<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 1998.
FILE NO. 33-52784
FILE NO. 811-7244
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 15 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 16 /X/
ABN AMRO FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE(617)573-1556
JULIE A. TEDESCO
FIRST DATA INVESTOR SERVICES GROUP, INC.
ONE EXCHANGE PLACE
BOSTON, MASSACHUSETTS 02109
(NAME AND ADDRESS OF AGENT FOR SERVICE)
Copies to:
RICHARD W. GRANT, ESQUIRE JOHN H. GRADY, ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE 1800 M STREET, N.W.
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, D.C. 20036
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
- ----
____ on [date] pursuant to paragraph (b)
____ 60 days after filing pursuant to paragraph (a)
____ on [date] pursuant to paragraph (a); or
____ 75 days after filing pursuant to paragraph (a) of Rule 485
<PAGE>
ABN AMRO FUNDS
(FORMERLY, THE "REMBRANDT FUNDS")
POST-EFFECTIVE AMENDMENT NO. 15
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- ------------------------------------------------------------------------------
<S> <C> <C>
PART A -
Item 1. Cover Page Cover Page
Item 2. Synopsis Fund Highlights, Portfolio Expenses
Item 3. Condensed Financial Information Financial Highlights
Item 4. General Description of Registrant Fund Highlights
General Information--The Trust; Investment Objective
and Policies; General Investment Policies; Certain Risk
Factors; Investment Limitations
Item 5. Management of the Trust General Information--Trustees of the Trust; The
Advisor; The Sub-Advisor, The Administrator; The
Transfer Agent; The Distributor; Distribution and
Shareholder Servicing
Item 6. Capital Stock and Other Securities General Information--Voting Rights; General
Information--Shareholder Inquiries; General
Information--Dividends; Taxes
Item 7. Purchase of Securities Being Offered Purchase of Shares
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings *
PART B -
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History The Trust
Item 13. Investment Objectives and Policies Description of Permitted Investments; Investment
Limitations; Non-Fundamental Policies
Item 14. Management of the Registrant Trustees and Officers of the Trust; The Administrator
Item 15. Control Persons and Principal Holders Trustees and Officers of the Trust
of Securities
Item 16. Investment Advisory and Other Services The Advisor; The Administrator; The Distributor; Experts
Item 17. Brokerage Allocation Fund Transactions; Trading Practices and Brokerage
Item 18. Capital Stock and Other Securities Description of Shares
Item 19. Purchase, Redemption, and Pricing Purchase and Redemption of Shares;
of Securities Being Offered Determination of Net Asset Value
Item 20. Tax Status Taxes
Item 21. Underwriters The Distributor
Item 22. Calculation of Yield Quotations Computation of Yield; Calculation of Total Return
Item 23. Financial Statements Financial Statements
</TABLE>
-2-
<PAGE>
PART C -
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
* Not Applicable
-3-
<PAGE>
ABN AMRO FUNDS
(FORMERLY, THE "REMBRANDT FUNDS")
COMMON SHARES -- A NO-LOAD CLASS
APRIL 30, 1998
- --------------------------------------------------------------------------------
Equity Funds Fixed Income Funds
. VALUE FUND . FIXED INCOME FUND
. GROWTH FUND . INTERMEDIATE GOVERNMENT FIXED INCOME FUND
. TAX-EXEMPT FIXED INCOME FUND
. SMALL CAP GROWTH FUND . INTERNATIONAL FIXED INCOME FUND
. INTERNATIONAL EQUITY FUND . LIMITED VOLATILITY FIXED INCOME FUND
. TRANSEUROPE FUND Money Market Funds
. ASIAN TIGERS FUND . TREASURY MONEY MARKET FUND
. LATIN AMERICA EQUITY FUND . GOVERNMENT MONEY MARKET FUND
. MONEY MARKET FUND
. REAL ESTATE FUND . TAX-EXEMPT MONEY MARKET FUND
Balanced Fund
. BALANCED 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 ("SAI") dated April 30, 1998 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 SAI is
incorporated into this Prospectus by reference.
Common Shares of the ABN AMRO Funds (formerly, the "Rembrandt Funds") (the
"Trust") are offered to individuals and institutional investors directly and
through wrap programs, retirement plans, discount brokerage programs, and
various brokerage firms.
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.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
TRUST'S SHARES OR 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. 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>
HOW TO READ THIS PROSPECTUS ____________________________________________________
This Prospectus gives you information that you should know about the ABN AMRO
Funds before investing. Brief descriptions are also provided throughout the
Prospectus to better explain certain key points.
FUND HIGHLIGHTS ________________________________________________________________
The following summary provides basic information about the Common Shares of the
following Funds: Value Fund, Growth Fund, Small Cap Growth Fund (formerly, the
"Small Cap Fund"), International Equity Fund, TransEurope Fund, Asian Tigers
Fund, Latin America Equity Fund, Real Estate 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"). The TransEurope and Limited Volatility Fixed Income
Funds currently are not offering their shares to the public. This summary is
qualified in its entirety by reference to the more detailed information
provided elsewhere in this Prospectus and in the SAI.
................................................................................
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fund Highlights......................................................... 2
Portfolio Expenses...................................................... 5
Financial Highlights.................................................... 7
Your Account and Doing Business with Us................................. 11
Investment Objectives and Policies...................................... 16
General Investment Policies............................................. 26
Certain Risk Factors.................................................... 28
Investment Limitations.................................................. 30
The Advisor............................................................. 31
The Sub-Advisor......................................................... 33
The Administrator....................................................... 34
The Transfer Agent...................................................... 34
The Distributor......................................................... 34
Performance............................................................. 35
Taxes................................................................... 36
Additional Information About Doing Business with Us..................... 39
General Information..................................................... 40
Description of Permitted Investments and Risk Factors................... 42
</TABLE>
................................................................................
INVESTMENT Below are the investment objectives and some basic investment
OBJECTIVES policies of each Fund. For more information, see "Investment
AND POLICIES Objectives and Policies," "General Investment Policies" and
"Description of Permitted Investments and Risk Factors."
EQUITY AND The Growth Fund and Small Cap Growth Fund both seek a high
BALANCED FUNDS level of total return primarily through capital appreciation.
The Value Fund, International Equity Fund and TransEurope
Fund each seek a high level of total return through capital
appreciation and current income.
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 Real Estate Fund seeks a high level of total return,
primarily through investments in the equity securities of
companies principally engaged in, or related to, the real
estate industry.
The Balanced Fund seeks to obtain a favorable total rate
of return through current income and capital appreciation
consistent with the preservation of capital, by 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, by
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, by 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, 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 International 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, by 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, by investing in a portfolio consisting
primarily of short- and intermediate-term fixed income
securities.
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 each 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. See "General Investment Policies,"
"Risk Factors" and "Description of Permitted Investments and
Risk Factors" in this prospectus, and the SAI.
3
<PAGE>
MANAGEMENT ABN AMRO Asset Management (USA) Inc. (the "Advisor")
PROFILE (formerly, LaSalle Street Capital Management, Ltd.), 208
South LaSalle Street, Chicago, Illinois 60604-1003, 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. First Data
Investor Services Group, Inc. (the "Administrator") serves
as the Administrator and shareholder servicing agent of the
Trust, as well as transfer agent ("Transfer Agent") and
dividend disbursing agent for the Trust. First Data
Distributors, Inc., an affiliate of the Administrator (the
"Distributor"), serves as distributor of the Trust's shares.
See "The Advisor," "The Sub-Advisor," "The Administrator,"
"The Transfer Agent" and "The Distributor."
YOUR ACCOUNT You may open a Common Shares account with a minimum
AND DOING investment of $2,000 per Fund and make additional
BUSINESS WITH investments with as little as $100. A Common Shares account
US may be opened by contacting the Transfer Agent or your
financial intermediary. See "Your Account and Doing Business
With Us."
DIVIDENDS Substantially all of the net investment income (exclusive of
net 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 net capital gains) of each of the Money Market
Funds is distributed in the form of daily dividends. Any net
capital gain is distributed at least annually. Distributions
are paid in additional shares unless you elect to take the
payment in cash. See "General Information--Dividends."
INFORMATION/ For more information, call 1-800-443-4725, or contact your
SERVICE financial intermediary.
CONTACTS
4
<PAGE>
PORTFOLIO EXPENSES ________________________________________________________
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in COMMON SHARES. Annual operating expenses are
based on expenses incurred during the fiscal year ended December 31, 1997,
unless otherwise stated.
SHAREHOLDER TRANSACTION EXPENSES(1) (As a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALL
FUNDS
-----
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Redemption Fee(2) None
- ------------------------------------------------
</TABLE>
(1) Certain financial intermediaries may impose account fees or other charges.
An IRA Account may be charged separate account fees by its custodian.
(2) A charge, currently $10.00, is imposed on wires of redemption proceeds.
ANNUAL OPERATING EXPENSES (As a percentage of average net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY/BALANCED FUNDS
---------------------
SMALL INT'L TRANS ASIAN LATIN AMERICA REAL ESTATE
VALUE GROWTH CAP EQUITY EUROPE TIGERS EQUITY FUND BALANCED
----- ------ ----- ------ ------ ------ ------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers)(1) .80% .80% .80% 1.00% 1.00% 1.00% 1.00% .70% .70%
12b-1 Fees None None None None None None None None None
Other Expenses (after
fee waivers)(2) .22% .24% .30% .37% .54% .61% .58% .62% .28%
- ----------------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)(3) 1.02% 1.04% 1.10% 1.37% 1.54% 1.61% 1.58% 1.32% .98%
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fee from the
Real Estate Fund. The Advisor reserves the right to change the amount of or
terminate its waiver at any time in its sole discretion. Absent fee
waivers, Advisory Fees for the Fund would be 1.00%.
(2) Absent fee waivers, "Other Expenses" for the TransEurope Fund are estimated
to be .79%. "Other Expenses" have been restated to reflect current fee
waivers. "Other Expenses" for the Latin America Equity and Real Estate
Funds are based on estimated amounts for the current fiscal year.
(3) Absent waivers described above, "Total Operating Expenses" for the
TransEurope Fund and the Real Estate Fund would be 1.79% and 1.62%,
respectively.
- --------------------------------------------------------------------------------
<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)(1) .50% .50% .48% .80% .50%
12b-1 Fees None None None None None
Other Expenses (after
fee waivers)(2) .19% .25% .28% .49% .24%
- -------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)(3) .69% .75% .76% 1.29% .74%
- -------------------------------------------------------------------------------------------
</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 change the amount of or terminate its waiver
at any time in its sole discretion. Absent fee waivers, Advisory Fees for
each Fund would be .60%. See "The Advisor."
(2) The Administrator is waiving, on a voluntary basis, a portion of its fee
from each Fund (except the Limited Volatility Fixed Income Fund). The
Administrator reserves the right to change the amount of or terminate its
waiver at any time in its sole discretion. Absent fee waivers, "Other
Expenses" for the Funds would be: Fixed Income Fund--.24%, Intermediate
Government Fixed Income Fund--.30%, Tax-Exempt Fixed Income Fund--.33% and
International Fixed Income Fund--.54%. "Other Expenses" for the Limited
Volatility Fixed Income Fund are based on estimated amounts for the current
fiscal year. "Other Expenses" have been restated to reflect current fees
and fee waivers.
(3) Absent waivers described above, "Total Operating Expenses" for the Funds
would be: Fixed Income Fund--.84%, Intermediate Government Fixed Income
Fund--.90%, Tax-Exempt Fixed Income Fund--.93%, International Fixed
Income--1.34% and Limited Volatility Fixed Income Fund--.84%. These fee
waivers are voluntary and may be discontinued at any time.
5
<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)(1) .20% .20% .20% .19%
12b-1 Fees None None None None
Other Expenses (after fee waivers)(2) .17% .14% .13% .14%
- ----------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(3) .37% .34% .33% .33%
- ----------------------------------------------------------------------------
</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 change the amount of or terminate its waiver
at any time in its sole discretion. Absent fee waivers, "Advisory Fees"
would be: 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 fees
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.
Absent fee waivers, "Other Expenses" for the Funds would be: Treasury Money
Market Fund--.25%, Government Money Market Fund--.22%, Money Market Fund--
.21% and Tax-Exempt Money Market Fund--.22%. "Other Expenses" have been
restated to reflect current fee waivers.
(3) Absent waivers described above, "Total Operating Expenses" for the Funds
would be: Treasury Money Market Fund--.60%, Government Money Market Fund--
.42%, Money Market Fund--.56% and Tax-Exempt Money Market Fund--.57%. These
fee waivers are voluntary and may be discontinued at any time.
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) 5% annual
return and (2) redemption at the end of each
time period:
Value Fund $10 $32 $56 $125
Growth Fund 11 33 57 127
Small Cap Growth Fund 11 35 61 134
International Equity Fund 14 43 75 165
TransEurope Fund 16 49 -- --
Asian Tigers Fund 16 51 88 191
Latin America Equity Fund 16 50 86 188
Real Estate Fund 13 42 -- --
Balanced Fund 10 31 54 120
Fixed Income Fund 7 22 38 86
Intermediate Government Fixed Income Fund 8 24 42 93
Tax-Exempt Fixed Income Fund 8 24 42 94
International Fixed Income Fund 13 41 71 156
Limited Volatility Fixed Income Fund 8 24 -- --
Treasury Money Market Fund 4 12 21 47
Government Money Market Fund 3 11 19 43
Money Market Fund 3 11 19 42
Tax-Exempt Money Market Fund 3 11 19 42
- ----------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON TOTAL OPERATING EXPENSES, EXCEPT FOR THE TRANSEUROPE
FUND, REAL ESTATE 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
you in understanding the various costs and expenses that may be directly or
indirectly borne by investors in Common Shares of the Funds. If you purchase
shares through a financial intermediary, you may be charged separate fees by
the financial intermediary. An IRA Account may be charged separate fees by its
custodian. See "The Advisor" and "The Administrator."
6
<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 30, 1998 on
the Trust's financial statements as of December 31, 1997. The Trust's financial
statements and the auditors report thereon are included in the Trust's 1997
Annual Report to Shareholders and incorporated by reference to the Trust's SAI
under "Financial Statements." This table should be read in conjunction with the
Trust's financial statements and related notes thereto. As of December 31,
1997, 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 COMMON SHARE* OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Ratio of Ratio of
Realized Net Expenses
and Net Ratio of Investment to
Net Net Unrealized Distri- Asset Net Expenses Income Average
Asset Invest- Gains Dividends butions Contri- Value Assets to (Loss) to Net
Value ment (Losses) from Net from bution End End of Average Average Assets
Beginning Income/ 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
----------
1997 $13.24 $ 0.24 $ 3.75 $(0.24) $(0.48) $0.00 $16.51 30.49 % $220,618 1.01% 1.57 % 1.01%
1996 12.26 0.29 2.18 (0.29) (1.20) 0.00 13.24 20.43 164,710 1.03 2.19 1.03
1995 9.79 0.34 2.74 (0.35) (0.26) 0.00 12.26 32.02 131,243 1.05 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
GROWTH FUND
-----------
1997 $13.06 $ 0.12 $ 2.97 $(0.12) $(1.46) $0.00 $14.57 23.98 % $132,649 1.02% 0.79 % 1.02%
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
SMALL CAP GROWTH FUND#
----------------------
1997 $13.03 $(0.09) $ 2.07 $ 0.00 $(1.63) $0.00 $13.38 15.89 % $ 41,945 1.04% (0.72)% 1.04%
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
INTERNATIONAL EQUITY FUND
-------------------------
1997 $15.83 $ 0.04 $ 0.68 $(0.08) $(1.09) $0.00 $15.38 4.56 % $ 85,440 1.35% 0.23 % 1.35%
1996 14.56 0.06 1.37 (0.04) (0.15) 0.03 15.83 10.09+ 96,442 1.36 0.44 1.36
1995 13.00 0.07 1.75 (0.06) (0.20) 0.00 14.56 14.03 77,519 1.38 0.70 1.38
1994 12.59 0.02 0.40 0.00 (0.01) 0.00 13.00 3.32 41,324 1.43 0.21 1.46
1993(1) 10.00 0.00 2.63 0.00 (0.04) 0.00 12.59 26.55 23,457 1.64 0.03 1.64
ASIAN TIGERS FUND
-----------------
1997 $11.91 $ 0.04 $(4.32) $(0.02) $(0.01) $0.00 $ 7.60 (35.98)% $ 34,664 1.60% 0.50 % 1.60%
1996 10.45 0.02 1.48 (0.04) (0.02) 0.02 11.91 14.55++ 33,602 1.54 0.23 1.54
1995 9.47 0.12 0.98 (0.12) 0.00 0.00 10.45 11.61 23,145 1.52 1.38 1.60
1994(2) 10.00 0.03 (0.53) (0.02) (0.01) 0.00 9.47 (5.07) 17,860 1.60 0.45 1.71
LATIN AMERICA EQUITY FUND
-------------------------
1997 $10.24 $ 0.05 $ 3.54 $(0.03) $(0.67) $0.00 $13.13 35.50 % $ 33,271 1.50% 0.56 % 1.50%
1996(3) 10.00 (0.02) 0.26 0.00 0.00 0.00 10.24 2.40 11,490 2.09 (0.55) 2.09
<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
----------
1997 1.57 % 79% $0.0408
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
GROWTH FUND
-----------
1997 0.79 % 62% $0.0600
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
SMALL CAP GROWTH FUND#
----------------------
1997 (0.72)% 170% $0.0597
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
INTERNATIONAL EQUITY FUND
-------------------------
1997 0.23 % 17% $0.0438
1996 0.44 9 0.0561
1995 0.70 11 N/A
1994 0.18 6 N/A
1993(1) 0.03 13 N/A
ASIAN TIGERS FUND
-----------------
1997 0.50 % 42% $0.0076
1996 0.23 24 0.0106
1995 1.30 28 N/A
1994(2) 0.34 13 N/A
LATIN AMERICA EQUITY FUND
-------------------------
1997 0.56 % 45% $0.0006
1996(3) (0.55) 10 0.0004
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Known as Trust Class, prior to October 10, 1997.
+ 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 Common Shares would have
been 9.87%.
++ 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 Common Shares would have
been 14.36%.
+++ 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.
# Formerly, the "Small Cap Fund."
1. Commenced operations on January 4, 1993. All ratios and total returns for
the period have been annualized.
2. Commenced operations on January 3, 1994. All ratios and total returns for
the period have been annualized.
3. Commenced operations on July 1, 1996. All ratios and total returns for the
period have been annualized.
7
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Realized Net Expenses Income
and Net Ratio of Investment to (Loss) to
Unrealized Distri- Asset Net Expenses Income Average Average
Net 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>
REAL ESTATE FUND
----------------
1997(1) 10.00 0.00 (0.05) 0.00 0.00 9.95 0.00 2,985 1.31 (1.31) 1.61 (1.61)
BALANCED FUND
-------------
1997 $10.98 $0.32 $ 2.06 $(0.32) $ (0.31) $12.73 22.10 % $ 68,523 0.93% 2.68 % 0.93% 2.68 %
1996 10.75 0.35 1.02 (0.35) (0.79) 10.98 13.15 54,546 0.94 3.14 0.94 3.14
1995 9.53 0.39 1.65 (0.39) (0.43) 10.75 21.85 49,899 0.92 3.74 0.92 3.74
1994 10.04 0.30 (0.50) (0.30) (0.01) 9.53 (2.11) 72,086 0.94 3.11 0.94 3.11
1993(2) 10.00 0.29 0.39 (0.29) (0.35) 10.04 7.09 58,510 0.97 2.88 0.97 2.88
FIXED INCOME FUND
-----------------
1997 $10.06 $0.60 $ 0.30 $(0.60) $ (0.01) $10.35 9.22 % $141,148 0.71% 5.95 % 0.81% 5.85 %
1996 10.32 0.59 (0.26) (0.59) 0.00 10.06 3.42 123,930 0.73 5.92 0.83 5.82
1995 9.30 0.59 $ 1.02 (0.59) 0.00 10.32 17.75 125,563 0.74 5.97 0.84 5.87
1994 10.23 0.54 $(0.93) (0.54) 0.00 9.30 (3.82) 92,402 0.72 5.45 0.82 5.35
1993(2) 10.00 0.47 $ 0.50 (0.47) (0.27) 10.23 9.92 131,002 0.77 4.60 0.87 4.50
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
1997 $ 9.85 $0.56 $ 0.19 $(0.56) $ 0.00 $10.04 7.93 % $ 51,934 0.71% 5.69 % 0.81% 5.59 %
1996 10.06 0.54 (0.21) (0.54) 0.00 9.85 3.51 56,895 0.74 5.38 0.84 5.28
1995 9.33 0.54 0.73 (0.54) 0.00 10.06 13.86 73,466 0.73 5.48 0.83 5.38
1994 10.08 0.47 (0.75) (0.47) 0.00 9.33 (2.78) 91,002 0.74 4.88 0.84 4.78
1993(2) 10.00 0.41 0.18 (0.41) (0.10) 10.08 6.04 104,826 0.76 4.15 0.86 4.05
<CAPTION>
Portfolio Average
Turnover Commission
Rate Rate+++
- ----------------------------------------------
<S> <C> <C>
REAL ESTATE FUND
----------------
1997(1) 0 0.0500
BALANCED FUND
-------------
1997 111% $0.0450
1996 104 0.0496
1995 85 N/A
1994 85 N/A
1993(2) 126 N/A
FIXED INCOME FUND
-----------------
1997 233% N/A
1996 194 N/A
1995 59 N/A
1994 126 N/A
1993(2) 163 N/A
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
1997 283% N/A
1996 179 N/A
1995 115 N/A
1994 124 N/A
1993(2) 81 N/A
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
+++ 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 in December 31, 1997. All ratios for the period have
been annualized.
2. Commenced operations on January 4, 1993. All ratios and total returns for
the period have been annualized.
8
<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
----------------------------
1997 $ 9.99 $0.49 $ 0.42 $(0.49) $0.00 $10.41 9.36 % $ 40,441 0.73% 4.84% 0.84% 4.73%
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
INTERNATIONAL FIXED INCOME FUND
-------------------------------
1997 $10.24 $0.43 $(1.03) $ 0.00 $0.00 $ 9.64 (5.86)% $ 15,574 1.22% 4.08% 1.22% 4.08%
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(2) 10.00 0.54 0.94 (0.64) (0.41) 10.43 16.33 16,488 1.21 5.95 1.21 5.95
TREASURY MONEY MARKET FUND
--------------------------
1997 $ 1.00 $0.05 $ 0.00 $(0.05) $0.00 $ 1.00 4.97 % $188,761 0.33% 4.86% 0.57% 4.62%
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
GOVERNMENT MONEY MARKET FUND
----------------------------
1997 $ 1.00 $0.05 $ 0.00 $(0.05) $0.00 $ 1.00 5.33 % $255,259 0.32% 5.21% 0.40% 5.13%
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
MONEY MARKET FUND
-----------------
1997 $ 1.00 $0.05 $ 0.00 $(0.05) $0.00 $ 1.00 5.41 % $737,736 0.32% 5.29% 0.56% 5.05%
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
<CAPTION>
Portfolio Average
Turnover Commission
Rate Rate+++
- ------------------------------
<S> <C> <C>
TAX-EXEMPT FIXED INCOME FUND
------------------------------
1997 54% N/A
1996 98 N/A
1995 129 N/A
1994 146 N/A
1993(1) 149 N/A
INTERNATIONAL FIXED INCOME FUND
-------------------------------
1997 52% N/A
1996 85 N/A
1995 105 N/A
1994 138 N/A
1993(2) 146 N/A
TREASURY MONEY MARKET FUND
--------------------------
1997 N/A N/A
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
GOVERNMENT MONEY MARKET FUND
----------------------------
1997 N/A N/A
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
MONEY MARKET FUND
-----------------
1997 N/A N/A
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
</TABLE>
- -------------------------------
- -------------------------------
+++ 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 February 7, 1993. All ratios and total returns for
the period have been annualized.
9
<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>
TAX-EXEMPT MONEY MARKET FUND
----------------------------
1997 $1.00 $0.03 $0.00 $(0.03) $0.00 $1.00 3.36% $250,260 0.33% 3.32% 0.57% 3.08%
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
<CAPTION>
Portfolio Average
Turnover Commission
Rate Rate+++
- -------------------------------
<S> <C> <C>
TAX-EXEMPT MONEY MARKET FUND
----------------------------
1997 N/A N/A
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
</TABLE>
- -------------------------------
- -------------------------------
+++ 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.
10
<PAGE>
YOUR ACCOUNT AND DOING BUSINESS WITH US
Common Shares are sold on a continuous basis and may be purchased directly from
the ABN AMRO Funds, P.O. Box 9765, Providence, Rhode Island 02940-5047, either
by mail, telephone or wire. Shares may also be purchased through a variety of
channels, including wrap programs, retirement plans, discount brokerage
programs and through various brokerage firms including Jack White & Company,
Discover Brokerage Direct, and Quick & Reilly. Shares of each Fund are offered
only to residents of states and other jurisdictions 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 PURCHASE
COMMON SHARES
FROM THE
TRANSFER AGENT
................................................................................
HOW DO I OBTAIN AN APPLICATION?
Account Application forms can be obtained by calling 1-800-443-4725.
................................................................................
Opening an You may purchase Common Shares of a Fund by completing and
Account By signing an Account Application and mailing it, along with a
Mail check (or other negotiable bank instrument or money order)
payable in U.S. dollars to "ABN AMRO Funds, [Fund Name]," to
Rembrandt Funds, P.O. Box 9765, Providence, Rhode Island 02940-
5047. Subsequent purchases of shares may be made at any time
by mailing a check (or other negotiable bank instrument or
money order) to the Transfer Agent.
Third party checks, credit cards, credit card checks and
cash will not be accepted. When purchases are made by check,
redemptions may be delayed until the investment being
redeemed has been in the account for up to 15 days.
By Telephone If an Account Application has been previously received, you
also may purchase shares over the telephone by calling 1-800-
443-4725. Orders by telephone will not be executed until
payment has been received. If a check received for purchase
of Common Shares does not clear, the purchase will be
canceled and you could be liable for any losses or fees
incurred.
By Wire If you have an account with a commercial bank that is a
member of the Federal Reserve System, you may purchase shares
of a Fund by requesting your bank to transmit funds by wire
to: BSDT of Boston, Massachusetts; ABA #01-10-01234; for
Account Number 142727; Further Credit: [Fund Name]. Your name
and account number must be specified in the wire. Your bank
may impose a fee for investments by wire. Shares may not be
purchased by Federal Reserve wire on federal holidays
restricting wire transfers.
Initial Purchases: Before making an initial investment by
wire, you must first telephone 1-800-443-4725 to be assigned
an account number. Your 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: ABN AMRO Funds,
P.O. Box 9765, Providence, Rhode Island 02940-5047.
Subsequent Purchases: Additional investments may be made
at any time through the wire procedures described above,
which must include your name and account number.
11
<PAGE>
................................................................................
BUY, EXCHANGE AND SELL REQUESTS ARE IN "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
................................................................................
When Can You may purchase shares on days that the New York Stock
You Purchase Exchange is open for business (a "Business Day"). The purchase
Shares? price of Common Shares of the Fund is the net asset value next
determined after your purchase request is effective. A
purchase request in good order for Common 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 your request before net asset value is
determined. However, your purchase request may be canceled if
the Custodian does not receive federal funds before net asset
value is determined on the next Business Day, and you could be
liable for any fees or expenses incurred by the Trust.
A purchase request in good order for Common Shares of the
Money Market Funds will be effective as of the Business Day
received by the Transfer Agent (and you will be eligible to
receive dividends declared the same Business Day) if the
Transfer Agent receives your request and the Custodian
receives Federal funds payment before 1:00 p.m., Eastern time
on such day. Purchase requests for the Money Market Funds
submitted to the Transfer Agent before 5:00 p.m., Eastern
time, by accounts for which ABN AMRO North America, Inc. or
certain of its affiliates act in a fiduciary, agency,
investment advisory or custodian capacity, will become
effective at the net asset value determined as of 5:00 p.m.
Eastern time that same Business Day.
Other If you purchased shares through an intermediary, please
Information contact your intermediary for more information about its
Regarding order requirements. Your intermediary may have earlier cutoff
Purchases times for share transactions.
Shareholders who desire to transfer the registration of
their shares should contact the Administrator by calling 1-800-
443-4725.
Purchases of Common Shares may be made by direct deposit
or Automated Clearing House ("ACH") transactions. However, if
you purchased shares through a financial intermediary,
contact your intermediary to find if direct deposit and ACH
transactions are available.
No certificates representing shares will be issued.
Automatic You may systematically purchase Common Shares through
Investment deductions from a checking account, provided the account is
Plan ("AIP") maintained through a bank which is part of the ACH 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. If you purchased
shares
12
<PAGE>
................................................................................
HOW DOES AN EXCHANGE TAKE PLACE?
When making an exchange, you authorize the sale of your shares of one or more
Funds in order to pur-chase the shares of another Fund. In other words, you are
execut-ing 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.
................................................................................
through a financial intermediary, contact your intermediary
to find out if the AIP is available to you. See "Doing
Business Through Intermediaries."
Employees of ABN AMRO North America, Inc. or its
affiliates who have arranged to purchase shares through the
AIP may open an account with no minimum initial purchase
amount.
HOW TO
EXCHANGE
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 some
Shares? or all of your Common Shares for Common Shares of other Funds
within the Trust. For an established account, exchanges will be
made only after instructions in writing or by telephone are
received by the Transfer Agent. You may exchange your shares on
any Business Day.
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 elected this option on your Account
Application.
If your exchange request in good order is received by the
Transfer Agent prior to the time the net asset value is
calculated, for the Equity, Balanced and Fixed Income Funds
and by 1:00 p.m., Eastern time for Money Market Funds, on any
Business Day, your exchange usually will occur on that day.
Exchanges are made at the net asset value next determined
after your request is received by the Transfer Agent.
Exchange requests for the Money Market Funds submitted to
the Transfer Agent before 5:00 p.m., Eastern time, on behalf
of accounts for which ABN AMRO North America, Inc. or certain
of its affiliates act in a fiduciary, agency, investment
advisory or custodial capacity, will become effective at the
net asset value determined as of 5:00 p.m., Eastern time that
same Business Day.
If you purchased shares through a financial intermediary,
contact your intermediary for more information about
exchanging shares.
HOW TO REDEEM You may redeem your shares on any Business Day, by mail or by
(SELL) SHARES telephone. If your redemption request in good order is
received by the Transfer Agent prior to the time net asset
value is determined for the Equity, Balanced and Fixed Income
Funds, and by 1:00 p.m., Eastern time for the Money Market
Funds, on any Business Day, your redemption usually will
occur on that day. Redemptions are made at the net asset
value next determined after your request is received by the
Transfer Agent. Redemption requests for the Money Market
Funds submitted to the Transfer Agent before 5:00 p.m.,
Eastern time,
13
<PAGE>
................................................................................
WHAT IS A SIGNATURE 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.
................................................................................
by accounts for which ABN AMRO North America, Inc. or certain
of its affiliates act in a fiduciary, agency, investment
advisory or custodial capacity, will become effective at the
net asset value determined as of 5:00 p.m., Eastern time that
same day.
By Mail A redemption request submitted by mail 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. This 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 or to a commercial bank account
previously designated either on the Account Application or by
written instruction to the Transfer Agent.
By Telephone Shares may be redeemed by telephone if you elect that option
on your Account Application.
Redemption Payment for shares redeemed generally will be made within
Proceeds seven days after receipt by the Transfer Agent of the valid
redemption request.
However, at various times, a Fund may be asked to redeem
shares for which is has not yet received good payment. In such
circumstances, your redemtion proceeds may be delayed for up to
15 days from the date of purchase or until payment has ben
collected for the purchase of your 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, you may incur brokerage costs
and taxes in converting such securities to cash.
You may have redemption proceeds mailed to your address or
mailed or wired to a commercial bank account previously
designated on your Account Application. There is no charge
for having redemption proceeds mailed to a designated bank
account. Under most circumstances, payments will be wired on
the next Business Day following receipt of a valid redemption
request. Wire transfer redemption requests may be made 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.
Redemption proceeds may not be transmitted by Federal Reserve
wire on federal holidays restricting wire transfers.
Communicating Neither the Trust nor the Transfer Agent will be responsible
with the for any loss, liability, cost or expense for acting upon wire
Transfer Agent instructions or upon telephone instructions that it
reasonably believes to be genuine. The Trust and the Transfer
Agent will each employ reasonable
14
<PAGE>
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 you experience
difficulties placing redemption orders by telephone, you may
wish to consider placing the order by other means. You may
not close your account by telephone.
Other If you purchased shares through a financial intermediary,
Information contact your intermediary for more information about
Regarding redemptions.
Redemptions See "Purchase and Redemption of Shares" in the Statement
of Additional Information for examples of when your right to
redeem your shares may be suspended.
Systematic The Funds offer a Systematic Withdrawal Plan ("SWP") for
Withdrawal Plan shareholders who wish to receive regular distributions from
their account. Upon commencement of the SWP, your account
must have a current value of $5,000 or more. You may elect
to receive automatic payments by check or ACH of $50 or more
on a monthly, quarterly, semi-annual or annual basis. A SWP
Application may be obtained by calling 1-800-443-4725.
If SWP withdrawals exceed income dividends, your invested
principal in the account will be depleted. Thus, depending
on the frequency and amounts of the withdrawal payments
and/or any fluctuations in the net asset value per share,
your original investment could be exhausted entirely. To
participate in the SWP, you must have your dividends
automatically reinvested. You may change or cancel the SWP
at any time upon written notice to the Transfer Agent.
If you purchased shares through a financial intermediary,
contact your intermediary to find out if the SWP is
available to you. See "Doing Business Through
Intermediaries."
CHECKWRITING Checkwriting is offered free of charge to shareholders in
SERVICE the Money Market Funds. You may redeem your Money Market
(Money Market Fund Common Shares by writing checks on your account for
Funds) $100 or more. Once you have signed and returned a signature
card, you will receive a supply of checks. A check may be
made payable to any person, and your 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, you may not use a check to
close your account. The checks are free, but your account
will be charged a fee for stopping payment of a check upon
your request or if the check cannot be honored because of
insufficient funds or other valid reasons. If you write a
check on your account for an amount below $100, you will be
charged a $5 processing fee.
If you purchased Money Market Fund shares through a
financial intermediary contact your intermediary to find out
if checkwriting services are available to you. See "Doing
Business Through Intermediaries."
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DOING BUSINESS Common Shares of the Funds may be purchased through financial
THROUGH institutions or broker-dealers which have established a
INTERMEDIARIES dealer agreement with the Distributor ("Intermediaries").
Each Intermediary may impose its own rules regarding
investing in the Funds, including procedures for purchases,
redemptions, and exchanges. Contact your Intermediary for
information about the services available to you and for
specific instructions on how to purchase, exchange and redeem
shares. Certain Intermediaries may charge account fees.
Information concerning any charges will be provided to you by
your Intermediary. Some Intermediaries may be required to
register as broker-dealers under state law.
The shares you purchase through your 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 your Intermediary, you should
call your Intermediary to request this change.
INVESTMENT OBJECTIVES AND POLICIES ____________________________________________
................................................................................
WHAT ARE INVESTMENT OBJECTIVES AND POLICIES?
Each Fund's investment objective 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 investment policies section spells out
the types of securities in which each Fund invests.
................................................................................
VALUE FUND The Value Fund seeks a high level of total return through
capital appreciation and current income.
Under normal circumstances, the Value Fund invests 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 Fund primarily invests in
common stocks that: (i) have below average price to earnings,
price to book value, price to sales, price to cash flow ratios
and/or above average dividend yields; and (ii) are issued by
companies that the Advisor believes are financially sound and
showing improving fundamentals not yet reflected in the
market.
Any remaining Fund assets 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"); (iii) preferred stock convertible
into common stocks; and (iv) U.S. dollar denominated equity
securities of foreign issuers (including sponsored American
Depositary Receipts ("ADRs")); and interests in real estate
investment trusts ("REITs").
GROWTH FUND The Growth Fund seeks a high level of total return primarily
through capital appreciation.
Under normal circumstances, the Growth Fund invests at
least 65% of its total assets in common stocks of
corporations of any size that, in the Advisor's opinion, have
strong prospects for appreciation through growth in earnings.
