid leveraging and related risks, when a
Fund purchases futures contracts, it will collateralize its
position by depositing an amount of liquid securities, cash
or cash equivalents, equal to the market value of the
futures positions held, less margin deposits, in a
segregated account with the Trust's custodian. Collateral
equal to the current market value of the futures position
will be marked to market on a daily basis.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets
and movements in interest rates; (2) there
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may be an imperfect or no correlation between the changes in
market value of the securities held by a Fund and the prices
of futures and options on futures; (3) there may not be a
liquid secondary market for a futures contract or option;
(4) trading restrictions or limitations may be imposed by an
exchange; and (5) government regulations may restrict
trading in futures contracts and futures options.
Guaranteed GICs are contracts issued by U.S. insurance companies.
Investment Pursuant to such contracts, the Fund makes cash
Contracts contributions to a deposit fund of the insurance company's
("GICs") general account. The insurance company then credits to the
Fund on a monthly basis guaranteed interest at either a
fixed, variable or floating rate. Generally, GICs are not
assignable or transferable without the permission of the
issuing insurance companies. For this reason, GICs are
considered by a Fund to be illiquid investments.
Illiquid Illiquid securities are securities that cannot be disposed
Securities of within 7 business days at approximately the price at
which they are being carried on a Fund's books. An illiquid
security includes a demand instrument with a demand notice
period exceeding 7 days, if there is no secondary market for
such security, and repurchase agreements with durations (or
maturities) over 7 days in length.
Loan Loan participations are interests in loans to U.S.
Participations corporations which are administered by the lending bank or
agent for a syndicate of lending banks, and sold by the
lending bank or syndicate member ("intermediary bank"). In a
loan participation, the borrower corporation will be deemed
to be the issuer of the participation interest except to the
extent the Fund derives its rights from the intermediary
bank. Because the intermediary bank does not guarantee a
loan participation in any way, a loan participation is
subject to the credit risks generally associated with the
underlying corporate borrower. In the event of the
bankruptcy or insolvency of the corporate borrower, a loan
participation may be subject to certain defenses that can be
asserted by such borrower as a result of improper conduct by
the intermediary bank. In addition, in the event the
underlying corporate borrower fails to pay principal and
interest when due, the Fund may be subject to delays,
expenses and risks that are greater than those that would
have been involved if the Fund had purchased a direct
obligation of such borrower. Under the terms of a loan
participation, the Fund may be regarded as a creditor of the
intermediary bank, (rather than of the underlying corporate
borrower), so that the Fund may also be subject to the risk
that the intermediary bank may become insolvent. The
secondary market, if any, for these loan participations is
limited.
Mortgage-Backed Mortgage-backed securities are instruments that entitle the
Securities holder to a share of all interest and principal payments
from mortgages underlying the security. The mortgages
backing these securities include conventional thirty-year
fixed rate mortgages, graduated payment mortgages, balloon
mortgages and adjustable rate mortgages. During periods of
declining interest rates, prepayment of mortgages underlying
mortgage-backed securities can be expected to accelerate.
Prepayment of mortgages which underlie securities purchased
at a
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premium often results in capital losses, while prepayment of
mortgages purchased at a discount often results in capital
gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict
accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities
that are issued or guaranteed by a U.S. Government agency
representing an interest in a pool of mortgage loans. The
primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. GNMA, Fannie Mae
and FHLMC guarantee timely distributions of interest to
certificate holders. GNMA and Fannie Mae also guarantee
timely distributions of scheduled principal. Fannie Mae and
FHLMC obligations are not backed by the full faith and
credit of the U.S. Government as GNMA certificates are, but
Fannie Mae and FHLMC securities are supported by the
instrumentalities' right to borrow from the U.S. Treasury.
Private Pass-Through Securities: These are mortgage-
backed securities issued by a non-governmental entity, such
as a trust or corporation. These securities include
collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). While they are
generally structured with one or more types of credit
enhancement, private pass-through securities typically lack
a guarantee by an entity having the credit status of a
governmental agency or instrumentality.
In a CMO, series of bonds or certificates are usually
issued in multiple classes. Principal and interest paid on
the underlying mortgage assets may be allocated among the
several classes of a series of a CMO in a variety of ways.
Principal payments on the underlying mortgage assets may
cause CMOs to be retired substantially earlier then their
stated maturities or final distribution dates, resulting in
a loss of all or part of any premium paid.
A REMIC is a CMO that qualifies for special tax treatment
under the Internal Revenue Code and invests in certain
mortgages principally secured by interests in real property.
Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC
Certificates") issued by Fannie Mae or FHLMC represent
beneficial ownership interests in a REMIC trust consisting
principally of mortgage loans or Fannie Mae. FHLMC or GNMA-
guaranteed mortgage pass-through certificates. For FHLMC
REMIC Certificates, FHLMC guarantees the timely payment of
interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage
participation certificates.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are
usually structured with two classes that receive specified
proportions of the monthly interest and principal payments
from a pool of mortgage securities. One class may receive
all of the interest payments and is thus termed an interest-
only class ("IO"), while the other class may receive all of
the principal payments and is thus termed the principal-only
class ("PO"). The value of IOs tends to increase as rates
rise and decrease as rates fall; the opposite is true
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of POs. SMBs are extremely sensitive to changes in interest
rates because of the impact thereon of prepayment of
principal on the underlying mortgage securities.
Municipal Municipal securities consist of (i) debt obligations issued
Securities by or on behalf of public authorities to obtain funds to be
used for various public facilities, for refunding
outstanding obligations, for general operating expenses, and
for lending such funds to other public institutions and
facilities, and (ii) certain private activity and industrial
development bonds issued by or on behalf of public
authorities to obtain funds to provide for the construction,
equipment, repair, or improvement of privately operated
facilities. General obligation bonds are backed by the
taxing power of the issuing municipality. Revenue bonds are
backed by the revenues of a project or facility; tolls from
a toll bridge for example. The payment of principal and
interest on private activity and industrial development
bonds generally is dependent solely on the ability of the
facility's user to meet its financial obligations and the
pledge, if any, of real and personal property so financed as
security for such payment.
Municipal securities include both municipal notes and
municipal bonds. Municipal notes include general obligation
notes, tax anticipation notes, revenue anticipation notes,
bond anticipation notes, certificates of indebtedness,
demand notes, and construction loan notes. Municipal bonds
include general obligation bonds, revenue or special
obligation bonds, private activity and industrial
development bonds.
Obligations of Supranational entities are entities established through the
Supranational joint participation of several governments, and include the
Entities Asian Development Bank, Inter-American Development Bank,
International Bank for Reconstruction and Development (World
Bank), African Development Bank, European Economic
Community, European Investment Bank and Nordic Investment
Bank. The governmental members, or "stockholders," usually
make initial capital contributions to the supranational
entity and in many cases are committed to make additional
capital contributions if the supranational entity is unable
to repay its borrowings.
Options A put option gives the purchaser the right to sell, and the
writer the obligation to buy, the underlying security at any
time during the option period. A call option gives the
purchaser the right to buy, and the writer the obligation to
sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration
for undertaking the obligations under the option contract.
A Fund may purchase put and call options to protect
against a decline in the market value of the securities in
its portfolio or to protect against an increase in the cost
of securities that the Fund may seek to purchase in the
future. A Fund purchasing put and call options pays a
premium therefor. If price movements in the underlying
securities are such that exercise of the options would not
be profitable for the Fund, loss of the premium paid may be
offset by an increase in the value of the Fund's securities
or by a decrease in the cost of acquisition of securities by
the Fund.
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A Fund may write covered put and call options as a means
of increasing the yield on its portfolio and as a means of
providing limited protection against decreases in its market
value. When a Fund sells an option, if the underlying
securities do not increase or decrease to a price level that
would make the exercise of the option profitable to the
holder thereof, the option generally will expire without
being exercised and the Fund will realize as profit the
premium received for such option. When a call option of
which a Fund is the writer is exercised, the Fund will be
required to sell the underlying securities to the option
holder at the strike price, and will not participate in any
increase in the price of such securities above the strike
price. When a put option of which a Fund is the writer is
exercised, the Fund will be required to purchase the
underlying securities at the strike price, which may be in
excess of the market value of such securities.
A Fund may purchase and write options on an exchange or
over-the-counter. Over-the-counter options ("OTC options")
differ from exchange-traded options in several respects.
They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-
performance by the dealer. OTC options are available for a
greater variety of securities and for a wider range of
expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded
on an exchange, pricing is done normally by reference to
information from a market maker. It is the position of the
Securities and Exchange Commission that OTC options are
illiquid.
A Fund may purchase and write put and call options on
foreign currencies (traded on U.S. and foreign exchanges or
over-the-counter markets) to manage its exposure to exchange
rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an
equal amount of the underlying foreign currency. With
respect to put options on foreign currency written by a
Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash, cash equivalents or
liquid securities in an amount equal to the amount the Fund
would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on
indices and enter into related closing transactions. Put and
call options on indices are similar to options on securities
except that options on an index give the holder the right to
receive, upon exercise of the option, an amount of cash if
the closing level of the underlying index is greater than
(or less than, in the case of puts) the exercise price of
the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise
price of the option, expressed in dollars multiplied by a
specified number. Thus, unlike options on individual
securities, all settlements are in cash, and gain or loss
depends on price movements in the particular market
represented by the index generally, rather than the price
movements in individual securities. All options written on
indices must be covered. When a Fund writes an option on an
index, it will establish a segregated account containing
cash, cash equivalents or liquid securities with its
custodian in an amount at least equal to the market value of
the option and will maintain the account while the option is
open or will otherwise cover the transaction.
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Risk Factors. Risks associated with options transactions
include: (1) the success of a hedging strategy may depend on
an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation
between the movement in prices of options and the securities
underlying them; (3) there may not be a liquid secondary
market for options; and (4) while a Fund will receive a
premium when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security. A Fund may choose to terminate an
option position by entering into a closing transaction. The
ability of a Fund to enter into closing transactions depends
upon the existence of a liquid secondary market for such
transactions.
Receipts Receipts are interests in separately traded interest and
principal component parts of U.S. Treasury obligations that
are issued by banks and brokerage firms and are created by
depositing U.S. Treasury obligations into a special account
at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners
of the certificates or receipts. The custodian arranges for
the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts are sold as
zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or
principal. This discount is amortized over the life of the
security, and such amortization will constitute the income
earned on the security for both accounting and tax purposes.
Because of these features, receipts may be subject to
greater price volatility than interest paying U.S. Treasury
obligations. See also "Taxes".
Repurchase Repurchase agreements are agreements by which a Fund obtains
Agreements a security and simultaneously commits to return the security
to the seller at an agreed upon price on an agreed upon date
within a number of days from the date of purchase. The Fund
or its agent will have actual or constructive possession of
the securities held as collateral for the repurchase
agreement. Collateral must be maintained at a value at least
equal to 100% of the purchase price. The Fund bears a risk
of loss in the event the other party defaults on its
obligations and the Fund is delayed or prevented from
exercising its right to dispose of the collateral securities
or if the Fund realizes a loss on the sale of the collateral
securities. A Fund will enter into repurchase agreements
only with financial institutions deemed to present minimal
risk of bankruptcy during the term of the agreement based on
established guidelines. Repurchase agreements are considered
loans under the 1940 Act, as well as for federal and state
income tax purposes.
Restraints on Investments by each Money Market Fund are subject to
Investments by limitations imposed under regulations adopted by the SEC.
Money Market Under these regulations, money market funds may acquire only
Funds obligations that present minimal credit risks and that are
"eligible securities," which means they are (i) rated, at
the time of investment, by at least two NRSROs (one if it is
the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be
of comparable quality (a "first tier security"), or (ii)
rated
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according to the foregoing criteria in the second highest
short-term rating category or, if unrated, determined to be
of comparable quality ("second tier security"). A security
is not considered to be unrated if its issuer has
outstanding obligations of comparable priority and security
that have a short-term rating. The Advisor will determine
that an obligation presents minimal credit risks or that
unrated instruments are of comparable quality in accordance
with guidelines established by the Trustees. In addition, in
the case of taxable money market funds, investments in
second tier securities are subject to the further
constraints that (i) no more than 5% of a Fund's assets may
be invested in such securities in the aggregate, and (ii)
any investment in such securities of one issuer is limited
to the greater of 1% of the Fund's total assets or $1
million. A taxable money market fund may hold up to 25% its
assets in first tier securities of a single issuer for three
Business Days.
Restricted Restricted securities are securities that may not be sold
Securities freely to the public absent registration under the
Securities Act of 1933 or an exemption from registration.
Rights Rights are instruments giving Shareholders the right to
purchase shares of newly issued common stock below the
public offering price before they are offered to the public.
Securities In order to generate additional income, a Fund may lend the
Lending securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by
collateral consisting of cash, securities of the U.S.
Government or its agencies equal at all times to 100% of the
market value plus accrued interest of the loaned securities.
Collateral is marked to market daily. A Fund continues to
receive interest on the loaned securities while
simultaneously earning interest on the investment of cash
collateral in U.S. Government securities. There may be risks
of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the
securities fail financially.
Standby Securities subject to standby commitments or puts permit the
Commitments holder thereof to sell the securities at a fixed price prior
and Puts to maturity. Securities subject to a standby commitment or
put may be sold at any time at the current market price.
However, unless the standby commitment or put was an
integral part of the security as originally issued, it may
not be marketable or assignable; therefore, the standby
commitment or put would only have value to the Fund owning
the security to which it relates. In certain cases, a
premium may be paid for a standby commitment or put, which
premium will have the effect of reducing the yield otherwise
payable on the underlying security.
Swaps, Caps, Interest rate swaps, mortgage swaps, currency swaps and
Floors and other types of swap agreements such as caps, floors and
Collars collars are designed to permit the purchaser to preserve a
return or spread on a particular investment or portion of
its portfolio, and to protect against any increase in the
price of securities the Fund anticipates purchasing at a
later date. In a typical interest rate swap, one party
agrees to make regular payments equal to a floating interest
rate times a "notional principal amount," in return for
payments equal to a fixed rate times the same amount, for a
specific period of time. Swaps may also depend on other
prices or rates, such as the value of an index or mortgage
prepayment rates.