The Growth Fund primarily
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invests in common stocks that: (i) 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
U.S. 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; (iv) U.S. dollar denominated
equity securities of foreign issuers (including sponsored
ADRs); and (v) REITs.
SMALL CAP The Small Cap Growth Fund (formerly, the "Small Cap Fund")
GROWTH FUND seeks a high level of total return primarily through capital
appreciation.
Under normal circumstances, the Small Cap Growth Fund
invests at least 65% of its total assets in common stocks of
corporations with smaller capitalization levels that the
Advisor believes have strong prospects for appreciation
through growth in earnings. The Advisor emphasizes a
diversified portfolio of common stocks of companies with
aggregate market capitalization of less than $1.5 billion.
In selecting stocks for the Fund, factors reviewed include
sales and earnings growth rates and the strength of the
issuer's balance sheet.
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; (iv) U.S. dollar denominated
equity securities of foreign issuers (including sponsored
ADRs); and (v) interests in real estate investment trusts
("REITs"). The Fund invests in equity securities of foreign
issuers only if (i) they are listed on national securities
exchanges or actively traded in the over-the-counter market
and (ii) they satisfy in substance the criteria for
investing in smaller capitalization stocks set forth above.
INTERNATIONAL The International Equity Fund seeks a high level of total
EQUITY FUND return through capital appreciation and current income.
Under normal circumstances, the International Equity Fund
invests 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 does not necessarily spread its
investments among more than three countries other than the
U.S., the Advisor intends to diversify the Fund's
investments among countries to reduce currency risk.
Investments are 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. The Fund may invest or hold a portion of its assets
in U.S. dollars and foreign currencies, including
multinational currency units. Normally a portion of the
Fund's total assets is held in U.S. dollars.
Any remaining Fund assets may be invested in: (i) common
stocks of closed-end management investment companies that
invest primarily in international common stocks; (ii) stocks
of U.S. issuers; (iii) convertible securities of U.S.
issuers (whether or not they are listed on national
securities exchanges); and (iv) money market instruments.
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TRANSEUROPE The TransEurope Fund seeks a high level of total return
FUND through capital appreciation and current income.
Under normal circumstances, 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 developing
markets of Europe. The Fund may also invest in the equity
securities of issuers in Eastern European countries,
including developing countries such as: the Czech Republic,
Hungary, Poland and Slovakia. Investing in developing
countries involves special risks not associated with
domestic markets. See "Certain Risk Factors."
Any remaining Fund assets may be invested in money market
instruments of European issuers. The Fund may invest or hold
a portion of its assets in European currencies, including
multinational currency units. Normally, a portion of the
Fund's total assets is held in U.S. dollars.
The Fund currently is not offering its shares to the
public.
ASIAN TIGERS The Asian Tigers Fund seeks to achieve capital appreciation.
FUND
The Asian Tigers Fund primarily invests 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
invest in sponsored ADRs of Asian issuers that are traded on
stock exchanges in the United States. Currently, 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, the Fund invests at least 65%
of its total assets 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 Lanka, South Korea and
Taiwan, and other developing markets. The Fund has no set
policy for allocating investments among Asian countries.
Allocation of investments among countries depends 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 may 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 issuers.
In selecting industries and particular issuers, the
Advisor evaluates 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.
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The Fund may invest or hold a portion of its assets in
U.S. dollars and Asian currencies. Normally, a portion of
the Fund's total assets is held in U.S. dollars.
LATIN AMERICA The Latin America Equity Fund seeks long-term capital
EQUITY FUND appreciation.
The Fund primarily invests 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, the Fund invests at least 65% of its
total assets 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
regulation and restrictions may limit the amount, mode and
extent of investment in companies in such countries.
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.
The Fund may invest or hold a portion of its assets in
U.S. dollars and Latin American currencies. Normally, a
portion of the Fund's total assets is held in U.S. dollars.
The Fund may enter into interest rate swaps, currency
transactions, caps, collars and floors for hedging purposes.
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.
REAL ESTATE The Real Estate Fund seeks a high level of total return, a
FUND combination of growth and income, primarily through
investments in equity securities of companies principally
engaged
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in the real estate industry. The Fund may invest in shares
or units of beneficial interests of REITs and limited
partnership interests in master limited partnerships.
Under normal circumstances, the Fund invests at least 65%
of its assets in equity securities of U.S. or foreign
companies principally engaged in the real estate industry.
For purposes of the Fund's investment policies, a company is
"principally engaged" in the real estate industry if (i) it
derives at least 50% of its revenues or profits from the
ownership, construction, management, financing, or sale of
residential, commercial, or industrial real estate, or (ii)
it has at least 50% of the fair market value of its assets
invested in residential, commercial, or industrial real
estate. Companies in the real estate industry may include,
but are not limited to, REITs or other securitized real
estate investments, master limited partnerships that are
treated as corporations for Federal income tax purposes and
that invest in interests in real estate, real estate
operating companies, real estate brokers or developers,
financial institutions that make or service mortgages, and
companies with substantial real estate holdings, such as
lumber and paper companies, hotel companies, residential
builders and land-rich companies. The Fund does not invest
in real estate directly.
Any remaining assets of the Fund may be invested in
securities of companies outside the real estate industry,
including: U.S. dollar denominated equity securities of
foreign issuers, including sponsored ADRs; fixed income
securities rated in the four highest rating categories by an
NRSRO; money market instruments and U.S. Government
securities. The Fund may engage in short sales.
The Fund may invest in convertible securities rated in
the four highest rating categories by an NRSRO. The Fund may
invest up to 100% of its assets in equity securities of
foreign companies principally engaged in the real estate
industry.
The Fund may be more susceptible to the risks associated
with the direct ownership of real estate than an investment
company that does not concentrate its investment in this
manner.
The Real Estate Fund's investments may be subject to the
risks associated with the direct ownership of real estate.
These risks include: the cyclical nature of real estate
values; risks related to general and local economic
conditions; overbuilding and increased competition;
increases in property taxes and operating expenses;
demographic trends and variations in rental income; changes
in zoning laws; casualty or condemnation losses;
environmental risks; regulatory limitations on rents;
changes in neighborhood values; related party risks; changes
in the appeal of properties to tenants; increases in
interest rates; and other real estate capital market
influences. Generally, increases in interest rates increase
the costs of obtaining financing which could directly and
indirectly decrease the value of the Fund's investments. The
Fund's share price and investment return may fluctuate and a
shareholder's investment when redeemed may be worth more or
less than its original cost. Certain of these securities
that are issued by foreign companies may be
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<PAGE>
subject to the risks associated with investing in foreign
securities in addition to the risks associated with the
direct ownership of real estate.
The Fund is non-diversified for purposes of 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.
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.
Under normal circumstances, the Balanced Fund invests 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) equity securities; (ii) corporate bonds and
debentures of U.S. or foreign issuers rated in the highest
four rating categories by an NRSRO; (iii) securities
denominated in U.S. dollars or in foreign currencies
(including multinational currency units), 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; (iv) short-term
commercial paper of U.S. or foreign issuers rated in the
highest two rating categories by an NRSRO; (v) 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; (vi) obligations denominated in U.S. dollars or
foreign currencies of supranational entities rated in the
highest three rating categories by an NRSRO; (vii) mortgage-
backed securities rated in the highest three rating
categories by an NRSRO; (viii) asset-backed securities rated
in the highest three rating categories by an NRSRO;
(ix) STRIPS and 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) guaranteed investment contracts ("GICs") and
bank investment contracts ("BICs") determined to be of
investment grade; (xiii) swaps; (xiv) municipal notes rated
in the highest two rating categories by an NRSRO; and (xv)
municipal bonds rated in the highest three rating categories
by an NRSRO. The Balanced Fund is not subject to maturity
restrictions.
The remainder of the Fund's assets may be invested in:
(i) debt securities convertible into common stocks; (ii)
preferred stocks convertible into common stocks; (iii) U.S.
dollar denominated equity securities of foreign issuers
(including sponsored ADRs); (iv) foreign securities; and (v)
equity options. The Fund may invest in equity securities of
companies of all sizes, including smaller capitalization
companies. The Fund has no minimum rating criteria for
convertible securities.
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
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investing in a portfolio consisting primarily of quality
intermediate- and long-term fixed income securities.
Under normal circumstances, the Fixed Income Fund invests
as fully as feasible (and at least 65% of its total assets)
in the following fixed income securities: (i) U.S. and
foreign corporate bonds and debentures rated in the highest
four rating categories by an NRSRO; (ii) obligations issued
or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities; (iii) short-
term commercial paper of U.S. or foreign issuers rated in
the highest two rating categories by an NRSRO; (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) 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 three
rating categories by an NRSRO; (viii) asset-backed
securities rated in the highest three rating categories of
an NRSRO; (ix) STRIPS and receipts; (x) repurchase
agreements involving such securities; (xi) loan
participations, in which the Fund does 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; and (xvi) municipal bonds rated in
the highest three rating categories by an NRSRO.
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.
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 invests
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, such as mortgage-backed securities and
repurchase agreements involving such securities.
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Normally, the Fund maintains an average weighted
maturity of three to ten years; under certain circumstances,
however, the average weighted maturity may fall below three
years.
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.
Under normal circumstances, the Tax-Exempt Fixed Income
Fund invests 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 categories by an NRSRO, and
invests 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; (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.
INTERNATIONAL The International Fixed Income Fund seeks a high level of
FIXED INCOME total return relative to funds with like investment
FUND 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.
Under normal circumstances, the International Fixed
Income Fund invests as fully as feasible (at least 65% of
its total assets) in investment grade 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 are made in high quality securities denominated
in various currencies, including the Euro.
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Fixed income securities consist of: (i) corporate bonds
and debentures rated in the highest four rating categories
by an NRSRO; (ii) short-term commercial paper of U.S. or
foreign issuers rated in the highest two rating categories
by an NRSRO; (iii) securities issued or guaranteed by
foreign governments, their political subdivisions, agencies
or instrumentalities (sovereign debt); (iv) obligations of
supranational entities; (v) repurchase agreements involving
such securities; (vi) loan participations; and (vii) swaps.
Any remaining Fund assets may 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) obligations
(certificates of deposit, time deposits, and bankers'
acceptances) of commercial banks, savings and loan
institutions, and U.S. and foreign 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; (iv) mortgage-backed securities rated in the
highest three 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. The Fund may invest or hold a portion of its
assets in U.S. dollars and foreign currencies, including
multinational currency units. Normally, a portion of the
Fund's total assets is held in U.S. dollars.
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 is non-diversified for purposes of 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.
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; (ii) obligations
issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities; (iii)
short-term commercial paper of U.S. or foreign issuers rated
in the highest two rating categories by an NRSRO;
(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) 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
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the highest three 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 and (xiii) municipal bonds rated in
the highest three rating categories by an NRSRO
The Fund may invest in forward commitments and securities
of foreign issuers.
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. The Fund currently is not offering its shares
to the public.
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 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 is 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 invests primarily in U.S. Treasury Obligations (other
than STRIPS) and repurchase agreements involving such
securities.
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.
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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
time of investment; (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; (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 Federal
alternative minimum tax.
The Tax-Exempt Money Market Fund invests at least 80% of
its net 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, 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 Federal alternative minimum tax.
GENERAL INVESTMENT POLICIES ____________________________________________________
THE EQUITY AND
BALANCED FUNDS Each Fund may invest in convertible securities.
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. The
Fixed Income Fund, Tax-Exempt Fixed Income Fund,
International Fixed Income Fund, Limited Volatility Fixed
Income Fund and Balanced Fund may purchase mortgage-backed
securities issued by non-governmental issuers that are rated
in the highest three rating categories of an NRSRO.
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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 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 may invest only in U.S.
dollar denominated securities, must maintain an average
maturity on a dollar-weighted basis of 90 days or less, and
may 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 invests no more than 10% of its
net assets in illiquid securities.
ALL FUNDS Each Fund invests no more than 15% of its total assets in
restricted securities. Each Fund invests no more than 15% of
its net assets in illiquid securities. All Funds may invest
in variable and floating rate obligations, may purchase
securities on a when-issued basis, and may enter into
repurchase agreements. Each 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 may engage in securities lending.
There is 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 may 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, each of the
Equity Funds, Fixed Income Funds and Balanced Fund may
invest up to 100% of its assets in money market instruments,
and may hold U.S. dollars and foreign currencies, including
multinational currency units.
RATINGS NRSROs provide ratings for certain instruments in which the
Funds may invest. For example, bonds rated in the fourth
highest rating category (investment grade bonds) have an
adequate capacity to pay principal and interest, but may
have speculative characteristics as well. 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
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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. The Funds may invest in unrated securities that
the Advisor (or Sub-Advisor) determine to be of comparable
quality at the time of purchase.
For a description of ratings, see the SAI.
CERTAIN RISK FACTORS ___________________________________________________________
The investment policies of each Fund entail certain risks
and considerations of which you should be aware.
Equity Investments in equity securities are generally subject to
Securities market risks that may cause their prices to fluctuate over
time. The values of convertible equity securities are also
affected by prevailing interest rates, the credit quality of
the issuer and any call provision. Fluctuations in the value
of equity securities in which a Fund invests will cause the
net asset value of the Fund to fluctuate.
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. There is a risk that the current interest
rate on floating and variable rate instruments may not
accurately reflect existing market interest rates. Fixed
income securities rated BBB by S&P or Baa by Moody's (the
lowest ratings of investment grade bonds) are deemed by
these rating services to have speculative characteristics.
Foreign Securities of foreign issuers are subject to certain risks
Securities 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.
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
28
<PAGE>
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, 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.
A Fund's investments in developing countries can be
considered speculative and, therefore, may offer higher
potential for gains and losses than investments in developed
markets of the world. With respect to any developing
country, the risks associated with foreign investing are
greater. The economies of developing countries generally are
heavily dependent upon international trade and, accordingly,
have been and may continue to be adversely affected by trade
barriers, exchange or currency controls, managed adjustments
in relative currency value and other protectionist measures
imposed or negotiated by the countries with which they
trade.
Investments in securities of foreign issuers are
frequently denominated in foreign currencies and the value
of a 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 a Fund may incur costs in
connection with conversions between various currencies. A
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 emerging
markets, including Latin American and Asian markets. This
may limit a Fund's ability to effectively hedge its
investments in such markets.
Mortgage-Backed During periods of declining interest rates, prepayment of
Securities mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which
underlie securities purchased at a premium often results in
capital losses, while prepayments 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.
Non- A non-diversified Fund means that it is not limited by the
Diversification 1940 Act in the proportion of its assets that it may invest
in the obligations of a single issuer. A non-diversified
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
a non-diversified 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 mutual fund.
REITs REITs may be affected by changes in the value of their
underlying properties and by defaults by borrowers or
tenants. Mortgage REITs may be affected by the quality of
the credit extended. Furthermore, REITs are dependent on
specialized management skills. Some REITs may have limited
diversification and may be subject to risks inherent in
investments in a limited number of properties, in a narrow
geographic area, or in a single
29
<PAGE>
property type. REITs depend generally on their ability to
generate cash flow to make distributions to shareholders or
unitholders, and may be subject to defaults by borrowers and
to self-liquidations. In addition, the performance of a REIT
may be affected by its failure to qualify for tax-free pass-
through of income under the Internal Revenue Code of 1986,
as amended (the "Code"), or its failure to maintain
exemption from registration under the 1940 Act. Rising
interest rates may cause the value of the debt securities in
which a Fund may invest. Conversely, falling interest rates
may cause their value to rise. Changes in the value of
portfolio securities does not necessarily affect cash income
derived from these securities but will effect a Fund's net
asset value.
Small Investments in small capitalization companies involve
Capitalization greater risk than is customarily associated with larger,
Companies more established companies due to the greater business risks
of small size, limited markets and financial resources,
narrow product lines and frequent lack of depth of
management. The securities of small-sized companies are
often traded over-the-counter, and may not be traded in
volumes typical of securities traded on a national
securities exchange. Consequently, the securities of smaller
companies may have limited market suitability and may be
subject to more abrupt or erratic market movements than
securities of larger, more established companies of the
market averages in general. If a 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.
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, International
Fixed Income or Real Estate Funds.
2. Purchase securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities, repurchase agreements
involving such securities, and, with respect to the Real
Estate Fund, investments in the real estate industry, if,
as a result, more than 25% of the total assets of the
Fund are invested in the securities of one or more
issuers whose principal business activities are in the
same industry.
3. Make loans, except as permitted by the 1940 Act, and the
rules and regulations thereunder.
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<PAGE>
No Money Market Fund may:
1. Purchase securities of any issuer if, as a result, the
Fund would violate the diversification provisions of Rule
2a-7 under the 1940 Act.
2. Purchase securities of any issuer if, as a result, more
than 25% of the total assets of the Fund are invested in
the securities of one or more issuers whose principal
business activities are 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) investment in obligations
issued or guaranteed by the U.S. Government or its
agencies and instrumentalities or in repurchase agreements
involving such securities; (ii) obligations issued by
domestic branches of U.S. banks or U.S. branches of
foreign banks subject to the same regulations as U.S.
banks; or (iii) tax-exempt securities issued by government
or political subdivisions of governments.
3. Make loans, except as permitted by the 1940 Act, and the
rules and regulations thereunder.
The foregoing percentages apply at the time of the
purchase of a security. Additional investment limitations are
set forth in the SAI.
................................................................................
INVESTMENT ADVISOR
An investment advisor manages the investment activities and is responsible for
the performance of the Fund. The advisor conducts investment research, exe-
cutes investment strategies based on an assessment of economic and market
conditions, and determines which securities to buy, hold or sell.
................................................................................
THE ADVISOR ____________________________________________________________________
The Trust and the Advisor, 208 South LaSalle Street, Chicago,
Illinois 60604-1003, 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.
Under the Advisory Agreement, 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, Real Estate 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
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<PAGE>
expenses of the Funds. The Advisor reserves the right, in
its sole discretion, to terminate voluntary fee waivers at
any time.
For the fiscal year ended December 31, 1997, the Advisor
received an advisory fee of .80% for the Value Fund, .80%
for the Growth Fund, .80% for the Small Cap Fund, 1.00% for
the International Equity Fund, 1.00% for the Asian Tigers
Fund, 1.00% for the Latin America Equity Fund, .70% for the
Real Estate Fund, .70% for the Balanced Fund, .50% for the
Fixed Income Fund, .50% for the Intermediate Government
Fixed Income Fund, .48% for the Tax-Exempt Fixed Income
Fund, .80% for the International Fixed Income Fund, .20% for
the Treasury Money Market Fund, .20% for the Government
Money Market Fund, .20% for the Money Market Fund and .19%
for the Tax-Exempt Money Market Fund. The TransEurope Fund
and Limited Volatility Fixed Income Fund had not commenced
operations at fiscal year end. The Funds may execute
brokerage or other agency transactions through an affiliate
of the Advisor for which the affiliate receives
compensation.
ABN AMRO Asset Management (USA) Inc. 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, 1997, total assets under
management by the Advisor were approximately $5.8 billion.
The Advisor is a direct, wholly-owned subsidiary of ABN
AMRO Capital Markets Holding, 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 Fund and the
equity portion of the Balanced Fund since their inception.
Mr. Cerney has been associated with the Advisor and its
predecessor since April, 1990 as a portfolio manager.
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 as a portfolio manager.
Nancy Droppelman, CPA has served as portfolio manager of
the Real Estate Fund since its inception. Ms. Droppelman has
been associated with the Advisor since January 1997 as a
portfolio manager. Prior to joining the Advisor, Ms.
Droppelman served as a real estate analyst with Edward Jones
from January, 1995 to December, 1996, and served as a senior
financial analyst and development accounting manager with
Center Mart Properties from November 1988 to January 1995.
Marc G. Borghans, Vice President of the Advisor, has
served as co-manager of the Small Cap Growth Fund since
March, 1997 and as manager since July, 1997. Mr. Borghans
has been associated with the Advisor or its affiliates since
1988 as a portfolio manager.
Mark W. Karstrom, Senior Vice President of the Advisor,
has served as portfolio manager for the Intermediate
Government Fixed Income Fund and the Limited Volatility
32
<PAGE>
Fixed Income Fund since September, 1996. Mr. Karstrom joined
the Advisor in August 1996 as a portfolio manager. 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. He served as the portfolio
manager for the Tax-Exempt Fixed Income Fund from September,
1996 to April, 1997, and co-manager of the Tax-Exempt Fixed
Income Fund from April, 1997 to June, 1997. Mr. Self joined
the Advisor in October, 1995 as a portfolio manager. He
served as a Vice President with CSI Asset Management from
December, 1988 to July, 1995.
Phillip P. Mierzwa, Vice President of the Advisor, has
served as co-manager of the Tax-Exempt Fixed Income Fund and
Tax-Exempt Money Market Fund since April, 1997. He has been
associated with the Advisor or its affiliates since
February, 1990 as a portfolio manager and trader.
Gregory D. Boal, Senior Vice President of the Advisor,
has served as portfolio manager of the fixed income portion
of the Balanced Fund since April, 1997 and as co-manager of
the Tax-Exempt Fixed Income Fund since July, 1997. Mr. Boal
joined the Advisor in March, 1997 as a portfolio manager. He
served as Manager, Fixed Income Division of First Citizens
Bank from November, 1989 to March, 1997.
Karen Van Cleave, Senior Vice President of the Advisor,
has served as co-manager of the Tax-Exempt Money Market Fund
and portfolio manager of the Money Market Fund, Treasury
Money Market Fund and Government Money Market Fund since
January 1994. Ms. Van Cleave joined the Advisor in January
1994 as a portfolio manager.
THE SUB-ADVISOR ________________________________________________________________
ABN AMRO-NSM International Funds Management B.V.,
Hoogoorddreef 66-68, P.O. Box 283, 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 (the "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. As
of December 31, 1997, the Sub-Advisor had approximately $955
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 as a
portfolio manager.
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 as a
33
<PAGE>
portfolio manager. 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.
Wouter Weijand has served as portfolio manager for the
International Fixed Income Fund since September, 1997. Mr.
Weijand has worked in various investment management
positions with ABN AMRO and/or its affiliates since 1984.
Luiz M. Ribeiro, Jr. has served as the portfolio manager
of the Latin America Equity Fund since November, 1997. Mr.
Ribeiro has worked in various investment management
positions with ABN AMRO and/or its affiliates since 1994.
From March, 1990 to June, 1993, he served with the trading
desk of Dibran DTVM Ltd.
For services provided and expenses incurred pursuant to
the Sub-Advisory Agreement, the Sub-Advisor 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, 1997.
THE ADMINISTRATOR ______________________________________________________________
First Data Investor Services Group, Inc. provides the Trust
with administrative services, including fund accounting,
regulatory reporting, necessary office space, equipment,
personnel and facilities. 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 each
Fund.
THE TRANSFERAGENT ______________________________________________________________
First Data Investor Services Group, Inc., 4400 Computer
Drive, Westborough, Massachusetts 01581, 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 ________________________________________________________________
First Data Distributors, Inc., 4400 Computer Drive
Westborough, Massachusetts 01581, and the Trust are parties
to a distribution agreement (the "Distribution Agreement").
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.
34
<PAGE>
The Trust also offers Investor Shares which are sold with
a shareholder servicing fee and a 12b-1 fee primarily to
institutions and individuals through financial
intermediaries which have established a dealer agreement
with the Distributor. For more information about Investor
Shares, you may contact your Intermediary or call
1-800-443-4725.
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, 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, on an aggregate basis, or an actual basis.
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
35
<PAGE>
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 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.
Additional performance information is set forth in the
1997 Annual Report to Shareholders, and is available upon
request and without charge by calling 1-800-443-4725.
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 normally will 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 and by requirements which
enable a Fund to receive favorable tax treatment. A
portfolio turnover rate of 100% or more will result in
higher transaction costs and may result in additional tax
consequences for shareholders. You will find portfolio
turnover rates for each Fund (except the Money Market Funds)
in the "Financial Highlights" section of this prospectus.
The performance of Common Shares of each Fund normally
will be higher than that of Investor Shares because of the
additional distribution and shareholder services expenses
charged to Investor Shares.
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. In addition, state and local tax
consequences on an investment in a Fund may differ from the
Federal income tax consequences described below.
Accordingly, you are urged to consult your tax advisor
regarding specific questions as to Federal, state, and local
income taxes. Additional information concerning taxes is set
forth in the SAI.
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<PAGE>
................................................................................
TAXES
You must pay taxes on your Fund's earnings, whether you take your payments in
cash or additional shares.
Tax Status of Each Fund is treated as a separate entity for Federal income
the Funds tax purposes and is not combined with the other Funds. Each
Fund intends to qualify for the special tax treatment afforded
regulated investment companies as defined under Subchapter M
of the Code. 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 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 substantially all of its net
Distributions investment income (including, for this purpose, net short-
term capital gain) to shareholders. Distributions from net
investment income will be taxable to you as ordinary income
whether received in cash or in additional shares. Any net
capital gains will be distributed annually as capital gains
distributions and will be treated as gain from the exchange
of a capital asset held for more than one year, regardless of
how long you have held shares and regardless of whether you
receive the distributions are received in cash or in
additional shares. Each Fund will notify you annually 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. A Fund will be required to include as part of its
current income the interest on such obligations even though
the Fund has not received any interest payments on such
obligations during that period. Because each Fund distributes
substantially all of its net investment income to
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.
................................................................................
DISTRIBUTIONS
The Fund dis-tributes income dividends and capital gains. Income dividends
represent the earnings from the Fund's investments; capital gains are
generally produced when investments are sold for more than the original
purchase price.
................................................................................
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 you as income
dividends from the Fund, provided certain state-specific
conditions are satisfied. Each Fund will inform you annually
of the percentage of income and distributions derived from
U.S. obligations. You should consult your tax advisor to
determine whether any portion of the income dividends received
from a Fund is considered tax exempt in your 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
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paid by the Fund and received by shareholders on December 31
of that year, if paid by the Fund at any time during the
following January.
Each Fund intends to make sufficient capital gains
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 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, income dividends (not capital gain
distributions) paid by a Fund, to the extent the dividend is
derived from dividends received from domestic corporations,
may, if 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 exchange or redemption (sale) of Fund shares is a
taxable event to you.
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ADDITIONAL INFORMATION ABOUT DOING BUSINESS WITH US ____________________________
Minimum The minimum initial investment is $2,000, which may be
Investment waived at the Distributor's discretion. All subsequent
investments must be at least $100. Employees of ABN AMRO
North America, Inc. or its affiliates who have arranged to
purchase shares through the Automatic Investment Plan (AIP)
may open an account with no minimum initial purchase amount.
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 when the Trust
or the Transfer Agent determines that it is not in the best
interests of the Trust or its shareholders to accept such
order. Your Intermediary may impose its own minimum initial
and subsequent investment requirements. If you purchased
shares through an Intermediary, you should contact your
Intermediary for information about any such requirements.
Maintaining a Due to the relatively high cost of handling small
Minimum Account investments, each Fund reserves the right to redeem your
Balance shares, at net asset value if, because of redemptions of
shares by or on your behalf, your account in any Fund has a
value of less than $2,000, the minimum initial purchase
amount. Accordingly, if you purchase shares of any Fund in
only the minimum initial investment amount, you may be
subject to such involuntary redemption if you thereafter
redeem any of these shares. Before any Fund exercises its
right to redeem such shares and send the proceeds you, you
will be given notice that the value of the shares in your
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 $2,000. See "Purchase and Redemption of Shares" in the
SAI for examples of when your right of redemption may be
suspended.
Your Intermediary also may have requirements for
maintaining a minimum account balance. If you purchased
shares through an Intermediary, you should contact your
Intermediary for information about any such arrangements.
Net Asset Value
The net asset value per share of the Money Market Funds is
calculated as of 5:00 p.m., Eastern time, each Business Day.
The net asset value of the Equity, Balanced and Fixed Income
Funds is determined as of the close of regular trading on
the New York Stock Exchange (normally 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
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investments of the Money Market Funds will be valued using
the amortized cost method described in the SAI. 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.
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, October 20, 1992 and April 27,
1998. 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,
Real Estate Fund, Value Fund, Growth Fund, Small Cap Growth
Fund (formerly, the "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, 1997, the Limited Volatility Fixed
Income Fund and TransEurope Fund had not commenced
operations. Generally, each Fund has two classes of shares:
Common Shares and Investor Shares. Each class has its own
expense structure and other characteristics. Investor Shares
are offered through a separate prospectus. Currently,
Investor Shares of the Latin America Equity Fund are not
available for purchase.
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.
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 other
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 shareholder meetings, but such meetings 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
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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.
Shareholder Shareholder inquiries should be directed to the
Inquiries Administrator, 4400 Computer Drive, Westborough,
Massachusetts, 01581, at 1-800-443-4725.
Dividends Substantially all of the net investment income (not
including net capital gains) of the Value, Growth, Small
Cap, Balanced, Fixed Income, Intermediate Government Fixed
Income, Tax-Exempt Fixed Income, Real Estate and Limited
Volatility Fixed Income Funds is distributed on a monthly
basis, and that of the International Equity, Latin America
Equity, TransEurope, Asian Tigers and International Fixed
Income Funds is distributed on an annual basis. Shareholders
who own shares at the close of business on the record date
will be entitled to receive the distribution. Currently, net
capital gains of the Funds, if any, will be distributed at
least annually.
The net investment income (not including net capital
gains) of each of the Money Market Funds is declared daily
and distributed monthly. Currently, net capital gains of the
Funds, if any, will be distributed at least annually.
Shareholders automatically receive all dividends and
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 distribution, 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 Trust believes that as of April 1, 1998, affiliates
of the Advisor owned of record or beneficially,
substantially all of the Common Shares of the Value, Growth,
Small Cap Growth, International Equity, Latin America
Equity, Real Estate, 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, these affiliates may be
deemed to "control" these Funds within the meaning of the
1940 Act.
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Counsel and Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Auditors Ernst & Young LLP serves as independent auditors of the
Trust.
Custodian The Chase Manhattan Bank, 270 Park Avenue, New York, New
York 10017, acts as custodian of the Trust. The custodian
holds cash, securities and other assets of the Trust as
required by the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS __________________________
The following is a description of certain of the permitted
investments and risk factors for the Funds:
ADRs, A Fund may invest in depositary receipts and other similar
Continental instruments, such as ADRs, CDRs, EDRs & GDRs. ADRs are
Depositary securities, typically issued by a U.S. financial institution
Receipts (a "depositary"), that evidence ownership interests in a
("CDRs"), security or a pool of securities issued by a foreign issuer
European and deposited with the depositary. EDRs, which are sometimes
Depositary referred to as CDRs, are securities, typically issued by a
Receipts non-U.S. financial institution, that evidence ownership
("EDRs") and interests in a security or a pool of securities issued by
Global either a U.S. or foreign issuer. GDRs are issued globally
Depositary and evidence a similar ownership arrangement. Generally,
Receipts ADRs are designed for trading in the U.S. securities market.
("GDRs") EDRs are designed for trading in European Securities Markets
and GDRs are designed for trading in non-U.S. securities
markets. Generally, depositary receipts 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 securities consist of securities secured by
Asset-Backed company receivables, truck and auto loans, leases and credit
Securities card receivables. Such securities are generally issued as
(non-mortgage) 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.
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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 ("BICs")institutions. Pursuant to such contracts, a Fund makes cash
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 instruments
Deposit with 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 are considered to be
illiquid.
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 a 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 a Fund to buy a
security.
If the broker-dealer to whom a 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 include common stocks, common stock
Securities equivalents, preferred stocks, securities convertible into
common stocks and securities having common stock
characteristics, such as rights and warrants to purchase
common stocks, sponsored and
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unsponsored depositary receipts (e.g., ADRs), REITs, and
equity securities of closed-end investment companies.
Fixed Income Fixed income securities are debt obligations issued by
Securities corporations, municipalities and other borrowers.
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
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
liquid assets 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.
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In order to avoid leveraging and related risks, when a
Fund purchases futures contracts, it will collateralize its
position by depositing an amount of cash or liquid assets,
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 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 to be illiquid investments.
Illiquid Illiquid securities are securities that cannot be disposed
Securities of within 7 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.
Investment Investments in shares of open-end and closed-end funds
Company Shares investment companies may result in the layering of expenses.
Since such investment companies pay management fees and
other expenses, shareholders of a Fund would indirectly pay
both Fund expenses and the expenses of underlying companies
with respect to Fund assets invested therein.
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 a 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, a Fund may be subject to delays,
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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, a 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.
Master Limited Master limited partnerships are public limited partnerships
Partnership composed of (i) assets spun off from corporations or (ii)
private limited partnerships. Master limited partnerships
are formed by reorganizing corporate assets or private
partnerships as public limited partnerships combining
various investment objectives. Interest in master limited
partnerships are represented by depositary receipts traded
in the secondary market. Because limited partners have no
active role in management, the safety of a limited partner's
investment in a master limited partnership depends upon the
management ability of the general partner.
Money Market Money market instruments include certificates of deposit,
Instruments commercial paper, bankers' acceptances, Treasury bills, time
deposits, repurchase agreements and shares of money market
funds.
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.
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
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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 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
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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 a 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.
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
SEC 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
48
<PAGE>
a segregated account with its custodian bank consisting of
cash or liquid assets 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 or liquid assets 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.
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 receives 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. Receipts include "Treasury Receipts" ("TRs"),
"Treasury Investment Growth Receipts" ("TIGRs"), and
"Certificates of Accrual on Treasury Securities" ("CATS").
49
<PAGE>
REITs REITs pool investors' funds for investment primarily in
income producing real estate or real estate related loans or
interests. Generally, REITs can be classified as Equity
REITs, Mortgage REITs and Hybrid REITs. Equity REITs own
real estate itself, but primarily invest their assets
directly in real estate and derive their income mainly from
rent and capital gains from sale of property. Mortgage REITs
make loans to provide capital to real estate owners and
buyers, primarily invest their assets in real estate
mortgages and derive their income from interest payments.
Hybrid REITs combine the features of Equity and Mortgage
REITs.
A REIT does not pay corporate income tax if it meets
regulatory requirements relating to its organization,
ownership, assets and income, and with a regulatory
requirement that it distributes at least 95% of its taxable
income for each taxable year.
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. A 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 rules adopted by the SEC. Under
Money Market SEC rules, money market funds may acquire only obligations
Funds that present minimal credit risks and that are "eligible
securities," which generally means they are rated, at the
time of investment, by at least two NRSROs (one if it is the
only organization rating such obligation) in one of the top
two short-term rating categories or, if unrated, determined
to be of comparable quality. First tier securities are
securities that are rated by at least two NRSROs (one if it
is the only organization rating such securities) or an
unrated security determined to be of comparable quality.
Second tier securities are eligible securities that do not
qualify as first tier securities. 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, no more than the
greater of 1% of the Fund's total assets or $1 million may
be invested in second tier securities of any one issuer.
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.
50
<PAGE>
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 or 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.
Securities of Foreign securities may be U.S. dollar denominated or non-
Foreign Issuers 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,
Yankee certificates of deposits, depositary receipts, and
investments in Canadian commercial paper, foreign securities
and Europaper.
Sovereign Debt Sovereign debt securities are debt securities issued by
Securities various foreign governmental issuers. Investing in fixed and
floating rate foreign sovereign debt securities will expose
a Fund to the direct or indirect consequences of political,
social or economic changes in the countries that issue the
securities. The ability and willingness of sovereign
obligors in developing and emerging market countries or the
governmental authorities that control repayment of their
external debt to pay principal and interest on such debt
when due may depend on general economic and political
conditions within the relevant country. Countries such as
those in which a Fund may invest have historically
experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate or trade
difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political
uncertainty or instability. Additional factors which may
influence the ability or willingness to service debt
include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange
on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, and its
government's policy towards the International Monetary Fund,
the World Bank and other international agencies.