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In a typical cap or floor agreement, one party agrees to
make payments only under specified circumstances, usually in
return for payment of a fee by the other party.
Swap agreements will tend to shift the Fund's investment
exposure from one type of investment to another. Depending
on how they are used, swap agreements may increase or
decrease the overall volatility of the Fund's investment and
their share price and yield.
Time Deposits Time deposits are non-negotiable receipts issued by a bank
in exchange for the deposit of funds. Time deposits with a
withdrawal penalty are considered to be illiquid.
U.S. Government Obligations issued or guaranteed by agencies of the U.S.
Agency Government, including, among others, the Federal Farm Credit
Obligations Bank, the Federal Housing Administration and the Small
Business Administration, and obligations issued or
guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage
Corporation, the Federal Land Banks and the U.S. Postal
Service. Some of these securities are supported by the full
faith and credit of the U.S. Treasury (e.g., Government
National Mortgage Association securities), others are
supported by the right of the issuer to borrow from the
Treasury (e.g., Federal Farm Credit Bank securities), while
still others are supported only by the credit of the
instrumentality (e.g., Fannie Mae securities). Guarantees of
principal by agencies or instrumentalities of the U.S.
Government may be a guarantee of payment at the maturity of
the obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity. Guarantees as
to the timely payment of principal and interest do not
extend to the value or yield of these securities nor to the
value of the Fund's shares.
U.S. Treasury U.S. Treasury obligations consist of bills, notes and bonds
Obligations issued by the U.S. Treasury.
Variable and Certain obligations may carry variable or floating rates of
Floating Rate interest, and may involve conditional or unconditional
Instruments demand features. Such instruments bear interest at rates
which are not fixed, but which vary with changes in
specified market rates or indices. The interest rates on
these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current
interest rate on such obligations may not accurately reflect
existing market interest rates.
Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy shares of a company at a given price
during a specified period.
When-Issued and When-issued or delayed delivery basis transactions involve
Delayed the purchase of an instrument with payment and delivery
Delivery taking place in the future. Delivery of and payment for
Securities these securities may occur a month or more after the date of
the purchase commitment. A Fund will maintain with the
Custodian a separate account with liquid securities, cash or
cash equivalents in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to
the Fund before settlement. These securities are subject to
market fluctuations due to changes in market
56
<PAGE>
interest rates, and it is possible that the market value at
the time of settlement could be higher or lower than the
purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a
when-issued or forward commitment basis with the intention
of actually acquiring securities for its portfolio, a Fund
may dispose of a when-issued security or forward commitment
prior to settlement if it deems appropriate. When investing
in when-issued securities, a Fund will not accrue income
until delivery of the securities and will invest in such
securities only for purposes of actually acquiring the
securities and not for the purpose of leveraging.
57
<PAGE>
REMBRANDT FUNDS(R)
INVESTMENT ADVISOR:
LASALLE STREET CAPITAL MANAGEMENT, LTD.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of
Rembrandt Funds(R) (the "Trust") and should be read in conjunction with the
Trust's prospectus dated April 30, 1997. Prospectuses may be obtained through
the Distributor, Rembrandt(R) Financial Services Company, Oaks, Pennsylvania
19456.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE TRUST ................................................................ 2
DESCRIPTION OF PERMITTED INVESTMENTS...................................... 3
INVESTMENT LIMITATIONS.................................................... 14
NON-FUNDAMENTAL POLICIES.................................................. 16
THE ADVISOR............................................................... 17
THE SUB-ADVISOR........................................................... 18
THE ADMINISTRATOR......................................................... 19
THE DISTRIBUTOR........................................................... 20
TRUSTEES AND OFFICERS OF THE TRUST........................................ 23
COMPUTATION OF YIELD...................................................... 25
CALCULATION OF TOTAL RETURN............................................... 28
PURCHASE AND REDEMPTION OF SHARES......................................... 30
LETTER OF INTENT.......................................................... 31
DETERMINATION OF NET ASSET VALUE.......................................... 31
TAXES..................................................................... 32
PORTFOLIO TRANSACTIONS.................................................... 36
TRADING PRACTICES AND BROKERAGE........................................... 36
DESCRIPTION OF SHARES..................................................... 41
SHAREHOLDER LIABILITY..................................................... 41
5% and 25% SHAREHOLDERS................................................... 42
LIMITATION OF TRUSTEES' LIABILITY......................................... 44
FINANCIAL STATEMENTS...................................................... 45
APPENDIX.................................................................. A-1
</TABLE>
APRIL 30, 1997
REM-F-007-[_] 06
<PAGE>
THE TRUST
Rembrandt Funds(R) is an open-end management investment company established as a
Massachusetts business trust pursuant to a Declaration of Trust dated September
17, 1992. The Declaration of Trust permits the Trust to offer separate series of
units of beneficial interest ("shares") and different classes of shares of each
fund. Shareholders may purchase shares through two separate classes, the Trust
Class and the Investor Class, which provide for variations in distribution
costs, voting rights and dividends. Except for these differences between Trust
Class shares and Investor Class shares, each share of each fund represents an
equal proportionate interest in that fund. See "Description of Shares." This
Statement of Additional Information relates to the Trust Class shares and
Investor Class shares of the following funds: Value Fund, Growth Fund, Latin
America Equity Fund, Small Cap Fund, International Equity Fund, TransEurope
Fund, Asian Tigers Fund (collectively, the "Equity Funds"), Fixed Income Fund
(formerly the Taxable Fixed Income Fund), Intermediate Government Fixed Income
Fund (formerly the Short/Intermediate Government Fixed Income Fund), Tax-Exempt
Fixed Income Fund, International Fixed Income Fund (formerly the Global Fixed
Income Fund), Limited Volatility Fixed Income Fund (collectively, the "Fixed
Income Funds"), Balanced Fund (the "Balanced Fund"), Money Market Fund,
Government Money Market Fund, Treasury Money Market Fund and Tax-Exempt Money
Market Fund (collectively, the "Money Market Funds" and together with the
Equity, Balanced and Fixed Income Funds, the "Funds").
DESCRIPTION OF PERMITTED INVESTMENTS
VARIABLE AMOUNT MASTER DEMAND NOTES
Variable amount master demand notes may or may not be backed by bank letters of
credit. These notes permit the investment of fluctuating amounts at varying
market rates of interest pursuant to direct arrangements between the Trust, as
lender, and the borrower. Such notes provide that the interest rate on the
amount outstanding varies on a daily, weekly or monthly basis depending upon a
stated short-term interest rate index. Both the lender and the borrower have the
right to reduce the amount of outstanding indebtedness at any time. There is no
secondary market for the notes. It is not generally contemplated that such
instruments will be traded.
BRADY BONDS
"Brady Bonds" are a particular type of Latin American debt security. During
1990, the Mexican external debt markets experienced significant changes with the
completion of the "Brady Plan" restructurings in those markets. The
restructurings provided for the exchange of loans and cash for newly issued
bonds ("Brady Bonds"). Brady Bonds fall into two categories: collaterized Brady
Bonds and bearer Brady Bonds. Both types of Brady Bonds are issued in various
currencies, primarily the U.S. dollar. Brady Bonds are actively traded in the
over-the-counter secondary market for Latin American debt. U.S.
dollar-denominated collaterized bonds, which may be fixed par bonds
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or floating rate discount bonds, are collaterized in full as to principal by
U.S. Treasury zero coupon bonds having the same maturity. At least one year of
rolling interest payments are collaterized by cash or other investments.
FLOATING RATE NOTES
Floating rate notes will normally involve industrial development or revenue
bonds which provide that the rate of interest is set as a specific percentage of
a designated base rate (such as the prime rate) at a major commercial bank, and
that the Fund can demand payment of the obligation at all times or at stipulated
dates on short notice (not to exceed 30 days) at par plus accrued interest. A
Fund may use the longer of the period required before the Fund is entitled to
prepayment under such obligations or the period remaining until the next
interest rate adjustment date for purposes of determining the maturity. Such
obligations are frequently secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying credit or of the
bank, as the case may be, must be rated in the third highest rating category or,
in the Advisor's opinion, be of comparable quality. The Advisor will monitor the
earning power, cash flow and liquidity ratios of the issuers of such instruments
and the ability of an issuer of a demand instrument to pay principal and
interest on demand. The Advisor may purchase other types of tax-exempt
instruments as long as they are of a quality equivalent to the bond or
commercial paper ratings stated above.
GNMA CERTIFICATES
GNMA Certificates are securities issued by the Government National Mortgage
Association ("GNMA"), a wholly-owned U.S. Government corporation which
guarantees the timely payment of principal and interest. The market value and
interest yield of these instruments can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of federally insured mortgage loans. GNMA
certificates consist of underlying mortgages with a maximum maturity of 30
years. However, due to scheduled and unscheduled principal payments, GNMA
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to accurately predict the average maturity of a particular
GNMA pool. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. As a result, there
will be monthly scheduled payments of principal and interest. In addition, there
may be unscheduled principal payments representing prepayments on the underlying
mortgages. Although GNMA certificates may offer yields higher than those
available from other types of U.S. Government securities, GNMA certificates may
be less effective than other types of securities as a means of "locking in"
attractive long-term rates because of the prepayment feature. For instance, when
interest rates decline, the value of a GNMA certificate likely will not rise as
much as comparable debt securities due to the prepayment feature. In addition,
these prepayments can cause the price of a GNMA certificate originally purchased
at a premium to decline in price to its par value, which may result in a loss.
-3-
<PAGE>
JUNK BONDS
Junk bonds are debt securities which are rated below investment grade or are not
rated. When debt securities are rated, it is expected that such ratings will
generally be below investment grade. Below investment grade securities are debt
securities rated BB or lower by S&P or Ba or lower by Moody's or, if unrated,
deemed by the Advisor or Sub-Advisor to be of comparable quality. Securities
rated below investment grade are the equivalent of high yield, high risk bonds,
commonly known as "junk bonds."
Such securities involve greater risk of default or price declines than
investment grade securities due to changes in the issuer's creditworthiness and
the outlook for economic growth. The market for these securities may be less
active, causing market price volatility and limited liquidity in the secondary
market. This may limit the Fund's ability to sell such securities at their
market value. In addition, the market for these securities may also be adversely
affected by legislative and regulatory developments. Credit quality in the junk
bond market can change suddenly and unexpectedly, and even recently issued
credit ratings may not fully reflect the actual risks imposed by a particular
security.
MORTGAGE-BACKED SECURITIES
Two principal types of mortgage-backed securities are collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"),
which are rated in one of the two highest rating categories by a nationally
recognized statistical rating organization ("NRSRO"). CMOs are securities
collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds
(bonds representing an interest in a pool of mortgages where the cash flow
generated from the mortgage collateral pool is dedicated to bond repayment), and
mortgage-backed bonds (general obligations of the issuers payable out of the
issuers' general funds that are secured by a first lien on a pool of single
family detached properties). Many CMOs are issued with a number of classes or
series which have different maturities and are retired in sequence.
Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
--- ----
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligation is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. Government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed. FHLMC
has in the past guaranteed only the ultimate collection of principal of the
underlying mortgage loan; however, FHLMC now issues mortgage-backed securities
(FHLMC Gold PCs) which also guarantee timely payment of monthly principal
reductions. Government and private guarantees do not extend to the securities'
value, which is likely to vary inversely with fluctuations in interest rates.
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<PAGE>
Certain of the Funds also may invest in parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated maturity
date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date, but may be retired earlier. PAC Bonds are always parallel pay CMOs with
the required principal payment on such securities having the highest priority
after interest has been paid to all classes.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
ASSET-BACKED SECURITIES
Asset-backed securities include company receivables, truck and auto loans,
leases, and credit card receivables. These issues may be traded over-the-counter
and typically have a short-intermediate maturity structure depending on the
paydown characteristics of the underlying financial assets which are passed
through to the security holder.
Principal and interest on non-mortgage asset-backed securities may be guaranteed
up to certain amounts and for a certain time period by a letter of credit issued
by a financial institution (such as a bank or insurance company) unaffiliated
with the issuers of such securities. The purchase of non-mortgage asset-backed
securities raises risk considerations peculiar to the financing of the
instruments underlying such securities. For example, there is a risk that
another party could acquire an interest in the obligations superior to that of
the holder of the asset-backed securities. There is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on those securities. Asset-backed securities entail prepayment
risk, which may vary depending on the type of asset, but is generally less than
the prepayment risk associated with mortgage-backed securities. In addition,
unlike most other asset-backed securities, credit card receivables are unsecured
obligations of the card holder.
STRIPS
Separately traded interest and principal securities ("STRIPS") are component
parts of U.S. Treasury Securities traded through the Federal Book-Entry System.
The Advisor will purchase only STRIPS that it determines are liquid or, if
illiquid, that do not violate the Fund's investment policy concerning
investments in illiquid securities. Consistent with Rule 2a-7, the Advisor will
purchase for Money Market Funds only STRIPS that have a remaining maturity of
397 days or less; therefore, the Money Market Funds currently may purchase only
interest component parts of U.S. Treasury Securities. While there is no
limitation on the percentage of a Fund's assets that may be comprised of STRIPS,
the Advisor will monitor the level of such holdings to avoid the risk of
impairing shareholders' redemption rights and of deviations in the value of
shares of the Money Market Funds.
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<PAGE>
REPURCHASE AGREEMENTS
Repurchase agreements, into which each of the Funds, except the Treasury Money
Market Fund, is permitted to enter, are agreements by which a person (e.g., a
----
Fund) obtains a security and simultaneously commits to return the security to
the seller (primary securities dealer recognized by the Federal Reserve Bank of
New York or a national member bank as defined in Section 3(d)(1) of the Federal
Deposit Insurance Act, as amended) at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the underlying security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by the Funds for purposes of
their investment limitations. The repurchase agreements entered into by the
Funds will provide that the underlying security at all times shall have a value
at least equal to 100% of the resale price stated in the agreement (the Advisor
monitors compliance with this requirement). Under all repurchase agreements
entered into by the Funds, the Custodian or its agent must take possession of
the underlying collateral. However, if the seller defaults, the Funds could
realize a loss on the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the resale price
provided in the agreement including interest. In addition, even though the
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, the Funds may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Funds are treated as an unsecured creditors and
required to return the underlying securities to the seller's estate.
MUNICIPAL SECURITIES
Municipal notes include, but are not limited to, general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior to receipt of expected non-tax revenues
from a specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. A Fund's investments in any of the
notes described above will be limited to those obligations (i) rated in the
highest two rating categories by an NRSRO or (ii) if not rated, of equivalent
quality in the Advisor's judgment.
Municipal bonds must be rated in the highest four rating categories by an NRSRO
at the time of investment or, if unrated, must be deemed by the Advisor to have
essentially the same characteristics and quality as bonds rated in the above
rating categories. The Advisor may purchase industrial development and pollution
control bonds if the interest paid is exempt from federal income tax. These
bonds are issued by or on behalf of public authorities to raise money to finance
various privately-operated facilities for business and manufacturing, housing,
sports, and pollution control. These bonds are also used to finance public
facilities such as airports, mass transit systems, ports and
-6-
<PAGE>
parking facilities. The payment of the principal and interest on such bonds is
dependent solely on the ability of the facility's user to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.
COMMERCIAL PAPER
Investments in tax-exempt commercial paper will be limited to investments in
obligations rated in one of the two highest rating categories by an NRSRO at the
time of investment, or determined by the Advisor to be of equivalent quality.
STANDBY COMMITMENTS, OR PUTS
The Advisor has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit a Fund to meet redemptions and remain as fully invested as
possible in municipal securities. The Funds reserve the right to engage in put
transactions. The right to put the securities depends on the writer's ability to
pay for the securities at the time the put is exercised. The Funds will limit
their put transactions to institutions which the Advisor believes present
minimal credit risks, and the Advisor will use its best efforts to initially
determine and continue to monitor the financial strength of the sellers of the
options by evaluating their financial statements and such other information as
is available in the marketplace. It may, however, be difficult to monitor the
financial strength of the writers because adequate current financial information
may not be available. In the event that any writer is unable to honor a put for
financial reasons, the Fund would be general creditor (i.e., on a parity with
-----
all other unsecured creditors) of the writer. Furthermore, particular provisions
of the contract between the Fund and the writer may excuse the writer from
repurchasing the securities; for example, a change in the published rating of
the underlying municipal securities or any similar event that has an adverse
effect on the issuer's credit or a provision in the contract that the put will
not be exercised except in certain special cases, for example, to maintain
portfolio liquidity. The Fund could, however, at any time sell the underlying
portfolio security in the open market or wait until the portfolio security
matures, at which time it should realize the full par value of the security.
The municipal securities purchased subject to a put may be sold to third persons
at any time, even though the put is outstanding, but the put itself, unless it
is an integral part of the security as originally issued, may not be marketable
or otherwise assignable. Therefore, the put would have value only to the Fund.
Sale of the securities to third parties or lapse of time with the put
unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Fund, the Fund could sell the portfolio security. The
maturity of the underlying security will generally be different from that of the
put. There will be no limit to the
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<PAGE>
percentage of portfolio securities that the Fund may purchase subject to a put,
but the amount paid directly or indirectly for puts which are not integral parts
of the security as originally issued which are held by the Fund will not exceed
1/2 of 1% of the value of the total assets of such Fund calculated immediately
after any such put is acquired. For the purpose of determining the "maturity" of
securities purchased subject to an option to put, and for the purpose of
determining the dollar-weighted average maturity of the Fund including such
securities, the Trust will consider "maturity" to be the first date on which it
has the right to demand payment from the writer of the put although the final
maturity of the security is later than such date.
OPTIONS
Put and call options may be used by a Fund from time to time as the Advisor
deems to be appropriate except as limited by each Fund's investment
restrictions, but will not be used for speculative purposes. Among the
strategies the Advisor may use are: protective puts on stocks owned by a Fund,
buying calls on stocks a Fund is attempting to buy and writing covered calls on
stocks a Fund owns.
A put option gives the purchaser of the option the right to sell, and the writer
the obligation to buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction". In
order to close out an option position, a Fund may enter into a "closing
transaction" -- the sale (purchase) of an option contract on the same security
with the same exercise price and expiration date as the option contract
originally opened.
A Fund may buy protective put options from time to time on such portion of its
assets as the Advisor determines is appropriate in seeking the Fund's investment
objective. The advantage to the Fund of buying the protective put is that if the
price of the stock falls during the option period, the Fund may exercise the put
and receive the higher exercise price for the stock. However, if the security
rises in value, the Fund will have paid a premium for the put which will expire
unexercised.
A Fund may buy call options from time to time as the Advisor determines is
appropriate in seeking the Fund's investment objective. The Fund may elect to
buy calls on stocks that the Fund is trying to buy. The advantage of the Fund
buying the fiduciary call is that if the price of the stock rises during the
option period, the Fund may exercise the call and buy the stock for the lower
exercise price. If the security falls in value, the Fund will have paid a
premium for the call (which will expire worthless) but will be able to buy the
stock at a lower price.
A Fund may write covered call options from time to time on such portion of its
assets as the Advisor determines is appropriate in seeking the Fund's investment
objective. The advantage to the Fund of writing covered call options is that the
Fund receives a premium which is additional income. How ever, if the security
rises in value, the Fund may not fully participate in the market appreciation.
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<PAGE>
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which a Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written. A closing purchase
transaction cannot be effected with respect to an option once the option writer
has received an exercise notice for such option.
The market value of an option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the pricing volatility of the underlying
security and the time remaining until the expiration date.
There are risks associated with option transactions, including the following:
(i) the success of a hedging strategy may depend on the ability of the Advisor
to predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be imperfect correlation
between the movement in prices of securities held by a Fund; (iii) there may not
be a liquid secondary market for options; and (iv) while a Fund will receive a
premium when it writes covered call options, it may not participate fully in a
rise in the market value of the underlying security.
FOREIGN SECURITIES
Foreign securities may be U.S. dollar denominated or non-U.S. dollar denominated
obligations or securities of foreign issuers, including obligations of foreign
branches of U.S. banks and of foreign banks, including European certificates of
deposit, European time deposits, Canadian time deposits and Yankee certificates
of deposit, and investments in Canadian commercial paper, foreign securities and
Europaper. In addition, a Fund may invest in American Depositary Receipts
("ADRs"). These instruments may subject a Fund to investment risks that differ
in some respects from those related to investments in obligations of U.S.
domestic issuers. Such risks include future adverse political and economic
developments, the possible imposition of withholding taxes on interest or other
income, possible seizure, nationalization, or expropriation of foreign deposits,
the possible establishment of exchange controls or taxation at the source,
greater fluctuations in value due to changes in exchange rates, or the adoption
of other foreign governmental restrictions which might adversely affect the
payment of principal and interest on such obligations. Such investments may also
entail higher custodial fees and sales commissions than domestic investments.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
than those applicable to domestic branches of U.S. banks.
Further, it may be more difficult for the Fund's agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the U.S. and
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<PAGE>
foreign countries may be less reliable than within the U.S., increasing the risk
of delayed settlements of portfolio securities. Certain markets may require
payment for securities before delivery. The Fund's ability and decisions to
purchase and sell portfolio securities may be affected by laws or regulations
relating to the convertibility of currencies and repatriation of assets. Some
countries restrict the extent to which foreigners may invest in their securities
markets.
The Latin America Equity Fund may invest in securities denominated in currencies
of Latin American countries. Accordingly, changes in the value of these
currencies against the U.S. dollar will result in corresponding changes in the
U.S. dollar value of the Fund's assets denominated in those currencies. Some
Latin American countries also may have managed currencies, which are not free
floating against the U.S. dollar. In addition, there is risk that certain Latin
American countries may restrict the free conversion of their currencies into
other currencies. Further, it may be difficult to reduce the Fund's Latin
American currency risk through hedging. Any devaluations in the currencies in
which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund's net asset value.
Certain risks associated with international investments and investing in
smaller, developing capital markets are heightened for investments in Latin
American countries. For example, some of the currencies of Latin American
countries have experienced steady devaluations relative to the U.S. dollar, and
major adjustments have been made in certain of these currencies periodically.
Any devaluations in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund. Furthermore, Latin
American currencies may not be internationally traded. Also, many Latin American
countries have experienced substantial, and in some periods extremely high,
rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have very negative effects on the economies
and securities markets of certain Latin American countries. In addition,
although there is a trend toward less government involvement in commerce,
governments of many Latin American countries have exercised and continue to
exercise substantial influence over many aspects of the private sector. In
certain cases, the government still owns or controls many companies, including
some of the largest companies in the country. Accordingly, government actions in
the future could have a significant effect on economic conditions in Latin
American countries, which could affect private sector companies and the Fund, as
well as the value of securities in the Fund's portfolio.
Securities of Latin American issuers pose greater liquidity risks and other
risks than securities of companies located in developed countries and traded in
more established markets. Low liquidity in markets may adversely affect the
Fund's ability to buy and sell securities and cause increased volatility. Many
of the countries in Latin America may at various times have less stable
political environments than more developed nations. Changes of control may
adversely affect the pricing of securities from time to time. Some of the Latin
American countries may afford only limited opportunities for investing. In
certain Latin American countries, the Fund may be able to invest solely or
primarily through ADRs or similar securities and government approved investment
vehicles (including closed-end investment funds). For example, due to Chile's
current investment restrictions (in most cases, capital invested directly in
Chile cannot be repatriated for at least one year), the Fund's investments
-10-
<PAGE>
in Chile primarily will be through investments in ADRs and established Chilean
investment companies not subject to repatriation restrictions. The Fund may
invest up to 10% of its total assets in the securities of closed-end investment
companies. If the Fund invests in closed-end investment companies, the Fund's
shareholders will bear not only their proportionate share of the expenses of the
Fund, but also will directly bear duplicative fees (including advisory fees) of
the underlying closed-end fund.
WHEN-ISSUED SECURITIES
The Funds will only make commitments to purchase obligations on a when-issued
basis with the intention of actually acquiring the securities, but may sell them
before the settlement date. The when-issued securities are subject to market
fluctuation, and the purchaser accrues no interest on the security during this
period. The payment obligation and the interest rate that will be received on
the securities are each fixed at the time the purchaser enters into the
commitment. Purchasing obligations on a when-issued basis may be used as a form
of leveraging because the purchaser may accept the market risk prior to payment
for the securities. The Funds will segregate [_] cash, cash equivalents or
liquid securities in an amount at least equal in value to the Funds' commitments
to purchase when-issued securities. If the value of these assets declines, the
Funds will place additional liquid assets aside on a daily basis so that the
value of the assets set aside is equal to the amount of such commitments.
Consequently, the Funds will not use such purchases for leveraging.
RESTRICTED SECURITIES
Restricted securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 (the "1933 Act") absent an
exemption from registration. Up to 10% of a Fund's assets may consist of
restricted securities that are illiquid and the Advisor may invest up to an
additional 5% of the total assets of a Fund in restricted securities, provided
it determines that at the time of investment such securities are not illiquid
(generally, an illiquid security cannot be disposed of within seven days in the
ordinary course of business at its full value), based on guidelines and
procedures developed and established by the Board of Trustees of the Trust. The
Board of Trustees will periodically review such procedures and guidelines and
will monitor the Advisor's implementation of such procedures and guidelines.
Under these procedures and guidelines, the Advisor will consider the frequency
of trades and quotes for the security, the number of dealers in, and potential
purchasers for, the securities, dealer undertakings to make a market in the
security and the nature of the security and of the marketplace trades. In
purchasing such restricted securities, the Advisor intends to rely upon the
exemption from registration provided by Rule 144A under the 1933 Act.
SECURITIES LENDING
Securities loaned by a Fund pursuant to an agreement which requires collateral
to secure the loan will not be made if, as a result, the aggregate amount of all
outstanding securities loans for the Fund exceed one-third of the value of a
Fund's total assets taken at fair market value. A Fund will continue
-11-
<PAGE>
to receive interest on the loaned securities while simultaneously earning
interest on the investment of the cash collateral in U.S. Government securities.
However, a Fund will normally pay lending fees to such broker-dealers and
related expenses from the interest earned on invested collateral. Loans are made
only to borrowers deemed by the Advisor to be of good standing and when, in the
judgment of the Advisor, the consideration which can be earned currently from
such securities loans justifies the attendant risk. Any loan may be terminated
by either party upon reasonable notice to the other party. The Funds may use the
Distributor or a broker-dealer affiliate of the Advisor as a broker in these
transactions.
INVESTMENT COMPANY SHARES
Investments in shares of open-end funds and closed-end funds, as described in
the prospectus, may result in the layering of expenses. Since such funds pay
management fees and other expenses, shareholders of a Fund would indirectly pay
both Fund expenses and the expenses of underlying funds with respect to Fund
assets invested therein. Under applicable regulations, the Funds are prohibited
from acquiring the securities of other investment companies if, as a result of
such acquisition, the Funds own more than 3% of the total voting stock of the
company; securities issued by any one investment company represent more than 5%
of the Fund's total assets; or securities (other than treasury stock) issued by
all investment companies represent more than 10% of the total assets of the
Funds. See also "Investment Limitations."
The Trust has received an exemptive order from the Securities and Exchange
Commission ("SEC") to permit the Funds to invest in shares of the Money Market
Funds. Pursuant to this order, each Fund is permitted to invest in shares of the
Money Market Funds provided that the Advisor and any of its affiliates waive
management fees and other expenses with respect to Fund assets invested therein.