The ability of a foreign sovereign obligor to make timely
payments on its external debt obligations will also be
strongly influenced by the obligor's balance of payments,
including export performance, its access to international
credits and investments, fluctuations in interest rates and
the extent of its foreign reserves. A country whose exports
are concentrated in a few commodities or whose economy
depends on certain strategic imports could be vulnerable to
fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for
its exports in currencies other than dollars, its ability to
make debt payments denominated in dollars could be adversely
affected. If a foreign sovereign obligor cannot generate
sufficient
51
<PAGE>
earnings from foreign trade to service its external debt, it
may need to depend on continuing loans and aid from foreign
governments, commercial banks and multilateral
organizations, and inflows of foreign investment. The
commitment on the part of these foreign governments,
multilateral organizations and others to make such
disbursements may be conditioned on the government's
implementation of economic reforms and/or economic
performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due
may result in the cancellation of such third parties'
commitments to lend funds, which may further impair the
obligor's ability or willingness to timely service its
debts.
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 has 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.
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 a 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 a 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
52
<PAGE>
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 , as well as separately traded
interest and principal component parts of such obligations,
known as "Separately Traded Registered Interest and
Principal Securities" ("STRIPS"), that are transferable
through the Federal book-entry system.
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,
usually higher than the market price at the time of issuance
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 cash or liquid assets 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 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.
53
<PAGE>
ABN AMRO FUNDS (R)
(FORMERLY, THE "REMBRANDT FUNDS")
INVESTOR SHARES
APRIL 30, 1998
- --------------------------------------------------------------------------------
Equity Funds Fixed Income Funds
. VALUE FUND . FIXED INCOME FUND
. GROWTH FUND . INTERMEDIATE GOVERNMENT FIXED INCOME FUND
. TAX-EXEMPT FIXED INCOME FUND
. SMALL CAP GROWTH FUND . INTERNATIONAL FIXED INCOME FUND
. INTERNATIONAL EQUITY FUND . LIMITED VOLATILITY FIXED INCOME FUND
. TRANSEUROPE FUND Money Market Funds
. ASIAN TIGERS FUND . TREASURY MONEY MARKET FUND
. LATIN AMERICA EQUITY FUND . GOVERNMENT MONEY MARKET FUND
. MONEY MARKET FUND
. REAL ESTATE FUND . TAX-EXEMPT MONEY MARKET FUND
Balanced Fund
. BALANCED 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 ("SAI") dated April 30, 1998 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 SAI is
incorporated into this Prospectus by reference.
Investor Shares of the ABN AMRO Funds (formerly, the "Rembrandt Funds") (the
"Trust") are offered to individuals and institutional investors through
financial intermediaries which have established a dealer agreement with the
Distributor.
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.
- --------------------------------------------------------------------------------
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
TRUST'S SHARES OR 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. 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>
HOW TO READ THIS PROSPECTUS ____________________________________________________
This Prospectus gives you information that you should know about the ABN AMRO
Funds before investing. Brief descriptions are also provided throughout the
Prospectus to better explain certain key points.
FUND HIGHLIGHTS ________________________________________________________________
The following summary provides basic information about the Investor Shares of
the following Funds: Value Fund, Growth Fund, Small Cap Growth Fund, (formerly,
the "Small Cap Fund"), International Equity Fund, TransEurope Fund, Asian
Tigers Fund, Latin America Equity Fund, Real Estate 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"). The
TransEurope, Limited Volatility Fixed Income and Latin America Equity Funds are
not currently offering Investor Shares to the public. This summary is qualified
in its entirety by reference to the more detailed information provided
elsewhere in this Prospectus and in the SAI.
................................................................................
TABLE OF CONTENTS
<TABLE>
<S> <C>
Fund Highlights......................................................... 2
Portfolio Expenses...................................................... 5
Financial Highlights.................................................... 7
Your Account and Doing Business with Us................................. 12
Investment Objectives and Policies...................................... 16
General Investment Policies............................................. 26
Certain Risk Factors.................................................... 28
Investment Limitations.................................................. 30
The Advisor............................................................. 31
The Sub-Advisor......................................................... 33
The Administrator....................................................... 34
The Transfer Agent...................................................... 34
Distribution and Shareholder Servicing.................................. 34
Performance............................................................. 35
Taxes................................................................... 37
Additional Information About Doing Business with Us..................... 39
General Information..................................................... 40
Description of Permitted Investments and Risk Factors................... 42
</TABLE>
................................................................................
INVESTMENT Below are the investment objectives and some basic investment
OBJECTIVES policies of each Fund. For more information, see "Investment
AND POLICIES Objectives and Policies," "General Investment Policies" and
"Description of Permitted Investments and Risk Factors."
EQUITY AND The Growth Fund and Small Cap Growth Fund both seek a high
BALANCED FUNDS level of total return primarily through capital appreciation.
The Value Fund, International Equity Fund and TransEurope
Fund each seek a high level of total return through capital
appreciation and current income.
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 Real Estate Fund seeks a high level of total return,
primarily through investments in the equity securities of
companies principally engaged in, or related to, the real
estate industry.
The Balanced Fund seeks to obtain a favorable total rate
of return through current income and capital appreciation
consistent with the preservation of capital, by 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, by
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, by 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, 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 International 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, by 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, by investing in a portfolio consisting
primarily of short- and intermediate-term fixed income
securities.
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 each 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. See "General Investment Policies,"
"Risk Factors" and "Description of Permitted Investments and
Risk Factors" in this prospectus, and the SAI.
3
<PAGE>
MANAGEMENT ABN AMRO Asset Management (USA) Inc. (the
PROFILE "Advisor")(formerly, LaSalle Street Capital Management,
Ltd.), 208 South LaSalle Street, Chicago, Illinois 60604-
1003 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.
First Data Investor Services Group, Inc. (the
"Administrator") serves as the Administrator and shareholder
servicing agent of the Trust, as well as transfer agent
("Transfer Agent") and dividend disbursing agent for the
Trust. First Data Distributors, Inc., an affiliate of the
Administrator (the "Distributor"), serves as distributor of
the Trust's shares. See "The Advisor," "The Sub-Advisor,"
"The Administrator," "The Transfer Agent" and "Distribution
and Shareholder Servicing."
YOUR ACCOUNT You may generally open an Investor Shares account with a
AND DOING minimum investment of $2,000 per Fund and make additional
BUSINESS WITH investments with as little as $100. However, please contact
US your financial intermediary for its specific requirements
regarding minimum initial and subsequent purchase amounts.
Purchases and 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
net 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 net capital gains) of each of the Money Market
Funds is distributed in the form of daily dividends. Any net
capital gain is distributed at least annually. Distributions
are paid in additional shares unless you elect to take the
payment in cash. See "General Information--Dividends."
INFORMATION/ For more information, call your financial intermediary.
SERVICE
CONTACTS
4
<PAGE>
PORTFOLIO EXPENSES ________________________________________________________
The purpose of the following table is to help you understand the various costs
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in INVESTOR SHARES. Annual operating expenses are
based on expenses incurred during the fiscal year ended December 31, 1997
unless otherwise stated.
SHAREHOLDER TRANSACTION EXPENSES(1)(As a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ALL FUNDS
---------
<S> <C>
Maximum Sales Charge Imposed on Purchases None
Redemption Fee(2) None
- ----------------------------------------------------
</TABLE>
(1) Certain financial intermediaries may impose account fees or other charges.
An IRA Account may be charged separate account fees by its custodian.
(2) A charge, currently $10.00, is imposed on wires of redemption proceeds.
ANNUAL OPERATING EXPENSES (As a percentage of average net assets)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EQUITY/BALANCED FUNDS
---------------------
SMALL INT'L TRANS ASIAN LATIN AMERICA REAL
VALUE GROWTH CAP EQUITY EUROPE TIGERS EQUITY ESTATE BALANCED
----- ------ ----- ------ ------ ------ ------------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers)(1) .80% .80% .80% 1.00% 1.00% 1.00% 1.00% .70% .70%
12b-1 Fees .25% .25% .25% .25% .25% .25% .25% .25% .25%
Other Expenses (after
fee waivers)(2) .47% .49% .55% .62% .54% .86% .83% .88% .53%
- -----------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)(3) 1.52% 1.54% 1.60% 1.87% 1.79% 2.11% 2.08% 1.83% 1.48%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fee from the
Real Estate Fund. The Advisor reserves the right to change the amount of or
terminate its waiver at any time in its sole discretion. Absent fee
waivers. Advisory Fees for the Fund would be 1.00%.
(2) Absent fee waivers, "Other Expenses" for the TransEurope Fund are estimated
to be .79%. "Other Expenses" for the TransEurope Fund have been restated to
reflect current fee waivers. "Other Expenses" for the TransEurope, Latin
America Equity and Real Estate Funds are based on estimated amounts for the
current fiscal year.
(3) Absent waivers described above, "Total Operating Expenses" for the
TransEurope Fund and the Real Estate Fund would be 2.04% and 2.13%,
respectively.
- --------------------------------------------------------------------------------
<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)(1) .50% .50% .48% .80% .50%
12b-1 Fees .25% .25% .25% .25% .25%
Other Expenses (after
fee waivers)(2) .44% .50% .53% .74% .24%
- -------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)(3) 1.19% 1.25% 1.26% 1.79% .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 change the amount of or terminate its waiver
at any time in its sole discretion. Absent fee waivers, "Advisory Fees" for
the Funds would be .60%. See "The Advisor."
(2) The Administrator is waiving, on a voluntary basis, a portion of its fee
from each Fund (except the Limited Volatility Fixed Income Fund). The
Administrator reserves the right to change the amount of or terminate its
waiver at any time in its sole discretion. Absent fee waivers, "Other
Expenses" would be: Fixed Income Fund--.49%, Intermediate Government Fixed
Income Fund--.55%, Tax-Exempt Fixed Income Fund--.58% and International
Fixed Income Fund--.79%. "Other Expenses" for the Limited Volatility Fixed
Income Fund are based on estimated amounts for the current fiscal year.
"Other Expenses" have been restated to reflect current fees and fee
waivers.
(3) Absent waivers described above, "Total Operating Expenses" for the Funds
would be: Fixed Income Fund--1.34%, Intermediate Government Fixed Income
Fund--1.40%, Tax-Exempt Fixed Income Fund--1.43%, International Fixed
Income--1.84% and Limited Volatility Fixed Income Fund--1.34%. These fee
waivers are voluntary and may be discontinued at any time.
5
<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)(1) .20% .20% .20% .19%
12b-1 Fees .25% .25% .25% .25%
Other Expenses (after fee waivers)(2) .17% .21% .24% .14%
- ----------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(3) .62% .66% .69% .58%
- ----------------------------------------------------------------------------
</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fees from
each Money Market Fund (except the Government Money Market Fund). The
Advisor reserves the right to change the amount of or terminate its waiver
at any time in its sole discretion. Absent fee waivers, "Advisory Fees"
would be: 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 Fund. The Administrator reserves the right to change the amount
of or terminate its waiver at any time in its sole discretion. The
Distributor is waiving, on a voluntary basis, a portion of its shareholder
servicing fee from each Fund. The Distributor reserves the right to change
the amount of or terminate its waiver at any time in its sole discretion.
Absent fee waivers, "Other Expenses" for the Funds would be: Treasury Money
Market Fund--.50%, Government Money Market Fund--.47%, Money Market Fund--
.46% and Tax-Exempt Money Market Fund--.47%. "Other Expenses" have been
restated to reflect current fee waivers.
(3) Absent waivers described above, "Total Operating Expenses" for the Funds
would be: Treasury Money Market Fund--1.10%, Government Money Market Fund--
.92%, Money Market Fund--1.06% and Tax-Exempt Money Market Fund--1.07%.
These fee waivers are voluntary and may be discontinued at any time.
EXAMPLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1 YR. 3 YRS. 5 YRS. 10 YRS.
----- ------ ------ -------
<S> <C> <C> <C> <C>
Value Fund $15 $48 $ 83 $181
Growth Fund 16 49 84 183
Small Cap Growth Fund 16 50 87 190
International Equity Fund 19 59 101 219
TransEurope Fund 18 56 -- --
Asian Tigers Fund 21 66 113 244
Latin America Equity Fund 21 65 112 241
Real Estate Fund 18 57 -- --
Balanced Fund 15 47 81 177
Fixed Income Fund 12 38 65 144
Intermediate Government Fixed Income 13 40 69 151
Tax-Exempt Fixed Income Fund 13 40 69 152
International Fixed Income Fund 18 56 97 211
Limited Volatility Fixed Income Fund 10 32 -- --
Treasury Money Market Fund 6 20 35 77
Government Money Market Fund 7 21 37 82
Money Market Fund 7 22 38 86
Tax-Exempt Money Market Fund 6 19 32 73
- ------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED ON TOTAL OPERATING EXPENSES, EXCEPT FOR THE LATIN AMERICA
EQUITY FUND, TRANSEUROPE FUND, REAL ESTATE 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 you in understanding the various costs and expenses
that may be directly or indirectly borne by investors in Investor Shares of the
Funds. Over the long-term, you may indirectly pay more than the maximum front-
end sales charges permitted by the National Association of Securities Dealers,
Inc. If you purchase shares through a financial intermediary, you may be
charged separate fees by the financial intermediary. An IRA Account may be
charged separate fees by its custodian. See "The Advisor," "The Administrator"
and "Distribution and Shareholder Servicing."
6
<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 30, 1998 on
the Trust's financial statements as of December 31, 1997. The Trust's financial
statements and the auditors report thereon are included in the Trust's 1997
Annual Report to Shareholders and incorporated by reference to the Trust's SAI
under "Financial Information." This table should be read in conjunction with
the Trust's financial statements and related notes thereto. As of December 31,
1997, the TransEurope Fund and Limited Volatility Fixed Income Fund had not yet
commenced operations. In addition, as of December 31, 1997, Investor Shares of
the Latin America Equity Fund and Real Estate Fund were not available for
purchase by the public. 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 AN INVESTOR 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
----------
1997 $13.26 $ 0.20 $ 3.76 $(0.20) $(0.48) $0.00 $16.54 30.20%* $1,965 1.26% 1.32 % 1.32%
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(1) 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
-----------
1997 $13.09 $ 0.08 $ 2.97 $(0.08) $(1.46) $0.00 $14.60 23.65%* $3,485 1.27% 0.54 % 1.33%
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(2) 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 GROWTH FUND#
----------------------
1997 $13.00 $(0.13) $ 2.05 $ 0.00 $(1.63) $0.00 $13.29 15.45%* $ 552 1.29% (0.97)% 1.35%
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(3) 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
----------
1997 1.26 % 79% $0.0408
1996 1.94 58 0.0493
1995 2.79 37 N/A
1994 3.13 38 N/A
1993(1) (5.00)** 40 N/A
GROWTH FUND
-----------
1997 0.48 % 62% $0.0600
1996 1.11 58 0.0600
1995 1.10 71 N/A
1994 1.30 68 N/A
1993(2) (3.88)** 82 N/A
SMALL CAP GROWTH FUND#
----------------------
1997 (1.03)% 170% $0.0597
1996 (0.52) 158 0.0599
1995 (0.08) 142 N/A
1994 0.02 43 N/A
1993(3) (32.37)** 27 N/A
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
*Sales loads, which were imposed prior to October 10, 1997, are not included
in total return.
**Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Shares' 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.
#Formerly, the "Small Cap Fund."
1.Commenced operations on March 26, 1993. All ratios and total returns for the
period have been annualized.
2.Commenced operations on March 8, 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.
7
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
Ratio of Ratio of
Realized Net Expenses
and Net Ratio of Investment to
Net Net Unrealized Distri- Asset Net Expenses Income Average
Asset Invest- Gains Dividends butions Contri- Value Assets to (Loss) to Net
Value ment (Losses) from Net from bution End End of Average Average Assets
Beginning Income 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>
INTERNATIONAL EQUITY FUND
-------------------------
1997 $15.79 $ 0.01 $ 0.66 $(0.03) $(1.09) $0.00 $15.34 4.28 %* $1,245 1.60% (0.05)% 1.65%
1996 14.52 0.04 1.35 0.00 (0.15) 0.03 15.79 9.85*+ 1,608 1.61 0.20 1.61
1995 12.96 0.05 1.73 (0.02) (0.20) 0.00 14.52 13.79 * 1,686 1.68 0.42 1.68
1994 12.58 0.02 0.37 0.00 (0.01) 0.00 12.96 3.08 * 1,179 1.73 0.03 2.22
1993(1) 10.93 (0.01) 1.70 0.00 (0.04) 0.00 12.58 23.52 * 321 1.92 (0.38) 20.12**
ASIAN TIGERS FUND
-----------------
1997 $11.89 $ 0.05 $(4.36) $ 0.00 $(0.01) $0.00 $ 7.57 (36.25)%* $ 334 1.85% 0.30% 1.89%
1996 10.44 (0.02) 1.48 (0.01) (0.02) 0.02 11.89 14.21*++ 840 1.79 (0.15) 1.79
1995 9.47 0.11 0.95 (0.09) 0.00 0.00 10.44 11.18 * 733 1.81 1.05 1.88
1994(2) 10.00 0.01 (0.53) 0.00 (0.01) 0.00 9.47 (5.37)* 705 1.90 0.15 2.75**
<CAPTION>
Ratio of
Net
Investment
Income
(Loss) to
Average
Net
Assets Portfolio Average
(Excluding Turnover Commission
Waivers) Rate Rate+++
- ----------------------------------------------
<S> <C> <C> <C>
INTERNATIONAL EQUITY FUND
-------------------------
1997 (0.10)% 17% $0.0438
1996 0.20 9 0.0561
1995 0.42 11 N/A
1994 (0.46) 6 N/A
1993(1) (18.58)** 13 N/A
ASIAN TIGERS FUND
-----------------
1997 0.26 % 42% $0.0076
1996 (0.15) 24 0.0106
1995 0.98 28 N/A
1994(2) (0.70)** 13 N/A
</TABLE>
- ----------------------------------------------
- ----------------------------------------------
* Sales loads, which were imposed prior to October 10, 1997, are not included
in total return.
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Shares' 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 Investor Shares would have
been 9.64%.
++ 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 Investor Shares would have
been 14.02%.
+++ 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 April 12, 1993. All ratios and total returns for
the period have been annualized.
2. Commenced operations on January 12, 1994. All ratios and total returns for
the period have been annualized.
8
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED) _______________________________________________
<TABLE>
<CAPTION>
Ratio of
Net
Ratio of Ratio of Investment
Realized Net Expenses Income
and Net Ratio of Investment to (Loss) to
Unrealized Distri- Asset Net Expenses Income Average Average
Net 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>
BALANCED FUND
-------------
1997 $ 10.98 $0.30 $ 2.06 $(0.30) $(0.31) $12.73 21.80%* $4,157 1.18% 2.43% 1.24% 2.37 %
1996 10.75 0.30 1.04 (0.32) (0.79) 10.98 12.86* 3,710 1.19 2.89 1.19 2.89
1995 9.53 0.34 1.67 (0.36) (0.43) 10.75 21.52* 3,949 1.22 3.36 1.22 3.36
1994 10.03 0.27 (0.49) (0.27) (0.01) 9.53 (2.29)* 2,894 1.24 2.86 1.34 2.76
1993(1) 10.28 0.20 0.12 (0.22) (0.35) 10.03 4.07* 1,265 1.30 2.30 5.06** (1.46)**
FIXED INCOME FUND
-----------------
1997 $10.09 $0.59 $ 0.29 $(0.58) $(0.01) $10.38 8.92%* $ 428 0.96% 5.71% 1.12% 5.55 %
1996 10.35 0.57 (0.26) (0.57) 0.00 10.09 3.24* 459 0.98 5.65 1.08 5.55
1995 9.32 0.55 1.04 (0.56) 0.00 10.35 17.40* 646 0.99 5.72 1.09 5.62
1994 10.24 0.50 (0.90) (0.52) 0.00 9.32 (3.97)* 442 0.98 5.38 1.08 5.28
1993(2) 10.30 0.35 0.23 (0.37) (0.27) 10.24 7.44* 86 1.06 4.08 42.44** (37.30)**
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
1997 $ 9.85 $0.57 $ 0.16 $(0.54) $ 0.00 $10.04 7.66%* $ 104 0.96% 5.44% 1.10% 5.30 %
1996 10.05 0.49 (0.18) (0.51) 0.00 9.85 3.30* 251 0.99 4.87 1.09 4.77
1995 9.32 0.49 0.76 (0.52) 0.00 10.05 13.59* 2,946 0.98 5.18 1.08 5.08
1994 10.07 0.43 (0.73) (0.45) 0.00 9.32 (3.03)* 1,133 1.02 5.05 1.12 4.95
1993(3) 10.21 0.28 (0.02) (0.30) (0.10) 10.07 3.42* 46 1.04 3.85 77.08** (72.19)**
<CAPTION>
Portfolio Average
Turnover Commission
Rate Rate+++
- ------------------------------------------
<S> <C> <C>
BALANCED FUND
-------------
1997 111% $0.0450
1996 104 0.0496
1995 85 N/A
1994 85 N/A
1993(1) 126 N/A
FIXED INCOME FUND
-----------------
1997 233% N/A
1996 194 N/A
1995 59 N/A
1994 126 N/A
1993(2) 163 N/A
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
1997 283% N/A
1996 179 N/A
1995 115 N/A
1994 124 N/A
1993(3) 81 N/A
</TABLE>
- ------------------------------------------
- ------------------------------------------
* Sales loads, which were imposed prior to October 10, 1997, are not included
in total return.
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Shares' 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 March 9, 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 rates and total returns for the
period have been annualized.
9
<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
----------------------------
1997 $ 9.97 $0.47 $ 0.41 $(0.46) $ 0.00 $10.39 9.11 %* $ 537 0.98% 4.59% 1.14% 4.43 %
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 10.18 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(1) 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
-------------------------------
1997 $10.23 $0.49 $(1.12) $ 0.00 $ 0.00 $ 9.60 (6.16)%* $ 68 1.47% 3.83% 1.51% 3.78 %
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(2) 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
--------------------------
1997 $ 1.00 $0.05 $ 0.00 $(0.05) $ 0.00 $ 1.00 4.70 %* $ 6,722 0.58% 4.60% 0.88% 4.30 %
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(3) 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
----------------------------
1997 54% N/A
1996 98 N/A
1995 129 N/A
1994 146 N/A
1993(1) 149 N/A
INTERNATIONAL FIXED INCOME FUND
-------------------------------
1997 52% N/A
1996 85 N/A
1995 105 N/A
1994 138 N/A
1993(2) 146 N/A
TREASURY MONEY MARKET FUND
--------------------------
1997 N/A N/A
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(3) N/A N/A
</TABLE>
- ---------------------------------
- ---------------------------------
*Sales loads, which were imposed prior to October 10, 1997, are not included
in total return.
**Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Shares' 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 March 9, 1993. All ratios and total returns for the
period have been annualized.
2.Commenced operations on April 26, 1993. All ratios and total returns for the
period have been annualized.
3.Commenced operations on March 25, 1993. All ratios and total returns for the
period have been annualized.
10
<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
----------------------------
1997 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 5.05%* $8,932 0.59% 4.95% 0.72% 4.82 %
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(1) 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
-----------------
1997 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 5.12%* $1,282 0.59% 5.00% 0.85% 4.74 %
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
----------------------------
1997 $1.00 $0.03 $0.00 $(0.03) $0.00 $1.00 3.10%* $2,978 0.58% 3.07% 0.89% 2.76 %
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
----------------------------
1997 N/A N/A
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
MONEY MARKET FUND
-----------------
1997 N/A N/A
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
----------------------------
1997 N/A N/A
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(3) N/A N/A
</TABLE>
- ---------------------------------
- ---------------------------------
*Sales loads which were imposed prior to October 10, 1997, are not included
in total return.
**Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Shares' 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 April 22, 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.
11
<PAGE>
................................................................................
WHAT IS
AN
INTERMEDIARY?
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 Fund shares to its customers.
................................................................................
YOUR ACCOUNT AND DOING BUSINESS WITH US
Investor Shares are sold on a continuous basis and may be purchased through
financial institutions or broker-dealers which have established a dealer
agreement with the Distributor ("Intermediaries"). The Funds may make Investor
Shares available to other investors in the future. Shares of each Fund are
offered only to residents of states and other jurisdictions 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 Shares of the Funds may be
PURCHASE, purchased through
REDEEM AND Intermediaries, which
EXCHANGE provide various services to
SHARES their customers, on any day
on which the New York Stock Exchange ("NYSE") is open for
business (a "Business Day"). The purchase price of Investor
Shares of the Fund is the net asset value next determined after
a purchase order is effective. A purchase order for Investor
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 net
asset value is calculated. However, an order may be canceled if
the custodian does not receive Federal funds before net asset
value is determined on the next Business Day, and you could be
liable for any fees or expenses incurred by the Trust. A
purchase order for Investor Shares of the Money Market Funds
will be effective as of the Business Day received by the
Transfer Agent if the Transfer Agent receives the order and the
Custodian receives Federal funds payment before 1:00 p.m.,
Eastern time on such day. Each Intermediary may impose its own
rules regarding investing in the Funds, including procedures
for purchases, redemptions, and exchanges. Contact your
Intermediary for information about the services available to
you and for specific instructions on how to buy, sell and
exchange shares. Certain Intermediaries may charge account
fees. Information concerning shareholder services and any
charges will be provided to you by your Intermediary. Some
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.
Other
Information Purchases of Investor Shares may be made by direct deposit or
Regarding Automated Clearing House ("ACH") transactions if your
Purchases Intermediary offers such services. Please contact your
Intermediary to find out if these services are available to
you and for more information about direct deposit or ACH
transactions.
12
<PAGE>
................................................................................
HOW DOES
AN
EXCHANGE TAKE
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.
................................................................................
Purchase requests for the Money Market Funds submitted to
the Transfer Agent before 5:00 p.m., Eastern time, by
accounts for which ABN AMRO North America, Inc. or certain of
its affiliates act in a fiduciary, agency, investment
advisory or custodian capacity, will become effective at the
net asset value determined as of 5:00 p.m., Eastern time that
same Business Day.
Your Intermediary also may impose a wire charge on
purchases.
No certificates representing shares will be issued.
Automatic
Investment You may systematically
Plan ("AIP") purchase Investor Shares
through deductions from your
checking account, provided
these accounts are
maintained through banks
which are part of the ACH
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 should contact
your intermediary to find
out if the AIP is available
to you. You may obtain an
AIP application form by
calling 1-800-443-4725 or by
contacting your
Intermediary.
HOW TO
EXCHANGE
SHARES
When Can You
Exchange Once payment for your shares has been received and accepted
Shares? (i.e., an account has been established), you may exchange
some or all of your Investor Shares for Investor Shares of
other Funds within the Trust.
Exchanges will be made only after instructions in writing
or by telephone are received by the Transfer Agent. Shares
may be exchanged on any Business Day.
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
Exchange of To exchange shares, you should contact your Intermediary, who
Shares will contact the Transfer Agent and effect the exchange on
your behalf.
If an exchange request in good order is received by the
Transfer Agent prior to the time the net asset value is
determined for the Equity, Balanced and Fixed Income Funds,
and by 1:00 p.m., Eastern time for the Money Market Funds, on
any Business Day, the exchange usually will occur on that
day. Exchanges are made at the net asset value next
determined after the request is received by the Transfer
Agent. Your Intermediary may have earlier cutoff times for
exchange requests. Please contact your Intermediary for more
information about its exchange policies. Purchase requests
for the Money Market Funds submitted to the Transfer Agent
before 5:00 p.m., Eastern time, by accounts for which ABN
AMRO North America, Inc. or certain of its affiliates act in
a fiduciary, agency,
13
<PAGE>
................................................................................
WHAT IS A SIGNATURE 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.
................................................................................
investment advisory or custodian capacity, will become
effective at the net asset value determined as of 5:00 p.m.,
Eastern time that same Business Day.
HOW TO REDEEM You may redeem your shares on any Business Day. Redemption
(SELL) SHARES requests must be made directly to your Intermediary. If a
redemption request is received by the Transfer Agent prior to
the time net asset value is determined for the Equity,
Balanced and Fixed Income Funds, and by 1:00 p.m., Eastern
time for the Money Market Funds, on any Business Day, the
redemption usually will occur on that day. Redemptions are
made at the net asset value next determined after the request
is received by the Transfer Agent. Your Intermediary may have
earlier cutoff times for redemption requests. Please contact
your Intermediary for more information regarding redemption
orders.
Purchase requests for the Money Market Funds submitted to
the Transfer Agent before 5:00 p.m., Eastern Time, by
accounts for which ABN AMRO North America, Inc. or certain of
its affiliates act in a fiduciary, agency, investment
advisory or cusodian capacity, will become effective at the
net asset value determined as of 5:00 p.m., Eastern time that
same Business Day.
A redemption request submitted by mail 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. This 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 or to a commercial bank account
previously designated either on the Account Application or by
written instruction to the Transfer Agent.
Redemption
Proceeds Payment to shareholders for shares redeemed generally will be
made within seven days after receipt by the Transfer Agent of
the valid redemption request. However, at various times, a
Fund may be asked to redeem shares for which it has not yet
received good payment. In such circumstances, the forwarding
of proceeds may be delayed for up to 15 days from the date of
purchase or until payment has been collected for the purchase
of your shares.
14
<PAGE>
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,
you may incur brokerage costs and taxes in converting such
securities to cash.
You may have redemption proceeds mailed to your address
or mailed or wired to a commercial bank account previously
designated on your Account Application. There is no charge
for having redemption proceeds mailed to a designated bank
account. Under most circumstances, payments will be wired on
the next Business Day following receipt of a valid
redemption request. Redemption proceeds may be transferred
by wire for a wire charge of $10.00, which is deducted from
the amount of the redemption. Redemption proceeds may not be
transmitted by Federal Reserve wire on federal holidays
restricting wire transfers.
Communications Neither the Trust nor the Transfer Agent will be responsible
with the for any loss, liability, cost or expense for acting upon
Transfer Agent 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 an Intermediary
experiences difficulties placing redemption orders by
telephone, the Intermediary may wish to consider placing the
order by other means. Your Intermediary may not close your
account by telephone. Please contact your Intermediary for
more information regarding its specific requirements for
written and telephone requests for redemptions and signature
guarantee requirements.
See "Purchase and Redemption of Shares" in the Statement
of Additional Information for examples of when your right to
redeem your shares may be suspended.
Systematic The Funds offer a Systematic Withdrawal Plan ("SWP") for
Withdrawal Plan Investor Shareholders who wish to receive regular
distributions from their account. Upon commencement of the
SWP, your account must have a current value of $5,000 or
more. You may elect to receive automatic payments by check
or ACH of $50 or more on a monthly, quarterly, semi-annual
or annual basis. You should contact your Intermediary to
find out if a SWP is available to you and for information
about the SWP. A SWP Application may be obtained by calling
1-800-443-4725 or by contacting your Intermediary.
If SWP withdrawals exceed income dividends, your invested
principal in your account will be depleted. Thus, depending
on the frequency and amounts of the withdrawal payments
and/or any fluctuations in the net asset value per share,
your original investment could be exhausted entirely. To
participate in the SWP, you must have your dividends
automatically reinvested. To change or cancel the SWP,
please contact your Intermediary.
15
<PAGE>
CHECKWRITING You may redeem your Money Market Investor Shares by writing
SERVICE checks on your account. Once you have signed and returned a
signature card, you will receive a supply of checks. A check
(Money Market may be made payable to any person, and your account will
Funds) continue to earn dividends until the check clears.
Because of the difficulty of determining in advance the
exact value of a Fund account, you may not use a check to
close your account. Your account may be charged a fee for
stopping payment of a check upon your request or if the check
cannot be honored because of insufficient funds or other
valid reasons.
You should contact your Intermediary to find out if
checkwriting services are available to you and for more
information about checkwriting services.
................................................................................
WHAT ARE INVESTMENT OBJECTIVES AND POLICIES?
Each Fund's investment objective 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 investment policies section spells out
the types of securities in which each Fund invests.
................................................................................
INVESTMENT OBJECTIVES AND POLICIES _____________________________________________
VALUE FUND The Value Fund seeks a high level of total return through
capital appreciation and current income.
Under normal circumstances, the Value Fund invests 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 Fund primarily invests in
common stocks that: (i) are below average price to earnings,
price to book value, price to sales, price to cash flow ratios
and/or above average dividend yields; and (ii) are issued by
companies that the Advisor believes are financially sound and
showing improving fundamentals not yet reflected in the market.
Any remaining Fund assets 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");
(iii) preferred stock convertible into common stocks; and
(iv) U.S. dollar denominated equity securities of foreign
issuers (including sponsored American Depositary Receipts
("ADRs")); and interests in real estate investment trusts
("REITs").
GROWTH FUND The Growth Fund seeks a high level of total return primarily
through capital appreciation.
Under normal circumstances, the Growth Fund invests at
least 65% of its total assets in common stocks of
corporations of any size that, in the Advisor's opinion, have
strong prospects for appreciation through growth in earnings.
The Growth Fund primarily
16
<PAGE>
invests in common stocks that: (i) 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; (iv) U.S. dollar denominated
equity securities of foreign issuers (including sponsored
ADRs); and (v) REITs.
SMALL CAP The Small Cap Growth Fund (formerly, the "Small Cap Fund")
GROWTH FUND seeks a high level of total return primarily through capital
appreciation.
Under normal circumstances, the Small Cap Growth Fund
invests at least 65% of its total assets in common stocks of
corporations with smaller capitalization levels that the
Advisor believes have strong prospects for appreciation
through growth in earnings. The Advisor emphasizes a
diversified portfolio of common stocks of companies with
aggregate market capitalization of less than $1.5 billion.
In selecting stocks for the Fund, factors reviewed include
sales and earnings growth rates and the strength of the
issuer's balance sheet.
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; (iv) U.S. dollar denominated
equity securities of foreign issuers (including sponsored
ADRs); and (v) interests in real estate investment trusts
("REITs"). The Fund invests in equity securities of foreign
issuers only if (i) they are listed on national securities
exchanges or actively traded in the over-the-counter market
and (ii) they satisfy in substance the criteria for
investing in smaller capitalization stocks set forth above.
INTERNATIONAL The International Equity Fund seeks a high level of total
EQUITY FUND return through capital appreciation and current income.
Under normal circumstances, the International Equity Fund
invests 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 does not necessarily spread its
investments among more than three countries other than the
U.S., the Advisor intends to diversify the Fund's
investments among countries to reduce currency risk.
Investments are 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. The Fund may invest or hold a portion of its assets
in U.S. dollars and foreign currencies, including
multinational currency units. Normally, a portion of the
Fund's total assets normally is held in U.S. dollars.
Any remaining Fund assets may be invested in: (i) common
stocks of closed-end management investment companies that
invest primarily in international common stocks; (ii) stocks
of U.S. issuers; (iii) convertible securities of U.S.
issuers (whether or not they are listed on national
securities exchanges); and (iv) money market instruments.
17
<PAGE>
TRANSEUROPE The TransEurope Fund seeks a high level of total return
FUND through capital appreciation and current income.
Under normal circumstances, 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 developing
markets of Europe. The Fund may also invest in the equity
securities of issuers in Eastern European countries,
including developing countries such as: the Czech Republic,
Hungary, Poland and Slovakia. Investing in developing
countries involves special risks not associated with
domestic markets. See "Certain Risk Factors."
Any remaining Fund assets may be invested in money market
instruments of European issuers. The Fund may invest or hold
a portion of its assets in U.S. dollars and European
currencies, including multinational currency units.
Normally, a portion of the Fund's total assets will be held
in U.S. dollars. The Fund currently is not offering its
shares to the public.
ASIAN TIGERS The Asian Tigers Fund seeks to achieve capital appreciation.
FUND
The Asian Tigers Fund primarily invests 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
invest in sponsored ADRs of Asian issuers that are traded on
stock exchanges in the United States. Currently, 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, the Fund invests at least 65%
of its total assets 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 Lanka, South Korea and
Taiwan, and other developing markets. The Fund has no set
policy for allocating investments among Asian countries.
Allocation of investments among countries depends 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 may 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 issuers.
In selecting industries and particular issuers, the
Advisor evaluates 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.
18
<PAGE>
The Fund may invest or hold a portion of its assets in
U.S. dollars and Asian currencies. Normally, a portion of
the Fund's total assets is held in U.S. dollars.
LATIN AMERICA The Latin America Equity Fund seeks long-term capital
EQUITY FUND appreciation.
The Fund primarily invests 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, the Fund invests at least 65% of its
total assets 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
regulation and restrictions may limit the amount, mode and
extent of investment in companies in such countries.
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.