It is the position of the staff of the SEC that certain nongovernmental issuers
of CMOs and REMICs constitute investment companies pursuant to the Investment
Company Act of 1940, as amended ("1940 Act") and either (a) investments in such
instruments are subject to the limitations set forth above or (b) the issuers of
such instruments have been granted orders from the SEC exempting such
instruments from the definition of investment company.
STANDARD & POOR'S DEPOSITARY RECEIPTS ("SPDRS")
SPDRs are interests in a unit investment trust ("UIT") that may be obtained from
the UIT or purchased in the secondary market as SPDRs are listed on the American
Stock Exchange. A UIT is a type of investment company, so investments in SPDRs
are subject to those regulations described above limiting a Fund's acquisition
of investment company securities.
The UIT will issue SPDRs in aggregations of 50,000 known as "Creation Units" in
exchange for a "Portfolio Deposit" consisting of (a) a portfolio of securities
substantially similar to the component securities ("Index Securities") of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P
-12-
<PAGE>
Index"), (b) a cash payment equal to a pro rata portion of the dividends accrued
on the UIT's portfolio securities since the last dividend payment by the UIT,
net of expenses and liabilities, and (c) a cash payment or credit ("Balancing
Amount") designed to equalize the net asset value of the S&P Index and the net
asset value of a Portfolio Deposit.
SPDRs are not individually redeemable, except upon termination of the UIT. To
redeem, the Funds must accumulate enough SPDRs to reconstitute a Creation Unit.
The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the Funds
will receive Index Securities and cash identical to the Portfolio Deposit
required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived and based upon the securities held by the UIT.
Accordingly, the level of risk involved in the purchase or sale of a SPDR is
similar to the risk involved in the purchase or sale of traditional common
stock, with the exception that the pricing mechanism for SPDRs is based on a
basket of stocks. Disruptions in the markets for the securities underlying SPDRs
purchased or sold by the Funds could result in losses on SPDRs. Trading in SPDRs
involves risks similar to those risks, described above under "Options," involved
in the writing of options on securities.
SWAPS, CAPS AND FLOORS
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a result,
swaps can be highly volatile and have a considerable impact on the Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. The Fund may also suffer losses if it is unable
to terminate outstanding swap agreements or reduce its exposure through
offsetting transactions. Any obligation the Fund may have under these types of
arrangements will be covered by setting aside liquid, high grade debt securities
in a segregated account. The Fund will enter into swaps only with counterparties
believed to be creditworthy.
In a typical cap or floor agreement, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specific interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate falls
below an agreed-upon level. An interest rate collar combines elements of buying
a cap and selling a floor. In swap agreements, if the Fund agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of the Fund's
investment and their share price and yield.
-13-
<PAGE>
INVESTMENT LIMITATIONS
Each Fund has adopted certain investment limitations which, in addition to those
limitations in the Prospectus, are fundamental and may not be changed without
approval by a majority vote of the Fund's outstanding shares. The term "majority
of the Fund's outstanding shares" means the vote of (i) 67% or more of the
Fund's shares present at a meeting, if more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of the
Fund's outstanding shares, whichever is less.
NO FUND MAY:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter under federal securities laws in selling a Fund
security.
4. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described below or as permitted by rule,
regulation or order of the SEC.
THE MONEY MARKET FUNDS MAY NOT:
1. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and to the extent that such borrowing exceeds 5%
of the value of the Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall
below 300%, the Fund shall, within three days thereafter or such longer
period as the SEC may prescribe by rules and regulations, reduce the amount
of its borrowings to such an extent that the asset coverage of such
borrowings shall be at least 300%. This borrowing provision is included
solely to facilitate the orderly sale of portfolio securities to
accommodate heavy redemption requests if they should occur and is not for
investment purposes. All borrowings will be repaid before making additional
investments and any interest paid on such borrowings will reduce income.
2. Pledge, mortgage or hypothecate assets except to secure temporary
borrowings permitted by (1) above in aggregate amounts not to exceed 10% of
total assets taken at current value at the time of the incurrence of such
loan, except as permitted with respect to securities lending.
3. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts and interests in a pool of securities
that are secured by interests in real estate. However, subject to their
permitted investments, any Fund may invest in companies which invest in
real estate commodities or commodities contracts.
-14-
<PAGE>
4. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits
as necessary for the clearance of security transactions.
5. Purchase securities of other investment companies except for money market
funds and then only as permitted by the 1940 Act and the rules and
regulations thereunder. The Money Market Funds will invest in shares of
another money market fund only if (i) such other money market fund is
subject to Rule 2a-7 under the 1940 Act; (ii) such other money market fund
has investment criteria equal to or higher than those of the investing
Money Market Fund; and (iii) the Trust's Board of Trustees monitors the
activities of such other money market fund.
6. Write or purchase puts, calls, options or combinations thereof.
THE EQUITY, FIXED INCOME AND BALANCED FUNDS MAY NOT:
1. Borrow money in an amount exceeding 33 1/3% of the value of its total
assets, provided that, for purposes of this limitation, investment
strategies which either obligate a Fund to purchase securities or require a
Fund to segregate assets are not considered to be borrowing. Except where a
Fund has borrowed money for temporary purposes in amounts not exceeding 5%
of its total assets, asset coverage of at least 300% is required for all
borrowings.
2. Purchase or sell real estate, physical commodities, or commodities
contracts, except that each Fund may purchase: (i) marketable securities
issued by companies which own or invest in real estate (including real
estate investment trusts), commodities, or commodities contracts, and (ii)
commodities contracts relating to financial instruments, such as financial
futures contracts and options on such contracts.
NON-FUNDAMENTAL POLICIES
NO FUND MAY:
1. Invest in warrants, except that each of the Tax-Exempt Fixed Income Fund,
Value Fund, Growth Fund, Small Cap Fund, International Equity Fund,
TransEurope Fund, Latin America Equity Fund, Asian Tigers Fund and Balanced
Fund may invest in warrants in an amount not exceeding 5% of the Fund's net
assets as valued at the lower of cost or market value. Included in that
amount, but not to exceed 2% of the Fund's net assets, may be warrants not
listed on the New York Stock Exchange or the American Stock Exchange.
2. Invest in illiquid securities in an amount exceeding, in the aggregate, 15%
of the Fund's net assets (except for all Money Market Funds for which the
limit is 10%).
-15-
<PAGE>
3. Purchase or retain securities of an issuer if, to the knowledge of the
Trust, an officer, trustee, partner or director of the Trust or any
investment adviser of the Trust owns beneficially more than 1/2 of 1% of
the shares or securities of such issuer and all such officers, trustees,
partners and directors owning more than 1/2 of 1% of such shares or
securities together own more than 5% of such shares or securities.
4. Invest in interests in oil, gas or other mineral exploration or development
programs and oil, gas or mineral leases.
5. Purchase securities of any company which has (with predecessors) a record
of less than three years continuing operations if, as a result more than 5%
of total assets (taken at fair market value) of the Fund would be invested
in such securities, except obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or municipal securities which
are rated by at least two nationally recognized bond rating services.
THE EQUITY, FIXED INCOME AND BALANCED FUNDS MAY NOT:
1. Purchase securities on margin or effect short sales, except that each Fund
may: (i) obtain short-term credits as necessary for the clearance of
security transactions; (ii) provide initial and variation margin in
connection with futures contracts and options on such contracts; (iii) make
short sales "against the box" or in compliance with the SEC's position
regarding the asset segregation requirements imposed by Section 18 of the
1940 Act.
2. Pledge, mortgage or hypothecate assets, except to secure temporary
borrowings permitted by the Fund's fundamental limitation on permitted
borrowings.
3. Invest its assets in securities of any investment company, except: (i) by
purchase in the open market involving only customary brokers' commissions;
(ii) in connection with mergers, acquisitions of assets or consolidations;
or (iii) as otherwise permitted by the 1940 Act.
The foregoing percentages (except for the limitation on illiquid securities)
will apply at the time of the purchase of a security and shall not be considered
violated unless an excess occurs or exists immediately after and as a result of
a purchase of such security.
THE ADVISOR
The Trust and LaSalle Street Capital Management, Ltd., 10 South LaSalle Street,
Suite 3701, Chicago, Illinois 60603 (the "Advisor"), have entered into an
advisory agreement (the "Advisory Agreement"). The Advisory Agreement provides
that the Advisor shall not be protected against any liability to the Trust or
its Shareholders by reason of willful misfeasance, bad faith or gross negligence
on its part in the performance of its duties or from reckless disregard of its
obligations or duties thereunder.
-16-
<PAGE>
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Advisor but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by the State of California, the Advisor will
bear the amount of such excess.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Funds by a majority of the outstanding shares of the Funds, on
not less than 30 days' nor more than 60 days' written notice to the Advisor, or
by the Advisor on 90 days' written notice to the Trust.
For the fiscal years ended December 31, 1994, 1995, and 1996, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
=================================================================================================================
Net Fees Paid Fees Waived
================================================================================
Fund 1994 1995 1996 1994 1995 1996
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Treasury Money Market Fund $233,796 $229,313 $ 291,794 $166,562 $184,294 $235,779
- -----------------------------------------------------------------------------------------------------------------
Government Money Market $337,352 $376,824 $ 448,001 $ 0 $ 0 $ 0
Fund
- -----------------------------------------------------------------------------------------------------------------
Money Market Fund $952,538 $998,172 $1,138,578 $605,293 $647,771 $853,933
- -----------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market $271,281 $362,794 $ 318,245 $206,848 $289,877 $275,379
Fund
- -----------------------------------------------------------------------------------------------------------------
Fixed Income Fund $549,880 $576,717 $ 625,690 $ 96,978 $100,132 $125,138
- -----------------------------------------------------------------------------------------------------------------
Intermediate Government Fixed $508,997 $419,323 $ 334,912 $ 92,677 $ 72,093 $ 66,982
Income Fund
- -----------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $297,375 $249,245 $ 218,761 $ 75,458 $ 64,521 $ 56,636
- -----------------------------------------------------------------------------------------------------------------
International Fixed Income Fund $129,517 $139,512 $ 140,609 $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income
Fund * * * * * *
- -----------------------------------------------------------------------------------------------------------------
Value Fund $448,762 $788,698 $1,170,294 $ 103 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------
Growth Fund $752,337 $685,748 $ 723,113 $ 2,930 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------
Small Cap Fund $342,751 $163,166 $ 235,012 $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------
International Equity Fund $353,164 $643,380 $ 886,424 $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * * * *
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
Net Fees Paid Fees Waived
================================================================================
Fund 1994 1995 1996 1994 1995 1996
=================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Asian Tigers Fund $151,709 $211,903 $ 312,823 $ 0 $ 0 $ 0
- -----------------------------------------------------------------------------------------------------------------
Latin America Equity Fund * * $ 44,270 * * $ 0
- -----------------------------------------------------------------------------------------------------------------
Balanced Fund $430,126 $454,111 $ 391,615 $ 0 $ 0 $ 0
=================================================================================================================
</TABLE>
* Not in operation during the period.
THE SUB-ADVISOR
LaSalle Street Capital Management, Ltd., on behalf of the Trust, and ABN
AMRO-NSM International Funds Management B.V., Foppingadreef 22, Amsterdam, 1000
EA Amsterdam, The Netherlands (the "Sub-Advisor"), have entered into a sub-
advisory agreement (the "Sub-Advisory Agreement"). The Sub-Advisory Agreement
provides that the Sub-Advisor shall not be protected against any liability to
the Trust or its Shareholders by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard of its or duties thereunder.
The Sub-Advisory Agreement provides that if, for any fiscal year, the Advisor is
required, under its Advisory Agreement with the Trust, to reduce its fees for
the Fund because of excess expenses, the Sub-Advisor shall reduce its fees by an
amount equal to one-half of the amount by which the Advisor reduced its fees. In
addition, from time to time, the Sub-Advisor may voluntarily agree to waive or
reduce some or all of the compensation to which it is entitled under the Sub-
Advisory Agreement.
The continuance of the Sub-Advisory Agreement, after the first year, must be
specifically approved at least annually (a) by the vote of a majority of those
members of the Trust's Board of Trustees who are not interested persons of the
Trust, the Sub-Advisor, or the Advisor, cast in person at a meeting called for
the purpose of voting on such approval, and (b) by the vote of a majority of the
Trust's Board of Trustees or by the vote of a majority of all votes attributable
to the outstanding shares of the Fund. Notwithstanding the foregoing, this
Agreement may be terminated as to the Fund at any time, without the payment of
any penalty, on sixty (60) days' written notice by the Advisor or by the Sub-
Advisor. The Sub-Advisory Agreement will immediately terminate in the event of
its assignment.
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator"), a wholly-owned
subsidiary of SEI Investments Company ("SEI") have entered into an
administration agreement (the "Administration Agreement"). The Administration
Agreement provides that the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which the Administration Agreement relates, except a loss
resulting from willful
-18-
<PAGE>
misfeasance, bad faith or gross negligence on the part of the Administrator in
the performance of its duties or from reckless disregard by it of its duties and
obligations thereunder.
The Administrator, a Delaware business trust has its principal business offices
at Oaks, Pennsylvania 19456. SEI Financial Management Corporation (SFM), a
wholly-owned subsidiary of SEI Corporation ("SEI"), is the owner of all
beneficial interest in the Administrator. SEI and its subsidiaries and
affiliates, including the Administrator, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors and money managers.
The Administrator and its affiliates also serve as administrator to the
following other mutual funds: The Achievement Funds Trust; The Advisors' Inner
Circle Fund; The Arbor Fund; ARK Funds; Bishop Street Funds; CoreFunds, Inc.;
CrestFunds, Inc.; CUFUND; FMB Funds, Inc.; First American Funds, Inc.; First
American Investment Funds, Inc.; Inventor Funds, Inc; Marquis Funds(R); Monitor
Funds; Morgan Grenfell Investment Trust; The PBHG Funds, Inc.; The Pillar Funds;
1784 Funds(R); SEI Asset Allocation Trust; SEI Daily Income Trust; SEI Index
Funds; SEI Institutional Investments Trust; SEI Institutional Managed Trust; SEI
International Trust; SEI Liquid Asset Trust; SEI Tax Exempt Trust; Stepstone
Funds; STI Classic Funds; STI Classic Variable Trust; and Turner Funds.