The Fund may invest or hold a portion of its assets in
U.S. dollars and Latin American currencies. Normally, a
portion of the Fund's total assets is held in U.S. dollars.
The Fund may enter into interest rate swaps, currency
transactions, caps, collars and floors for hedging purposes.
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 currently is not
offering Investor Shares to the public.
19
<PAGE>
REAL ESTATE The Real Estate Fund seeks a high level of total return, a
FUND combination of growth and income, primarily through
investments in equity securities of companies principally
engaged in the real estate industry. The Fund may invest in
shares or units of beneficial interests of REITs and limited
partnership interests in master limited partnerships.
Under normal circumstances the Fund invests at least 65%
of its assets in equity securities of U.S. or foreign
companies principally engaged in the real estate industry.
For purposes of the Fund's investment policies, a company is
"principally engaged" in the real estate industry if (i) it
derives at least 50% of its revenues or profits from the
ownership, construction, management, financing, or sale of
residential, commercial, or industrial real estate, or (ii)
it has at least 50% of the fair market value of its assets
invested in residential, commercial, or industrial real
estate. Companies in the real estate industry may include,
but are not limited to, REITs or other securitized real
estate investments, master limited partnerships that are
treated as corporations for Federal income tax purposes and
that invest in interests in real estate, real estate
operating companies, real estate brokers or developers,
financial institutions that make or service mortgages, and
companies with substantial real estate holdings, such as
lumber and paper companies, hotel companies, residential
builders and land-rich companies. The Fund does not invest
in real estate directly.
Any refinancing assets of the Fund may be invested in
securities of companies outside the real estate industry,
including: U.S. dollar denominated equity securities of
foreign issuers, including sponsored ADRs; fixed income
securities rated in the four highest rating categories by an
NRSRO; money market instruments and U.S. Government
securities. The Fund may engage in short sales.
The Fund may invest in convertible securities rated in
the four highest rating categories by an NRSRO. The Fund may
invest up to 100% of its assets in equity securities of
foreign companies principally engaged in the real estate
industry.
The Fund may be more susceptible to the risks associated
with the direct ownership of real estate than an investment
company that does not concentrate its investment in this
manner.
The Real Estate Fund's investments may be subject to the
risks associated with the direct ownership of real estate.
These risks include: the cyclical nature of real estate
values; risks related to general and local economic
conditions; overbuilding and increased competition;
increases in property taxes and operating expenses;
demographic trends and variations in rental income; changes
in zoning laws; casualty or condemnation losses;
environmental risks; regulatory limitations on rents;
changes in neighborhood values; related party risks; changes
in the appeal of properties to tenants; increases in
interest rates; and other real estate capital market
influences. Generally, increases in interest rates increase
the costs of obtaining financing, which could directly and
indirectly decrease the value of the Fund's investments. The
Fund's share price and investment return may fluctuate, and
a shareholder's investment when redeemed may be worth more
or less than
20
<PAGE>
its original cost. Certain of these securities that are
issued by foreign companies may be subject to the risks
associated with investing in foreign securities in addition
to the risks associated with the direct ownership of real
estate.
The Fund is non-diversified for purposes of 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.
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.
Under normal circumstances, the Balanced Fund invests 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) equity securities; (ii) corporate bonds and
debentures of U.S. or foreign issuers rated in the highest
four rating categories by an NRSRO; (iii) securities
denominated in U.S. dollars or in foreign currencies,
including multinational currency units, 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; (iv) short-term commercial paper of
U.S. or foreign issuers rated in the highest two rating
categories by an NRSRO; (v) 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;
(vi) obligations denominated in U.S. dollars or foreign
currencies 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) STRIPS and
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)
guaranteed investment contracts ("GICs") and bank investment
contracts ("BICs") deemed by the Advisor to be of investment
grade; (xiii) swaps; (xiv) municipal notes rated in the
highest two rating categories by an NRSRO; and (xv)
municipal bonds rated in the highest three rating categories
by an NRSRO.
The remainder of the Fund's assets may be invested in:
(i) debt securities convertible into common stocks; (ii)
preferred stocks convertible into common stocks; (iii) U.S.
dollar denominated equity securities of foreign issuers
(including sponsored ADRs); (iv) foreign securities; and (v)
equity options. The Fund may invest in equity securities of
companies of all sizes, including smaller capitalization
companies. The Fund has no minimum rating criteria for
convertible securities.
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<PAGE>
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.
Under normal circumstances, the Fixed Income Fund invests
as fully as feasible (and at least 65% of its total assets)
in the following fixed income securities: (i) U.S. and
foreign corporate bonds and debentures rated in the highest
four rating categories by an NRSRO; (ii) obligations issued
or guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities; (iii) short-
term commercial paper of U.S. or foreign issuers rated in
the highest two rating categories by an NRSRO; (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) 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 three
rating categories by an NRSRO; (viii) asset-backed
securities rated in the highest three rating categories of
an NRSRO; (ix) STRIPS and receipts; (x) repurchase
agreements involving such securities; (xi) loan
participations, in which the Fund does 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; and (xvi) municipal bonds rated in
the highest three rating categories by an NRSRO.
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.
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 invests
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 such as mortgage-backed securities, and
repurchase agreements involving such securities.
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Normally, the Fund maintains an average weighted maturity
of three to ten years; under certain circumstances, however,
the average weighted maturity may fall below three years.
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.
Under normal circumstances, the Tax-Exempt Fixed Income
Fund invests 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 categories by an NRSRO, and
invests 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; (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.
INTERNATIONAL The International Fixed Income Fund seeks a high level of
FIXED INCOME total return relative to funds with like investment
FUND 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.
Under normal circumstances, the International Fixed
Income Fund invests as fully as feasible (at least 65% of
its total assets) in investment grade 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 are made in high quality securities denominated
in various currencies, including the Euro.
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Fixed income securities consist of: (i) corporate bonds
and debentures rated in the highest four rating categories
by an NRSRO; (ii) short-term commercial paper of U.S. or
foreign issuers rated in the highest two rating categories
by an NRSRO; (iii) securities issued or guaranteed by
foreign governments, their political subdivisions, agencies
or instrumentalities ("sovereign debt"); (iv) obligations of
supranational entities; (v) repurchase agreements involving
such securities; (vi) loan participations; and (vii) swaps.
Any remaining Fund assets may 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) obligations
(certificates of deposit, time deposits, and bankers'
acceptances) of commercial banks, savings and loan
institutions, and U.S. and foreign 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; (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. The
Fund may invest or hold a portion of its assets in U.S.
dollars and foreign currencies, including multinational
currency units. Normally, a portion of the Fund's total
assets is held in U.S. dollars.
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 is non-diversified for purposes of 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.
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; (ii) obligations
issued or guaranteed as to principal and interest by the
U.S. Government, its agencies or instrumentalities; (iii)
short-term commercial paper of U.S. or foreign issuers rated
in the highest two rating categories by an NRSRO;
(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) 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
24
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the highest three rating categories by an NRSRO; (vii)
mortgage-backed securities rated in the highest three 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; and
(xiii) municipal bonds rated in the highest three rating
categories by an NRSRO.
The Fund may invest in forward commitments and securities
of foreign issuers.
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.
The Fund currently is not offering its shares to the
public.
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 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 is 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 invests primarily in U.S. Treasury Obligations (other
than STRIPS) and repurchase agreements involving such
securitiies.
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.
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<PAGE>
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
time of investment; (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; (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 Federal
alternative minimum tax.
The Tax-Exempt Money Market Fund invests at least 80% of
its net 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; 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 Federal alternative minimum tax.
GENERAL INVESTMENT POLICIES ____________________________________________________
THE EQUITY AND Each Fund may invest in convertible securities.
BALANCED FUNDS
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. The
Fixed Income Fund, Tax-Exempt Fixed Income Fund,
International Fixed Income Fund, Limited Volatility Fixed
Income Fund and Balanced Fund may purchase mortgage-backed
securities issued by non-governmental issuers that are rated
in the highest three rating categories of an NRSRO.
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<PAGE>
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 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 may invest only in U.S.
dollar denominated securities, must maintain an average
maturity on a dollar-weighted basis of 90 days or less, and
may 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 invests no more than 10% of its
net assets in illiquid securities.
ALL FUNDS Each Fund invests no more than 15% of its total assets in
restricted securities. Each Fund invests no more than 15% of
its net assets in illiquid securities. All Funds may invest
in variable and floating rate obligations and may purchase
securities on a when-issued basis, and may enter into
repurchase agreements. Each 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 may engage in securities lending.
There is 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 may 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, each of the
Equity Funds, Fixed Income Funds and Balanced Fund may
invest up to 100% of its assets in money market instruments,
and may hold U.S. dollars and foreign currencies, including
multinational currency units.
RATINGS NRSROs provide ratings for certain instruments in which the
Funds may invest. For example, bonds rated in the fourth
highest rating category (investment grade bonds) have an
adequate capacity to pay principal and interest, but may
have speculative characteristics as well. 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
27
<PAGE>
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. The Funds may invest in unrated securities that the
Advisor (or Sub-Advisor) determine to be of comparable
quality at the time of purchase.
For a description of ratings, see the SAI.
CERTAIN RISK FACTORS ___________________________________________________________
The investment policies of each Fund entail certain risks
and considerations of which you should be aware.
Equity Investments in equity securities are generally subject to
Securities market risks that may cause their prices to fluctuate over
time. The values of convertible equity securities are also
affected by prevailing interest rates, the credit quality of
the issuer and any call provision. Fluctuations in the value
of equity securities in which a Fund invests will cause the
net asset value of the Fund to fluctuate.
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. There is a risk that the current interest
rate on floating and variable rate instruments may not
accurately reflect existing market interest rates. Fixed
income securities rated BBB by S&P or Baa by Moody's (the
lowest ratings of investment grade bonds) are deemed by
these rating services to have speculative characteristics.
Foreign Securities of foreign issuers are subject to certain risks
Securities 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.
28
<PAGE>
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, 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. A Fund's investments in
developing countries can be considered speculative, and
therefore may offer higher potential for gains and losses
than investments in developed markets of the world. With
respect to any developing country, the risks associated with
foreign investing are greater. The economies of developing
countries generally are heavily dependent upon international
trade and, accordingly, have been and may continue to be
adversely affected by trade barriers, exchange or currency
controls, managed adjustments in relative currency value and
other protectionist measures imposed or negotiated by the
countries with which they trade.
Investments in securities of foreign issuers are
frequently denominated in foreign currencies and the value
of a 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 a Fund may incur costs in
connection with conversions between various currencies. A
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 emerging
markets, including Latin American and Asian markets. This
may limit a Fund's ability to effectively hedge its
investments in such markets.
Mortgage-Backed During periods of declining interest rates, prepayment of
Securities mortgages underlying mortgage-backed securities can be
expected to accelerate. Prepayment of mortgages which
underlie securities purchased at a 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.
Non- A non-diversified Fund for purposes of the 1940 Act means
Diversification 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. A non-diversified 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 a non-diversified Fund's assets in the
securities of a small number of issuers may cause a Fund's
share price to fluctuate more than that of a diversified
mutual fund.
REITs REITs may be affected by changes in the value of their
underlying properties and by defaults by borrowers or
tenants. Mortgage REITs may be affected by the quality of
the credit extended. Furthermore, REITs are dependent on
specialized management skills. Some REITs may have limited
diversification and may be subject to risks inherent in
29
<PAGE>
investments in a limited number of properties, in a narrow
geographic area, or in a single property type. REITs depend
generally on their ability to generate cash flow to make
distributions to shareholders or unitholders, and may be
subject to defaults by borrowers and to self-liquidations.
In addition, the performance of a REIT may be affected by
its failure to qualify for tax-free pass-through of income
under the Internal Revenue Code of 1986, as amended (the
"Code"), or its failure to maintain exemption from
registration under the 1940 Act. Rising interest rates may
cause the value of the debt securities in which a Fund may
invest. Conversely, falling interest rates may cause their
value to rise. Changes in the value of portfolio securities
does not necessarily affect cash income derived from these
securities but will affect a Fund's net asset value.
Investments in small capitalization companies involve
greater risk than is customarily associated with larger,
more established companies due to the greater business risks
of small size, limited markets and financial resources,
narrow product lines and frequent lack of depth of
management. The securities of small-sized companies are
often traded over-the-counter, and may not be traded in
volumes typical of securities traded on a national
securities exchange. Consequently, the securities of smaller
companies may have limited market suitability and may be
subject to more abrupt or erratic market movements than
securities of larger, more established companies of the
market averages in general. If a 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.
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, International
Fixed Income or Real Estate Funds.
2. Purchase securities of any issuer (other than securities
issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities; repurchase agreements
involving such securities; and with respect to the Real
Estate Fund, investments in the real estate industry) if,
as a result, more than 25% of the total assets of the
Fund are invested in the securities of one or more
issuers whose principal business activities are in the
same industry.
3. Make loans, except as permitted by the 1940 Act, and the
rules and regulations thereunder.
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<PAGE>
No Money Market Fund may:
1. Purchase securities of any issuer if, as a result, the
Fund would violate the diversification provisions of Rule
2a-7 under the 1940 Act.
2. Purchase securities of any issuer if, as a result, more
than 25% of the total assets of the Fund are invested in
the securities of one or more issuers whose principal
business activities are 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) investment in
obligations issued or guaranteed by the U.S. Government
or its agencies and instrumentalities or in repurchase
agreements involving such securities; (ii) obligations
issued by domestic branches of U.S. banks or U.S.
branches of foreign banks subject to the same regulations
as U.S. banks; or (iii) tax-exempt securities issued by
government or political subdivisions of governments.
3. Make loans, except as permitted by the 1940 Act, and the
rules and regulations thereunder.
The foregoing percentages apply at the time of the
purchase of a security. Additional investment limitations
are set forth in the SAI.
THE ADVISOR ____________________________________________________________________
The Trust and the Advisor, 208 South LaSalle Street,
Chicago, Illinois 60604-1003, 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.
Under the Advisory Agreement, 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,
Real Estate 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 voluntary
fee waivers at any time.
For the fiscal year ended December 31, 1997, the Advisor
received an advisory fee of .80% for the Value Fund, .80%
for the Growth Fund, .80% for the Small Cap Fund, 1.00% for
the International Equity Fund, 1.00% for the Asian Tigers
Fund, .70% for the Real Estate Fund, .70% for the Balanced
Fund, 50% for the Fixed Income Fund, .50% for the
Intermediate Government Fixed Income Fund, .48% for the Tax-
Exempt Fixed Income
31
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................................................................................
INVESTMENT ADVISOR
An investment advisor manages the investment activities and is responsible for
the performance of the Fund. The advisor conducts investment research, exe-
cutes investment strategies based on an assessment of economic and market
conditions, and determines which securities to buy, hold or sell.
................................................................................
Fund, .80% for the Tax-Exempt Fixed Income Fund, .80% for the
International Fixed Income Fund, .20% for the Government Money
Market Fund, .19% for the Tax-Exempt Money Market Fund, .20%
for the Treasury 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.
The Latin America Equity Fund and the Real Estate Fund had not
offered Investor Shares to the public at fiscal year end. The
Funds may execute brokerage or other agency transactions
through an affiliate of the Advisor for which the affiliate
receives compensation.
ABN AMRO Asset Management (USA) Inc. 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, 1997, total assets under management by the
Advisor were approximately $5.8 billion. The Advisor is a
direct, wholly-owned subsidiary of ABN AMRO Capital Markets
Holding, 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 Fund and the equity
portion of the Balanced Fund since their inception. Mr.
Cerney has been associated with the Advisor and its
predecessor since April, 1990 as a portfolio manager.
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 as a portfolio manager.
Nancy Droppelman, CPA, has served as portfolio manager of
the Real Estate Fund since its inception. Ms. Droppelman has
been associated with the Advisor since January 1997 as a
portfolio manager. Prior to joining the Advisor, Ms.
Droppelman served as a real estate analyst with Edward Jones
from January, 1995 to December, 1996, and served as a senior
financial analyst and development accounting manager with
Center Mart Properties from November 1988 to January 1995.
Marc G. Borghans, Vice President of the Advisor, has
served as co-manager of the Small Cap Fund since March, 1997
and portfolio manager since July, 1997. Mr. Borghans has been
associated with the Advisor or its affiliates since 1988 as a
portfolio manager.
Mark W. Karstrom, Senior 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
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<PAGE>
August 1996 as a portfolio manager. 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. He served as the portfolio
manager for the Tax-Exempt Fixed Income Fund from September,
1996 to April, 1997, and co-manager of the Tax-Exempt Fixed
Income Fund from April, 1997 to June, 1997. Mr. Self joined
the Advisor in October, 1995 as a portfolio manager. He
served as a Vice President with CSI Asset Management from
December, 1988 to July, 1995.
Phillip P. Mierzwa, Vice President of the Advisor, has
served as co-manager of the Tax-Exempt Fixed Income Fund and
Tax-Exempt Money Market Fund since April, 1997. He has been
associated with the Advisor or its affiliates since
February, 1990 as a portfolio manager and a trader.
Gregory D. Boal, Senior Vice President of the Advisor,
has served as portfolio manager of the fixed income portion
of the Balanced Fund since April, 1997 and as co-manager of
the Tax-Exempt Fixed Income Fund since July, 1997. Mr. Boal
joined the Advisor in March, 1997 as a portfolio manager. He
served as Manager, Fixed Income Division of First Citizens
Bank from November, 1989 to March, 1997.
Karen Van Cleave, Senior Vice President of the Advisor,
has served as co-manager of the Tax-Exempt Money Market Fund
and portfolio manager of the Money Market Fund, Treasury
Money Market Fund and Government Money Market Fund since
January 1994. Ms. Van Cleave joined the Advisor in January
1994 as a portfolio manager.
THE SUB-ADVISOR ________________________________________________________________
ABN AMRO-NSM International Funds Management B.V.,
Hoogoorddreef 66-68, P.O. Box 283, 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 (the "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. As
of December 31, 1997, the Sub-Advisor had approximately $955
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 as a
portfolio manager.
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 as a
portfolio manager. Mr. Ng also serves as the Far East
Director of Asset Management for a Hong Kong-based affiliate
of the Advisor.
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Felix Lanters, portfolio manager for the TransEurope
Fund, has been associated with the Sub-Advisor and/or its
parent since 1987 as a portfolio manager.
Wouter Weijand has served as portfolio manager for the
International Fixed Income Fund since September, 1997. Mr.
Weijand has worked in various investment management
positions with ABN AMRO and/or its affiliates since 1984.
Luiz M. Ribeiro, Jr. has served as the portfolio manager
of the Latin America Equity Fund since November, 1997. Mr.
Ribeiro has worked in various investment management
positions with ABN AMRO and/or its affiliates since 1994.
From March, 1990 to June, 1993, he served with the trading
desk of Dibran DTVM Ltd.
For services provided and expenses incurred pursuant to
the Sub-Advisory Agreement, the Sub-Advisor 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, 1997. As of fiscal
year end, the TransEurope Fund had not commenced operations
and the Latin America Equity Fund had not offered Investor
Shares to the public.
THE ADMINISTRATOR ______________________________________________________________
First Data Investor Services Group, Inc. provides the Trust
with administrative services, including fund accounting,
regulatory reporting, necessary office space, equipment,
personnel and facilities. 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 each
Fund.
THE TRANSFERAGENT ______________________________________________________________
First Data Investor Services Group, Inc., 4400 Computer
Drive, Westborough, MA 01581, 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.
DISTRIBUTION AND SHAREHOLDER SERVICING _________________________________________
First Data Distributors, Inc., 4400 Computer Drive,
Westborough, MA 01581 and the Trust are parties to a
distribution agreement (the "Distribution Agreement").
The Funds have adopted a distribution plan (the
"Distribution Plan") and a shareholder servicing plan (the
"Shareholder Servicing Plan") under which firms, including
the Distributor, may provide shareholder and administrative
services to Investor Shares
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shareholders for compensation. Under each plan, the
Distributor may provide those services itself, or may enter
into arrangements under which third parties provide such
services and are compensated by the Distributor.
Under the Distribution Plan, the Trust pays a fee of .25%
of the average daily net assets of Investor Shares to the
Distributor as compensation for its services. From this
amount, the Distributor may make payments to financial
institutions and intermediaries such as banks, 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 Distribution Plan is characterized as a
compensation plan since the distribution fee is paid to the
Distributor without regard to the distribution or
shareholder services expenses incurred by the Distributor or
the amount of payments made to financial institutions and
intermediaries.
Under the Shareholder Servicing Plan, the Trust pays a
fee of .25% of the average daily net assets of the Investor
Shares to the Distributor in exchange for the Distributor
(or its agent's) efforts in maintaining client accounts,
arranging bank wires, responding to client inquiries
concerning services provided or investment, and assisting
clients in purchase, redemption and exchange transactions
and changing their dividend options, account designations
and addresses.
It is possible that an institution may offer different
classes of shares to its customers and differing services to
the classes, and thus receive compensation with respect to
different classes. These financial institutions may also
charge separate fees to their customers.
The Trust also offers Common Shares, which are sold
without a 12b-1 fee or shareholder servicing fee, primarily
to individuals and institutional investors directly and
through wrap programs, retirement plans, discount brokerage
programs, and various brokerage firms. For more information
about Common Shares, you may call 1-800-433-4725.
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 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
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reinvestment of all dividend and capital gain distributions.
The total return of a Fund may also be quoted as a dollar
amount, on an aggregate basis, or an actual basis.
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 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.
Additional performance information is set forth in the
1997 Annual Report to Shareholders, and is available upon
request and without charge by calling 1-800-443-4725.
Except for the intermediate Government Fixed Income,
Fixed Income, Tax Exempt Fixed Income and International
Fixed Income Funds, it is expected that the portfolio
36
<PAGE>
turnover rate normally will 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 and by requirements which enable a Fund
to receive favorable tax treatment. A portfolio turnover rate
of 100% or more will result in higher transaction costs and
may result in additional tax consequences for shareholders.
You will find portfolio turnover rates for each Fund (except
the Money Market Funds) in the "Financial Highlights" section
of this prospectus.
The performance of Common Shares normally will be higher
than that of Investor Shares because of the additional
distribution and shareholder services expenses charged to
Investor Shares.
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. In addition, state and local tax
consequences on an investment in a Fund may differ from the
Federal income tax consequences described below. Accordingly,
you are urged to consult your tax advisor regarding specific
questions as to federal, state, and local income taxes.
Additional information concerning taxes is set forth in the
SAI.
Tax Status of
the Funds Each Fund is treated as a separate entity for Federal income
tax purposes and is not combined with the other Funds. Each
Fund intends to qualify for the special tax treatment
afforded regulated investment companies as defined under
Subchapter M of the Code. 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 excess of net long-term capital gain over
net short-term capital loss) which is distributed to
shareholders.
................................................................................
[LOGO(R) APPEARS HERE] TAXES
You must pay taxes on your Fund's earnings, whether you take your payments in
cash or additional shares.
................................................................................
Tax Status of Each Fund will distribute substantially all of its net
Distributions investment income (including, for this purpose, net short-term
capital gain) to shareholders. Distributions from net
investment income will be taxable to you as ordinary income
whether received in cash or in additional shares. Any net
capital gains will be distributed annually as capital gains
distributions and will be treated as gain from the sale or
exchange of a capital asset held for more than one year,
regardless of how long the you have held shares and regardless
of whether the distributions are received in
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................................................................................
[LOGO(R) APPEARS HERE] DISTRIBUTIONS
The Fund distributes income dividends and capital gains. Income dividends
represent the earnings from the Fund's investments; capital gains are
generally produced when investments are sold for more than the original
purchase price.
................................................................................
cash or in additional shares. Each Fund will notify you
annually 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.
A 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 substantially
all of its net investment income to shareholders, a Fund may
have to sell portfolio securities to distribute such 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 you as
income dividends from the Fund, provided certain state-
specific conditions are satisfied. Each Fund will inform you
annually of the percentage of income and distributions
derived from U.S. obligations. You should consult your tax
advisor to determine whether any portion of the income
dividends received from a Fund is considered tax exempt in
your 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 shareholders on December 31 of that
year, if paid by the Fund at any time during the following
January.
Each Fund intends to make sufficient capital gains
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 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, income dividends (not capital gain
distributions) paid by a Fund, to the extent the dividend is
derived from dividends received from domestic corporations,
may, if 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.
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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 exchange or redemption (sale) of Fund shares is a
taxable event to you.
ADDITIONAL INFORMATION ABOUT DOING BUSINESS WITH US ____________________________
Minimum The minimum initial investment in the Investor Shares is
Investment $2,000, which may be waived at the Distributor's discretion.
All subsequent investments 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 Investor Shares when
the Trust or the Transfer Agent determines that it is not in
the best interests of the Trust or its shareholders to
accept such order.
Your Intermediary may impose its own minimum initial and
subsequent investment requirements. You should contact your
Intermediary for information about any such requirements.
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<PAGE>
Maintaining a Due to the relatively high cost of handling small
Minimum Account investments, each Fund reserves the right to redeem your
Balance shares, at net asset value, if, because of redemptions of
shares by or on your behalf, your account in any Fund has a
value of less than $2,000, the minimum initial purchase
amount. Accordingly, if you purchase shares of any Fund in
only the minimum investment amount you may be subject to
such involuntary redemption if you thereafter redeems any of
these shares. Before any Fund exercises its right to redeem
such shares and to send the proceeds to you, you will be
given notice that the value of the shares in your 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 $2,000.
See "Purchase and Redemption of Shares" in the SAI for
examples of when your right of redemption may be suspended.
Your Intermediary also may have requirements for
maintaining a minimum account balance. You should contact
your Intermediary for information about any such
requirements.
Net Asset Value The net asset value per share of the Money Market Funds is
calculated as of 5:00 p.m., Eastern time, each Business Day.
The net asset value of the Equity, Balanced and Fixed Income
Funds is determined as of the close of regular trading on
the New York Stock Exchange (normally 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 SAI. 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.
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, October 20, 1992 and April 27,
1998. 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,
Real Estate Fund, Value Fund, Growth Fund, Small Cap Growth
Fund (formerly, the "Small Cap Fund"), International Equity
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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, 1997, the Limited Volatility Fixed
Income Fund and TransEurope Fund had not commenced
operations. Generally, each Fund has two classes of shares:
Common Shares and Investor Shares. Each class has its own
expense structure and other characteristics. Common Shares
are offered through a separate prospectus. Currently,
Investor Shares of the Latin America Equity Fund are not
available for purchase.
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.
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 other
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 shareholder meetings but such meetings 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.
Shareholder Shareholder inquiries should be directed to the
Inquiries Administrator, 4400 Computer Drive, Westborough,
Massachusetts, 01581, at 1-800-443-4725.
Dividends Substantially all of the net investment income (not
including net capital gains) of the Value, Growth, Small
Cap, Balanced, Fixed Income, Intermediate Government Fixed
Income, Tax-Exempt Fixed Income, Real Estate and Limited
Volatility Fixed Income Funds is distributed on a monthly
basis, and that of the International Equity, Latin America
Equity, TransEurope, Asian Tigers and International Fixed
Income Funds is distributed on an annual basis. Shareholders
who own shares at the close of business on the record date
will be entitled to
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receive the distribution. Currently, capital gains of the
Funds, if any, will be distributed at least annually.
The net investment income (not including net capital
gains) of each of the Money Market Funds is declared daily
and distributed monthly. Currently, net 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 distribution, 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 Trust believes that as of April 1, 1998, affiliates
of the Advisor owned of record or beneficially,
substantially all of the Investor Shares of the Money Market
and Tax-Exempt Money Market Funds. As a consequence, these
affiliates may be deemed to "control" these Funds within the
meaning of the 1940 Act.
Counsel and
Auditors Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Ernst & Young LLP serves as independent auditors of the
Trust.
Custodian The Chase Manhattan Bank, 270 Park Avenue, New York, New
York 10017, acts as custodian of the Trust. The custodian
holds cash, securities and other assets of the Trust as
required by the 1940 Act.
DESCRIPTION OF PERMITTED INVESTMENTS AND RISK FACTORS __________________________
The following is a description of certain of the permitted
investments and risk factors for the Funds:
ADRs, A Fund may invest in depositary receipts and other similar
Continental instruments, such as ADRs, CDRs, EDRs & GDRs. ADRs are
Depositary securities, typically issued by a U.S. financial institution
Receipts (a "depositary"), that evidence ownership interests in a
("CDRs"), security or a pool of securities issued by a foreign issuer
European and deposited with the depositary. EDRs, which are sometimes
Depositary referred to as CDRs, are securities, typically issued by a
Receipts non-U.S. financial institution, that evidence ownership
("EDRs") and interests in a security or a pool of securities issued by
Global either a U.S. or foreign issuer. GDRs are issued globally
Depositary and evidence a similar ownership arrangement. Generally,
Receipts ADRs are designed for trading in the U.S. securities market.
("GDRs") EDRs are designed for trading in European Securities Markets
and GDRs are designed for trading in non-U.S. securities
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markets. Generally, depositary receipts 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 securities consist of securities secured by
Asset-Backed company receivables, truck and auto loans, leases and credit
Securities card receivables. Such securities are generally issued as
(non-mortgage) 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 ("BICs")institutions. Pursuant to such contracts, a Fund makes cash
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 instruments
Deposit with 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 are considered to be
illiquid.
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.
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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 a 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 a Fund to buy a
security.
If the broker-dealer to whom a 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 include common stocks, common stock
Securities equivalents, preferred stocks, securities convertible into
common stocks and securities having common stock
characteristics, such as rights and warrants to purchase
common stocks, sponsored and unsponsored depositary receipts
(e.g., ADRs), REITs, and equity securities of closed-end
investment companies.
Fixed Income Fixed income securities are debt obligations issued by
Securities corporations, municipalities and other borrowers.
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
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.
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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
liquid assets 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 cash or liquid assets,
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 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 to be illiquid investments.
Illiquid Illiquid securities are securities that cannot be disposed
Securities of within 7 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.
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Investment Investments in shares of open-end and closed-end funds
Company Shares investment companies may result in the layering of expenses.
Since such investment companies pay management fees and
other expenses, shareholders of a Fund would indirectly pay
both Fund expenses and the expenses of underlying companies
with respect to Fund assets invested therein.
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 a 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, a 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, a 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.
Master Limited Master limited partnerships are public limited partnerships
Partnerships composed of (i) assets spun off from corporations or (ii)
private limited partnerships. Master limited partnerships
are formed by reorganizing corporate assets or private
partnerships as public limited partnerships combining
various investment objectives. Interests in master limited
partnerships are represented by depositary receipts traded
in the secondary market. Because limited partners have no
active role in management, the safety of a limited partner's
investment in a master limited partnership depends upon the
management ability of the general partner.
Money Market Money market instruments include certificates of deposit,
Instruments commercial paper, bankers' acceptances, Treasury bills, time
deposits, repurchase agreements and shares of money market
funds.
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.
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,
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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 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
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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 a 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.
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
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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
SEC 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 or liquid assets 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 or liquid assets 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.
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 receives 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.
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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. Receipts include "Treasury Receipts" ("TRs"),
"Treasury Investment Growth Receipts" ("TIGRs"), and
"Certificates of Accrual on Treasury Securities" ("CATS").
REITs REITs pool investors' funds for investment primarily in
income producing real estate or real estate related loans or
interests. Generally, REITs can be classified as Equity
REITs, Mortgage REITs and Hybrid REITs. Equity REITs own
real estate itself, but primarily invest their assets
directly in real estate and derive their income mainly from
rent and capital gains from sale of property. Mortgage REITs
make loans to provide capital to real estate owners and
buyers, primarily invest their assets in real estate
mortgages and derive their income mainly from interest
payments. Hybrid REITs combine the features of Equity and
Mortgage REITs.
A REIT does not pay corporate income tax if it meets
regulatory requirements relating to its organization,
ownership, assets and income, and with a regulatory
requirement that it distribute at least 95% of its taxable
income for each taxable year.
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. A 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 rules adopted by the SEC. Under
Money Market SEC rules, money market funds may acquire only obligations
Funds that present minimal credit risks and that are "eligible
securities," which generally means
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they are rated, at the time of investment, by at least two
NRSROs (one if it is the only organization rating such
obligation) in one of the two short-term rating categories
or, if unrated, determined to be of comparable quality.
First tier securities are securities that are rated by at
least two NRSROs (one if it is the only organization rating
such securities) or an unrated security determined to be of
comparable quality. Second tier securities are eligible
securities that do not qualify as first tier securities. 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, no more than the greater of 1% of the Fund's total
assets or $1 million may be invested in second tier
securities of any one issuer.
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 or 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.
Securities of Foreign securities may be U.S. dollar denominated or non-
Foreign Issuers 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 time
deposits, Canadian time deposits, Yankee certificates of
deposit, depositary receipts, and investments in Canadian
commercial paper, foreign securities and Europaper.
Sovereign Debt Sovereign debt securities are debt securities issued by
Securities various foreign governmental issuers. Investing in fixed and
floating rate foreign sovereign debt securities will expose
a Fund to the direct or indirect consequences of political,
social or economic changes in the countries that issue the
securities. The ability and willingness of sovereign
obligors in developing and emerging market countries or the
governmental authorities that control repayment of their
external debt to pay principal and interest on such debt
when due may depend on general economic and political
conditions within the relevant country. Countries such as
those in which a Fund may invest have historically
experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate or trade
difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political
uncertainty or instability. Additional factors which may
influence the ability or willingness to service debt
include, but are not limited to a country's cash flow
situation,
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the availability of sufficient foreign exchange on the date
a payment is due, the relative size of its debt service
burden to the economy as a whole and its government's policy
towards the International Monetary Fund, the World Bank and
other International agencies.
The ability of a foreign sovereign obligor to make timely
payments on its external debt obligations will also be
strongly influenced by the obligor's balance of payments,
including export performance, its access to international
credits and investments, fluctuations in interest rates and
the extent of its foreign reserves. A country whose exports
are concentrated in a few commodities or whose economy
depends on certain strategic imports would be vulnerable to
fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for
its exports in currencies other than dollars, its ability to
make debt payments denominated in dollars could be adversely
affected. If a foreign sovereign obligor cannot generate
sufficient earnings from foreign trade to service it
external debt, it may need to depend on continuing loans and
aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign
investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make
such disbursements may be conditioned to the government's
implementation of economic reforms and/or economic
performance and the timely service of its obligations.
Failure to implement such reforms, achieve such levels of
economic performance or repay principal or interest when due
may result in the cancellation of such third parties'
commitment to lend funds which may further impair the
obligor's ability or willingness to timely service its
debts.
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 has 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.
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.
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Swap agreements will tend to shift a 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 a 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, as well as separately traded
interest and principal component parts of such obligations,
known as "Separately Traded Registered Interest and
Principal Securities" ("STRIPS"), that are transferable
through the Federal book-entry system.
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
usually higher than the market price at the time of issuance
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 cash or liquid assets 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
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securities are subject to market fluctuations due to changes
in market 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.
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ABN AMRO FUNDS
(FORMERLY, THE "REMBRANDT FUNDS")
INVESTMENT ADVISOR:
ABN AMRO ASSET MANAGEMENT (USA) INC.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of ABN
AMRO Funds (the "Trust") and should be read in conjunction with the appropriate
prospectus. The Trust has two prospectuses dated April 30, 1998. One
prospectus relates to Common Shares of the funds and the other relates to
Investor Shares of the funds. Prospectuses may be obtained by writing to First
Data Distributors, Inc. (the "Distributor"), 4400 Computer Drive, Westborough,
Massachusetts 01581, or by calling 1-800-443-4725.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE TRUST............................................................. 2
DESCRIPTION OF PERMITTED INVESTMENTS.................................. 2
INVESTMENT LIMITATIONS................................................ 16
NON-FUNDAMENTAL POLICY................................................ 17
THE ADVISOR........................................................... 17
THE SUB-ADVISOR....................................................... 19
THE ADMINISTRATOR..................................................... 20
DISTRIBUTION AND SHAREHOLDER SERVICING................................ 21
TRUSTEES AND OFFICERS OF THE TRUST.................................... 24
COMPUTATION OF YIELD.................................................. 27
CALCULATION OF TOTAL RETURN........................................... 30
PURCHASE AND REDEMPTION OF SHARES..................................... 33
DETERMINATION OF NET ASSET VALUE...................................... 33
TAXES................................................................. 35
PORTFOLIO TRANSACTIONS................................................ 38
TRADING PRACTICES AND BROKERAGE....................................... 39
DESCRIPTION OF SHARES................................................. 43
SHAREHOLDER LIABILITY................................................. 44
5% AND 25% SHAREHOLDERS............................................... 44
LIMITATION OF TRUSTEES' LIABILITY..................................... 48
YEAR 2000............................................................. 48
FINANCIAL STATEMENTS.................................................. 49
APPENDIX.............................................................. A-1
</TABLE>
APRIL 30, 1998
REM-F-007-07
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THE TRUST
ABN AMRO Funds (formerly, Rembrandt Funds) 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 ("funds") of units of beneficial interest ("shares")
and different classes of shares of each fund. Generally, investors may purchase
shares through two separate classes, Common Shares and the Investor Shares,
which provide for variations in distribution costs and other expenses. Except
for these differences between Common Shares and Investor 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 following funds: Value Fund, Growth Fund, International Equity Fund, Small
Cap Growth Fund (formerly, the Small Cap Fund), Asian Tigers Fund, TransEurope
Fund, Latin America Equity Fund, Real Estate Fund (collectively, the "Equity
Funds"), Balanced Fund (the "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"), 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
ASSET-BACKED SECURITIES
Asset-backed securities 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.
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BORROWING
Borrowing may exaggerate changes in the net asset value of a Fund's shares and
in the return on the Fund's portfolio. Although the principal of any borrowing
will be fixed, a Fund's assets may change in value during the time the borrowing
is outstanding. A Fund may be required to liquidate portfolio securities at a
time when it would be disadvantageous to do so in order to make payments with
respect to an outstanding borrowing resulting in additional transaction costs.
In addition, liquidating portfolio securities may generate capital gains, which
will be distributed to shareholders as taxable income or capital gains. The
Funds may be required to segregate liquid assets in an amount sufficient to meet
their obligations in connection with such borrowings.
BRADY BONDS
Brady Bonds are a particular type of debt obligation created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring. During 1990, the Mexican
external debt markets experienced significant changes with the completion of the
"Brady Plan" restructurings in those markets. Brady Bonds are issued by
governments that may have previously defaulted on the loans being restructured
by the Brady Bonds, so are subject to the risk of default by the issuer. They
may be fully or partially collateralized or uncollateralized and issued in
various currencies (although most are U.S. dollar denominated) and they are
actively traded in the over-the-counter secondary market. U.S. dollar-
denominated collateralized Brady Bonds are generally collateralized in full as
to principal due at maturity by U.S. Treasury zero coupon obligations with the
same maturity. Interest payments on these Brady Bonds may be collateralized by
cash or securities in an amount that is typically equal to between 12 and 18
months of interest payments. Payment of interest and (except in the case of
principal-collateralized Brady Bonds) principal on Brady Bonds with no or
limited collateral depends on the willingness and ability of the foreign
government to make payment. In the event of a default on collateralized Brady
Bonds for which obligations are accelerated, the collateral for the payment of
principal will not be distributed to investors, nor will such obligations be
sold and the proceeds distributed. The collateral will be held by the
collateral agent to the scheduled maturity of the defaulted Brady Bonds, which
will continue to be outstanding, at which time the face amount of the collateral
will equal the principal payments which would have then been due on the Brady
Bonds in the normal course. The restructurings provided for the exchange of
loans and cash for newly issued bonds, Brady Bonds. Brady Bonds generally 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 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.
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DEBT SECURITIES -- RATINGS
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 promptly reassesses 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 disposes 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.
EURO-DENOMINATED SECURITIES
On January 1, 1999, the European Monetary Union (EMU) plans to implement a new
currency unit, the Euro, which is expected to reshape financial markets, banking
systems and monetary policies in Europe and other parts of the world. The
countries initially expected to convert to the Euro include Austria, Belgium,
France, Germany, Luxembourg, the Netherlands, Ireland, Finland, Italy, Portugal
and Spain.
Beginning January 1, 1999, financial transactions and market information
including share quotations and company accounts, in participating countries will
be in Euros. Approximately 46% of the stock exchange capitalization of the
total European market may be reflected in Euros, and participating governments
will issue their bonds in Euros. Monetary policy for participating countries
will be uniformly managed by a new central bank, the European Central Bank
(ECB).
Although it is not possible to predict the impact of the Euro on the Funds, the
transition may change the economic environment and behavior of investors,
particularly in European markets. In addition, investors may begin to view those
countries participating in the EMU as a single entity. The Advisor and Sub-
Advisor may need to adapt investment strategies accordingly. The process of
implementing the Euro also may adversely affect financial markets world-wide and
may result in changes in the relative strength and value of the U.S. dollar or
other major currencies, as well as possible adverse tax consequences as a result
of currency conversions to the Euro. Until the Euro develops its reputation and
the ECB gains experience in managing monetary policy, it will be difficult to
predict the strengths and weaknesses of the Euro.
FLOATING RATE NOTES
Floating rate notes 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 a 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
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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 monitors 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.
FOREIGN SECURITIES
Foreign securities 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 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,
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. Government regulation in many of
the countries of interest to a Fund may limit the extent of the Fund's
investment in companies in those countries.
Further, it may be more difficult for a Fund's agents to keep currently informed
about corporate actions which may affect the prices of portfolio securities.
Communications between the U.S. and 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.
A 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.
Investments in securities of foreign issuers are frequently denominated in
foreign currencies (including the Euro and other multinational currency units)
and the value of a 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 a Fund may incur costs in connection with conversions between
various currencies. A Fund may enter into forward foreign currency contracts as
a
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<PAGE>
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
emerging markets, including Latin American and Asian markets. This may limit a
Fund's ability to effectively hedge its investments in such markets.
A Fund may invest in securities denominated in currencies of foreign 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 a Fund's assets
denominated in those currencies. Foreign countries also may have managed
currencies, which are not free floating against the U.S. dollar. In addition,
there is risk that certain foreign countries may restrict the free conversion of
their currencies into other currencies, including the U.S. dollar. Further, it
may be difficult to reduce a Fund's currency risk through hedging. Any
devaluations in the currencies in which a 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.
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 issuers pose located in countries with developing securities
markets greater liquidity risks and other risks than securities of issuers
located in developed countries and traded in more established markets. Low
liquidity in markets may adversely affect a Fund's ability to buy and sell
securities and cause increased volatility. Developing countries 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 developing countries may afford only limited opportunities for
investing. In certain developing countries, a Fund may be able to invest solely
or primarily through ADRs or similar securities and government approved
investment vehicles, including closed-end investment companies.
In making investment decisions for the Fund, the Advisor evaluates the risks
associated with investing Fund assets in a particular country, including risks
stemming from a country's financial infrastructure and settlement practices; the
likelihood of expropriation, nationalization or
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confiscation of invested assets; prevailing or developing custodial practices in
the country; the country's laws and regulations regarding the safekeeping,
maintenance and recovery of invested assets; the likelihood of government-
imposed exchange control restrictions which could impair the liquidity of Fund
assets maintained with custodians in that country, as well as risks from
political acts of foreign governments ("country risks"). Of course, the
Advisor's decisions regarding these risks may not be correct or prove to be wise
and, generally, any losses resulting from investing in foreign countries will be
borne by Fund shareholders.
Holding Fund assets in foreign countries presents additional risks including,
but not limited to, the risks that a particular foreign custodian or depositary
will not exercise proper care with respect to Fund assets or will not have the
financial strength or adequate practices and procedures to properly safeguard
Fund assets.
FORWARD FOREIGN CURRENCY CONTRACTS
A forward contract involves an obligation to purchase or sell a specific
currency amount at a future date, agreed 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 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 CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
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.
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 secur ities
represent ownership in a pool of federally insured mortgage loans. GNMA
certificates con sist 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
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<PAGE>
"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.
INVESTMENT COMPANY SHARES
Under applicable regulations, the Funds are generally 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.
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 for cash management purposes, 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 under the Investment Company
Act of 1940 ("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.
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
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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 obliga tion. 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.
A Fund 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.
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 indebt
edness, demand notes and construction loan notes. A Fund's investments in any
of the notes described above is 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 character istics 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
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transit systems, ports and 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.
OPTIONS
Put and call options may be used by a Fund from time to time as the Advisor
deems to be appro priate, except as limited by each Fund's investment
restrictions. Options are 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 seek ing 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. However, if the
security rises in value, the Fund may not fully participate in the market
appreciation.
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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 under lying 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.
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.
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.
REPURCHASE AGREEMENTS
Repurchase agreements 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
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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.
RESTRICTED SECURITIES
Restricted securities are securities (including those of foreign issuers) 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 considers 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.
SECURITIES LENDING
Securities loaned by a Fund pursuant to an agreement which requires collateral
to secure the loan are not 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 (including the value of the collateral) taken at fair market
value. A Fund continues 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 normally pays 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 an affiliate of the Advisor as a broker in these
transactions.
SHORT SALES
Selling securities short involves selling securities the seller (e.g., a Fund)
does not own (but has borrowed) in anticipation of a decline in the market price
of such securities. To deliver the securities to the buyer, the seller must
arrange through a broker to borrow the securities and, in so doing, the seller
becomes obligated to replace the securities borrowed at their market price at
the time of the replacement. In a short sale, the proceeds the seller receives
from the sale are
-12-
<PAGE>
retained by a broker until the seller replaces the borrowed securities. The
seller may have to pay a premium to borrow the securities and must pay any
dividends or interest payable on the securities until they are replaced.
A Fund may sell securities short "against the box." A short sale is "against
the box" if, at all times during which the short position is open, the Fund owns
at least an equal amount of the securities or securities convertible into, or
exchangeable without further consideration for, securities of the same issuer as
the securities that are sold short.
A Fund may also maintain short positions in forward currency exchange
transactions, in which the Funds agree to exchange currency that does not own at
that time for another currency at a future date and specified price in
anticipation of a decline in the value of the currency sold short relative to
the currency that the Fund has contracted to receive in the exchange. To ensure
that any short position of a Fund is not used to achieve leverage, the Fund
establishes with its custodian a segregated account consisting of cash or liquid
assets equal to the fluctuating market value of the currency as to which any
short position is being maintained.
SOVEREIGN DEBT SECURITIES
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, foreign
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.
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. 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 issues 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 compo nent securities ("Index Securities") of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 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 liabi lities, 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.
-13-
<PAGE>
SPDRs are not individually redeemable, except upon termination of the UIT. To
redeem, a Fund must accumulate enough SPDRs to reconstitute a Creation Unit.
The liquidity of small holdings of SPDRs, therefore, depends upon the existence
of a secondary market. Upon redemption of a Creation Unit, a Funds receives
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 a Fund 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.
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 called 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 infor mation 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 repurchas ing 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 main
tain 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.
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
-14-
<PAGE>
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 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 securi ties, 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.
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. 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.
SWAPS, CAPS, FLOORS AND COLLARS
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 a 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. A Fund may also suffer losses if it is unable to
terminate outstanding swap agreements or reduce its exposure through offsetting
transactions. Any obligation a Fund may have under these types of arrangements
are covered by setting aside cash or liquid assets in a segregated account. A
Fund enters 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
-15-
<PAGE>
selling a floor. In swap agreements, if a 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 a Fund's investment and their
share price and yield.
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.
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 segregate cash or liquid assets 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 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 do not use
such purchases for leveraging.
INVESTMENT LIMITATIONS
Each Fund has adopted certain investment limitations which, in addition to those
limitations in the prospectuses, 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.
-16-
<PAGE>
NO FUND MAY:
1. Underwrite securities issued by others, except to the extent that a Fund
may be considered an underwriter within the meaning of the Securities Act
of 1933 in the disposition of shares of the Fund.
2. 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.
3. Borrow money, except that a Fund (a) may borrow money for temporary or
emergency purposes in an amount not exceeding 5% of the Fund's total assets
determined at the time of the borrowing and (b) may borrow money from banks
or by engaging in reverse repurchase agreements. Asset coverage of at
least 300% is required for all borrowings, except where a Fund has borrowed
money for temporary purposes in amounts not exceeding 5% of its total
assets.
4. Purchase or sell real estate or physical commodities, unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent a Fund from investing in securities or other instruments either
issued by companies that invest in real estate, backed by real estate or
securities of companies engaged in the real estate business).
The foregoing percentages (except for the limitation on illiquid securities
below) 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.
NON-FUNDAMENTAL POLICY
No Fund may 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% of net assets).
THE ADVISOR
The Trust and ABN AMRO Asset Management (USA) Inc. (formerly LaSalle Street
Capital Management, Ltd.), 208 South LaSalle Street, Chicago, Illinois 60604
(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.
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
-17-
<PAGE>
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, 1995, 1996, and 1997, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
======================================================================================
Net Fees Paid Fees Waived
------------------------------------------------------------------
Fund 1995 1996 1997 1995 1996 1997
======================================================================================
<S> <C> <C> <C> <C> <C> <C>
Treasury Money $229,313 $ 291,794 $ 374,682 $184,294 $235,779 $ 301,942
Market Fund
- --------------------------------------------------------------------------------------
Government
Money Market
Fund $376,824 $ 448,001 $ 497,187 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------
Money Market
Fund $998,172 $1,138,578 $1,386,860 $647,771 $853,933 $1,040,154
- --------------------------------------------------------------------------------------
Tax-Exempt
Money Market
Fund $362,794 $ 318,245 $ 484,301 $289,877 $275,379 $ 413,335
- --------------------------------------------------------------------------------------
Fixed Income
Fund $576,717 $ 625,690 $ 670,250 $100,132 $125,138 $ 134,049
- --------------------------------------------------------------------------------------
Intermediate
Government
Fixed Income
Fund $419,323 $ 334,912 $ 268,185 $ 72,093 $ 66,982 $ 53,637
- --------------------------------------------------------------------------------------
Tax-Exempt
Fixed Income
Fund $249,245 $ 218,761 $ 194,948 $ 64,521 $ 56,636 $ 43,866
- --------------------------------------------------------------------------------------
International
Fixed Income
Fund $139,512 $ 140,609 $ 136,701 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------
Limited
Volatility Fixed
Income Fund * * * * * *
- --------------------------------------------------------------------------------------
Value Fund $788,698 $1,170,294 $1,620,699 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------
Growth Fund $685,748 $ 723,113 $ 972,369 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------
Small Cap
Growth Fund $163,166 $ 235,012 $ 319,968 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
======================================================================================
Net Fees Paid Fees Waived
------------------------------------------------------------------
Fund 1995 1996 1997 1995 1996 1997
======================================================================================
<S> <C> <C> <C> <C> <C> <C>
International
Equity Fund $643,380 $ 886,424 $ 972,268 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------
TransEurope
Fund * * * * * *
- --------------------------------------------------------------------------------------
Asian Tigers
Fund $211,903 $ 312,823 $ 393,065 $ 0 $ 0 $ 0
- --------------------------------------------------------------------------------------
Latin America
Equity Fund * $ 44,270 $ 259,452 * $ 0 $ 0
- --------------------------------------------------------------------------------------
Real Estate Fund * * $ 57 * * $ 25
- --------------------------------------------------------------------------------------
Balanced Fund $454,111 $ 391,615 $ 466,334 $ 0 $ 0 $ 0
======================================================================================
</TABLE>
* Not in operation during the period.
THE SUB-ADVISOR
The Advisor, 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'
-19-
<PAGE>
written notice by the Advisor or by the Sub-Advisor. The Sub-Advisory Agreement
will terminate automatically in the event of its assignment.
THE ADMINISTRATOR
The Trust and First Data Investor Services Group (the "Administrator"), a
wholly-owned subsidiary of First Data Corporation, have entered into an
administration agreement (the "Administration Agreement") dated March 2, 1998.
Under the Administration Agreement: (i) the Administrator is entitled to receive
a fee at an annual rate of .15% of the average daily net assets of the Funds;
(ii) the Trust may withhold a portion of this fee in the event that the
Administrator fails to perform its duties according to the performance standards
as set forth in the Agreement; and (iii) the Trust agreed to pay the
Administrator $1,500,000 if the Trust terminates the Agreement within the first
year and $750,000 if the Trust terminates the Agreement in the second year.
The Administrator, a Massachusetts corporation, has its principal business
offices at 4400 Computer Drive, Westborough, Massachusetts 01581. First Data
Corporation 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.
Prior to March 2, 1998, SEI Fund Resources ("SEI") served as the Trust's
administrator. SEI, a Delaware business trust, has its principal offices at
Oaks, Pennsylvania 19456. SEI Investments Management Corporation, a wholly-owned
subsidiary of SEI Investments Company, is the owner of all beneficial interest
in SEI.
For the fiscal years ended December 31, 1995, 1996, and 1997, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
==============================================================================
Net Fees Paid
-----------------------------------
Fund 1995 1996 1997
==============================================================================
<S> <C> <C> <C>
Treasury Money Market Fund $176,434 $226,103 $135,486
- ------------------------------------------------------------------------------
Government Money Market Fund $282,618 $336,001 $176,620
- ------------------------------------------------------------------------------
Money Market Fund $647,771 $853,933 $435,763
- ------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $277,850 $254,410 $180,324
- ------------------------------------------------------------------------------
Fixed Income Fund $159,185 $187,707 $201,074
- ------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund $113,044 $100,473 $ 80,456
- ------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 78,442 $ 68,849 $ 59,704
- ------------------------------------------------------------------------------
International Fixed Income Fund $ 26,158 $ 26,364 $ 25,631
- ------------------------------------------------------------------------------
</TABLE>
-20-
<PAGE>
<TABLE>
<CAPTION>
==============================================================================
Net Fees Paid
-----------------------------------
Fund 1995 1996 1997
==============================================================================
<S> <C> <C> <C>
Limited Volatility Fixed Income Fund * * *
- ------------------------------------------------------------------------------
Value Fund $147,881 $219,430 $303,868
- ------------------------------------------------------------------------------
Growth Fund $128,578 $135,584 $182,319
- ------------------------------------------------------------------------------
Small Cap Growth Fund $ 30,713 $ 44,065 $ 59,994
- ------------------------------------------------------------------------------
International Equity Fund $ 6,507 $132,965 $145,840
- ------------------------------------------------------------------------------
TransEurope Fund * * *
- ------------------------------------------------------------------------------
Asian Tigers Fund $ 31,786 $ 46,924 $ 58,960
- ------------------------------------------------------------------------------
Latin America Equity Fund * $ 6,640 $ 38,918
- ------------------------------------------------------------------------------
Real Estate Fund * * $ 12
- ------------------------------------------------------------------------------
Balanced Fund $ 97,310 $ 83,917 $ 99,929
=========================================================================
</TABLE>
* Not in operation during the period.
DISTRIBUTION AND SHAREHOLDER SERVICING
First Data Distributors, Inc., (the "Distributor"), a wholly-owned subsidiary of
First Data Corporation, 4400 Computer Drive, Westborough, Massachusetts 01581,
and the Trust are parties to a distribution agreement (the "Distribution
Agreement") dated March 2, 1998. 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 PLAN
The Trust has adopted a distribution plan for the Investor Shares of each Fund
(the "Distribution Plan") in accordance with the provisions of Rule 12b-1 under
the 1940 Act. Rule 12b-1 regulates the circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. Continuance of the Distribution 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 Distribution Plan
requires that quarterly written reports
-21-
<PAGE>
of amounts spent under the Distribution 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 Distribution 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 Distribution
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 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.
The Distribution Plan provides for payments to the Distributor at an annual rate
of .25% of the Investor Shares average daily net assets. This ongoing
distribution fee is calculated on each Fund's aggregate average daily net assets
attributable to its Investor Shares. The Distribution 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.
Prior to March 2, 1998, Rembrandt Financial Services Company ("RFS"), Oaks,
Pennsylvania 19456, served as the Trust's distributor. RFS is a wholly-owned
subsidiary of SEI Financial Services Company.
For the fiscal year ended December 31, 1997, the Funds paid the following
amounts pursuant to the Distribution Plan:
<TABLE>
<CAPTION>
==============================================================================
Distribution Amount Paid
Fund 1997
- ------------------------------------------------------------------------------
<S> <C>
Treasury Money Market Fund $19,886
- ------------------------------------------------------------------------------
Government Money Market Fund $14,542
- ------------------------------------------------------------------------------
Money Market Fund $ 4,950
- ------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $ 7,474
- ------------------------------------------------------------------------------
Fixed Income Fund $ 1,086
- ------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund $ 325
- ------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 1,437
- ------------------------------------------------------------------------------
International Fixed Income Fund $ 211
- ------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund *
- ------------------------------------------------------------------------------
Value Fund $ 4,457
- ------------------------------------------------------------------------------
Growth Fund $ 8,416
- ------------------------------------------------------------------------------
</TABLE>
-22-
<PAGE>
<TABLE>
<CAPTION>
==============================================================================
Distribution Amount Paid
Fund 1997
- ------------------------------------------------------------------------------
<S> <C>
Small Cap Growth Fund $ 1,413
- ------------------------------------------------------------------------------
International Equity Fund $ 3,666
- ------------------------------------------------------------------------------
TransEurope Fund *
- ------------------------------------------------------------------------------
Real Estate Fund *
- ------------------------------------------------------------------------------
Asian Tigers Fund $ 1,920
- ------------------------------------------------------------------------------
Latin America Equity Fund *
- ------------------------------------------------------------------------------
Balanced Fund $ 9,810
==============================================================================
</TABLE>
* Not in operation during the period.
The distribution-related services that may be provided under the Distribution
Plan include: incremental printing costs for reports, prospectuses, notices and
similar materials; advertising; cost of preparing, printing, and distributing
literature used in connection with the offering of shares; and expenses incurred
in the promotion and sale of shares. 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 or
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 Distribution Plan
or related agreements.
SHAREHOLDER SERVICING PLAN
The Trust has adopted a shareholder servicing plan for the Investor Shares of
each Fund (the "Shareholder Servicing Plan"). Under the Shareholder Servicing
Plan, the Distributor may perform, or may compensate other service providers for
performing, the following shareholder services: maintaining client accounts;
arranging for bank wires; responding to client inquiries concerning services
provided on investments; assisting clients in changing dividend options, account
designations and addresses; sub-accounting; providing information on share
positions to clients; forwarding shareholder communications to clients;
processing purchase, exchange and redemption orders; and processing dividend
payments.
-23-
<PAGE>
TRANSFER AGENT
The Trust and First Data Investor Services Group (the "Transfer Agent"), a
wholly-owned subsidiary of First Data Corporation, have entered into a transfer
agency agreement (the "Transfer Agency Agreement") dated May 11, 1998. Under
the Transfer Agency Agreement, the Transfer Agent is entitled to receive fees
for its services, which may be reduced in the event that the Transfer Agent
fails to meet certain performance standards set forth in the Agreement. Under
the Agreement, the Trust agreed to pay the Transfer Agent $1,500,000 if the
Trust terminates the Agreement within the first year and $750,000 if it
terminates the Agreement during the second year.
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 -- 950 N. Michigan Avenue,
Chicago, Illinois 60611. 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 FIEDLER (11/19/30) -- Trustee -- 179 East Lake Shore Drive, Chicago,
Illinois 60601. Chairman of Executive Committee, Board of Directors, Weyco
Group, Inc., since 1996. President and Director, Weyco Group, Inc., 1968-1996.
JOHN A. WING* (11/9/35) -- Trustee**-- 208 South LaSalle Street, Chicago,
Illinois 60604. Chief Executive Officer, ABN AMRO Chicago Corp. since January 1,
1997. Prior thereto, Chief Executive Officer, Chicago Corporation since 1981.
TIMOTHY J. LEACH (2/28/55) -- President and Chief Executive Officer** -- ABN
AMRO Asset Management (USA) Inc., 208 S. LaSalle Street, Chicago, Illinois
60604. Since February 1998, President, Chief Executive Officer and Director.
President and Chief Investment Officer of Qualivest Capital Management, Inc.,
March 1994 - February 1998. Vice President, Manager of Wells Fargo Bank, N.A.,
April 1987 - February 1994.
-24-
<PAGE>
RICHARD A. FRODSHAM (3/23/40) -- Executive Vice President** -- ABN AMRO Asset
Management (USA) Inc., 208 S. LASALLE Street, Chicago, Illinois 60604. Since
October 1997, Executive Vice President and Director of Marketing and
Administration. President of LaSalle Street Capital Management, Ltd., January
1997 - September 1997. Senior Vice President of ABN AMRO Incorporated
(formerly, ABN AMRO Chicago Corporation, formerly, The Chicago Corporation),
January 1994 - Present. Vice President of Certus Financial Corporation, June
1993 - December 1993. Self-employed as a broker/owner in real estate and
property management, March 1992 - May 1993.
CHARLES KLIMKOWSKI (9/15/35) -- Vice President** -- ABN AMRO Asset Management
(USA) Inc., 208 S. LASALLE Street, Chicago, Illinois 60604. Since October 1997,
Executive Vice President. Senior Vice President of ABN AMRO Incorporated
(formerly, ABN AMRO Chicago Corporation, formerly, The Chicago Corporation),
October 1980 -Present.
MICHAEL T. CASTINO (12/9/64) -- Vice President** -- ABN AMRO Asset Management
(USA) Inc., 208 S. LASALLE Street, Chicago, Illinois 60604. Since July 1997,
Vice President, Fund Marketing. Assistant Vice President, Rembrandt Product
Manager of LaSalle National Bank (formerly, LaSalle National Trust, N.A.), mid-
1995 - July 1997. Director of Fund Marketing, Kemper Financial Services, Inc.,
1991 - mid-1995.
MARTHA CLEMONS (8/10/62) -- Vice President and Secretary** -- ABN AMRO Asset
Management (USA) Inc., 208 S. LASALLE Street, Chicago, Illinois 60604. Since
February 1998, Vice President, Chief Counsel. Attorney, Securities and Exchange
Commission, August 1991 - January 1998.
LAURIE LYNCH (8/3/61) -- Vice President** -- ABN AMRO Asset Management (USA)
Inc., 208 S. LASALLE Street, Chicago, Illinois 60604. Since August 1997,
Marketing Associate, Fund Marketing (formerly, LaSalle Street Capital
Management, Ltd.). Executive Assistant, LaSalle Street Capital Management,
Ltd., April 1996 - August 1997. Municipal Underwriting Assistant, Fidelity
Capital Markets, August 1994 - April 1996. Office Administrator, The Choice for
Staffing, mid-1992 - August 1994.
KATHRYN L. MARTIN (10/23/57) -- Vice President** -- ABN AMRO Asset Management
(USA) Inc., 208 S. LASALLE Street, Chicago, Illinois 60604. Since March 1998,
Senior Vice President, Director of Compliance. Vice President, ABN AMRO Asset
Management (USA) Inc. (formerly, LaSalle Street Capital Management, Ltd.), June
1995 - March 1998. Assistant Vice President, LaSalle Street Capital Management,
Ltd. (formerly, Chemical Investment Group), October 1989 - June 1995.
ANN WEIS (2/5/62) -- Vice President** -- ABN AMRO Asset Management (USA) Inc.,
208 S. LASALLE Street, Chicago, Illinois 60604. Since December 1997, Vice
President, Chief of Administration. Assistant Vice President, ABN AMRO Asset
Management (USA) Inc.
-25-
<PAGE>
(formerly, LaSalle Street Capital Management, Ltd.), February 1997 - December
1997. From September 1981 to February 1997, she held accounting and operations
positions at LaSalle Street Capital Management, Ltd.
JULIE TEDESCO (4/30/57) -- Vice President and Assistant Secretary -- First Data
Investor Services Group, Inc., 53 State Street, Boston, Massachusetts 02109.
Since May 1994, Counsel to Investor Services Group. From July 1992 to May 1994,
Assistant Vice President and Counsel of The Boston Company Advisors, Inc.
TERESA HAMLIN (12/9/63) -- Vice President and Assistant Secretary -- First Data
Investor Services Group, Inc., 53 State Street, Boston, Massachusetts 02109.
Since 1995, Counsel to Investor Services Group. Prior to that time, she was a
paralegal manager with The Boston Company Advisors, Inc.
JOHN J. BURKE, III (9/11/64) -- Vice President and Treasurer -- Since 1991, Vice
President of Fund Accounting and Portfolio Valuation Group. Prior to 1991, Mr.
Burke was a management associate with Fidelity Investments.
JYLANNE DUNNE (5/22/60) -- Vice President and Assistant Treasurer -- First Data
Investor Services Group, Inc., 53 State Street, Boston, Massachusetts 02109.
Since 1994, Vice-President of Client Services.
DIANA TARNOW (11/16/62) -- Vice President and Assistant Treasurer -- First Data
Investor Services Group, Inc., 53 State Street, Boston, Massachusetts 02109.
Since 1997, Vice President for Investor Services Group's Treasury Department.
Prior to that time, she was Vice President of Financial Reporting and Tax. From
1989 to 1994, Ms. Tarnow served as Vice President of Financial Reporting and Tax
with The Boston Company Advisors, Inc.
THERESE HOGAN (2/27/62) -- Vice President and Assistant Treasurer -- First Data
Investor Services Group, Inc., 53 State Street, Boston, Massachusetts 02109.
Since June 1994, Manager (State Regulation) of Investor Services Group. From
October 1993 to June 1994, Senior Legal Assistant at Palmer & Dodge, Boston,
Massachusetts. For more than eight years prior thereto, a paralegal at Robinson
& Cole in Hartford, Connecticut.
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.
RICHARD W. GRANT (10/25/45) -- Assistant Secretary -- 2000 One Logan Square,
Philadelphia, Pennsylvania 19103-6993. Partner, Morgan, Lewis & Bockius LLP
(law firm) since 1989.
-26-
<PAGE>
COLEEN D. DINNEEN (12/10/69) -- Assistant Secretary -- Counsel, Mutual Fund
Legal Division, First Data Investor Services Group, Inc., 53 State Street,
Boston, Massachusetts 02109 since 1997. Vice-President, Scudder, Stevens &
Clark, Inc. (1989-1996).
___________________
*Mr. Wing is a Trustee who may be deemed to be an "interested person" of the
Trust as the term is defined in the 1940 Act.
** This person is an "affiliated person" of both the Advisor and 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, 1997, 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, for Fiscal Year as Part of Fund Upon Fiscal Year Ended
Position Ended 1997 Expenses Retirement 1997
- ------------------------------------------------------------------------------------------------------------
<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
- ------------------------------------------------------------------------------------------------------------
John A. Wing*, N/A N/A N/A N/A
Trustee
- ------------------------------------------------------------------------------------------------------------
Robert Fiedler*, N/A N/A N/A N/A
Trustee
- ------------------------------------------------------------------------------------------------------------
</TABLE>
_____________________
N/A Not Applicable
* Messrs. Wing and Fiedler did not serve as Trustees during 1997.
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
-27-
<PAGE>
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 (execlusive of 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, 1997, the end of the Trust's most
recent fiscal year, the Money Market Funds' current, effective and tax-
equivalent yields were as follows:
-28-
<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>
Treasury Money Common 4.75% 4.86% N/A N/A
--------------------------------------------------------------------------
Market Fund Investor 4.50% 4.60% N/A N/A
- --------------------------------------------------------------------------------------------------
Government Money Common 5.45% 5.60% N/A N/A
--------------------------------------------------------------------------
Market Fund Investor 5.13% 5.26% N/A N/A
- --------------------------------------------------------------------------------------------------
Money Market Fund Common 5.41% 5.56% N/A N/A
--------------------------------------------------------------------------
Investor 5.05% 5.18% N/A N/A
- --------------------------------------------------------------------------------------------------
Tax-Exempt Money Common 3.80% 3.63% 6.29% 6.01%
--------------------------------------------------------------------------
Market Fund Investor 3.55% 3.37% 5.88% 5.58%
==================================================================================================
</TABLE>
N/A Not Applicable
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 Growth 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, Real
Estate 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, 1997, the yield for the following
Funds were:
<TABLE>
<CAPTION>
===============================================================================
Fund Class 30-Day Yield
===============================================================================
<S> <C> <C>
Fixed Income Fund Common 5.62%
--------------------------------
Investor 5.37%
- -------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund Common 5.20%
--------------------------------
Investor 4.95%
- -------------------------------------------------------------------------------
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
Fund Class 30-Day Yield
===============================================================================
<S> <C> <C>
Tax-Exempt Fixed Income Fund Common 4.22%
--------------------------------
Investor 3.97%
- -------------------------------------------------------------------------------
International Fixed Income Fund Common 3.19%
--------------------------------
Investor 2.94%
- -------------------------------------------------------------------------------
Value Fund Common 1.27%
--------------------------------
Investor 1.02%
- -------------------------------------------------------------------------------
Growth Fund Common .50%
--------------------------------
Investor .23%
- -------------------------------------------------------------------------------
Balanced Fund Common 2.27%
--------------------------------
Investor 2.00%
===============================================================================
</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, 1997, was 6.99% for the Common Shares and 6.57% for
the Investor Shares.
CALCULATION OF TOTAL RETURN
From time to time, the Value Fund, Growth Fund, Small Cap Growth Fund,
International Equity Fund, TransEurope Fund, Asian Tigers Fund, Latin America
Equity Fund, Fixed Income Fund, Intermediate Government Fixed Income Fund, Tax-
Exempt Fixed Income Fund, International Fixed Income Fund, Limited Volatility
Fixed Income Fund, Balanced Fund and Real Estate 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, 1997, and for the one and three
year periods ended December 31, 1997, were as follows:
-30-
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
Average Annual Total Return
-------------------------------------------
Fund Class Since
One Year Five Ten Inception
Year Year
===========================================================================================================================
<S> <C> <C> <C> <C> <C>
Treasury Money Market Fund Investor-Without sales load /1#/ 4.70% N/A N/A 4.05%
--------------------------------------------------------------------------------
Common/2/ 4.97% N/A N/A 4.24%
- ---------------------------------------------------------------------------------------------------------------------------
Government Money Market Fund Investor-Without sales load/3#/ 5.05% N/A N/A 4.42%
--------------------------------------------------------------------------------
Common/2/ 5.33% N/A N/A 4.58%
- ---------------------------------------------------------------------------------------------------------------------------
Money Market Fund Investor-Without sales load/4#/ 5.12% N/A N/A 4.45%
--------------------------------------------------------------------------------
Common/2/ 5.41% N/A N/A 4.63%
- ---------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund Investor-Without sales load/5#/ 3.10% N/A N/A 2.67%
--------------------------------------------------------------------------------
Common/2/ 3.36% N/A N/A 2.90%
- ---------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund Investor-With sales load/6#/ 8.92% N/A N/A 6.28%
--------------------------------------------------------------------------------
Investor-Without sales load/6/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Common/2/ 9.22% N/A N/A 7.05%
- ---------------------------------------------------------------------------------------------------------------------------
Intermediate Government Fixed Investor-With sales load/7#/ 7.66% N/A N/A 4.93%
--------------------------------------------------------------------------------
Income Fund Investor-Without sales load/7/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Common/2/ 7.93% N/A N/A 5.57%
- ---------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund Investor-With sales load/8#/ 9.11% N/A N/A 5.25%
--------------------------------------------------------------------------------
Investor-Without sales load/8/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Common/2/ 9.36% N/A N/A 6.11%
- ---------------------------------------------------------------------------------------------------------------------------
International Fixed Income Fund Investor-With sales load/9#/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Investor-Without sales load/9/ -6.16% N/A N/A 3.74%
--------------------------------------------------------------------------------
Common/10/ -5.86% N/A N/A 5.91%
- ---------------------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income Investor-With sales load/#/ * * * *
--------------------------------------------------------------------------------
Fund Investor-Without sales load * * * *
--------------------------------------------------------------------------------
Common * * * *
- ---------------------------------------------------------------------------------------------------------------------------
Balanced Fund Investor-With sales load/8#/ 21.80% N/A N/A 11.46%
--------------------------------------------------------------------------------
Investor-Without sales load/8/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
</TABLE>
-31-
<PAGE>
<TABLE>
<CAPTION>
=============================================================================================================
Average Annual Total Return
-------------------------------------------
Fund Class Since
One Year Five Ten Inception
Year Year
=============================================================================================================
<S> <C> <C> <C> <C> <C>
Common/2/ 22.10% N/A N/A 12.04%
- -------------------------------------------------------------------------------------------------------------
Value Fund Investor-With sales load/11#/ 30.20% N/A N/A 16.74%
--------------------------------------------------------------------------------
Investor-Without sales load/11/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Common/2/ 30.49% N/A N/A 17.26%
- -------------------------------------------------------------------------------------------------------------
Growth Fund Investor-With sales load/12#/ 23.65% N/A N/A 14.59%
--------------------------------------------------------------------------------
Investor-Without sales load/12/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Common/2/ 23.98% N/A N/A 15.39%
- -------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund Investor-With sales load/7#/ 15.45% N/A N/A 13.55%
--------------------------------------------------------------------------------
Investor-Without sales load/7/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Common/2/ 15.89% N/A N/A 12.02%
- -------------------------------------------------------------------------------------------------------------
International Equity Fund Investor-With sales load/7#/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Investor-Without sales load/7/ 4.28% N/A N/A 9.74%
--------------------------------------------------------------------------------
Common/2/ 4.56% N/A N/A 11.38%
- -------------------------------------------------------------------------------------------------------------
Asian Tigers Fund Investor-With sales load/13#/ N/A N/A N/A N/A
--------------------------------------------------------------------------------
Investor-Without sales load/13/ -36.25% N/A N/A -6.45%
--------------------------------------------------------------------------------
Common/14/ -35.98% N/A N/A -6.11%
- -------------------------------------------------------------------------------------------------------------
Latin America Equity Fund Investor-With sales load/#/ * * * *
--------------------------------------------------------------------------------
Investor-Without sales load * * * *
--------------------------------------------------------------------------------
Common 35.50% N/A N/A 24.23%
- -------------------------------------------------------------------------------------------------------------
TransEurope Fund Investor-With sales load/#/ * * * *
--------------------------------------------------------------------------------
Investor-Without sales load * * * *
--------------------------------------------------------------------------------
Common * * * *
- -------------------------------------------------------------------------------------------------------------
Real Estate Fund Investor-With sales load/#/ * * * *
--------------------------------------------------------------------------------
Investor-Without sales load * * * *
--------------------------------------------------------------------------------
Common/16/ N/A N/A N/A N/A
==============================================================================================================
</TABLE>
N/A Not Applicable.