For the fiscal years ended December 31, 1994, 1995, and 1996, the Funds paid the
following fees to the Administrator:
<TABLE>
<CAPTION>
===============================================================
Net Fees Paid
----------------------------
Fund 1994 1995 1996
===============================================================
<S> <C> <C> <C>
Treasury Money Market Fund $158,779 $176,434 $226,103
- ---------------------------------------------------------------
Government Money Market Fund $253,014 $282,618 $336,001
- ---------------------------------------------------------------
Money Market Fund $605,293 $647,771 $853,933
- ---------------------------------------------------------------
Tax-Exempt Money Market Fund $187,532 $277,850 $254,410
- ---------------------------------------------------------------
Fixed Income Fund $150,882 $159,185 $187,707
- ---------------------------------------------------------------
Intermediate Government Fixed $142,816 $113,044 $100,473
Income Fund
- ---------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 90,263 $ 78,442 $ 68,849
- ---------------------------------------------------------------
International Fixed Income Fund $ 14,686 $ 26,158 $ 26,364
- ---------------------------------------------------------------
Limited Volatility Fixed Income * * *
Fund
- ---------------------------------------------------------------
Value Fund $ 84,163 $147,881 $219,430
- ---------------------------------------------------------------
Growth Fund $141,613 $128,578 $135,584
- ---------------------------------------------------------------
Small Cap Fund $ 64,266 $ 30,713 $ 44,065
- ---------------------------------------------------------------
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
===============================================================
Net Fees Paid
----------------------------
Fund 1994 1995 1996
===============================================================
<S> <C> <C> <C>
- ---------------------------------------------------------------
International Equity Fund $ 43,927 $ 96,507 $132,965
- ---------------------------------------------------------------
TransEurope Fund * * *
- ---------------------------------------------------------------
Asian Tigers Fund $ 6,456 $ 31,786 $ 46,924
- ---------------------------------------------------------------
Latin America Equity Fund * * $ 6,640
- ---------------------------------------------------------------
Balanced Fund $ 92,170 $ 97,310 $ 83,917
===============================================================
</TABLE>
* Not in operation during the period.
THE DISTRIBUTOR
Rembrandt(R) Financial Services Company, Oaks, Pennsylvania 19456 (the
"Distributor"), a wholly-owned subsidiary of SEI Financial Services Company
("SFS"), and the Trust are parties to a distribution agreement (the
"Distribution Agreement"). Unless otherwise terminated as provided therein, the
Distribution Agreement is renewable annually. Notwithstanding the foregoing,
the Distribution Agreement shall be reviewed and ratified at least annually (i)
by the Trustees or by the vote of a majority of the outstanding shares of the
Trust, and (ii) by the vote of a majority of the Trustees of the Trust who are
not parties to the Distribution Agreement or "interested persons" (as defined in
the 1940 Act) of any party to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval. The Distribution
Agreement will terminate in the event of any assignment, as defined in the 1940
Act, and is terminable with respect to a particular Fund on not less than 60
days' notice by the Trustees, by vote of a majority of the outstanding shares of
such Fund or by the Distributor.
RULE 12B-1 FEES
The Trust has adopted a distribution plan for the Investor Class shares of each
Fund (the "Investor Class Plan") in accordance with the provisions of Rule 12b-1
under the 1940 Act, which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. Continuance of the Investor Class Plan must be approved annually by
a majority of the Trustees of the Trust and by a majority of the Trustees who
are not "interested persons" of the Trust or the Distributor, as that term is
defined in the 1940 Act ("Disinterested Trustees"). The Investor Class Plan
requires that quarterly written reports of amounts spent under the Investor
Class Plan and the purposes of such expenditures be furnished to and reviewed by
the Trustees. In accordance with Rule 12b-1 under the 1940 Act, the Investor
Class Plan may be terminated with respect to any Fund by a vote of a majority of
the Disinterested Trustees, or by a vote of a majority of the outstanding shares
of that Fund. The Investor Class Plan may be amended by vote of the Trust's
Board of Trustees, including a majority of the Disinterested Trustees, cast in
person at a meeting called for such purpose, except that any change that would
effect a material
-20-
<PAGE>
increase in any distribution fee with respect to a Fund requires the approval of
that Fund's shareholders. All material amendments of the Plan will require
approval by a majority of the Trustees of the Trust and of the Disinterested
Trustees.
Pursuant to the Distribution Agreement and the Investor Class Plan, Investor
Class shares are subject to an ongoing distribution fee calculated on each
Fund's aggregate average daily net assets attributable to its Investor Class
shares.
The Distribution Agreement and the Investor Class Plan provide for payments to
the Distributor at an annual rate of .25% of the Investor Class average daily
net assets. The Investor Class Plan is characterized as a compensation plan and
is not directly tied to expenses incurred by the Distributor; the payments the
Distributor receives during any year may therefore be higher or lower than its
actual expenses.
For the fiscal year ended December 31, 1996, the Funds paid the following
amounts pursuant to the Investor Class Plan:
<TABLE>
<CAPTION>
===========================================================================
Distribution Amount Paid
Fund 1996
===========================================================================
<S> <C>
Treasury Money Market Fund $23,603
- ---------------------------------------------------------------------------
Government Money Market Fund $11,419
- ---------------------------------------------------------------------------
Money Market Fund $ 3,753
- ---------------------------------------------------------------------------
Tax-Exempt Money Market Fund $ 7,665
- ---------------------------------------------------------------------------
Fixed Income Fund $ 1,540
- ---------------------------------------------------------------------------
Intermediate Government Fixed Income Fund $ 2,487
- ---------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 2,165
- ---------------------------------------------------------------------------
International Fixed Income Fund $ 340
- ---------------------------------------------------------------------------
Limited Volatility Fixed Income Fund *
- ---------------------------------------------------------------------------
Value Fund $ 4,103
- ---------------------------------------------------------------------------
Growth Fund $ 7,113
- ---------------------------------------------------------------------------
Small Cap Fund $ 1,414
- ---------------------------------------------------------------------------
International Equity Fund $ 4,177
- ---------------------------------------------------------------------------
TransEurope Fund *
- ---------------------------------------------------------------------------
Asian Tigers Fund $ 2,265
- ---------------------------------------------------------------------------
Latin America Equity Fund *
- ---------------------------------------------------------------------------
Balanced Fund $ 9,712
===========================================================================
</TABLE>
-21-
<PAGE>
* Not in operation during the period.
The distribution-related services that may be provided under the Investor Class
Plan include establishing and maintaining customer accounts and records;
aggregating and processing purchase and redemption requests from customers;
placing net purchase and redemption orders with the Distributor;
automatically investing customer account cash balances; providing periodic
statements to customers; arranging for wires; answering customer inquiries
concerning their investments; assisting customers in changing dividend options,
account designations, and addresses; performing sub-accounting functions;
processing dividend payments from the Trust on behalf of customers; and
forwarding shareholder communications from the Trust (such as proxies,
shareholder reports, and dividend distribution, and tax notices) to these
customers with respect to investments in the Trust. Certain state securities
laws may require those financial institutions providing such distribution
services to register as dealers pursuant to state law.
Except to the extent that the Administrator or Advisor benefitted through
increased fees from an increase in the net assets of the Trust which may have
resulted in part from the expenditures, no "interested person" of the Trust nor
any Trustee of the Trust who is not an "interested person" of the Trust had a
direct or indirect financial interest in the operation of the Investor Class
Plan or related agreements.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust and their principal occupations for
the last five years are set forth below.
ARNOLD F. BROOKSTONE (4/8/30) -- Trustee and Chairman -- 150 N. Michigan Avenue,
Chicago, Illinois 60601. Retired. Executive Vice President, Chief Financial
Officer and Planning Officer of Stone Container Corporation, 1991-1995. Senior
Vice President, Chief Financial Officer and Planning Officer of Stone Container
Corporation since 1981. Prior thereto, Mr. Brookstone held various other
executive positions with Stone Container Corporation since 1973.
WILLIAM T. SIMPSON (7/26/27) -- Trustee -- 1318 Navajo Court, Louisville,
Kentucky. Consultant, PNC Bank of Kentucky (formerly Citizens Fidelity Bank and
Trust company) (a state chartered bank) since 1992. Senior Vice President, PNC
Bank of Kentucky 1973-1992.
ROBERT A. NESHER (8/17/46) -- Trustee* -- 8 South Street, P.O. Box 89,
Kennebunkport, Maine 04046-0089. Retired since 1994. Director, Executive Vice
President of SEI, 1986-1994. Director and Executive Vice President of the
Administrator and Distributor, 1981-1994.
-22-
<PAGE>
DAVID G. LEE (4/16/52) -- President and Chief Executive Officer -- Senior Vice
President of the Administrator and Distributor since 1993. Vice President of
the Administrator and Distributor 1991-1993. President, GW Sierra Trust Funds
before 1991.
RICHARD W. GRANT (10/25/45) -- Secretary -- 2000 One Logan Square, Philadelphia,
Pennsylvania 19103, Partner of Morgan, Lewis & Bockius LLP (law firm), Counsel
to SEI, the Trust, the Administrator and Distributor.
JIM VOLK (8/28/62) -- Controller, Chief Financial Officer -- Director of
Investment Accounting Operations of SEI, the Administrator and Distribution
since 1996. Assistant Chief Accountant, Securities and Exchange Commission,
Division of Investment Management, 1993 to 1996. Senior Manager, Coopers &
Lybrand, 1985-1993.
SANDRA K. ORLOW (10/18/53) -- Vice President, Assistant Secretary -- Vice
President and Assistant Secretary of SEI and the Administrator and Distributor
since 1983.
TODD CIPPERMAN (2/14/66) - Vice President and Assistant Secretary - Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since May, 1995, Associate, Dewey Ballantine (law firm) 1994-1995, Associate,
Winston & Strawn (law firm) 1991-1995.
KATHRYN L. STANTON (11/19/58) -- Vice President, Assistant Secretary -- Vice
President, Assistant Secretary of SEI, the Administrator and Distributor since
1994. Associate, Morgan, Lewis & Bockius LLP (law firm), 1989-1994.
KEVIN P. ROBINS (4/15/61) -- Vice President, Assistant Secretary -- Senior Vice
President and General Counsel of SEI, the Administrator and Distributor since
1994. Vice President and Assistant Secretary of SEI, the Administrator and
Distributor since 1992. Associate, Morgan, Lewis & Bockius LLP (law firm),
1988-1992.
BARBARA A. NUGENT (6/18/56) -Vice President, Assistant Secretary -Vice President
and Assistant Secretary of SEI, the Administrator and Distributor; Associate,
Drinker Biddle & Reath (law firm), 1994-1996; Assistant Vice
President/Administration, Delaware Service Company, Inc., 1981-1994.
MARC H. CAHN (6/19/57) -Vice President, Assistant Secretary -Vice President and
Assistant Secretary of SEI, the Administrator and Distributor; Associate General
Counsel, Barclays Bank PLC, 1995-1996; Counsel for First Fidelity Bancorporation
prior to 1995.
-23-
<PAGE>
JOHN H. GRADY, JR. (6/1/61) -Assistant Secretary -1800 M Street, N.W.
Washington, DC 20036. Partner, Morgan, Lewis & Bockius LLP (law firm) since
1995; Associate, Morgan, Lewis & Bockius LLP, 1993-1995; Associate, Ropes & Gray
(law firm), 1988-1993.
____________________________
*Mr. Nesher is a Trustee who may be deemed to be an "interested person" of the
Trust as the term is defined in the 1940 Act.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust. The Trust pays the fees for unaffiliated Trustees.
Compensation of officers and affiliated Trustees of the Trust is paid by the
Administrator.
For the fiscal year ended December 31, 1996, the Trustees received the following
compensation:
<TABLE>
<CAPTION>
=============================================================================================================
Total Compensation
Aggregate Pension or from Registrant and
Compensation Retirement Estimated Fund Complex Paid
From Registrant Benefits Accrued Annual Benefits to Directors for
Name of Person, Position for Fiscal Year as Part of Fund Upon Retirement Fiscal Year Ended
Ended 1996 Expenses 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arnold F. Brookstone, $14,000 N/A N/A $14,000 for service
Trustee on one board
- -------------------------------------------------------------------------------------------------------------
William T. Simpson, $14,000 N/A N/A $14,000 for service
Trustee on one board
- -------------------------------------------------------------------------------------------------------------
Robert A. Nesher,* $ 0 N/A N/A $0 for service on
Trustee one board
=============================================================================================================
</TABLE>
- ---------------
*Mr. Nesher is a Trustee who may be deemed an "interested person" of the Trust
as the term is defined in the 1940 Act.
COMPUTATION OF YIELD
From time to time the Treasury Money Market Fund, Government Money Market Fund,
Money Market Fund and Tax-Exempt Money Market Fund advertise their current yield
and effective compound yield. Both yield figures are based on historical
earnings and are not intended to indicate future performance. The yield of the
Funds refers to the income generated by an investment in a Fund over a seven-day
period (which period will be stated in the advertisement). This income is then
"annualized." That is, the amount of income generated by the investment during
that week is assumed to be generated each week over a 52-week period and is
shown as a percentage of the investment. The effective yield is calculated
similarly but, when annualized, the income earned by an investment in a Fund is
assumed to be reinvested. The effective yield will be slightly higher than the
yield because of the compounding effect of this assumed reinvestment.
The current yield of the Funds will be calculated daily based upon the seven
days ending on the date of calculation ("base period"). The yield is computed
by determining the net change (exclusive of
-24-
<PAGE>
capital changes) in the value of a hypothetical pre-existing Shareholder account
having a balance of one share at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from Shareholder accounts, and
dividing such net change by the value of the account at the beginning of the
same period to obtain the base period return and multiplying the result by
(365/7). Realized and unrealized gains and losses are not included in the
calculation of the yield. The effective yield of the Funds is determined by
computing the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one share at the beginning
of the period, subtracting a hypothetical charge reflecting deductions from
Shareholder accounts, and dividing the difference by the value of the account at
the beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7, and subtracting 1 from the result, according to the
following formula: Effective Yield = (Base Period Return + 1)365/7) - 1. The
current and the effective yields reflect the reinvestment of net income earned
daily on portfolio assets.
Tax Equivalent yields are computed by dividing that portion of a Fund's yield
which is tax-exempt by one minus a federal and/or state income tax rate and
adding the product to that portion, if any, of the Fund's yield that is not tax-
exempt.
Yield = 2[((a-b)/(cd) + 1)/6/ - 1] where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of reimbursement); c
= the current daily number of shares outstanding during the period that were
entitled to receive dividends; and d = the maximum offering price per share on
the last day of the period.
The yield of these Funds fluctuates, and the annualization of a week's dividend
is not a representation by the Trust as to what an investment in the Fund will
actually yield in the future. Actual yields will depend on such variables as
asset quality, average asset maturity, the type of instruments the Fund invests
in, changes in interest rates on money market instruments, changes in the
expenses of the Fund and other factors.
For the seven-day period ended December 31, 1996, the end of the Trust's most
recent fiscal year, the Money Market Funds' current, effective and tax-
equivalent yields were as follows:
<TABLE>
<CAPTION>
=================================================================================
7-Day Tax-
7-Day 7-Day Tax- Equivalent
Effective Equivalent Effective
Fund Class 7-Day Yield Yield Yield Yield
=================================================================================
<S> <C> <C> <C> <C> <C>
Treasury Money Trust 4.58% 4.68% N/A N/A
Market Fund
------------------------------------------------------------
Investor 4.33% 4.42% N/A N/A
- ---------------------------------------------------------------------------------
Government Money Trust 5.04% 5.16% N/A N/A
Market Fund
------------------------------------------------------------
Investor 4.79% 4.90% N/A N/A
- ---------------------------------------------------------------------------------
Money Market Fund Trust 5.14% 5.27% N/A N/A
------------------------------------------------------------
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
=================================================================================
7-Day Tax-
7-Day 7-Day Tax- Equivalent
Effective Equivalent Effective
Fund Class 7-Day Yield Yield Yield Yield
=================================================================================
<S> <C> <C> <C> <C> <C>
Investor 4.89% 5.00% N/A N/A
- ---------------------------------------------------------------------------------
Tax-Exempt Money Trust 3.40% 3.45% 5.63% 5.30%
Market Fund
--------------------------------------------------------------
Investor 3.15% 3.20% 5.22% 5.30%
==============================================================
</TABLE>
Yields are one basis upon which investors may compare the Funds with other money
market funds; however, yields of other money market funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.
The Value Fund, Growth Fund, Small Cap Fund, International Equity Fund,
TransEurope Fund, Asian Tigers Fund, Fixed Income Fund, Intermediate Government
Fixed Income Fund, Tax-Exempt Fixed Income Fund, International Fixed Income
Fund, Limited Volatility Fixed Income Fund, Latin America Equity Fund, and
Balanced Fund may also advertise a 30-day yield figure. These figures will be
based on historical earnings and are not intended to indicate future
performance. The yield of these Funds refers to the annualized income generated
by an investment in the Funds over a specified 30-day period. The yield is
calculated by assuming that the income generated by the investment during that
30-day period is generated over one year and is shown as a percentage of the
investment.
For the thirty-day period ended December 31, 1996, the yield for the following
Funds were:
<TABLE>
<CAPTION>
===================================================================
Fund Class 30-Day Yield
===================================================================
<S> <C> <C>
Fixed Income Fund Trust 5.90%
----------------------
Investor 5.39%
- -------------------------------------------------------------------
Intermediate Government Fixed Income Fund Trust 5.53%
----------------------
Investor 5.04%
- -------------------------------------------------------------------
</TABLE>
-26-
<PAGE>
<TABLE>
<CAPTION>
===================================================================
Fund Class 30-Day Yield
===================================================================
<S> <C> <C>
Tax-Exempt Fixed Income Fund Trust 4.80%
----------------------
Investor 4.34%
- -------------------------------------------------------------------
International Fixed Income Fund Trust 2.94%
----------------------
Investor 2.57%
- -------------------------------------------------------------------
Limited Volatility Fixed Income Fund Trust *
----------------------
Investor *
- -------------------------------------------------------------------
Value Fund Trust 2.00%
----------------------
Investor 1.66%
- -------------------------------------------------------------------
Growth Fund Trust 1.16%
----------------------
Investor 0.87%
- -------------------------------------------------------------------
Small Cap Fund Trust 0.00%
----------------------
Investor 0.00%
- -------------------------------------------------------------------
International Equity Fund Trust N/A
----------------------
Investor N/A
----------------------
TransEurope Fund Trust *
----------------------
Investor *
- -------------------------------------------------------------------
Asian Tigers Fund Trust N/A
----------------------
Investor N/A
- -------------------------------------------------------------------
Latin America Equity Fund Trust N/A
----------------------
Investor *
- -------------------------------------------------------------------
Balanced Fund Trust 2.94%
----------------------
Investor 2.56%
===================================================================
</TABLE>
* Not in operation at the end of the period.
The 30-day tax equivalent yields for the Tax-Exempt Fixed Income Fund for the
period ended December 31, 1996, was 7.95% for the Trust Shares and 7.19% for the
Investor Shares.
CALCULATION OF TOTAL RETURN
From time to time, the Value Fund, Growth Fund, Small Cap Fund, International
Equity Fund, TransEurope Fund, Asian Tigers Fund, Latin America Equity Fund,
Fixed Income Fund, Intermediate
-27-
<PAGE>
Government Fixed Income Fund, Tax-Exempt Fixed Income Fund, International Fixed
Income Fund, Limited Volatility Fixed Income Fund and Balanced Fund may
advertise total return. The total return of a Fund refers to the average
compounded rate of return to a hypothetical investment for designated time
periods (including but not limited to, the period from which the Fund commenced
operations through the specified date), assuming that the entire investment is
redeemed at the end of each period. In particular, total return will be
calculated according to the following formula: P (1 + T)/n/ = ERV, where P = a
hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time period as of the end of
such period.
Based on the foregoing, the average annual total return for the Funds from
commencement of operations through December 31, 1996, and for the one and three
year periods ended December 31, 1996, were as follows:
<TABLE>
<CAPTION>
====================================================================================================
Average Annual Total Return
-------------------------------
Fund Class
Since
One Year Three Year Inception
====================================================================================================
<S> <C> <C> <C> <C>
Treasury Money Market Fund Investor-Net Asset Value/1/ 4.54% 4.29% 3.88%
-----------------------------------------------------------------
Trust/2/ 4.80% 4.55% 4.06%
- ----------------------------------------------------------------------------------------------------
Government Money Market Fund Investor-Net Asset Value/3/ 4.82% 4.59% 4.24%
-----------------------------------------------------------------
Trust/2/ 5.08% 4.85% 4.39%
- ----------------------------------------------------------------------------------------------------
Money Market Fund Investor-Net Asset Value/4/ 4.87% 4.65% 4.27%
-----------------------------------------------------------------
Trust/2/ 5.13% 4.91% 4.44%
- ----------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund Investor-Net Asset Value/5/ 2.88% 2.79% 2.56%
-----------------------------------------------------------------
Trust/2/ 3.14% 3.05% 2.78%
- ----------------------------------------------------------------------------------------------------
Fixed Income Fund Investor-Offering Price/6/ (1.43)% 3.59% 4.32%
-----------------------------------------------------------------
Investor-Net Asset Value/6/ 3.24% 5.19% 5.60%
- ----------------------------------------------------------------------------------------------------
Trust/2/ 3.42% 5.41% 6.51%
-----------------------------------------------------------------
Intermediate Government Fixed Investor-Offering Price/7/ (1.32)% 2.82% 2.93%
Income Fund
-----------------------------------------------------------------
Investor-Net Asset Value/7/ 3.30% 4.40% 4.21%
-----------------------------------------------------------------
Trust/2/ 3.51% 4.64% 4.99%
- ----------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund Investor-Offering Price/8/ (1.93)% 2.36% 3.00%
-----------------------------------------------------------------
Investor-Net Asset Value/8/ 2.70% 3.94% 4.27%
-----------------------------------------------------------------
Trust/2/ 2.96% 4.23% 5.31%
- ----------------------------------------------------------------------------------------------------
International Fixed Income Fund Investor-Offering Price/9/ (2.02)% 5.15% 5.27%
-----------------------------------------------------------------
</TABLE>
-28-
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================
Average Annual Total Return
------------------------------
Fund Class
Since
One Year Three Year Inception
====================================================================================================
<S> <C> <C> <C> <C>
Investor-Net Asset Value/9/ 2.62% 6.77% 6.60%
-----------------------------------------------------------------
Trust/10/ 2.82% 7.02% 9.16%
- ----------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income Investor-Offering Price * * *
Fund
-----------------------------------------------------------------
Investor-Net Asset Value * * *
-----------------------------------------------------------------
Trust * * *
- ----------------------------------------------------------------------------------------------------
Balanced Fund Investor-Offering Price/8/ 7.75% 8.58% 7.61%
-----------------------------------------------------------------
Investor-Net Asset Value/8/ 12.86% 10.25% 8.90%
-----------------------------------------------------------------
Trust/2/ 13.15% 10.51% 9.65%
- ----------------------------------------------------------------------------------------------------
Value Fund Investor-Offering Price/11/ 14.67% 14.65% 12.03%
-----------------------------------------------------------------
Investor-Net Asset Value/11/ 20.09% 16.44% 13.41%
-----------------------------------------------------------------
Trust/2/ 20.43% 16.72% 14.16%
- ----------------------------------------------------------------------------------------------------
Growth Fund Investor-Offering Price/12/ 15.92% 14.11% 10.99%
-----------------------------------------------------------------
Investor-Net Asset Value/12/ 21.41% 15.86% 12.33%
-----------------------------------------------------------------
Trust/2/ 21.69% 16.19% 13.33%
- ----------------------------------------------------------------------------------------------------
Small Cap Fund Investor-Offering Price/7/ 13.79% 11.91% 11.65%
-----------------------------------------------------------------
Investor-Net Asset Value/7/ 19.18% 13.63% 13.04%
-----------------------------------------------------------------
Trust/2/ 19.42% 13.93% 11.07%
- ----------------------------------------------------------------------------------------------------
International Equity Fund Investor-Offering Price/7/ 4.93% 7.17% 9.88%
-----------------------------------------------------------------
Investor-Net Asset Value/7/ 9.85% 8.82% 11.26%
-----------------------------------------------------------------
Trust/2/ 10.09% 9.05% 13.16%
- ----------------------------------------------------------------------------------------------------
Asian Tigers Fund Investor-Offering Price/13/ 9.09% * 4.82%
-----------------------------------------------------------------
Investor-Net Asset Value/13/ 14.21% * 6.45%
-----------------------------------------------------------------
Trust/14/ 14.55% * 6.70%
- ----------------------------------------------------------------------------------------------------
Latin America Equity Fund Investor-Offering Price * * *
-----------------------------------------------------------------
Investor-Net Asset Value * * *
-----------------------------------------------------------------
Trust 2.40% * 4.76%
- ----------------------------------------------------------------------------------------------------
TransEurope Fund Investor-Offering Price * * *
-----------------------------------------------------------------
Investor-Net Asset Value * * *
-----------------------------------------------------------------
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================
Average Annual Total Return
----------------------------------
Fund Class
Since
One Year Three Year Inception
===================================================================================================
<S> <C> <C> <C> <C>
Trust * * *
===================================================================================================
</TABLE>
* Not in operation during the period.