* Not in operation during the period.
/#/ Prior to July 28, 1997, Investor Shares were subject to front-end sales
load
-32-
<PAGE>
_______________
/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 3/24/93 /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 /16/ Commenced operations 12/31/97
PURCHASE AND REDEMPTION OF SHARES
It is currently the Trust's policy to pay for all redemptions in cash. The
Trust retains the right, however, 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 and taxes
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, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
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. Although the methodology and procedures are
identical, the net asset value per share of Common Shares and Investor Shares
within the Funds may differ because of the distribution and shareholder
servicing expenses charged to Investor Shares.
THE MONEY MARKET FUNDS
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
-33-
<PAGE>
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 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 permitted 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; with holding 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
--- ----
share holder'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 EQUITY, BALANCED AND FIXED INCOME FUNDS
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 pric-
-34-
<PAGE>
ing service and its valuations are reviewed by the officers of the Trust under
the general supervision of the Trustees.
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.
FEDERAL INCOME TAX
ALL FUNDS
This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986 (the "Code"), and the regulations issued thereunder, in
effect on the date of this Statement of Additional Information. New
legislation, as well as administrative changes or court decisions, may change
the conclusions expressed herein, and may have a retroactive effect with respect
to the transactions contemplated herein. The Fund intends to qualify as a
"regulated investment company" ("RIC") as defined under Subchapter M of 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
investment 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;
and (b) 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
-35-
<PAGE>
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.
It is possible that a Fund may make a distribution in excess of the Fund's
current and accumulated earnings and profits. Such a "return of capital"
distribution is applied against and reduces the tax basis of your shares. The
excess of a return of capital distribution over the tax basis of your shares is
treated as gain from a sale of exchange of the shares.
Any gain or loss recognized on a sale or redemption of shares of a Fund by a
shareholder who is not a dealer in securities will generally be treated as long-
term capital gain or loss if the shares have been held for more than eighteen
months, mid-term if the shares have been held for over one year but not for over
eighteen months, and short-term if for a year or less. If shares on which a net
capital gain distribution has been received are subsequently sold or redeemed,
and such shares have been held for six months or less, any loss recognized by a
shareholder will be treated as long-term capital loss to the extent of the long-
term capital gain distributions.
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.
A Fund may sell securities short "against the box." Under certain circumstances,
these transactions may be treated as constructive sales, resulting in the
recognition of gain to the Fund.
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 (the
"Tax-Exempt Funds") 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
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<PAGE>
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.
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 Funds 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.
EQUITY AND BALANCED FUNDS (EXCEPT FOR THE INTERNATIONAL FIXED INCOME FUND)
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. 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. Dividends received from other funds, e.g., Money Market or
----
Fixed Income Funds, will not be eligible for the dividends-received deduction.
-37-
<PAGE>
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. Shareholders should verify their state and local tax liability with
their tax advisors.
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.
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 are 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 seek 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
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<PAGE>
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 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 a fund or account generating the
brokerage business.
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
-39-
<PAGE>
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 an ability 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 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, 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
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, 1997, the Funds paid the following
brokerage fees:
-40-
<PAGE>
<TABLE>
<CAPTION>
===========================================================================================================================
% of Total Total
Total $ % of Total of Brokerage Commissions Total $
Total $ Amount of Brokerage Transactions Paid to Amount
Amount of Brokerage Commissions Effected Affiliates in of Brokerage
Brokerage Commissions Paid to Through Connection Commissions
Fund Commissions Paid to Affiliates in Affiliated with Paid for
Paid in 1997 Affiliates in 1997 Brokers in Repurchase Research
1997 1997 Agreement in 1997
Transactions in
1997
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Intermediate
Government Fixed
Income Fund $ 0 $ 0 0% 0% $ 810 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed
Income Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $ 0 $ 0 0% 0% $ 1,927 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
International Fixed
Income Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed
Income Fund * * * * * *
- ----------------------------------------------------------------------------------------------------------------------------
Value Fund $256,616 $19,358 7.54% 0% $ 3,521 $130,038
- ----------------------------------------------------------------------------------------------------------------------------
Growth Fund $135,230 $ 0 0% 0% $ 3,211 $131,546
- ----------------------------------------------------------------------------------------------------------------------------
Small Cap Growth
Fund $ 77,603 $ 0 0% 0% $ 525 $ 55,807
- ----------------------------------------------------------------------------------------------------------------------------
International Equity
Fund $134,578 $ 0 0% 0% $ 0 $120,847
- ----------------------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $178,644 $ 0 0% 0% $ 0 $164,984
- ----------------------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * * * *
- ----------------------------------------------------------------------------------------------------------------------------
Latin America Equity
Fund $117,515 $ 0 0% 0% $ 0 $ 88,523
- ----------------------------------------------------------------------------------------------------------------------------
Real Estate Fund $ 4,285 $ 0 0% 0% $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
Balanced Fund $ 47,708 $12,801 26.83% 0% $ 1,467 $ 31,259
- ----------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money
Market Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
Money Market Fund $ 0 $ 0 0% 0% $112,277 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
Treasury Money Market
Fund $ 0 $ 0 0% 0% $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------------------
Government Money
Market Fund $ 0 $ 0 0% 0% $ 43,587 $ 0
============================================================================================================================
</TABLE>
-41-
<PAGE>
* Not in operation during the period.
For the fiscal years ended December 31, 1995 and 1996, Funds paid the
following brokerage fees:
<TABLE>
<CAPTION>
================================================================================================================
Total $ Amount of Brokerage Commissions Total $ Amount of Brokerage
Paid in Commissions Paid to Affiliates in
Fund 1995 - 1996 1995 - 1996
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate Government Fixed $ 0 $ 0 $ 0 $ 0
Income Fund
- ----------------------------------------------------------------------------------------------------------------
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 $125,283 $185,275 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Growth Fund $117,644 $ 99,324 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Small Cap Growth Fund $ 73,502 $ 89,340 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
International Equity Fund $169,608 $ 80,851 $66,033 $ 0
- ----------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $102,905 $109,083 $24,295 $ 0
- ----------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * *
- ----------------------------------------------------------------------------------------------------------------
Latin America Equity Fund * $ 38,488 * $ 0
- ----------------------------------------------------------------------------------------------------------------
Real Estate Fund * * * *
- ----------------------------------------------------------------------------------------------------------------
Balanced Fund $ 87,467 $ 37,786 $ 732 $ 0
- ----------------------------------------------------------------------------------------------------------------
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 execute 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
Rembrandt Financial Services Company and SEI Fund Resources.
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<PAGE>
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, 1996 and 1997, the portfolio turnover
rate for each Fund was:
<TABLE>
<CAPTION>
===============================================================================
Turnover Rate
Fund 1996 1997
- -------------------------------------------------------------------------------
<S> <C> <C>
Value Fund 58% 79%
- -------------------------------------------------------------------------------
Growth Fund 58% 62%
- -------------------------------------------------------------------------------
Small Cap Growth Fund 158% 170%
- -------------------------------------------------------------------------------
International Equity Fund 9% 17%
- -------------------------------------------------------------------------------
TransEurope Fund * *
- -------------------------------------------------------------------------------
Asian Tigers Fund 24% 42%
- -------------------------------------------------------------------------------
Latin America Equity Fund 10% 45%
- -------------------------------------------------------------------------------
Fixed Income Fund 194% 233%
- -------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund 179% 283%
- -------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund 98% 54%
- -------------------------------------------------------------------------------
International Fixed Income Fund 85% 52%
- -------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund * *
- -------------------------------------------------------------------------------
Balanced Fund 104% 111%
- -------------------------------------------------------------------------------
Real Estate Fund * *
===============================================================================
</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. Share holders 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
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<PAGE>
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 shareholders incurring financial loss for that reason appears
remote because the Trust's Declaration of Trust contains an express disclaimer
of share holder 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 March 31, 1998, 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. 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 Investor Class shares of the Funds were held for the record owner's
fiduciary, agency or custodial customers.
TREASURY MONEY MARKET FUND
LaSalle National Bank 193,586,550.6500 96.23%
Attn: Demand Note Desk
P.O. Box 1443
Chicago, IL 60690-1443
GOVERNMENT MONEY MARKET FUND
LaSalle National Bank 226,222,240.4300 69.11%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 46,191,568.0100 14.11%
P.O. Box 1443
Chicago, IL 60609-1443
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<PAGE>
ABN AMRO Incorporated 42,561,800.1100 13.00%
Attn: Control Department
208 S. LaSalle St.
Chicago, IL 60604-1001
MONEY MARKET FUND
LaSalle National Bank 822,797,886.5000 86.51%
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
ABN AMRO Incorporated 122,494,879.8800 12.88%
Attn: Control Department
208 S. LaSalle St.
Chicago, IL 60604-1001
TAX-EXEMPT MONEY MARKET FUND
LaSalle National Bank 227,915,460.0800 83.87%
P.O. Box 1443
Chicago, IL 60690-1443
ABN AMRO Incorporated 40,397,769.5700 14.87%
Attn: Control Department
208 S. LaSalle St.
Chicago, IL 60604-1001
FIXED INCOME FUND
LaSalle National Bank 12,482,344.9740 78.20%
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 3,388,388.7840 21.23%
P.O. Box 1443
Chicago, IL 60609-1443
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
LaSalle National Bank. 4,707,178.7690 94.81%
P.O. Box 1443
Chicago, IL 60690-1443
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<PAGE>
LaSalle National Bank 249,645.7780 5.03%
P.O. Box 1443
Chicago, IL 60690-1443
TAX-EXEMPT FIXED INCOME FUND
LaSalle National Bank 3,661,549.5960 98.40%
P.O. Box 1443
Chicago, IL 60690-1443
INTERNATIONAL FIXED INCOME FUND
LaSalle National Bank 1,789,528.3510 98.61%
P.O. Box 1443
Chicago, IL 60690-1443
VALUE FUND
LaSalle National Bank 10,357,367.9480 70.60%
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 4,153,682.2470 28.31%
P.O. Box 1443
Chicago, IL 60690-1443
GROWTH FUND
LaSalle National Bank 3,216,234.6960 32.79%
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 6,347,358.4360 64.72%
P.O. Box 1443
Chicago, IL 60690-1443
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<PAGE>
SMALL CAP GROWTH FUND
LaSalle National Bank 3,441,853.4270 91.17%
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 281,361.3190 7.45%
P.O. Box 1443
Chicago, IL 60690-1443
INTERNATIONAL EQUITY FUND
LaSalle National Bank 4,086,430.0990 64.87%
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 2,136,029.4510 33.91%
P.O. Box 1443
Chicago, IL 60690-1443
ASIAN TIGERS FUND
LaSalle National Bank 4,219,096.6750 79.70%
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 960,073.4740 18.14%
P.O. Box 1443
Chicago, IL 60690-1443
BALANCED FUND
LaSalle National Bank 975,194.6600 15.98%
P.O. Box 1443
Chicago, IL 60690-1443
LaSalle National Bank 4,802,881.8920 78.69%
P.O. Box 1443
Chicago, IL 60690-1443
-47-
<PAGE>
LATIN AMERICA EQUITY FUND
LaSalle National Bank 2,877,243.2770 98.64%
P.O. Box 1443
Chicago, IL 60690-1443
REAL ESTATE FUND
ABN AMRO Incorporated 300,963.9840 72.61%
Attn: Bill Thiel
208 S. LaSalle Street
Chicago, IL 60604-1001
ABN AMRO Incorporated 20,774.1050 5.01%
Attn: Mutual Fund Operations
208 S. LaSalle Street
Chicago, IL 60604-1001
ABN AMRO Incorporated 31,156.0880 7.52%
Attn: Mutual Fund Operations
208 S. LaSalle Street
Chicago, IL 60604-1001
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.
YEAR 2000
The Trust depends on the smooth functioning of computer systems in almost every
aspect of its business. Like other mutual funds, businesses and individuals
around the world, the Trust could be adversely affected if the computer systems
used by its service providers do not properly process the date January 1, 2000
and distinguish between the year 2000 and the year 1900. The Trust has asked
its service providers whether they expect to have their computer systems
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<PAGE>
adjusted for the year 2000 transition, and received assurances from each that
its system is expected to accommodate the year 2000 without material adverse
consequences to the Trust. The Funds and their shareholders may experience
losses if these assurances prove to be incorrect or as a result of year 2000
computer difficulties experienced by issuers of portfolio securities or third
parties, such as custodians, banks, broker-dealers or others with which the
Funds do business.
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended December 31, 1997,
including notes thereto and the report of Ernst & Young LLP are herein
incorporated by reference from the Trust's Annual Report. A copy of the 1997
Annual Report to Shareholders must accompany the delivery of this Statement of
Additional Information.
-49-
<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.
A-1
<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
A-2
<PAGE>
applicable earnings that safety 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
<PAGE>
ABN AMRO FUNDS
(FORMERLY, THE "REMBRANDT FUNDS")
PART C: OTHER INFORMATION
POST EFFECTIVE AMENDMENT NO. 15
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Part A--Financial Highlights
Part B--The following audited financial statements as of December 31,
1997 and the report of Ernst & Young LLP dated January 30, 1998 are
hereby incorporated by reference to the Statement of Additional
Information from Form N-30D, the Annual Report to Shareholders, as
filed with the Securities and Exchange Commission on February 25, 1998
with Accession Number 0000935069-98-000021.
Schedule of Investments
Statement of Assets & Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Additional Exhibits
1 Agreement and Declaration of Trust and Amendment thereto as
originally filed as Exhibit 1 to Registrant's initial
Registration Statement on October 2, 1992 and incorporated by
reference to Exhibit 1 Post-Effective Amendment No. 11, filed
April 29, 1997.
1(a) Amendment dated October 20, 1992 to Registrant's Agreement and
Declaration of Trust as originally filed as Exhibit 1(b) with
Registrant's Pre-Effective Amendment No. 1 filed on December 3,
1992 and incorporated by reference to Exhibit 1(a) Post-Effective
Amendment No. 11, filed April 29, 1997.
1(b) Amendment dated April 27, 1998 to Registrant's Agreement and
Declaration of Trust is filed herewith.
2 Registrant's By-Laws as originally filed as Exhibit 2 with
Registrant's initial Registration Statement on October 2, 1992
and incorporated by reference to Exhibit 2 Post-Effective
Amendment No. 11, filed April 29, 1997.
2(a) Registrant's restated By-Laws as of March 11, 1998 are filed
herewith.
3 Not applicable.
4 Not applicable.
5 Investment Advisory Agreement with LaSalle Street Capital
Management, Ltd, as originally filed as Exhibit 5(b) with
Registrant's initial Registration Statement on October 2, 1992
and incorporated by reference to Exhibit 5 Post-Effective
Amendment No. 11, filed April 29, 1997.
5(a) Investment Sub-Advisory Agreement between LaSalle Street Capital
Management Ltd., on behalf of the Registrant, and ABN AMRO-NSM
International Funds Management B.V. as originally filed as
Exhibit 5(c) with Registrant's Pre-Effective Amendment No. 1 and
incorporated by reference to Exhibit 5(a) Post-Effective
Amendment No. 11, filed April 29, 1997.
6 Distribution Agreement as originally filed as Exhibit 6 with
Registratrant's Pre-Effective Agreement No. 1 and incorporated by
reference to Exhibit 6 Post-Effective Amendment No. 11, filed
April 29, 1997.
6(a) Distribution Agreement between the Registrant and First Data
Distributors, Inc. dated February 26, 1998 is filed herewith.
7 Not applicable.
8 Custodian Agreement as originally filed as Exhibit 8(a) with
Registrant's Pre-Effective Amendment No. 1 and incorporated by
reference to Exhibit 8 Post-Effective Amendment No. 11, filed
April 29, 1997.
-4-
<PAGE>
8(a) Sub-Custodian Agreement between CoreStates Bank, N.A. and Barclays
Bank PLC as filed as Exhibit 8(a)(1) to Post-Effective Amendment No. 6
to Registrant's Registration Statement on Form N-1A (File No. 33-
52784), filed with the Securities and Exchange Commission on January
13, 1995.
8(b) Form of Transfer Agency Agreement between the Registrant and
Supervised Service Company as filed as Exhibit 8(c) to Post-Effective
Amendment No. 4 to Registrant's Registration Statement on Form N-1A
(File No. 33-52784) filed with the Securities and Exchange Commission
on April 1, 1994.
8(c) Custodian Agreement between the Registrant and The Chase Manhattan
Bank to be filed by amendment.
8(d) Form of Transfer Agency Agreement between the Registrant and First
Data Investor Services Group,Inc., dated May 11, 1998 to be filed by
amendment.
9 Administration Agreement as originally filed as Exhibit 5(a)
with Registrant's Pre-Effective Amendment No. 1 filed on December 3,
1992 and incorporated by reference to Exhibit 9 Post-Effective
Amendment No. 11, filed April 29, 1997.
9(a) Consent to Assignment and Assumption (of the Administration Agreement)
incorporated by reference to Exhibit 9(a), Post-Effective Amendment
No. 12 to Registrant's Registration Statement on Form N-1A (File No.
33-52784), filed with the Securities and Exchange Commission on
October 17, 1997.
9(b) Shareholder Service Plan and Agreement between Rembrandt Funds and
Rembrandt Financial Services Company dated August 4, 1997 incorporated
by reference to Exhibit 9(b), Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File No. 33-52784),
filed with the Securities and Exchange Commission on October 17, 1997.
9(c) Administration Agreement between the Registrant and First Data
Investor Services Group, Inc., dated February 26, 1998 is filed
herewith.
9(d) Shareholder Servicing Plan and Agreement between the Registrant and
First Data Distributors, Inc., dated March 2, 1998 to be filed by
amendment.
10 Opinion and Consent of Counsel as originally filed as Exhibit 10 with
Registrant's Post-Effective Amendment No. 2 and incorporated by
reference to Exhibit 10 Post-Effective Amendment No. 11, filed April
29, 1997.
11 Consent of Independent Public Accountants, filed herewith.
12 Not applicable.
13 Not applicable.
14 Not applicable.
15 Distribution Plan - Investor Class as originally filed as Exhibit 15
with Registrant's Pre-Effective Amendment No. 1 and incorporated by
reference to Exhibit 15 Post-Effective Amendment No. 11, filed April
29, 1997.
15(a)Distribution Plan -Investor Class between the Registrant and First
Data Distributors, Inc. as of February 26, 1998 is filed herewith.
16 Performance Quotation Computation
17 Financial Data Schedules, filed herewith.
18 Rule 18f-3 Plan as originally filed as Exhibit 18 with Registrant's
Post-Effective Amendment No. 8 and incorporated by reference to
Exhibit 18 Post-Effective Amendment No. 11, filed April 29, 1997.
24 Powers of Attorney are incorporated by reference to Exhibit 24 Post-
Effective Amendment No. 13, filed April 16, 1998.
Item 25. Persons Controlled by or under Common Control with Registrant:
See the Prospectuses and the Statement of Additional Information regarding
the Trust's control relationships.
Item 26. Number of Holders of Securities:
As of March 31, 1998
-5-
<PAGE>
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Units of beneficial interest, without par value -
COMMON SHARES
Value Fund................................................ 53
Growth Fund............................................... 67
Small Cap Growth Fund..................................... 17
International Equity Fund................................. 37
TransEurope Fund.......................................... 0
Asian Tigers Fund......................................... 35
Fixed Income Fund......................................... 16
Intermediate Government Fixed Income Fund................. 7
Tax-Exempt Fixed Income Fund.............................. 8
International Fixed Income Fund........................... 10
Limited Volatility Fixed Income Fund...................... 0
Money Market Fund......................................... 10
Government Money Market Fund.............................. 8
Treasury Money Market Fund................................ 4
Tax-Exempt Money Market Fund.............................. 16
Real Estate Fund.......................................... 23
Balanced Fund............................................. 39
Latin America Equity Fund................................. 24
INVESTOR SHARES
Value Fund................................................ 166
Growth Fund............................................... 282
Small Cap Growth Fund..................................... 74
International Equity Fund................................. 177
TransEurope Fund.......................................... 0
Asian Tigers Fund......................................... 9
Fixed Income Fund......................................... 23
Intermediate Government Fixed Income Fund................. 10
Tax-Exempt Fixed Income Fund.............................. 24
International Fixed Income Fund........................... 26
Limited Volatility Fixed Income........................... 0
Money Market Fund......................................... 96
Government Money Market Fund.............................. 9
Treasury Money Market Fund................................ 7
Tax Exempt Money Market Fund.............................. 19
Balanced Fund............................................. 253
Real Estate Fund.......................................... 0
</TABLE>
Item 27. Indemnification:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
-6-
<PAGE>
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
Item 28. Business and Other Connections of Investment Advisor and Investment
Sub-Advisor:
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------- -------------
<S> <C> <C>
Robert T. Brehm ABN AMRO Chicago Corporation Executive Vice President
Chairman Director
ABN AMRO Asset Management President, Director
(USA) Inc.
Richard A. Frodsham ABN AMRO Chicago Corporation Senior Vice President
President
Chief Executive Officer
Director
John A. Wing ABN AMRO Chicago Corporation Chairman, CEO
Vice Chairman Amerus Life Director
Chicago Board Options Exchange Director
Perry L. Taylor, Jr. ABN AMRO Chicago Corporation Executive Vice President &
Director, Secretary Director
Erikson Institute Trustee
Daniel J. Shannon Catholic Charities Board of Advisors,
Director Board of Directors
Notre Dame National Monogram Club President
Dental Benefit Services of Illinois Vice Chairman
Total Travel, Inc. Director
BioSafe International Director
Charles R. Klimkowski ABN AMRO Chicago Corporation Senior Vice President
Director Director
Theregenics, Inc. Director
Charles H. Self III LaSalle National Bank Senior Vice President & Assistant
Director Secretary
Senior Vice President Government Insurance Managers, Inc. Director
Keith Dibble LaSalle National Bank Senior Vice President & Assistant
Senior Vice President Secretary
Thomas F. McGrath LaSalle National Bank Senior Vice President & Assistant
Senior Vice President Secretary
ABN AMRO Chicago Corporation Senior Vice President
</TABLE>
-7-
<PAGE>
<TABLE>
<S> <C> <C>
John F. Bonetti LaSalle National Bank Senior Vice President & Assistant
Vice President Secretary
Marc G. Borghans LaSalle National Bank Vice President & Assistant
Vice President Secretary
James J. Baudendistel None
Vice President
Gregory D. Boal LaSalle National Bank Vice President & Assistant
Vice President Secretary
A. Wade Buckles LaSalle National Bank First Vice President & Assistant
First Vice President Secretary
ABN AMRO Chicago Corporation Senior Vice President
Jac A. Cerney LaSalle National Bank Vice President & Assistant
Senior Vice President Secretary
Martin L. Eisenberg ABN AMRO Bank N.V. Vice President
Vice President Netherlands Trading Society East, Inc. Vice President
Pine Tree Capital Holdings, Inc. Vice President
AMRO Securities, Inc. Vice President
ABN AMRO North America Finance, Vice President
Inc.
DBI Holdings, Inc. Vice President
ABN AMRO North America, Inc. Senior Vice President
ABN AMRO Mortgage Corp. Vice President
ABN AMRO Resource Management, Vice President
Inc.
Danic Asset Management Corp. Vice President
National Asset Management Vice President
SFH, Inc. Vice President
ABN AMRO Acceptance Corp. Vice President
ABN AMRO Asset Management Vice President
(USA) Inc.
ABN AMRO Credit Corp. Vice President
ABN AMRO Investment Services, Inc. Vice President
LaSalle Management Company, Inc. Vice President
Cragin Financial Corp. Vice President
Cragin Service Corp. Vice President
Cumberland & Higgins, Inc. Vice President
LaSalle Bank, F.S.B. Vice President
Lease Plan Illinois, Inc. Vice President
LaSalle Financial Services, Inc. Tax Officer
LaSalle Home Mortgage Corporation Tax Officer
LaSalle National Corporation Vice President
ABN AMRO Capital (USA) Inc. Vice President
Lease Plan North America, Inc. Vice President
ABN AMRO Information Technology Vice President
Services Company
Lisle Corporation Vice President
ABN AMRO Services Company, Inc. Vice President
</TABLE>
-8-
<PAGE>
<TABLE>
<S> <C> <C>
LaSalle Bank Vice President
LaSalle Bank NI Vice President
LaSalle Northwest National Bank Vice President
LaSalle National Bancorp, Inc. Vice President
LaSalle Bank Illinois Vice President
Amsterdam Pacific Corporation Vice President
LaSalle Trade Services Limited Vice President
Heigl Mortgage and Financial Vice President
Corporation
CNBC Bancorp, Inc. Vice President
Columbia Financial Services, Inc. Vice President
Columbia National Bank of Chicago Vice President
CNBC Development Corporation Vice President
CNBC Investment Corporation Vice President
CNBC Leasing Corporation Vice President
Sky Mortgage Company Vice President
Sky Finance Company Vice President
CNB Property Corporation Vice President
Union Realty Mortgage Co., Inc. Vice President
Leonard Voila Corporation Vice President
LaSalle National Bank Vice President
Monroe Corporation of Delaware Vice President
LaSalle National Safe Deposit Vice President
Corporation
Rob-Wal Investment Co. Vice President
ENB Realty Col, Inc. Vice President
LaSalle Trade Services Corporation Vice President
LaSalle National Leasing Corporation Vice President
LaSalle Business Credit, Inc. Vice President
European American Bank Vice President
Cityspire Realty Corp. Vice President
EA Debt Corp. Vice President
EA Land Corp. Vice President
EAB Land Company, Inc. Vice President
EAB Mortgage Company, Inc. Vice President
EAB Realty Corp. Vice President
EAB Realty of Florida, Inc. Vice President
EAB Securities, Inc. Vice President
Ashland Properties, Inc. Vice President
Discount Brokers International, Inc. Vice President
Kany Long Island City Corp. Vice President
Cragin Service Development Corp. Vice President
Wasco Funding Corp. Vice President
Island Abodes Corp. Vice President
Lyric Holdings, Inc. Vice President
EAB Credit Corp. Vice President
ORE Realty, Inc. Vice President
Texas Holdings, Inc. Vice President
Twelve Polo Realty Inc. Vice President
Vail at North Salem Inc. Vice President
32A Realty Inc. Vice President
81 Lee Avenue Corp. Vice President
169 East Flagler Corp. Vice President
</TABLE>
-9-
<PAGE>
<TABLE>
<S> <C> <C>
EAB Plaza, Inc. Vice President
117 Seaman Realty, Inc. Vice President
Garden City Marble Corp. Vice President
Mamaroneck Point Realty, Inc. Vice President
East River 52 Corp. Vice President
Huntington Bay Development Corp. Vice President
Plaza Homes Inc. (Metrofund) Vice President
Tower East 147 Inc. Vice President
LSR Realty Inc. Vice President
Beckman Hospitality Corp. Vice President
Atlantic Avenue Development Corp. Vice President
Bald Hills Park at Farmingville Inc. Vice President
Bennett 143 Corp. Vice President
Birch Locust Valley Corp. Vice President
Broadhollow 532 Melville Corporation Vice President
CK at Manorville Inc. Vice President
Colony at Sayerville, Corp. Vice President
Corners Estates at Hauppauge Inc. Vice President
Corona 114 Apartments Inc. Vice President
Country Knolls at Manorville Inc. Vice President
Cove Townhouses at Southold Inc. Vice President
Crystal Domiciles Inc. Vice President
Eastern Shores at Northampton Corp. Vice President
Edison Townhouse Corp. Vice President
Forestwood at North Hills Inc. Vice President
Garden State Convention Center at Vice President
Somerest County, Inc.
Half Acre on 347 at Nesoonset Inc. Vice President
Horse Race Lane at Nissequogue Inc. Vice President
Hunt Club at Middletown Inc. Vice President
Jericho 969 Turnpike Inc. Vice President
Fairfield Avenue Corp. Vice President
Amsterdam Development Corp. Vice President
Brownstone Apts. Inc. Vice President
Central Cedarhurst Corp. Vice President
GSC Land Corp. Vice President
East 91st Street Development Corp. Vice President
East 92nd Street Development Corp. Vice President
LLPA Corporation Vice President
Lake and Pulaski at Greenlawn Inc. Vice President
Lake Front Land Corp. Vice President
Lattingtown Mansion, Inc. Vice President
Long Beach Breeze Corp. Vice President
Lowell Acquisition Corp. Vice President
Ludlow Development Corp. Vice President
MPE at St. James Inc. Vice President
Manor Homes at Aberdeen Corp. Vice President
Maspeth 56-25 58th Street Corp. Vice President
Metro Case Corp. Vice President
Mills Pond Estates at St. James Inc. Vice President
Montauk Hospitality Corp. Vice President
Moreland Hauppauge Corp. Vice President
Nineteenth Street Development Corp. Vice President
</TABLE>
-10-
<PAGE>
<TABLE>
<S> <C> <C>
North Hills Link Corp. Vice President
Old Country Road at Wyandanch Inc. Vice President
Omni General Realty Corp. Vice President
Omni Realty Corp. Vice President
Orchards at Mt. Sinai Inc. "(The)" Vice President
Parkway Plaza 1400 Corp. Vice President
Plaza Boulevard Equities Corp. Vice President
Plaza Boulevard Properties Corp. Vice President
Plaza Uniondale Equities Corp. Vice President
Plaza Uniondale Properties Corp. Vice President
Remington Ronkonkoma Corp. Vice President
Rendezvous Realty Corp. Vice President
SE at Commack Inc. Vice President
SE at Commack II Inc. Vice President
SE at Commack III Inc. Vice President
SE at Commack IV Inc. Vice President
Scholar Estates at Commack Inc. Vice President
Seaman Shares at Inwood Corp. Vice President
Shoreham North Country Corp. Vice President
Showcase Estates at Dix Hills Inc. Vice President
Smith Island at Everett Corp. Vice President
Soho 350 Corp. Vice President
Southampton Settlers Corporation Vice President
Southeast Ridgefield Lane Corp. Vice President
Steinway 18-50 Astoria Corp. Vice President
Sterling DTVA Corp. Vice President
TE at Dix Hills Inc. Vice President
TE at Dix Hills II Inc. Vice President
TE at Dix Hills III Inc. Vice President
TO at Mt. Sanai Inc. Vice President
Tara II at Hauppauge Inc. Vice President
Thornwood Estates at Dix Hills Inc. Vice President
Vermilyea 119 Corp. Vice President
Veterans 4320 Bohemia Corp. Vice President
Village 185 Corp. Vice President
W.M. Seaman at Inwood Corp. Vice President
Welcome Center at Manorville Inc. Vice President
West End 700 Inc. Vice President
Westminster Downs at Dix Hills, Inc. Vice President
Westwood Hills at Middletown, Inc. Vice President
Windsor 37th Corp. Vice President
Z161 Corp. Vice President
Z174 Corp. Vice President
Ziegfeld Villas Corp. Vice President
41 East Sunrise Highway Corporation Vice President
55 Commerce, Inc. (Sold to EMI Vice President
1/20/92)
Seventh Street Development Corp. Vice President
Fourteenth Street Development Corp. Vice President
West 51st Street Development Corp. Vice President
West 73rd Street Development Corp. Vice President
Lemark Land in Setauket, Inc. Vice President
Ludlow Street Development Corp. Vice President
</TABLE>
-11-
<PAGE>
<TABLE>
<S> <C> <C>
Milestone Square Corp. Vice President
Oceanside 35-05 Hampton Road Inc. Vice President
Oceanside 35-39 Hampton Road Inc. Vice President
Sangeo 709 Merrick Road Corp. Vice President
Sherwood Plaza Corp. Vice President
Syosset 240 Jericho, Inc. Vice President
Mark Karstrom LaSalle National Bank Vice President
Vice President Secretary
Kathryn L. Martin ABN AMRO Asset Management Compliance Officer
Vice President (USA) Inc.
Ronald C. Scheuer LaSalle National Bank Vice President & Assistant
Vice President Secretary
Roger R. Sullivan LaSalle National Bank Vice President & Assistant
Vice President Secretary
Karen Van Cleave LaSalle National Bank Vice President & Assistant
Vice President Secretary
Nancy A. Ellefson LaSalle National Bank Assistant Vice President &
Vice President Assistant Secretary
Mark T. Morgan LaSalle National Bank Assistant Vice President &
Assistant Vice President Assistant Secretary
ABN AMRO Chicago Corporation Vice President
Phillip P. Mierzwa LaSalle National Bank Trust Officer & Assistant
Assistant Vice President Secretary
Susan M. Weimeler None
Officer
Christine R. Dragon LaSalle National Bank Employee
Officer
</TABLE>
Other business, profession, vocation, or employment of a substantial nature in
which each director or principal officer of the Sub-Advisor is or has been, at
any time during the last two fiscal years, engaged for his/her own account or in
the capacity of director, officer, employee, partner or trustee are as follows:
ABN AMRO-NSM International Funds Management B.V., a registered investment
advisor, serves as the investment sub-advisor of the Latin America Equity Fund,
International Equity Fund, TransEurope Fund, Asian Tigers Fund and International
Fixed Income Fund.
-12-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------- -------------
<S> <C> <C>
Hendrik Stienstra ABN AMRO Investment Management B.V. Director
Director ABN AMRO Beheer Beleggingsfondsen B.V. Director
B.V. Hollandsche Belegging en Beheer Director
Maatshchappij
ABN AMRO Bank N.V. Senior Vice President
Diederik Wermolder ABN AMRO Investment Management B.V. Director
Director ABN AMRO Beheer Beleggingsfondsen B.V. Director
B.V. Hollandsche Belegging en Beheer Director
Maatshchappij
ABN AMRO Luxembourg Investment Director
Management S.A.
ABN AMRO Funds Investment Advisory Director
(Luxembourg) S.A.
ABN AMRO Interest Growth Fund Investment Director
Advisory (Luxembourg) S.A.
ABN AMRO Valurente Investment Advisory Vice President
(Luxembourg) S.A.
ABN AMRO Bank N.V.