_______________
/1/ Commenced operations 3/25/93 /9/ Commenced operations 4/26/93
/2/ Commenced operations 1/4/93 /10/ Commenced operations 2/7/93
/3/ Commenced operations 4/22/93 /11/ Commenced operations 3/26/93
/4/ Commenced operations 3/31/93 /12/ Commenced operations 3/8/93
/5/ Commenced operations 4/13/93 /13/ Commenced operations 1/12/94
/6/ Commenced operations 3/12/93 /14/ Commenced operations 1/3/94
/7/ Commenced operations 4/12/93 /15/ Commenced operations 7/1/96
/8/ Commenced operations 3/9/93
PURCHASE AND REDEMPTION OF SHARES
It is currently the Trust's policy to pay for all redemptions in cash. The
Trust retains the right, how ever, to alter this policy to provide for
redemptions in whole or in part by a distribution in-kind of securities held by
the Funds in lieu of cash. Shareholders may incur brokerage charges on the sale
of any such securities so received in payment of redemptions. However, a
Shareholder will at all times be entitled to aggregate cash redemptions from all
Funds of the Trust during any 90-day period of up to the lesser of $250,000 or
1% of the Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading
on the New York Stock Exchange is restricted, or during the existence of an
emergency (as determined by the SEC by rule or regulation) as a result of
disposal or valuation of the Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of the Fund for any period during
which the New York Stock Exchange, the Advisor, the Administrator and/or the
Custodian are not open for business. Currently, the following holidays are
observed by the Trust: New Year's Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
In calculating the sales charge rates applicable to purchases of shares of the
International Fixed Income, Fixed Income, Intermediate Government Fixed Income,
Tax-Exempt Fixed Income, Limited Volatility Fixed Income, Balanced, Growth,
Small Cap, International Equity, TransEurope and Asian Tigers Funds, customers
of the following broker-dealers which have entered into an
-30-
<PAGE>
agreement with the Distributor are entitled to the following percentage-based
discount from the otherwise applicable sales charge:
<TABLE>
<CAPTION>
Name of Group Percentage of Waiver Date Offer Starts
- ------------- -------------------- -----------------
<S> <C> <C>
Jack White & Company 100% January 1, 1996
</TABLE>
LETTER OF INTENT
Reduced sales charges are applicable to the aggregate amount of purchases made
by any such purchaser previously enumerated within a 13-month period pursuant to
a written Letter of Intent (the "Letter") provided by the Transfer Agent, DST
Systems, Inc., and not legally binding on the signer or a Fund which provides
for the holding in escrow by the Transfer Agent of 5% of the total amount
intended to be purchased until such purchase is completed within the 13-month
period. The 13-month period begins on the date of the earliest purchase. If
the intended investment is not completed, the purchaser will be asked to pay an
amount equal to the difference between the sales charge on the shares purchased
at the reduced rate and the sales charge otherwise applicable to the total
shares purchased. If such payment is not made within 20 days following the
expiration of the 13-month period, the Transfer Agent will surrender an
appropriate number of the escrowed shares for redemption in order to realize the
difference. Such purchasers may include the value (at offering price at the
level designated in their Letter) of all their shares of the Fund and of any
other Fund previously purchased and still held as of the date of their Letter
toward the completion of such Letter.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Funds is calculated by adding the value of
securities and other assets, subtracting liabilities and dividing by the total
number of outstanding shares. Securities of the Treasury Money Market,
Government Money Market, Money Market and Tax-Exempt Money Market Funds will be
valued by the amortized cost method, which involves valuing a security at its
cost on the date of purchase and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuations in general market rates of interest on
the value of the instrument. While this method provides certainty in valuation,
it may result in periods during which a security's value, as determined by this
method, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield of the
Fund may tend to be higher than a like computation made by a company with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio securities. Thus, if the
use of amortized cost by the Fund resulted in a lower aggregate portfolio value
on a particular day, a prospective investor in the Fund would be able to obtain
a somewhat higher yield than would result from investment in a
-31-
<PAGE>
company utilizing solely market values, and existing investors in the Fund would
experience a lower yield. The converse would apply in a period of rising
interest rates.
A Fund's use of amortized cost and the maintenance of the Fund's net asset value
at $1.00 are per mitted by Rule 2a-7 under the 1940 Act, provided that certain
conditions are met. Rule 2a-7 also requires the Trustees to establish
procedures which are reasonably designed to stabilize the net asset value per
share at $1.00 for the Funds. Such procedures include the determination of the
extent of deviation, if any, of the Funds' current net asset value per share
calculated using available market quotations from the Funds amortized cost price
per share at such intervals as the Trustees deem appropriate and reasonable in
light of market conditions and periodic reviews of the amount of the deviation
and the methods used to calculate such deviation. In the event that such
deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what
action, if any, should be initiated, and, if the Trustees believe that the
extent of any deviation may result in material dilution or other unfair results
to Shareholders, the Trustees are required to take such corrective action as
they deem appropriate to eliminate or reduce such dilution or unfair results to
the extent reasonably practicable. Such actions may include the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; redeeming shares in
kind; or establishing a net asset value per share by using available market
quotations. In addition, if the Funds incur a significant loss or liability,
the Trustees have the authority to reduce pro rata the number of shares of the
--------
Funds in each Shareholder's account and to offset each Shareholder's pro rata
--------
portion of such loss or liability from the Shareholder's accrued but unpaid
dividends or from future dividends while each other Fund must annually
distribute at least 90% of its investment company taxable income.
The securities of the Equity, Balanced and Fixed Income Funds are valued by the
Administrator pursuant to valuations provided by an independent pricing service.
The pricing service relies primarily on prices of actual market transactions as
well as trader quotations. However, the service may also use a matrix system to
determine valuations of fixed income securities, which system considers such
factors as security prices, yields, maturities, call features, ratings and
developments relating to specific securities in arriving at valuations. The
procedures of the pricing service and its valuations are reviewed by the
officers of the Trust under the general supervision of the Trustees. Although
the methodology and procedures are identical, the net asset value per share of
Trust Class and Investor Class shares within the Funds may differ because of the
distribution expenses charged to Investor Class shares.
TAXES
The following is only a summary of certain income tax considerations generally
affecting a Fund and its 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
income tax liabilities.
-32-
<PAGE>
FEDERAL INCOME TAX
ALL FUNDS
Each Fund intends to qualify as a "regulated investment company" ("RIC") as
defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code").
In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally, net investment income plus net short-term capital
gain) (the "Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (a) at least 90% of a
Fund's gross income each taxable year must be derived from dividends, interest,
payments with respect to securities loans, and gains from the sale or other
disposition of stock or securities, or certain other income; (b) a Fund must
derive less than 30% of its gross income each taxable year from the sale or
other disposition of stocks, securities, options, futures or forward contracts,
or foreign currencies (or options, futures or forward contracts on foreign
currencies) that are not directly related to a Fund's business of investing in
stock or securities, held for less than three months; and (c) diversify its
holdings so that; (i) at the close of each quarter of a Fund's taxable year, at
least 50% of the value of its total assets must be represented by cash and cash
items, U.S. Government securities, securities of other RICs and other
securities, with such other securities limited, in respect to any one issuer, to
an amount that does not exceed 5% of the value of a Fund's assets and that does
not represent more than 10% of the outstanding voting securities of such issuer;
and (ii) at the close of each quarter of a Fund's taxable year, not more than
25% of the value of its assets may be invested in securities (other than U.S.
Government securities or the securities of other RICs) of any one issuer or of
two or more issuers which are engaged in the same, similar or related trades or
businesses if the Fund owns at least 20% of the voting power of such
issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% excise tax to the extent it fails to
distribute by the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income for the one-year period ending on
October 31 of that year, plus certain other amounts. Each Fund intends to make
sufficient distributions to avoid liability for the 4% federal excise tax.
If for any taxable year a Fund does not qualify as a RIC, all of its taxable
income will be subject to tax at regular corporate rates without any deduction
for distributions to Shareholders. In such case, distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits. Such distributions
generally will be eligible for the dividends-received deduction in the case of
corporate Shareholders.
-33-
<PAGE>
TAX EXEMPT FUNDS
Interest on indebtedness incurred by a Shareholder in order to purchase or carry
shares in the Tax-Exempt Fixed Income Fund or Tax-Exempt Money Market Fund is
generally not deductible for federal income tax purposes to the extent that the
Fund distributes exempt-interest dividends during the taxable year. If a
Shareholder receives exempt-interest dividends with respect to any share of
these Funds and if such share is held by the Shareholder for six months or less,
then any loss on the sale or exchange of such share will be disallowed to the
extent of the amount of exempt-interest dividends. In addition, the Code may
require a Shareholder who receives exempt-interest dividends to treat as taxable
income a portion of certain social security and railroad retirement benefit
payments. Furthermore, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by "private
activity bonds" or certain industrial development bonds should consult their tax
advisers before purchasing shares in the Tax-Exempt Funds. For these purposes,
the term "substantial user" is defined generally to include a "non-exempt
person" who regularly uses in trade or business a part of a facility financed
from the proceeds of such bonds. Moreover, some or all of dividends received
from the Tax-Exempt Funds may be a specific preference item, or a component of
an adjustment item, for purposes of the federal individual and corporate
alternative minimum taxes. The receipt of these exempt-interest dividends and
distributions also may affect a corporate Shareholder's federal "environmental"
tax liability, a foreign corporate Shareholder's federal "branch profits" tax
liability, and an S corporation Shareholder's federal excess "passive investment
income."
Shareholders of the Tax-Exempt Funds should consult their tax advisers to
determine whether any portion of the income dividends received from such Funds
is considered tax exempt in their particular states.
Issuers of bonds purchased by the Tax-Exempt Funds (or the beneficiary of such
bonds) may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Shareholders should be aware
that exempt-interest dividends may become subject to federal income taxation
retroactively to the date of issuance of the bonds to which such dividends are
attributable if such representations are determined to have been inaccurate or
if the issuers (or the beneficiary) of the bonds fail to comply with certain
covenants made at that time.
-34-
<PAGE>
EQUITY AND BALANCED FUNDS
A dividends-received deduction is available to corporations that receive
dividends from domestic corporations. Dividends paid by an Equity or Balanced
Fund will be eligible for the dividends-received deduction for corporate
shareholders to the extent they are derived from dividends from domestic
corporations and to the extent that the respective security has been held for at
least three months. Equity and Balanced Fund Shareholders will be advised each
year of the portion of ordinary income dividends eligible for the deduction.
Individual shareholders are not entitled to the dividends received deduction
regardless of which fund paid the dividend.
FIXED INCOME AND MONEY MARKET FUNDS
Dividends received from other funds, e.g., Money Market or Fixed Income Funds,
----
will not be eligible for the dividends-received deduction.
STATE TAXES
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Funds
to Shareholders and the ownership of shares may be subject to state and local
taxes.
FOREIGN TAXES
Dividends and interest received by a Fund may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on a Fund's securities. Tax conventions between certain
countries and the United States may reduce or eliminate these taxes. Foreign
countries generally do not impose taxes on capital gains with respect to
investments by foreign investors. If a Fund meets the Distribution Requirement
and if more than 50% of the value of such Fund's total assets at the close of
its taxable year consists of stock or securities of foreign corporations, such
Fund will be eligible to file an election with the Internal Revenue Service that
will enable Shareholders, in effect, to receive the benefit of the foreign tax
credit with respect to any foreign and U.S. possessions income taxes paid by the
Fund. Pursuant to the election, a Fund will treat those taxes as dividends paid
to its Shareholders. Each Shareholder will be required to include a
proportionate share of those taxes in gross income as income received from a
foreign source and must treat the amount so included as if the Shareholder had
paid the foreign tax directly. The Shareholder may then either deduct the taxes
deemed paid by him or her in computing his or her taxable income or,
alternatively, use the foregoing information in calculating the foreign tax
credit against the Shareholder's federal income tax. If a Fund makes the
election, it will report annually to its Shareholders the respective amounts per
share of such Fund's income from sources within, and taxes paid to, foreign
countries and U.S. possessions.
-35-
<PAGE>
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisor and Sub-Advisor is responsible for
placing the orders to execute transactions for the Fund. In placing orders, it
is the policy of the Trust to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities, and the firm's risk in positioning the
securities involved. While the Advisor and Sub-Advisor generally seeks
reasonably competitive spreads or commissions, the Trust will not necessarily be
paying the lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an exchange. Where possible, the Advisor and Sub-
Advisor will deal directly with the dealers who make a market in the securities
involved except in those circumstances where better prices and execution are
available elsewhere. Such dealers usually are acting as principal for their own
account. On occasion, securities may be purchased directly from the issuer.
Money market securities are generally traded on a net basis and do not normally
involve either brokerage commissions or transfer taxes. The cost of executing
portfolio securities transactions of the Trust will primarily consist of dealer
spreads and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Advisor and Sub-Advisor select brokers or dealers to execute transactions
for the purchase or sale of portfolio securities on the basis of their judgment
of the professional capability of the brokers or dealers to provide the service.
The primary consideration is to have brokers or dealers execute transactions at
best price and execution. Best price and execution refer to many factors,
including the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. The Trust's determination of what are reasonably
competitive rates is based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Trust pays a minimal share
transaction cost when the transaction presents no difficulty. Some trades are
made on a net basis where the Trust either buys securities directly from the
dealer or sells them to the dealer. In these instances, there is no direct
commission charged but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission.
The Trust may allocate out of all commission business generated by all of the
Funds and any other accounts under management by the Advisor and Sub-Advisor,
brokerage business to brokers or dealers who provide brokerage and research
services. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing
-36-
<PAGE>
in, purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing of analyses and reports
concerning issuers, securities or industries; providing information on economic
factors and trends; assisting in determining portfolio strategy; providing
computer software used in security analyses; and providing portfolio performance
evaluation and technical market analyses. Such services are used by the Advisor
and Sub-Advisor in connection with their investment decision-making process with
respect to one or more funds and accounts managed by them, and may not be used
exclusively with respect to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act"), higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-dealers
who provide such brokerage and research services, the Trust believes that the
commissions paid to such broker-dealers are not, in general, higher than
commissions that would be paid to broker-dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In addition, portfolio transactions which
generate commissions or their equivalent are directed to broker-dealers who
provide daily portfolio pricing services to the Trust. Subject to best price and
execution, commissions used for pricing may or may not be generated by the funds
receiving the pricing service.
The Advisor and Sub-Advisor may place a combined order for two or more accounts
or Funds engaged in the purchase or sale of the same security if, in their
judgment, joint execution is in the best interest of each participant and will
result in best price and execution. Transactions involving commingled orders are
allocated in a manner deemed equitable to each account or Fund. It is believed
that the ability of the accounts to participate in volume transactions will
generally be beneficial to the accounts and Funds. Although it is recognized
that, in some cases, the joint execution of orders could adversely affect the
price or volume of the security that a particular account or Fund may obtain, it
is the opinion of the Advisor and Sub-Advisor and the Trust's Board of Trustees
that the advantages of combined orders outweigh the possible disadvantages of
separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Funds may
place orders with broker-dealers which have agreed to defray certain Trust
expenses such as custodian fees, and may, at the request of the Distributor,
give consideration to sales of shares of the Trust as a factor in the selection
of brokers and dealers to execute Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of the Advisor or Sub-Advisor, which is
a registered broker-dealer, for commissions in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of the Advisor or Sub-Advisor is permitted to
receive and retain compensation for effecting portfolio transactions for the
Trust on an exchange. These rules
-37-
<PAGE>
further require that commissions paid to the Distributor by the Trust for
exchange transactions not exceed "usual and customary" brokerage commissions.