Wypke Postma ABN AMRO Investment Management B.V. Officer
Director ABN AMRO Beheer Beleggingsfondsen B.V. Officer
B.V. Hollandsche Belegging en Beheer Officer
Maatschappij
ABN AMRO Bank N.V. Vice President
Mathilde De La Serviere Banque NSM, Paris Vice President
Director
Anne-Marie George Banque NSM, Paris Vice President
Director
Rogier Crijns ABN AMRO Bank N.V. Vice President
Portfolio Manager
Jan-Wim Derks ABN AMRO Bank N.V. Vice President
Portfolio Manager
Gijs Dooresteijn ABN AMRO Bank N.V. Vice President
Portfolio Manager
Alex Ng ABN AMRO Asset Management (Asia) Ltd. Director
Portfolio Manager P.T. ABN AMRO Manajemen Investasl Director
George Theodoridis ABN AMRO Investment Management B.V. Officer
Officer ABN AMRO Beheer Beleggingsfondsen B.V. Officer
B.V. Hollandsche Belegging en Beheer Officer
Maatshchappij Officer
ABN AMRO Bank N.V. Vice President
Erik Eleveld ABN AMRO Bank N.V. Assistant Vice
Trader President
John Vaartjes ABN AMRO Investment Management B.V. Officer
Compliance Officer ABN AMRO Beheer Beleggingsfondsen B.V. Officer
B.V. Hollandsche Belegging en Beheer Officer
Maatshchapij
ABN AMRO Bank N.V. Assistant Vice President
</TABLE>
-13-
<PAGE>
Item 29. Principal Underwriters:
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or
investment adviser.
First Data Distributors, Inc., a wholly-owned subsidiary of First
Data Corporation, acts as distributor for ABN AMRO Funds pursuant
to a distribution agreement dated February 26, 1998. First Data
Distributors, Inc. also acts as underwriter for BT Insurance
Funds Trust, First Choice Funds Trust, The Galaxy Fund, The
Galaxy VIP Fund, Galaxy Fund II, Panorama Trust, CT&T Funds,
Wilshire Target Funds, Inc., Potomac Funds, Undiscovered Managers
Funds, LKCM Funds, IBJ Funds Trust and the ICM Series Trust. The
Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers. The Distributor is a wholly-
owned subsidiary of First Data Corporation and is located at 4400
Computer Drive, Westborough, Massachusetts 01581.
(b) Furnish the Information required by this Item 29 (b) with respect to each
director, officer, or partner of First Data Distributors, Inc. is
incorporated by reference to Schedule A of Form BD filed by First Data
Distributors, Inc. with the Securities and Exchange Commission pursuant to
the Securities Act of 1934 (File No. 8-45467.)
Item 30. Location of Accounts and Records:
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8);
(12); and 31a-1(d), the required books and records are maintained at the offices
of Registrant's Custodian:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are
maintained at the offices of Registrant's Administrator:
First Data Investor Services Group, Inc. First Data Investor Services
Group, Inc.
One Exchange Place, 8th Floor and First Data Distributors, Inc.
Boston, Massachusetts 02109 4400 Computer Drive
Westborough, Massachusetts 01581
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Advisor and Sub-Advisor:
ABN AMRO Asset Management (USA) ABN AMRO-NSM International Funds
Inc. Management B.V.
208 South LaSalle Street Hoogoorddreef 66-68
Chicago, IL 60604-1003 P.O. Box 283, 1000 E.A.
Amsterdam, The Netherlands ZU100GST
Item 31. Management Services: None.
-14-
<PAGE>
Item 32. Undertakings:
Registrant hereby undertakes that whenever shareholders meeting the
requirements of Section 16(c) of the Investment Company Act of 1940 inform the
Board of Trustees of their desire to communicate with Shareholders of the Trust,
the Trustees will inform such Shareholders as to the approximate number of
Shareholders of record and the approximate costs of mailing or afford said
Shareholders access to a list of Shareholders.
Registrant undertakes to call a meeting of Shareholders for the purpose of
voting upon the question of removal of a Trustee(s) when requested in writing to
do so by the holders of at least 10% of Registrant's outstanding shares and in
connection with such meetings to comply with the provisions of Section 16(c) of
the Investment Company Act of 1940 relating to Shareholder communications.
Registrant undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to Shareholders,
upon request and without charge.
-15-
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for ABN AMRO Funds (formerly
The Rembrandt Funds, The LSNT Funds and The Passport Funds) is on file with the
Secretary of State of The Commonwealth of Massachusetts and notice is hereby
given that this Registration Statement has been executed on behalf of the Trust
by an officer of the Trust as an officer and by its Trustees as trustees and not
individually and the obligations of or arising out of this Registration
Statement are not binding upon any of the Trustees, officers, or Shareholders
individually but are binding only upon the assets and property of the Trust.
-16-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant Certifies that it meets all of
the requirements for the effectiveness of this Registration Statement pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 15 to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Commonwealth of
Boston, State of Massachusetts, on the 28th day of April 1998
ABN AMRO FUNDS
By: /s/ Timothy J. Leach
---------------------------
Timothy J. Leach, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement has been signed below by the following persons in the
capacity on the dates indicated.
* Trustee April 28, 1998
- ----------------------
Arnold F. Brookstone
* Trustee April 28, 1998
- ----------------------
William T. Simpson
* Trustee April 28, 1998
- ----------------------
Robert Feitler
* Trustee April 28, 1998
- ----------------------
John A. Wing
/s/ Timothy J. Leach
- ----------------------
Timothy J. Leach President & Chief April 28, 1998
Executive Officer
/s/ John J. Burke, III
- ----------------------
John J. Burke, III Vice President & April 28, 1998
Treasurer
*By: /s/ Julie A. Tedesco
----------------------
Julie A. Tedesco, Attorney-in-Fact
-17-
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Name Exhibit
- ---- -------
<S> <C>
Agreement and Declaration of Trust and Amendment thereto as originally Ex-99.B1
filed as Exhibit 1 with Registrant's initial Registration Statement on
October 2, 1992 and incorporated by reference to Exhibit 1 Post-
Effective Amendment No. 11, filed April 29, 1997.
Amendment dated October 20, 1992 to Registrant's Agreement and Ex-99.B1A
Declaration of Trust as originally filed as Exhibit 1(b) with Registrant's Pre-
Effective Amendment No. 1 filed on December 3, 1992 and incorporated
by reference to Exhibit 1(a) Post-Effective Amendment No. 11, filed
April 29, 1997.
Amendment dated April 27, 1998 to Registrant's Agreement and Declaration Ex-99.BIB
of Trust is filed herewith.
Registrant's By-Laws as originally filed as Exhibit 2 with Registrant's initial Ex-99.B2
Registration Statement on October 2, 1992 and incorporated by reference to
Exhibit 2 Post-Effective Amendment No. 11, filed April 29, 1997.
Registrant's restated By-Laws as of March 11, 1998 are filed herewith. Ex-99.B2A
Not applicable. Ex-99.B3
Not applicable. Ex-99.B4
Investment Advisory Agreement with LaSalle Street Capital Management, Ex-99.B5
Ltd. as originally filed as Exhibit 5(b) with Registrant's initial Registration
Statement on October 2, 1992 and incorporated by reference to Exhibit 5
Post-Effective Amendment No. 11, filed April 29, 1997.
Investment Sub-Advisory Agreement between LaSalle Street Capital Ex-99.B5A
Management Ltd., on behalf of the Registrant, and ABN AMRO-NSM
International Funds Management B.V. as originally filed as Exhibit 5(c)
with Registrant's Pre-Effective Amendment No. 1 and incorporated by
reference to Exhibit 5(a) Post-Effective Amendment No. 11, filed April
29, 1997.
Distribution Agreement as originally filed as Exhibit 6 with Registrant's Ex-99.B6
Pre-Effective Amendment No. 1 and incorporated by reference to Exhibit
6 Post-Effective Amendment No. 11, filed April 29, 1997.
Distribution Agreement between the Registrant and First Data Distributors, Inc. Ex-99.B6A
dated February 26, 1998 is filed herewith.
Not applicable. Ex-99.B7
Custodian Agreement as originally filed as Exhibit 8(a) with Registrant's Ex-99.B8
Pre-Effective Amendment No. 1 and as filed as Exhibit 8 Post-Effective
Amendment No. 11, filed April 29, 1997.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Sub-Custodian Agreement between CoreStates Bank, N.A. and Barclays Ex-99.B8A
Bank PLC as filed as Exhibit 8(a)(1) to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on Form N-1A (File No.
33-52784), filed with the Securities and Exchange Commission on
January 13, 1995.
Form of Transfer Agency Agreement between the Registrant and Supervised Ex-99.B8B
Service Company incorporated herein by reference to Exhibit 8(c) to
Post-Effective Amendment No. 4 to Registrant's Registration Statement on
Form N-1A (File No. 33-52784) filed with the Securities and Exchange
Commission on April 1, 1994.
Custodian Agreement between the Registrant and The Chase Manhattan Bank, to Ex-99.B8C
be filed by amendment.
Form of Transfer Agency Agreement between the Registrant and First Data Ex-99.B8D
Investor Services Group, Inc., to be filed by amendment.
Administration Agreement as originally filed as Exhibit 5(a) with Registrant's Ex-99.B9
Pre-Effective Amendment No. 1 filed on December 3, 1992 and incorporated
by reference to Exhibit 9 Post-Effective Amendment No. 11, filed April 29,
1997.
Consent to Assignment and Assumption (of the Administration Ex-99.B9A
Agreement) incorporated herein by reference to Exhibit 9(a) to
Post-Effective Amendment No. 12 to Registrant's Registration Statement on
Form N-1A (File No. 33-52784) filed with the Securities and Exchange
Commission on October 17, 1997.
Shareholder Service Plan and Agreement between Rembrandt Funds and Ex-99.B9B
Rembrandt Financial Services Company dated August 4, 1997, incorporated
herein by reference to Exhibit 9(b) to Post-Effective Amendment No. 12 to
Registrant's Registration Statement on Form N-1A (File No. 33-52784)
filed with the Securities and Exchange Commission on October 17, 1997.
Administration Agreement between the Registrant and First Data Investor Ex-99.B9C
Services Group, Inc., dated February 26, 1998 is filed herewith.
Shareholder Servicing Plan and Agreement between the Registrant and Ex-99.B9D
First Data Distributors, Inc., dated February 26, 1998, to be filed by
amendment.
Opinion and Consent of Counsel as originally filed as Exhibit 10 with Ex-99.B10
Registrant's Post-Effective Amendment No. 2 and incorporated by
reference to Exhibit 10 Post-Effective Amendment No. 11, filed April 29
1997.
Consent of Independent Public Accountants, filed herewith. Ex-99.B11
Not applicable. Ex-99.B12
Not applicable. Ex-99.B13
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Not applicable. Ex-99.B14
Distribution Plan - Investor Class as originally filed as Exhibit 15 in Ex-99.B15
Registrant's Pre-Effective Amendment No. 1 and incorporated by
reference to Exhibit 15 Post-Effective Amendment No. 11, filed April
29, 1997.
Distribution Plan - Investor Class between the Registrant and First Ex-99.B15A
Data Distributors, Inc. as of February 26, 1998 is filed herewith.
Performance Quotation Computation Ex-99.B16
Rule 18f-3 Plan as originally filed as Exhibit 8 with Registrant's Post- Ex-99.B18
Effective Amendment No. 8 and incorporated by reference to Exhibit
18 Post-Effective Amendment No. 11, filed April 29, 1997.
Powers of Attorney are incorporated by reference to Exhibit 24 Post- Ex-99.B24
Effective Amendment No. 13, filed April 16, 1998.
Financial Data Schedules, filed herewith. Ex-99.B27
</TABLE>
<TABLE>
<S> <C>
Financial Data Schedule for Fixed Income Fund - Common Class Ex-99.B27A(1)
Financial Data Schedule for Fixed Income Fund - Investor Class Ex-99.B27A(2)
Financial Data Schedule for Intermediate Government Fixed Income Fund - Common Class Ex-99.B27B(1)
Financial Data Schedule for Intermediate Government Fixed Income Fund - Investor Class Ex-99.B27B(2)
Financial Data Schedule for Tax-Exempt Fixed Income Fund - Common Class Ex-99.B27C(1)
Financial Data Schedule for Tax-Exempt Fixed Income Fund - Investor Class Ex-99.B27C(2)
Financial Data Schedule for International Fixed Income Fund - Common Class Ex-99.B27D(1)
Financial Data Schedule for International Fixed Income Fund - Investor Class Ex-99.B27D(2)
Financial Data Schedule for Balanced Fund - Common Class Ex-99.B27E(1)
Financial Data Schedule for Balanced Fund - Investor Class Ex-99.B27E(2)
Financial Data Schedule for Value Fund - Common Class Ex-99.B27F(1)
Financial Data Schedule for Value Fund - Investor Class Ex-99.B27F(2)
Financial Data Schedule for Growth Fund - Common Class Ex-99.B27G(1)
Financial Data Schedule for Growth Fund - Investor Class Ex-99.B27G(2)
Financial Data Schedule for Small Cap Fund - Common Class Ex-99.B27H(1)
Financial Data Schedule for Small Cap Fund - Investor Class Ex-99.B27H(2)
Financial Data Schedule for International Equity Fund - Common Class Ex-99.B27I(1)
Financial Data Schedule for International Equity Fund - Investor Class Ex-99.B27I(2)
Financial Data Schedule for Asian Tigers Fund - Common Class Ex-99.B27J(1)
Financial Data Schedule for Asian Tigers Fund - Investor Class Ex-99.B27J(2)
Financial Data Schedule for Treasury Money Market Fund - Common Class Ex-99.B27K(1)
Financial Data Schedule for Treasury Money Market Fund - Investor Class Ex-99.B27K(2)
Financial Data Schedule for Government Money Market Fund - Common Class Ex-99.B27L(1)
Financial Data Schedule for Government Money Market Fund - Investor Class Ex-99.B27L(2)
Financial Data Schedule for Money Market Fund - Common Class Ex-99.B27M(1)
Financial Data Schedule for Money Market Fund - Investor Class Ex-99.B27M(2)
Financial Data Schedule for Tax-Exempt Money Market Fund - Common Class Ex-99.B27N(1)
Financial Data Schedule for Tax-exempt Money Market Fund - Investor Class Ex-99.B27N(2)
Financial Data Schedule for Latin America Equity Fund - Common Class Ex-99.B270(1)
Financial Data Schedule for Real Estate Fund - Common Class Ex-99.B27P(1)
</TABLE>
<PAGE>
AMENDMENT TO
AGREEMENT AND DECLARATION OF TRUST
OF
REMBRANDT FUNDS
The undersigned, constituting a majority of the Trustees of Rembrandt Funds
(the "Trust"), a Massachusetts business trust created under an Agreement and
Declaration of Trust dated September 17, 1992, and amended on September 29, 1992
and October 19, 1992, hereby amends the Agreement and Declaration of Trust by
changing the name of the Trust to "ABN AMRO Funds" effective upon the filing of
this instrument in the office of the Secretary of State of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the undersigned Trustees of the Trust have set their hands
as of this 15 day of April, 1998.
/s/ Arnold F. Brookstone
- ---------------------------------- __________________________________
Arnold F. Brookstone Robert Feitler
__________________________________ __________________________________
William T. Simpson John Wing
<PAGE>
AMENDMENT TO
AGREEMENT AND DECLARATION OF TRUST
OF
REMBRANDT FUNDS
The undersigned, constituting a majority of the Trustees of Rembrandt Funds
(the "Trust"), a Massachusetts business trust created under an Agreement and
Declaration of Trust dated September 17, 1992, and amended on september 29, 1992
and October 19, 1992, hereby amends the Agreement and Declaration of Trust by
changing the name of the Trust to "ABN AMRO Funds" effective upon the filing of
this instrument in the office of the Secretary of State of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the undersigned Trustees of the Trust have set their hands
as of this __ day of April, 1998.
/s/ Robert Feitler
__________________________________ -------------------------------
Arnold F. Brookstone Robert Feitler
__________________________________ _______________________________
William T. Simpson John Wing
<PAGE>
AMENDMENT TO
AGREEMENT AND DECLARATION OF TRUST
OF
REMBRANDT FUNDS
The undersigned, constituting a majority of the Trust of Rembrandt Funds
(the "Trust"), a Massachusetts business trust created under an Agreement and
Declaration of Trust dated September 17, 1992, and amended on September 29, 1992
and October 19,1992, hereby amends the Agreement and Declaration of Trust by
changing the name of the Trust to "ABN AMRO Funds" effective upon the filing of
this instrument in the office of the Secretary of State of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the undersigned Trustees of the Trust have set their hands
as of this __ day of April, 1998.
____________________________________ ________________________________
Arnold F. Brookstone Robert Feitler
/s/ John Wing
____________________________________ --------------------------------
William T. Simpson John Wing
<PAGE>
AMENDMENT TO
AGREEMENT AND DECLARATION OF TRUST
OF
REMBRANDT FUNDS
The undersigned, constituting a majority of the Trustees of Rembrandt Funds
(the "Trust"), a Massachusetts business trust created under an Agreement and
Declaration of Trust dated September 17, 1992, and amended on September 29,1992
and October 19, 1992, hereby amends the Agreement and Declaration of Trust by
changing the name of the Trust to "ABN AMRO Funds" effective upon the filing of
this instrument in the office of the Secretary of State of the Commonwealth of
Massachusetts.
IN WITNESS WHEREOF, the undersigned Trustees of the Trust have set their hands
as of this 15 day of April, 1998.
__________________________________ _________________________________
Arnold F. Brookstone Robert Feitler
/s/ William T. Simpson
- ----------------------------------- _________________________________
William T. Simpson John Wing
<PAGE>
BY-LAWS
OF
REMBRANDT FUNDS
SECTION 1. AGREEMENT AND DECLARATION OF TRUST AND PRINCIPAL OFFICE
1.1 Agreement and Declaration of Trust. These By-Laws shall be subject to the
-----------------------------------
Agreement and Declaration of Trust, as from time to time in effect (the
"Declaration of Trust"), of Rembrandt Funds, the Massachusetts business
trust established by the Declaration of Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of the Trust shall be
------------------------------
located in Boston, Massachusetts.
SECTION 2. SHAREHOLDERS
2.1 Annual Meeting. The annual meeting of the shareholders shall be at such
---------------
time and on such date in each year as the president or Trustees may from
time to time determine.
2.2 Special Meeting in Place of Annual Meeting. If no annual meeting has been
-------------------------------------------
held in accordance with the foregoing provisions, a special meeting of the
shareholders may be held in place thereof, and any action taken at such
special meeting shall have the same force and effect as if taken at the
annual meeting, and in such case all references in these By-Laws to the
annual meeting of the shareholders shall be deemed to refer to such special
meeting.
2.3 Special Meetings. A special meeting of the shareholders may be called at
-----------------
any time by the Trustees, by the president or, if the Trustees and the
president shall fail to call any meeting of shareholders for a period of 30
days after written application of one or more shareholders who hold at
least 25% of all shares issued and outstanding and entitled to vote at the
meeting, then such shareholders may call such meeting. Each call of a
meeting shall state the place, date, hour and purposes of the meeting.
2.4 Place of Meetings. All meetings of the shareholders shall be held at the
------------------
principal office of the Trust, or, to the extent permitted by the
Declaration of Trust, at such other place within the United States as shall
be designated by the Trustees or the president of the Trust.
1
<PAGE>
2.5 Notice of Meetings. A written notice of each meeting of shareholders,
-------------------
stating the place, date and hour and the purposes of the meeting, shall be
given at least seven days before the meeting to each shareholder entitled
to vote thereat by leaving such notice with him or at his residence or
usual place of business or by mailing it, postage prepaid, and addressed to
such shareholder at his address as it appears in the records of the Trust.
Such notice shall be given by the secretary or an assistant secretary or by
an officer designated by the Trustees. No notice of any meeting of
shareholders need be given to a shareholder if a written waiver of notice,
executed before or after the meeting by such shareholder or his attorney
thereunto duly authorized, is filed with the records of the meeting.
2.6 Ballots. No ballot shall be required for any election unless requested by
--------
a shareholder present or represented at the meeting and entitled to vote in
the election.
2.7 Proxies. Shareholders entitled to vote may vote either in person or by
--------
proxy in writing dated not more than six months before the meeting named
therein, which proxies shall be filed with the secretary or other person
responsible to record the proceedings of the meeting before being voted.
Unless otherwise specifically limited by their terms, such proxies shall
entitle the holders thereof to vote at any adjournment of such meeting but
shall not be valid after the final adjournment of such meeting.
SECTION 3. TRUSTEES
3.1 Committees and Advisory Board. The Trustees may appoint from their number
------------------------------
an executive committee and other committees. Except as the Trustees may
otherwise determine, any such committee may make rules for conduct of its
business. The Trustees may appoint an advisory board to consist of not less
than two nor more than five members. The members of the advisory board
shall be compensated in such manner as the Trustees may determine and shall
confer with and advise the Trustees regarding the investments and other
affairs of the Trust. Each member of the advisory board shall hold office
until the first meeting of the Trustees following the next annual meeting
of the shareholders and until his successor is elected and qualified, or
until he sooner dies, resigns, is removed, or becomes disqualified, or
until the advisory board is sooner abolished by the Trustees.
3.2 Regular Meetings. Regular meetings of the Trustees may be held without
-----------------
call or notice at such places and at such times as the Trustees may from
time to time determine, provided that notice of the first regular meeting
following any such determination shall be given to absent Trustees. A
regular meeting of the Trustees
2
<PAGE>
may be held without call or notice immediately after and at the same place
as the annual meeting of the shareholders.
3.3 Special Meetings. Special meetings of the Trustees may be held at any time
-----------------
and at any place designated in the call of the meeting, when called by the
Chairman of the Board, the president or the treasurer or by two or more
Trustees, sufficient notice thereof being given to each Trustee by the
secretary or an assistant secretary or by the officer or one of the
Trustees calling the meeting.
3.4 Notice. It shall be sufficient notice to a Trustee to send notice by mail
-------
at least forty-eight hours or by telegram at least twenty-four hours before
the meeting addressed to the Trustee at his or her usual or last known
business or residence address or to give notice to him or her in person or
by telephone at least twenty-four hours before the meeting. Notice of a
meeting need not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with the
records of the meeting, or to any Trustee who attends the meeting without
protesting prior thereto or at its commencement the lack of notice to him
or her. Neither notice of a meeting nor a waiver of a notice need specify
the purposes of the meeting.
3.5 Quorum. At any meeting of the Trustees one-third of the Trustees then in
-------
office shall constitute a quorum; provided, however, a quorum shall not be
less than two. Any meeting may be adjourned from time to time by a majority
of the votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
SECTION 4. OFFICERS AND AGENTS
4.1 Enumeration; Qualification. The officers of the Trust shall be a
---------------------------
president, a treasurer, a secretary and such other officers, if any, as the
Trustees from time to time may in their discretion elect or appoint. The
Trust may also have such agents, if any, as the Trustees from time to time
may in their discretion appoint. Any officer may be but none need be a
Trustee or shareholder. Any two or more offices may be held by the same
person.
4.2 Powers. Subject to the other provisions of these By-Laws, each officer
-------
shall have, in addition to the duties and powers herein and in the
Declaration of Trust set forth, such duties and powers as are commonly
incident to his or her office as if the Trust were organized as a
Massachusetts business corporation and such other duties and powers as the
Trustees may from time to time designate.
4.3 Election. The president, the treasurer and the secretary shall be elected
---------
annually by the Trustees at their first meeting following the annual
meeting of the
3
<PAGE>
shareholders. Other officers, if any, may be elected or appointed by the
Trustees at said meeting or at any other time.
4.4 Tenure. The president, the treasurer and the secretary shall hold office
-------
until the first meeting of Trustees following the next annual meeting of
the shareholders and until their respective successors are chosen and
qualified, or in each case until he or she sooner dies, resigns, is removed
or becomes disqualified. Each agent shall retain his or her authority at
the pleasure of the Trustees.
4.5 President and Vice Presidents. The president shall be the chief executive
------------------------------
officer of the Trust. The president shall, subject to the control of the
Trustees, have general charge and supervision of the business of the Trust.
Any vice president shall have such duties and powers as shall be designated
from time to time by the Trustees.
4.6 Chairman of the Board. If a Chairman of the Board of Trustees is elected,
----------------------
he shall have the duties and powers specified in these By-Laws and, except
as the Trustees shall otherwise determine, preside at all meetings of the
shareholders and of the Trustees at which he or she is present and have
such other duties and powers as may be determined by the Trustees.
4.7 Treasurer and Controller. The treasurer shall be the chief financial
-------------------------
officer of the Trust and subject to any arrangement made by the Trustees
with a bank or trust company or other organization as custodian or transfer
or shareholder services agent, shall be in charge of its valuable papers
and shall have such other duties and powers as may be designated from time
to time by the Trustees or by the president. If at any time there shall be
no controller, the treasurer shall also be the chief accounting officer of
the Trust and shall have the duties and powers prescribed the Trust and
shall have the duties and powers prescribed herein for the controller. Any
assistant treasurer shall have such duties and powers as shall be
designated from time to time by the Trustees.
The controller, if any be elected, shall be the chief accounting officer of
the Trust and shall be in charge of its books of account and accounting
records. The controller shall be responsible for preparation of financial
statements of the Trust and shall have such other duties and powers as may
be designated from time to time by the Trustees or the president.
4.8 Secretary and Assistant Secretaries. The secretary shall record all
------------------------------------
proceedings of the shareholders and the Trustees in books to be kept
therefor, which books shall be kept at the principal office of the Trust.
In the absence of the secretary from any meeting of shareholders or
Trustees, an assistant secretary, or if there be none or
4
<PAGE>
he or she is absent, a temporary clerk chosen at the meeting shall record
the proceedings thereof in the aforesaid books.
SECTION 5. RESIGNATION AND REMOVALS
Any Trustee, officer or advisory board member may resign at any time by
delivering his or her resignation in writing to the Chairman of the Board, the
president, the treasurer or the secretary or to a meeting of the Trustees. The
Trustees may remove any officer elected by them with or without cause by the
vote of a majority of the Trustees then in office. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee, officer,
or advisory board member resigning, and no officer or advisory board member
removed shall have any right to any compensation for any period following his or
her resignation or removal, or any right to damages on account of such removal.
SECTION 6. VACANCIES
A vacancy in any office may be filled at any time. Each successor shall hold
office for the unexpired term, and in the case of the president, the treasurer
and the secretary, until his or her successor is chosen and qualified, or in
each case until he or she sooner dies, resigns, is removed or becomes
disqualified.
SECTION 7. SHARES OF BENEFICIAL INTEREST
7.1 Share Certificates. No certificates certifying the ownership of shares
-------------------
shall be issued except as the Trustees may otherwise authorize. In the
event that the Trustees authorize the issuance of share certificates,
subject to the provisions of Section 7.3, each shareholder shall be
entitled to a certificate stating the number of shares owned by him or her,
in such form as shall be prescribed from time to time by the Trustees.
Such certificate shall be signed by the president or a vice president and
by the treasurer or an assistant treasurer. Such signatures may be
facsimiles if the certificate is signed by a transfer or shareholder
services agent or by a registrar, other than a Trustee, officer or employee
of the Trust. In case any officer who has signed or whose facsimile
signature has been placed on such certificate shall have ceased to be such
officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he or she were such officer at the time of its
issue.
In lieu of issuing certificates for shares, the Trustees or the transfer or
shareholder services agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares,
who shall in either case be deemed, for all purposes hereunder, to be the
holders of certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and agreed to the
terms hereof.
5
<PAGE>
7.2 Loss of Certificates. In the case of the alleged loss or destruction or
---------------------
the mutilation of a share certificate, a duplicate certificate may be
issued in place thereof, upon such terms as the Trustees may prescribe.
7.3 Discontinuance of Issuance of Certificates. The Trustees may at any time
-------------------------------------------
discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the
Trust for cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
SECTION 8. RECORD DATE
The Trustees may fix in advance a time, which shall not be more than 60 days
before the date of any meeting of shareholders or the date for the payment of
any dividend or making of any other distribution to shareholders, as the record
date for determining the shareholders having the right to notice and to vote at
such meeting and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on such record
date shall have such right, notwithstanding any transfer of shares on the books
of the Trust after the record date.
SECTION 9. SEAL
The seal of the Trust shall, subject to alteration by the Trustees, consist of a
flat-faced circular die with the word "Massachusetts," together with the name of
the Trust and the year of its organization, cut or engraved thereon; but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
SECTION 10. EXECUTION OF PAPERS
Except as the Trustees may generally or in particular cases authorize the
execution thereof in some other manner, all deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations made, accepted or endorsed by
the Trust shall be signed, and any transfers of securities standing in the name
of the Trust shall be executed, by the president or by one of the vice
presidents or by the treasurer or by whomsoever else shall be designated for
that purpose by the vote of the Trustees and need not bear the seal of the
Trust.
6
<PAGE>
SECTION 11. FISCAL YEAR
The fiscal year of the Trust shall end on such date in each year as the Trustees
shall from time to time determine.
SECTION 12. PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S BUSINESS
12.1 Dealings with Affiliates. No officer, Trustee or agent of the Trust and no
-------------------------
officer, director or agent of any investment advisor shall deal for or on
behalf of the Trust with himself as principal or agent, or with any
partnership, association or corporation in which he has a material
financial interest; provided that the foregoing provisions shall not
prevent (a) officers and Trustees of the Trust from buying, holding or
selling shares in the Trust, or from being partners, officers or directors
of or financially interested in any investment advisor to the Trust or in
any corporation, firm or association which may at any time have a
distributor's or principal underwriter's contract with the Trust; (b)
purchases or sales of securities or other property if such transaction is
permitted by or is exempt or exempted from the provisions of the
Investment Company Act of 1940 or any Rule or Regulation thereunder and if
such transaction does not involve any commission or profit to any security
dealer who is, or one or more of whose partners, shareholders, officers or
directors is, an officer or Trustee of the Trust or an officer or director
of the investment advisor, manager or principal underwriter of the Trust;
(c) employment of legal counsel, registrar, transfer agent, shareholder
services, dividend disbursing agent or custodian who is, or has a partner,
stockholder, officer or director who is, an officer or Trustee of the
Trust; (d) sharing statistical, research and management expenses,
including office hire and services, with any other company in which an
officer or Trustee of the Trust is an officer or director or financially
interested.
12.2 Dealing in Securities of the Trust. The Trust, the investment advisor, any
-----------------------------------
corporation, firm or association which may at any time have an exclusive
distributor's or principal underwriter's contract with the Trust (the
"distributor") and the officers and Trustees of the Trust and officers and
directors of every investment advisor and distributor, shall not take long
or short positions in the securities of the Trust, except that:
(a) the distributor may place orders with the Trust for its shares
equivalent to orders received by the distributor;
(b) shares of the Trust may be purchased at not less than net asset value
for investment by the investment advisor and by officers and
directors of the distributor, investment advisor, or the Trust and by
any trust, pension, profit-sharing or other benefit plan for such
persons, no such purchase to be in contravention of any applicable
state or federal requirement.
7
<PAGE>
12.3 Limitation on Certain Loans. The Trust shall not make loans to any
----------------------------
officer, Trustee or employee of the Trust or any investment advisor or
distributor or their respective officers, directors or partners or
employees.
12.4 Custodian. All securities and cash owned by the Trust shall be maintained
----------
in the custody of one or more banks or trust companies having (according
to its last published report) not less than two million dollars
($2,000,000) aggregate capital, surplus and undivided profits (any such
bank or trust company is hereinafter referred to as the "custodian");
provided, however, the custodian may deliver securities as collateral on
borrowings effected by the Trust, provided, that such delivery shall be
conditioned upon receipt of the borrowed funds by the custodian except
where additional collateral is being pledged on an outstanding loan and
the custodian may deliver securities lent by the trust against receipt of
initial collateral specified by the Trust. Subject to such rules,
regulations and orders, if any, as the Securities and Exchange Commission
may adopt, the Trust may or may not permit any custodian to deposit all or
any part of the securities owned by the Trust in a system for the central
handling of securities operated by the Federal Reserve Banks, or
established by a national securities exchange or national securities
association registered with said Commission under the Securities Exchange
Act of 1934, or such other person as may be permitted by said Commission,
pursuant to which system all securities of any particular class or series
of any issue deposited with the system are treated as fungible and may be
transferred or pledged by bookkeeping entry, without physical delivery of
such securities.
The Trust shall upon the resignation or inability to serve of its
custodian or upon change of the custodian:
(a) in the case of such resignation or inability to serve use its best
efforts to obtain a successor custodian;
(b) require that the cash and securities owned by this corporation be
delivered directly to the successor custodian; and
(c) in the event that no successor custodian can be found, submit to the
shareholders, before permitting delivery of the cash and securities
owned by this Trust otherwise than to a successor custodian, the
question whether or not this Trust shall be liquidated or shall
function without a custodian.
12.5 Reports to Shareholders; Distributions from Realized Gains. The Trust
-----------------------------------------------------------
shall send to each shareholder of record at least annually a statement of
the condition of the Trust and of the results of its operation, containing
all information required by applicable laws or regulations.
8
<PAGE>
SECTION 13. AMENDMENTS
These By-Laws may be amended or repealed, in whole or in part, by a majority of
the Trustees then in office at any meeting of the Trustees, or by one or more
writings signed by such majority.
9
<PAGE>
DISTRIBUTION AGREEMENT
THIS DISTRIBUTION AGREEMENT is made as of this 26th day of February, 1998
(the "Agreement") by and between Rembrandt Funds, a Massachusetts business trust
(the "Company") having its principal place of business at 208 South La Salle
Street, Chicago, Illinois 60604 and First Date Distributors, Inc., a
Massachusetts corporation (the "Distributor") having its principal place of
business at 4400 Computer Drive, Westborough, Massachusetts 01581.
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and its units of beneficial interest (such units of all series are hereinafter
called the "Shares") are registered with the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933 (the "1933 Act"), and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934 (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD"),
and
WHEREAS, the Company desires to retain the Distributor as distributor for
the investment portfolios of the Company to provide for the sale and
distribution of the Shares of the investment portfolios identified on Schedule A
(the "Funds") and for such additional classes or series as the Company may
issue, and the Distributor is prepared to provide such services commencing on
the date first written above, and
WHEREAS, the Company and the Distributor wish to enter into an agreement
with each other with respect to the continuous offering of the Company's Shares.
NOW THEREFORE, in consideration of the premises and mutual covenants set
forth herein the Distributor and the Company hereby agree as follows:
1. SERVICE AS DISTRIBUTOR
----------------------
1.1 The Company hereby appoints and the Distributor agrees to act as the
Company's agent to sell and arrange for the sale of the Shares covered by
the Company's registration statement under the 1933 Act.
1.2 The Distributor agrees to use its best efforts in connection with the
distribution of Shares, including such advertising and promotion as it
believes reasonable in connection with such distribution.
The Distributor will hold itself available to receive orders, that the
Distributor reasonably believes to be in good order, for the purchase of
the Shares and will accept such orders and will transmit such orders as are
so accepted and funds received by it in payment for such Shares to the
Company's transfer agent or custodian, as appropriate, as promptly as
practicable. Purchase orders shall be deemed effective at the time and in
the manner set forth in the Prospectus. The offering price of the Shares
will be the net asset value per
<PAGE>
share of the Shares plus any applicable sales charges, determined as set
forth in the Prospectus. The Distributor shall not make any short sales of
the Shares.
The Distributor shall comply with all applicable laws, rules and
regulations, including, without limitation, all rules and regulations made
or adopted by the SEC or by any securities association registered under the
1934 Act and which regulates the Distributor. The Distributor shall
maintain the required licenses and registration for itself as a broker-
dealer, and for its registered representatives or other associated persons,
under the 1934 Act and applicable state securities laws.
The Distributor is not authorized by the Company to give on behalf of the
Company any information or make any representations in connection with the
sale of Shares other than the information and representations contained in
the Registration Statement filed with the SEC under the 1933 Act and the
1940 Act, as such Registration Statement may be amended from time to time,
or contained in shareholder reports or other material that may be prepared
by or on behalf of the Company for the Distributor's use.
1.3 The Company understands that the Distributor is now, and may in the future
be, the distributor of the shares of several investment companies or series
(collectively, the "Investment Entities"), including Investment Entities
having investment objectives similar to those of the Company. The Company
further understands that investors and potential investors in the Company
may invest in shares of such other Investment Entities. The Company agrees
that the Distributor's duties to such Investment Entities shall not be
deemed in conflict with its duties to the Company under this Section 1.3.