The rules define "usual and customary" commissions to include amounts which are
"reasonable and fair compared to the commission, fee or other remuneration
received or to be received by other brokers in connection with comparable
transactions involving similar securities being purchased or sold on a
securities exchange during a comparable period of time." In addition, the Trust
may direct commission business to one or more designated broker-dealers in
connection with such broker-dealers' provision of services to the Trust or
payment of certain Trust expenses (e.g., custody, pricing and professional
----
fees). The Trustees, including those who are not "interested persons" of the
Trust, have adopted procedures for evaluating the reasonableness of commissions
paid to the Distributor and will review these procedures periodically.
For the fiscal year ended December 31, 1996, the Funds paid the following
brokerage fees:
<TABLE>
<CAPTION>
====================================================================================================================================
% of Total Total
Total $ % of Total of Brokerage Commissions Total $ Amount
Total $ Amount of Brokerage Transactions Paid to SFS in of Brokerage
Amount of Brokerage Commissions Effected Connection with Commissions
Brokerage Commissions Paid to Through Repurchase Paid for
Fund Commissions Paid to Affiliates in Affiliated Agreement Research
Paid in 1996 Affiliates in 1996 Brokers in Transactions in in 1996
1996 1996 1996
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Intermediate Government
Fixed Income Fund $ 0 $ 0 0% 0% $ 1,652.54 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income
Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $ 0 $ 0 0% 0% $ 2,941.04 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
International Fixed Income
Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed
Income Fund * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Value Fund $185,275 $ 0 0% 0% $ 1,699.77 $130,921
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund $ 99,324 $ 0 0% 0% $ 1,717.97 $ 99,324
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Fund $ 89,340 $ 0 0% 0% $ 838.21 $ 78,287
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $ 80,851 $ 0 0% 0% $ 0 $ 80,851
- ------------------------------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $109,083 $ 0 0% 0% $ 0 $101,066
- ------------------------------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Latin America Equity Fund $ 38,488 $ 0 0% 0% $ 0 $ 38,488
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $ 37,786 $ 0 0% 0% $ 831.08 $ 27,594
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-38-
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
% of Total Total
Total $ % of Total of Brokerage Commissions Total $ Amount
Total $ Amount of Brokerage Transactions Paid to SFS in of Brokerage
Amount of Brokerage Commissions Effected Connection with Commissions
Brokerage Commissions Paid to Through Repurchase Paid for
Fund Commissions Paid to Affiliates in Affiliated Agreement Research
Paid in 1996 Affiliates in 1996 Brokers in Transactions in in 1996
1996 1996 1996
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Tax-Exempt Money Market
Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund $ 0 $ 0 0% 0% $101,268.72 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Money Market Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Government Money Market
Fund $ 0 $ 0 0% 0% $ 39,439.90 $ 0
====================================================================================================================================
</TABLE>
* Not in operation during the period.
For the fiscal years ended December 31, 1994 and 1995, the Funds paid the
following brokerage fees:
<TABLE>
<CAPTION>
===============================================================================================================================
Total $ Amount of Brokerage Commissions Total $ Amount of Brokerage
Paid in Commissions Paid Affiliates in
Fund 1994 1995 1994 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate Government Fixed Income Fund $ 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $ 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
International Fixed Income Fund $ 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund * * * *
- -------------------------------------------------------------------------------------------------------------------------------
Value Fund $ 78,580 $125,283 $ 0 $ 2,994
- -------------------------------------------------------------------------------------------------------------------------------
Growth Fund $155,975 $117,644 $ 0 $10,080
- -------------------------------------------------------------------------------------------------------------------------------
Small Cap Fund $ 35,240 $ 73,502 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $113,705 $169,608 $62,007 $66,033
- -------------------------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $160,589 $102,905 $59,738 $24,295
- -------------------------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * *
- -------------------------------------------------------------------------------------------------------------------------------
Latin America Equity Fund * * * *
- -------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $ 89,161 $ 87,467 $ 0 $ 732
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-39-
<PAGE>
<TABLE>
<CAPTION>
===============================================================================================================================
Total $ Amount of Brokerage Commissions Total $ Amount of Brokerage
Paid in Commissions Paid Affiliates in
Fund 1994 1995 1994 1995
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Tax-Exempt Money Market Fund $ 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Money Market Fund $ 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Treasury Money Market Fund $ 0 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Government Money Market Fund $ 0 $ 0 $ 0 $ 0
===============================================================================================================================
</TABLE>
* Not in operation during the period.
The broker-dealers who executed transactions on behalf of the Funds and who are
affiliates of the Fund's Advisor and Sub-Advisor are brokers in the ABN AMRO
International brokerage network. In addition, the Funds executed brokerage
trades through SEI Financial Services Company, an affiliate of the Administrator
and Distributor.
Except for the Intermediate Government Fixed Income, Fixed Income, Tax Exempt
Fixed Income and International Fixed Income Funds, it is expected that the
portfolio turnover rate will normally not exceed 100% for any Fund. A portfolio
turnover rate would exceed 100% if all of its securities, exclusive of U.S.
Government securities and other securities whose maturities at the time of
acquisition are one year or less are replaced in the period of one year.
Turnover rates may vary from year to year and may be affected by cash
requirements for redemptions and by requirements which enable a Fund to receive
favorable tax treatment.
For the fiscal years ended December 31, 1995 and 1996, the portfolio turnover
rate for each of the Funds was:
<TABLE>
<CAPTION>
================================================================================
Turnover Rate
Fund 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Value Fund 37% 58%
- --------------------------------------------------------------------------------
Growth Fund 71% 58%
- --------------------------------------------------------------------------------
Small Cap Fund 142% 158%
- --------------------------------------------------------------------------------
International Equity Fund 11% 9%
- --------------------------------------------------------------------------------
TransEurope Fund * *
- --------------------------------------------------------------------------------
Asian Tigers Fund 28% 24%
- --------------------------------------------------------------------------------
Latin America Equity Fund * 10%
- --------------------------------------------------------------------------------
Fixed Income Fund 59% 194%
- --------------------------------------------------------------------------------
</TABLE>
-40-
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Turnover Rate
Fund 1995 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Intermediate Government Fixed Income Fund 115% 179%
- --------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund 129% 98%
- --------------------------------------------------------------------------------
International Fixed Income Fund 105% 85%
- --------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund * *
- --------------------------------------------------------------------------------
Balanced Fund 85% 104%
================================================================================
</TABLE>
* Not in operation during the period.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of the Funds each of which represents an equal proportionate interest in
that Fund with each other share. Shares are entitled upon liquidation to a pro
---
rata share in the net assets of the Funds. Shareholders have no preemptive
- ----
rights. The Declaration of Trust provides that the Trustees of the Trust may
create additional series of shares. All consideration received by the Trust for
shares of any additional series and all assets in which such consideration is
invested would belong to that series and would be subject to the liabilities
related thereto. Share certificates representing shares will not be issued.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust, under certain
circumstances, could be held personally liable as partners for the obligations
of the Trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any Shareholder held personally liable for the
obligations of the Trust.
5% AND 25% SHAREHOLDERS
As of April 1, 1997, the following persons were the only persons who were record
owners (or to the knowledge of the Trust, beneficial owners) of 5% or 25% or
more of the shares of the Funds.
-41-
<PAGE>
Persons who owned of record or beneficially more than 25% of a Fund's
outstanding shares may be deemed to control the Fund within the meaning of the
1940 Act. The Trust believes that most of the shares of the Trust Class shares
of the Funds were held for the record owner's fiduciary, agency or custodial
customers.
<TABLE>
<S> <C> <C>
TREASURY MONEY MARKET FUND
LaSalle National Bank N.A. 210,781,047.7500 95.90%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
GOVERNMENT MONEY MARKET FUND
LaSalle National Bank N.A. 200,060,372.9100 97.10%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
MONEY MARKET FUND
LaSalle National Bank N.A. 618,984,122.3000 99.49%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
TAX-EXEMPT MONEY MARKET FUND
LaSalle National Bank N.A. 264,175,440.8600 98.95%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
FIXED INCOME FUND
LaSalle National Bank N.A. 12,699,633.0270 99.66%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
</TABLE>
-42-
<PAGE>
<TABLE>
<S> <C> <C>
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
LaSalle National Bank N.A. 5,680,987.3080 99.74%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
TAX-EXEMPT FIXED INCOME FUND
LaSalle National Bank N.A. 3,939,396.7920 98.43%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
INTERNATIONAL FIXED INCOME FUND
LaSalle National Bank N.A. 2,011,407.4540 99.51%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
VALUE FUND
LaSalle National Bank N.A. 12,945,512.5880 99.08%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
GROWTH FUND
LaSalle National Bank N.A. 7,539,904.8240 97.07%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
SMALL CAP FUND
LaSalle National Bank N.A. 2,697,812.5030 98.43%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
</TABLE>
-43-
<PAGE>
<TABLE>
<S> <C> <C>
INTERNATIONAL EQUITY FUND
LaSalle National Bank N.A. 6,215,886.1060 98.57%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
ASIAN TIGERS FUND
LaSalle National Bank N.A. 3,026,941.1560 98.04%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
BALANCED FUND
LaSalle National Bank N.A. 5,045,815.4230 94.02%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
LATIN AMERICA EQUITY FUND
LaSalle National Bank N.A. 1,563,465.4440 100.00%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
</TABLE>
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisers, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
-44-
<PAGE>
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended December 31, 1996,
including notes thereto and the report of Ernst & Young are herein incorporated
by reference from the Trust's Annual Report. A copy of the 1996 Annual Report to
Shareholders must accompany the delivery of this Statement of Additional
Information.
-45-
<PAGE>
APPENDIX
DESCRIPTION OF COMMERCIAL PAPER RATINGS
The following descriptions of commercial paper ratings have been published by
Standard & Poor's Corporation ("S&P"), Moody's Investors Service, Inc.
("Moody's"), Fitch Investors Service, Inc. ("Fitch"), Duff & Phelps, Inc.
("Duff") and IBCA Limited and IBCA, Inc. (together, "IBCA").
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1, 1+ and 2, to indicate the relative degree of safety. Issues rated
A-1+ are those with "extremely strong safety characteristics." Those rated A-1,
the highest rating category, reflect a "satisfactory" degree of safety regarding
timely payment. Those rated A-2, the second highest rating category, reflect a
safety regarding timely payment but not as high as A-1.
Commercial paper issues rated Prime-1 or Prime-2 by Moody's are judged by
Moody's to be of "superior" quality and "strong" quality respectively on the
basis of relative repayment capacity.
The rating F-1+ (Exceptionally Strong) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch. Paper rated Fitch-1+ is regarded as having
the strongest degree of assurance for timely payment. Paper rated F-1 (Very
Strong) reflects an assurance of timely payment only slightly less in degree
than paper rated F-1+ the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by good fundamental protection
factors. Risk factors are minor. Duff has incorporated gradations of 1+ and 1-
to assist investors in recognizing quality differences within this highest tier.
Paper rated Duff-1+ has the highest certainty of timely payment, with
outstanding short-term liquidity and safety just below risk-free U.S. Treasury
short-term obligations. Paper rated Duff-1- has high certainty of timely payment
with strong liquidity factors which are supported by good fundamental protection
factors. Risk factors are very small. Paper rated Duff-2 is regarded as having
good certainty of timely payment, good access to capital markets (although
ongoing funding may enlarge total financing requirements) and sound liquidity
factors and company fundamentals. Risk factors are small.
The designation A1, the highest rating category established by IBCA indicates
that the obligation is supported by a very strong capacity for timely repayment.
Those obligations rated A1+ are supported by the highest capacity for timely
repayment. Obligations rated A2, the second highest rating category, are
supported by a satisfactory capacity for timely repayment, although such
capacity may be susceptible to adverse changes in business, economic or
financial conditions.
<PAGE>
DESCRIPTION OF CORPORATE BOND RATINGS
The following descriptions of corporate bond ratings have been published by S&P,
Moody's, Fitch, Duff and IBCA.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and differs from AAA issues only in small
degree. Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
Bonds which are rated BBB are considered as medium-grade obligations (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged". Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, 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 risk appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Debt rated Baa is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times or
many times interest requirements, with such stability of applicable earnings
that safety
A-2
<PAGE>
is beyond reasonable question whatever changes occur in conditions. Bonds rated
AA by Fitch are judged by Fitch to be of safety virtually beyond question and
are readily salable, whose merits are not unlike those of the AAA class, but
whose margin of safety is less strikingly broad. The issue may be the obligation
of a small company, strongly secured but influenced as to rating by the lesser
financial power of the enterprise and more local type market. Fitch uses plus
and minus signs to indicate the relative position of a credit within the AA
rating category. Bonds rated AAA by Fitch are considered to be investment grade
and of the highest credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely to be affected by
reasonably foreseeable events. Bonds rated AA by Fitch are considered to be
investment grade and of very high credit quality. The obligor's ability to pay
interest and repay principal is very strong, although not quite as strong as
bonds rated AAA. Because bonds rated in the AAA and AA categories are not
significantly vulnerable to foreseeable future developments, short-term debt of
these issuers is generally rated F-1+.
Fitch uses plus and minus signs to indicate the relative position of a credit
within the AA rating category. Bonds rated AAA by Fitch are considered to be
investment grade and of the highest credit quality. The obligor has an
exceptionally strong ability to pay interest and repay principal, which is
unlikely to be affected by reasonably foreseeable events. Bonds rated AA by
Fitch are considered to be investment grade of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
Bonds rated Duff-1 are judged by Duff to be of the highest credit quality with
negligible risk factors; only slightly more than for risk-free U.S. Treasury
debt. Bonds rated AA by Duff are judged to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
Obligations rated AAA by IBCA have the lowest expectation of investment risk.
Capacity for timely repayment of principal and interest is substantial, such
that adverse changes in business, economic or financial conditions are unlikely
to increase investment risk significantly. Obligations for which there is a very
low expectation of investment risk are rated AA by IBCA. Capacity for timely
repayment of principal and interest is substantial. Adverse changes in business,
economic or financial conditions may increase investment risk albeit not very
significantly.
A-3