1.4 The Distributor shall not utilize any materials in connection with the sale
or offering of Shares except the Company's current prospectus and statement
of additional information and such other materials as the Company shall
provide or approve.
1.5 All activities by the Distributor and its employees, as distributor of the
Shares, shall comply with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted by
the SEC or the National Association of Securities Dealers.
1.6 The Distributor will transmit any orders received by it for purchase or
redemption of the Shares to the transfer agent for the Company.
1.7 Whenever in its judgment such action is warranted by unusual market,
economic or political conditions or abnormal circumstances of any kind, the
Company may decline to accept any orders for, or make any sales of, the
Shares until such time as the Company deems it advisable to accept such
orders and to make such sales, and the Company advises the Distributor
promptly of such determination.
1.8 The Company agrees to pay all costs and expenses in connection with the
registration of Shares under the Securities Act of 1933, as amended, and
all expenses in connection with maintaining facilities for the issue and
transfer of Shares and for supplying information, prices and other data to
be furnished by the Fund hereunder, and all expenses in
2
<PAGE>
connection with preparation and printing of the Fund's prospectuses and
statements of additional information for regulatory purposes and for
distribution to shareholders.
1.9 The Company agrees at its own expense to execute any and all documents
and to furnish any and all information and otherwise to take all actions
that may be reasonably necessary in connection with the qualification of
the Shares for sale in such states as the Distributor may designate. The
Company shall notify the Distributor in writing of the states in which
the Shares may be sold and shall notify the Distributor in writing of any
changes to the information contained in the previous notification.
1.10 The Company shall furnish from time to time, for use in connection with
the sale of the Shares, such information with respect to the Company and
the Shares as the Distributor may reasonably request. The Company shall
also furnish the Distributor upon request with: (a) audited annual
statements and unaudited semi-annual statements of a Fund's books and
accounts prepared by the Company, (b) quarterly earnings statements
prepared by the Company, (c) a monthly itemized list of the securities in
the Funds, (d) monthly balance sheets as soon as practicable after the
end of each month, and (e) from time to time such additional information
regarding the financial condition of the Company as the Distributor may
reasonably request.
1.11 The Company represents to the Distributor that, all Registration
Statements and prospectuses filed by the Company with the SEC under the
1933 Act with respect to the Shares have been prepared in conformity with
the requirements of the 1933 Act and the rules and regulations of the SEC
thereunder. As used in this Agreement, the term "Registration Statement"
shall mean any registration statement and any prospectus and any
statement of additional information relating to the Company filed with
the SEC and any amendments or supplements thereto at any time filed with
the SEC. Except as to information included in the Registration Statement
in reliance upon information provided to the Company by the Distributor
or any affiliate of the Distributor expressly for use in the Registration
Statement, the Company represents and warrants to the Distributor
expressly for use in the Registration Statement, when such Registration
Statement becomes effective, will contain statements required to be
stated therein in conformity with the 1933 Act and the rules and
regulations of the SEC; that all statements of fact contained in any such
Registration Statement will be true and correct when such Registration
Statement becomes effective; and that no Registration Statement when such
Registration Statement becomes effective will include an unture statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading to a
purchaser of the Shares. The Distributor may, but shall not be obligated
to, propose from time to time such amendment or amendments to any
Registration Statement and such supplement or supplements to any
prospectus as, in the light of future developments, may, in the opinion
of the Company's counsel, be necessary or advisable. The Company shall
promptly notify the Distributor of any advice given to it by its counsel
regarding the necessity or advisability of amending or supplementing such
Registration Statement. The Company shall not file any amendment to any
Registration Statement or supplement to any prospectus without giving the
Distributor reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Company's
right to file at any time such amendments to any Registration
3
<PAGE>
Statements and/or supplements to any prospectus, of whatever character,
as the Company may deem advisable, such right being in all respects
absolute and unconditional.
1.12 The Company agrees to indemnify and hold harmless the Distributor, its
officers, directors, and employees, and any person who controls the
Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, costs, expenses (including
reasonable attorneys' fees) losses, damages, charges, payments and
liabilities of any sort or kind which the Distributor, its officers,
directors, employees or any such controlling person may incur under the
1933 Act, under any other statute, at common law or otherwise, but only
to the extent that such liability or expense incurred by the Distributor,
its officers, directors, employees or any controlling person resulting
from such claims or demands arise out of the acquisition of Shares by any
person which is based upon: (i) any untrue statement, or alleged untrue
statement, of material fact contained in the Company's Registration
Statement, prospectus, statement of additional information, or sales
literature (including amendments and supplements thereto), or (ii) any
omission, or alleged omission, to state a material fact required to be
stated in the Company's Registration Statement, prospectus, statement of
additional information or sales literature (including amendments or
supplements thereto), necessary to make the statements therein not
misleading. Notwithstanding the foregoing, the Company shall not be
obligated to indemnify any entity or person pursuant to this paragraph
1.12 against any losses, claims, costs, charges, payments, damages,
liabilities or expenses (including attorneys' fees) of any sort or kind
(i) arising out of the acquisition so Shares by any person which is bases
upon any untrue statement or omission or alleged untrue statement or
omission made in reliance on and in conformity with information furnished
to the Company by the Distributor or its affiliated persons for use in
the Company's Registration Statement, prospectus, or statement of
additional information or sales literature (including amendments or
supplements thereto) or (ii) arising by reason of the Distributor's
willful misfeasance, bad faith or negligence in the performance of the
Distributor's willful misfeasance, bad faith or negligence in the
performance of the Distributor's duties hereunder or by reason of
reckless disregard of its obligations or duties hereunder, form reliance
on information furnished to the Company by the Distributor or its
affiliates, or from the Distributor's furnished to the Company by the
Distributor or its affiliates, or from the Distributor's refusal or
failure to comply with the terms or conditions of this Agreement.
1.13 The Distributor agrees to indemnify and hold harmless the Company, its
several officers and Trustees and each person, if any, who controls a
Fund within the meaning of Section 15 of the 1933 Act against any and all
claims, costs, expenses (including reasonable attorneys' fees), losses,
damages, charges, payments and liabilities of any sort or kind which the
Company, its officers, Trustees or any such controlling person may incur
the 1933 Act, under any other statute, at common law or otherwise, but
only to the extent that such liability or expense incurred by the
Company, its officers or Trustees, or any controlling person resulting
from such claims or demands arose (i) out of the acquisition of any
Shares by any person which may be based upon any untrue statement, or
alleged untrue statement, of a material fact contained in the Company's
Registration Statement, prospectus, statement of additional information
(including amendments and supplements thereto) or sales literature, or
any omission, or alleged omission, to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished or confirmed in writing to the Company by the
Distributor or its affiliated persons (as defined in the
4
<PAGE>
1940 Act), (ii) by reason of the Distributor's willful misfeasance, bad
faith or negligence in performance of the Distributor's duties or
obligations hereunder or by reason of reckless disregard of its duties or
obligations hereunder, (iii) from reliance on information furnished to
the Company by the Distributor or its affiliates, or (iv) from the
Distributor's refusal or failure to comply with the terms or conditions
of this Agreement.
1.14 In any case in which one party hereto (the "Indemnifying Party") may be
asked to indemnify or hold the other party hereto (the "Indemnified
Party") harmless, the Indemnified Party will notify the Indemnifying
Party promptly after identifying any situation which it believes presents
or appears likely to present a claim for indemnification (an
"Indemnification Claim") against the Indemnifying Party, although the
failure to do so shall not prevent recovery by the Indemnified Party, and
shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall have
the option to defend the Indemnified Party against any Indemnification
Claim which may be the subject of this indemnification, and, in the event
that the Indemnifying Party so elects, such defense shall be conducted by
counsel chosen by the Indemnifying Party and satisfactory to the
Indemnified Party, whose approval shall not be unreasonably withheld, and
thereupon the Indemnifying Party shall take over the complete defense of
the Claim and the Indemnified Party shall sustain no further legal or
other expenses in respect of such Claim. In the event that the
Indemnifying Party elects to assume the defense of any Indemnification
Claim and retains legal counsel, the Indemnified Party shall bear the
fees and expenses of any additional legal counsel retained by it. The
Indemnified Party will not confess any Indemnification Claim or make any
compromise in any case in which the Indemnifying Party will be asked to
provide indemnification, except with the Indemnifying Party's prior
written consent. The obligations of the parties hereto under this Section
1.14 and Section 3.1 shall survive the termination of this Agreement.
In the event that the Indemnifying Party does not elect to assume the
defense of any such suit, or in case the Indemnified Party reasonably
does not approve of counsel chosen by the Indemnifying Party, or in case
there is a conflict of interest between the Indemnifying Party and the
Indemnified Party, the Indemnifying Party will reimburse the Indemnified
Party, its officers, trustees, directors and employees, or the
controlling person or persons named as defendant or defendants in such
suit, for the reasonable fees and expenses of any counsel retained by the
Indemnified Party or such Defendant. The Indemnifying Party's
indemnification agreement contained in this Section 1.14 and the
Indemnifying Party's representations and warranties in this Agreement
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party, its
officers, directors, trustees, or employees, or any controlling persons,
and shall survive the delivery of any Shares. This agreement of indemnity
will inure exclusively to the Indemnified Party's benefit, to the benefit
of its several officers, directors, trustees or employees, and their
respective estates and to the benefit of the controlling persons and
their successors. The Indemnifying Party agrees promptly to notify the
Indemnified Party of the commencement of any litigation or proceedings
against the Indemnifying Party or any of its officers, trustees,
employees or directors in connection with the issue and sale of any
Shares.
1.15 No Shares shall be offered by either the Distributor or the Company under
any of the provisions of this Agreement and no orders for the purchase or
sale of Shares hereunder
5
<PAGE>
shall be accepted by the Company if and so long as effectiveness of the
Registration Statement then in effect or any necessary amendments thereto
shall be suspended under any of the provisions of the 1933 Act, or if and
so long as a current prospectus as required by Section 5(b)(2) of the 1933
Act is not on file with the SEC; provided, however, that nothing contained
in this Section 1.15 shall in any way restrict or have any application to
or bearing upon the Company's obligation to redeem. Shares tendered for
redemption by any shareholder in accordance with the provisions of the
Company's Registration Statement, Declaration of Company, or bylaws.
1.16 The Company agrees to advise the Distributor as soon as reasonably
practical by a notice in writing delivered to the Distributor.
(a) in the event of the issuance by the SEC of any stop order suspending
the effectiveness of the Registration Statement, prospectus or statement of
additional information then in effect or the initiation by service of
process on the Company of any proceeding for that purpose;
(b) of the happening of any event that makes untrue any statement of a
material fact made in the Registration Statement, prospectus or statement
of additional information then in effect or that requires the making of a
change in such Registration Statement, prospectus or statement of
additional information in order to make the statements therein not
misleading; and
(c) of all actions of the SEC with respect to any amendments to any
Registration Statement, prospectus or statement of additional information
which may from time to time be filed with the SEC.
For purposes of this section, informal requests by or acts of the Staff of
the SEC shall not be deemed actions of the SEC.
2. TERM AND TERMINATION OF AGREEMENT
---------------------------------
2.1 This Agreement shall become effective on the date first written above and,
unless sooner terminated as provided herein, shall continue for an initial
two-year term and thereafter shall be renewed for successive one-year terms
in accordance with the requirements of the 1940 Act. This Agreement is
terminable without penalty, on at least sixty days' written notice, by
either party. This Agreement will also terminate automatically in the event
of its assignment (as defined in the 1940 Act and the rules thereunder).
2.2 In the event a termination notice is given by the Company, all reasonable
expenses associated with movement of records and materials and conversion
thereof will be borne by the Company.
3. LIMITATION OF LIABILITY
-----------------------
3.1 The Distributor shall at all times act in good faith and agrees to use its
best efforts within commercially reasonable limits to ensure the accuracy
of all services performed under this Agreement. The Distributor shall not
be liable to the Company for any error of judgment
6
<PAGE>
or mistake of law or for any loss suffered by the Company in connection
with the performance of its obligations and duties under this Agreement,
except a loss resulting from the Distributor's willful misfeasance, bad
faith or negligence in the performance of such obligations and duties, or
by reason of its reckless disregard thereof, reliance on information
furnished to the Company by the Distributor or its affiliates, or the
Distributor's refusal or failure to comply with the terms and conditions of
this Agreement. The Company shall not be liable to the Distributor for any
error of judgment or mistake of law or for any loss suffered by the
Distributor, except a loss resulting from the Company's willful
misfeasance, bad faith or negligence in the performance of its duties and
obligations hereunder, or by reason of its reckless disregard thereof.
3.2 Each party shall have the duty to mitigate damages for which the other
party may become responsible.
3.3 NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT
SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
TRUSTEES, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR LOST
PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR
CONSEQUENTIAL DAMAGES.
4. EXCLUSION OF WARRANTIES
-----------------------
THIS IS A SERVICE AGREEMENT EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT,
THE DISTRIBUTOR DISCLAIMS ALL OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS
OR IMPLIED, MADE TO THE COMPANY, A FUND OR ANY OTHER PERSON,
INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY,
SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE
(IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF TRADE) OF ANY
SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES PROVIDED UNDER THIS
AGREEMENT. THE DISTRIBUTOR DISCLAIMS ANY WARRANTY OF TITLE OR NON-
INFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT.
5. MODIFICATIONS AND WAIVERS
-------------------------
No change, termination, modification, or waiver of any term or condition of
the Agreement shall be valid unless in writing signed by each party. No
such writing shall be effective as against the Distributor unless said
writing is executed by a Senior Vice President, Executive Vice President or
President of the Distributor. A party's waiver of a breach of any term or
condition in the Agreement shall not be deemed a waiver of any subsequent
breach of the same or another term or condition.
6. NO PRESUMPTION AGAINST DRAFTER
------------------------------
The Distributor and the Company have jointly participated in the
negotiation and drafting of this Agreement. The Agreement shall be
construed as if drafted jointly by the Company
7
<PAGE>
and the Distributor, and no presumptions arise favoring any party by virtue
of the authorship of any provision of this Agreement.
7. PUBLICITY
---------
Neither the Distributor nor the Company shall release or publish news
releases, public announcements, advertising or other publicity relating to
this Agreement or to the transactions contemplated by it, other than
factual statements concerning the existence of the relationship, without
prior review and written approval of the other party; provided, however,
that either party may make such disclosures as are required by legal,
accounting or regulatory requirements after making reasonable efforts in
the circumstances to consult in advance with the other party.
8. SEVERABILITY
------------
The parties intend every provision of this Agreement to be severable. If a
court of competent jurisdiction determines that any term or provision is
illegal or invalid for any reason, the illegality or invalidity shall not
affect the validity or the remainder of this Agreement. In such case, the
parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of
this paragraph, if a court determines that any remedy stated in this
Agreement has failed of its essential purpose, then all other provisions of
this Agreement, including the limitations on liability and exclusion of
damages, shall remain fully effective.
9. FORCE MAJEURE
-------------
No party shall be liable for any default or delay in the performance of its
obligations under this Agreement if and to the extent such default or delay
is caused, directly or indirectly, by (i) fire, flood, elements of nature
or other acts of God; (ii) any outbreak or escalation of hostilities, war,
riots or civil disorders in any country, (iii) any act or omission of the
other party or any governmental authority, (iv) any labor disputes (whether
or not the employees' demands are reasonable or within the party's power to
satisfy); or (v) nonperformance by a third party or any similar cause
beyond the reasonable control of such party, including without limitation,
failures or fluctuations in telecommunications or other equipment. In any
such event, the non-performing party shall be excused from any further
performance and observance of the obligations so affected only for so long
as such circumstances prevail and such party continues to use commercially
reasonable efforts to recommence performance or observance as soon as
practicable.
10. EQUIPMENT FAILURES
------------------
Notwithstanding any other provision in this Agreement, in the event of
equipment failures or the occurrence of events beyond the Distributor's
control which render its performance under this Agreement impossible, the
Distributor shall at no additional expense to the Company take reasonable
steps to minimize service interruptions. The Distributor represents that
the various procedures and systems which the Distributor has implemented
with regard to safekeeping from loss or damage attributable to fire, theft
or any other cause of the records, and other data of the Company and the
Distributor's records, data,
8
<PAGE>
are reasonably adequate and are covered by a reasonably adequate disaster
recovery plan, and it will make such changes therein from time to time as
are reasonably required for the secure performance of its obligations
hereunder.
11. YEAR 2000
---------
The Distributor's services hereunder shall rendered, and its computer
systems used in rendering such services shall operate and function, without
any Year 2000 Error. The term "Year 2000 Error" means;
(a) any failure of the Distributor's systems to properly record,
store, process, calculate or present calendar dates falling on and
after (and, if applicable, spans of time including) January 1, 2000 as
a result of the occurrence or use of data consisting of such dates;
(b) any failure of the Distributor's systems to calculate any
information dependent on or relating to dates on or after January 1,
2000 in the same manner, and with the same functionality, date
integrity and performance, as such systems record, store, process,
calculate and present calendar dates on or before December 31, 1999,
or information dependent on or relating to such dates; or
(c) any loss of functionality or performance with respect to the
introduction of records or processing of data containing dates falling
on or after January 1, 2000.
12. NOTICES
-------
Any notice or other instrument authorized or required by this Agreement to
be given in writing to the Company or the Distributor shall be sufficiently
given if addressed to the party and received by it at its office set forth
below or at such other place as it may from time to time designate in
writing.
To the Company:
Rembrandt Funds
208 South La Salle Street
Chicago, Illinois 60604
To the Distributor:
First Data Distributors, Inc.
4400 Computer Drive
Westboro, Massachusetts 01581
Attention: President
with a copy to the Distributor's Chief Legal Officer
9
<PAGE>
13. GOVERNING LAW/VENUE
-------------------
The laws of the Commonwealth of Massachusetts, excluding the laws on
conflicts of laws, and the applicable provisions of the 1940 Act shall
govern the interpretation, validity, and enforcement of this Agreement. To
the extent the provisions of Massachusetts law or the provisions hereof
conflict with the 1940 Act, the 1940 Act shall control. All actions arising
from or related to this Agreement shall be brought in the state and federal
courts sitting in the City of Boston, and the Distributor and the Company
hereby submit themselves to the exclusive jurisdiction of those courts
14. COUNTERPARTS
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original and which collectively shall be deemed to
constitute only one instrument.
15. CAPTIONS
--------
The captions of this Agreement are included for convenience of reference
only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
16. SUCCESSORS
----------
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and is not intended to
confer upon any other person any rights or remedies hereunder.
17. ARBITRATION
-----------
Any claim or controversy arising out of or related to this Agreement, or
breach hereof, shall be settled by arbitration administered by the American
Arbitration Association in Boston, Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the Federal
Rules of Civil Procedure with respect to the discovery process shall apply.
The parties hereby agree that judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction.
The parties acknowledge and agree that the performance of the obligations
under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law
provisions in this Agreement, the parties agree that the Federal
Arbitration Act shall govern and control with respect to the provisions of
this Article.
18. CONFIDENTIALITY
---------------
18.1 Confidentiality. In the course of performance under this Agreement, each
---------------
party may have access to and receive disclosure of confidential information
about the other party, including but not limited to that party's financial
information, financial strategies,
10
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marketing plans, customer profiles, sales estimates, business plans and a
variety of other information which the receiving party should reasonably
consider to be confidential and proprietary (hereinafter referred to as
"Confidential Information"). The contents of this Agreement are also
Confidential Information. Each party shall exercise reasonable care to
safeguard the confidentiality of the Confidential Information of the
other. Confidential Information of the disclosing party shall be used by
the receiving party solely in the performance of the receiving party's
obligations pursuant to this Agreement. The receiving party shall receive
Confidential Information in confidence and not disclose Confidential
Information of the disclosing party to any third party, except as may be
necessary for the receiving party to perform its obligations pursuant to
this Agreement, as required by law or a court of competent jurisdiction
or by a regulatory agency with supervisory responsibilities over the
disclosing party, for confidential consultations with accountants or
attorneys, or as may otherwise be agreed upon in writing by the
disclosing party. Each party may, however, disclose Confidential
Information to its parent corporation, affiliates, subsidiaries and
affiliated companies and employees, provided that each shall use
reasonable efforts to ensure that the Confidential Information is not
duplicated or disclosed in breach of this Agreement.
Each party acknowledges that breach of the restrictions on use,
dissemination or disclosure of any Confidential Information of the other
party would result in immediate and irreparable harm, and money damages
would be inadequate to compensate the other party for that harm. Each
party shall be entitled to equitable relief, in addition to all other
available remedies, to redress any such breach.
10.2 Ownership. In the course of performance under this Agreement, Investor
---------
Services Group may create reports, marketing materials, promotional
materials, and other materials relating to the Company ("Results"). The
Company acknowledges and agrees that Investor Services Group is the sole
owner of all rights (including, but not limited to, copyrights) to any
Results, or aspects of Results, that are used by Investor Services Group
for administering its clients generally and are not created solely for
the Company. Notwithstanding the foregoing, all rights (including, but
not limited to, copyrights) to any Results that are created solely for
the Company (including, but not limited to, any marketing materials and
promotional materials created solely in connection with the Company) are
solely owned by the Company and are assigned to the Company by Investor
Services Group and the Company shall have a perpetual, royalty free,
worldwide, transferable license to use, copy, transmit, distribute and
modify any Results owned by Investor Services Group as may reasonably be
necessary for the Company to exploit fully all of its rights in any
Results owned by the Company.
19. Obligations of the Company
--------------------------
The Company and the Distributor agree that the obligations of the Company
under the Agreement shall not be binding upon any of the Trustees,
shareholders, nominees, officers, employees or agents, whether past,
present or future, of the Company individually, but are binding only upon
the assets and property of the Company, as provided in the Declaration of
Trust of the Company. The execution and delivery of this Agreement have
been authorized by the Directors of the Company, and signed by an
authorized officer of the Company, acting as such, and neither such
authorization by such Trustee nor such
11
<PAGE>
execution and delivery by such officer shall be deemed to have been made by
any of them or any shareholder of the Company individually or to impose any
liability on any of them or any shareholder of the Company personally, but
shall bind only the assets and property of the Company as provided in the
Declaration of Trust of the Company. The Company and the Distributor
further agree that the obligations of a Fund under the Agreement shall not
be binding on any other Fund, but are binding only upon the assets and
property of such Fund, as provided in the Declaration of Trust.
20. ENTIRE AGREEMENT
----------------
This Agreement, including all Schedules hereto, constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous proposals, agreements, contracts,
representations,and understandings, whether written or oral, between the
parties with respect to the subject matter hereof.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
REMBRANDT FUNDS
By: /s/ Tim J. Leach
-------------------------
Name: Tim J. Leach
-----------------------
Title: President
-----------------------
FIRST DATA DISTRIBUTORS, INC.
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------
Name: [SIGNATURE ILLEGIBLE]
-----------------------
Title: V.P & TReasurer
-----------------------
13
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SCHEDULE A
----------
to the Distribution Agreement
between Rembrandt Funds and
First Data Distributions, Inc.
Name of Funds
-------------
Money Market Funds
Treasury Money Market Fund
Government Money Market Fund
Money Market Fund
Tax-Exempt Money Market Fund
Fixed Income Funds
Fixed Income Fund
Intermediate Government Fixed Income Fund
Tax-Exempt Fixed Income Fund
International Fixed Income Fund
Limited Volatility Fixed Income Fund
Balanced Funds
Balanced Fund
Equity Funds
Value Fund
Growth Fund
International Equity Fund
Small Cap Fund
Asian Tigers Fund
TransEurope Fund
Latin America Equity Fund
Real Estate Fund
A-1
<PAGE>
ADMINISTRATION AND FUND ACCOUNTING AGREEMENT
THIS ADMINISTRATION AND FUND ACCOUNTING AGREEMENT dated as of this 26th day
of February, 1998 (the "Agreement"), by and between FIRST DATA INVESTOR SERVICES
GROUP, INC., a Massachusetts corporation ("Investor Services Group"), having its
principal offices at 4400 Computer Drive, Westborough. Massachusetts 01581 and
REMBRANDT FUNDS, a Massachusetts business trust (the "Company") having its
principal place of business at 208 South La Salle Street, Chicago, Illinois
60604.
WHEREAS, the Company is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company desires to retain Investor Services Group to perform
certain administrative services with respect to each investment portfolio listed
in Schedule A hereto (collectively, the "Funds"), as the same may be amended
from time to time by the parties hereto, and
WHEREAS, Investor Services Group is willing to perform such services on the
terms and conditions set forth herein.
WITNESSETH:
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein, the Company and Investor Services Group agree as follows:
1. Effective Date and Appointment. This Agreement shall be effective on
------------------------------
the date first written above. The Company hereby appoints Investor Services
Group as Administrator of the Company on the terms set forth in this Agreement.
Investor Services Group accepts such appointment and agrees to render the
services hereinafter set forth.
2. Delivery of Documents. The Company shall, on or before the date this
---------------------
Agreement goes into effect, but in any case within a reasonable period of time
for Investor Services Group to prepare to perform its duties hereunder, deliver
or cause to be delivered to Investor Services Group the following documents
properly certified or authenticated:
(a) Resolutions of the Company's Board of Trustees authorizing the
appointment of Investor Services Group to provide certain administrative
services required by the Company for each Fund and approving this Agreement;
(b) The Company's Declaration of Trust (the "Declaration of Trust")
filed with the Commonwealth of Massachusetts and all amendments thereto;
(c) The Company's By-Laws and all amendments thereto (the "By-Laws");
(d) The Investment Advisory Agreement between ABN Amro Asset
Management (USA) Inc. (the "Adviser") and the Company dated as of December 31,
1992 and all amendments thereto (the "Advisory Agreement");
-1-
<PAGE>
(e) The Custody Agreement between CoreStates Bank, N.A. (the "Custodian")
and the Company dated as of December 31, 1992 and all amendments thereto (the
"Custody Agreement").
(f) The Transfer Agency and Services Agreement between First Data
Investor Services Group, Inc. (the "Transfer Agent") and the Company dated as of
_________ 1998 and all am endments thereto;
(g) The Distribution Agreement between First Data Distributors, Inc.
(the "Distributor") and the Company dated as of _________ 1998 and all
amendments thereto, (the "Distribution Agreement");
(h) The Company's Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 and under the 1940
Act (File Nos. 33-52784 and 811-7244), as declared effective by the Securities
and Exchange Commission ("SEC") on December 31, 1992, relating to shares of the
Company's beneficial interests, no par value per share, and all amendments
thereto; and
(i) Each Fund's most recent prospectus and Statement of Additional
Information and all amendments and supplements thereto (collectively, the
"Prospectuses").
The Company will furnish Investor Services Group from time to time with
copies, properly certified or authenticated of all amendments of or supplements
to the foregoing. Furthermore, the Company will provide Investor Services Group
with any other documents that Investor Services Group may reasonably request and
will notify Investor Services Group as soon as possible of any matter materially
affecting the performances of Investor Services Group of its services under
this Agreement.
3. Duties as Administrator. Subject to the supervision and direction of
-----------------------
the Board of Trustees of the Company, Investor Services Group, as Administrator,
will assist in supervising various aspects of the Company's administrative
operations and undertakes to perform the following specific services:
(a) Administering and performing the customary services of an
administrator, including those described in Schedule D hereto and incorporated
herein and in accordance with the terms of the Registration Statement of the
Company on behalf of the Funds, applicable law, the procedures of the Company,
and the procedures established from time to time between Investor Services Group
and the Company;
(b) Maintaining office facilities (which may be in the offices of
Investor Services Group or a corporate affiliate) and furnishing corporate
officers for the Company;
(c) Performing the functions ordinarily performed by a mutual fund
group's internal legal department as described in Schedule D to this Agreement,
furnishing data processing services, clerical services, and executive and
administrative services and standard stationery and office supplies in
connection with the foregoing;
(d) Accounting and bookkeeping services (including the maintenance of
such accounts, books and records of the Company as may be required by Section
31(2) of the 1910 Act and the rules thereunder),
(e) Internal auditing;
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<PAGE>
(f) Performing all functions ordinarily performed by the office of a
corporate treasurer, and furnishing the services and facilities ordinarily
incident thereto, including calculating the net asset value of the shares in
conformity with the Fund(s) prospectus(es).
(g) Preparing reports to the Company's shareholders of record and the
SEC including, but no necessarily limited to Annual Reports and Semi-Annual
Reports on Form N-SAR;
(h) Preparing and filing various reports or other documents required
by federal, state and other applicable laws and regulations, other than those
filed or required to be filed by the Adviser or Transfer Agent;
(i) Preparing and filing the Company's tax returns;
(j) Assisting the Adviser, at the Adviser's request in developing
compliance procedures for the Company which will include, among other matters,
procedures monitoring compliance with each Fund's investment objective,
policies, restriction, tax matters and applicable laws and regulations;
(k) Monitoring compliance with each Fund's investment objective,
policies, restrictions, tax matters, and applicable laws and regulations in
accordance with the procedures established from time to time between Investor
Services Group, the Adviser and the Company;
(l) Performing all functions ordinarily performed by the office of a
corporate secretary, and furnishing the services and facilities incident
thereto, including all function pertaining to matters organic to the
organization, existence and maintenance of the corporate franchise of the
Company, including preparation for, conduct of, an recording trustees meetings
and shareholders meetings, Trustees meetings in excess of five in any calendar
year and shareholder meetings in excess of one in any one year period shall be
for an additional reasonable charge as may be agreed upon by the Company and
Investor Services Group;
(m) Performing "Blue Sky" compliance functions, including maintaining
notice filings, qualifications or "Blue Chip" exemptions (if available) in all
U.S. jurisdictions requested by the Company, monitoring sales of shares in all
such jurisdictions and filing such additional notice or applying for such
additional or amended qualifications may be reasonably anticipated to be
necessary to permit continuous sales of the shares of the Funds in all such
jurisdictions, filing sales literate and advertising materials to the extent
required, with such Blue Sky authorities, and making and filing all other
applications, reports, notices, documents and exhibits in connection with the
foregoing; and
(n) Furnishing all other services identified on Schedule D annexed
hereto and incorporated herein which are not otherwise specifically set forth
above.
(o) Investor Services Group agrees to provide the services set forth
herein in accordance with the Performance Standards annexed hereto as Exhibit I
of Schedule D and incorporated herein (the "Performance Standards"). Such
Performance Standards may be amended from time to time by the parties.
In performing its duties under this Agreement, Investor Services Group, (a)
will act in accordance with the Declaration of Trust. By-Laws, Prospectus and
with the instructions and directions of the Company and will conform to and
comply with the requirements of the 1940 Act and all other applicable
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<PAGE>
federal or state laws and regulations; and (b) will consult with legal counsel
to the Company, as appropriate. Furthermore, Investor Services Group shall not
have or be required to have any authority to supervise the investments
reinvestment of the securities or other properties which comprise the assets of
the Company or any of its Funds and shall not provide any investment advisory
services to the Company or any of its Funds.
4. Compensation and Allocation of Expenses. Investor Services Group shall
---------------------------------------
bear all expenses in connection with the performance of its services under this
Agreement, except as indicated below.
(a) Investor Services Group will from time to time employ or
associate with itself such person or persons as Investor Services Group may
believe to be particularly suited to assist it in performing services under this
Agreement. Such person or persons may be officers and employees who are employed
by both Investor Services Group and the Company. The compensation of such person
or persons shall be paid by Investor Services Group and to obligation shall be
incurred on behalf of the Company in such respect.
(b) Investor Services Group shall not be required to pay any of the
following expenses incurred by the Company: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing prospectuses, reports and notices; interests on
borrowed money; brokerage commissions; taxes and fees payable to Federal, state
and other governmental agencies; fees of Trustees of the Company who are not
affiliated with Investor Services Group; outside auditing expenses; outside
legal expenses; or other expenses not specified in this Section 4 which are
properly payable by the Company.
(c) The Company on behalf of each of the Funds will compensate
Investor Services Group for the performance of its obligations hereunder in
accordance with the fees set forth in the written Fee Schedule annexed hereto as
Schedule B and incorporated herein.
(d) The Company will compensate Investor Services Group for its
services rendered pursuant to this Agreement in accordance with the fees set
forth above. Such fees do not include reasonable out-of-pocket disbursements of
Investor Services Group or Special Legal Services; as described in Schedule C,
for which Investor Services Group shall be entitled to bill separately.
Out-of-pocket disbursements shall include the items specified in Schedule C,
attached hereto and incorporated herein, and such other expenses as agreed upon
in writing by Investor Services Group and the Company.
(e) Investor Services Group will bill the Company as soon as
practicable after the end of each calendar month, and said billings will be
detailed in accordance with the out-of-pocket schedule. The Company will pay to
Investor Services Group the amount of such billing by Federal Funds Wire within
fifteen (15) business days after the Company's receipt of said bill. In
addition, Investor Services Group may charge a service fee on any past due
billed amount equal to the lesser of (i) one and one half percent (1-1/2%) per
month or (ii) the highest interest rate legally permitted.
(f) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule B, a revised Fee Schedule, executed and dated by
the parties hereto.
(g) In the event that Investor Services Group has failed to meet a
specific Performance Standard category with respect to any Fund, as set forth in
Exhibit 1 to Schedule D, in two of any rolling three month periods, the Company
may reduce the total amount of fees due to Investor Services Group
-4-
<PAGE>
under this Agreement, excluding out-of-pocket expenses, by an amount equal to
five percent (5%) of the fees for the third month. Notwithstanding the
foregoing, the Company's right under this Section 4(g) shall not be effective
until ninety (90) days after Investor Services Group has began providing
services under this Agreement.
(h) In the event that Investor Services Group has failed to meet a
specific Performance Standard category with respect to the Fund, as set forth in
Exhibit 1 to Schedule D, in four or any rolling six month period, the Company
may terminate this Agreement in accordance with Section 8(d). Notwithstanding
the foregoing, the Company's right under this Section 4(h) shall not be
effective until ninety (90) days after Investor Services Group has begun
providing services under this Agreement.
5. Limitation of Liability.
-----------------------
(a) Investor Services Group shall at all times act in good faith and
agrees to use it best efforts within commercially reasonable limits to ensure
the accuracy of all services performed under this Agreement. Investor Services
Group shall not be liable for any error of judgment or mistake of law or for any
loss suffered by the Company in connection with the performance of its
obligations and duties under this Agreement, except a loss resulting from
Investor Services Group's willful misfeasance, bad faith or negligence in the
performance of such obligations and duties, or by reason of its reckless
disregard thereof, reliance on information furnished to the Company by Investor
Services Group or its affiliates, or Investor Services Group's refusal or
failure to comply with the terms or conditions of this Agreement. The Company
shall not be liable to Investor Services Group or any of its affiliates for any
error of judgment or mistake of law or for any loss suffered by Investor
Services Group or its affiliates in connection with this Agreement, except for a
loss resulting from the Company's willful misfeasance, bad faith or negligence,
or by reason of its reckless disregard of its duties and obligations hereunder.
(b) Each party shall have the duty to mitigate damages for which the other
party may become responsible.
(c) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO
EVENT SHALL EITHER PARTY, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE FOR LOST PROFITS,
EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES.
6 Indemnification.
---------------
(a) The Company shall indemnify and hold Investor Services Group
harmless from and against any and all claims, costs, expenses, (including
reasonable attorneys' fees), losses, damages, charges, payments and liabilities
of any sort or kind which may be asserted against Investor Services Group or for
which Investor Services Group may be held to be liable in connection with any
action required to be taken pursuant to this Agreement (a "Claim"), unless such
Claim resulted from a willful misfeasance, bad faith or negligence by Investor
Service Group in the performance of its duties hereunder or reckless disregard
of its duties or obligations hereunder, reliance on information furnished to the
Company by Investor Services Group or its affiliates, or Investor Services
Group's refusal or failure to comply with the terms or conditions of this
Agreement.
(b) Investor Services Group shall indemnify and hold the Company
harmless from and against any and all claims, costs, expenses (including
attorney's fees), losses, damages, charges, payments
-5-
<PAGE>
and liabilities of any sort or kind which may be asserted against the Company
or for which the Company may be held liable in connection with the Agreement, or
Investor Services Group's performance hereunder (a "Claim"), unless such Claim
resulted form willful misfeasance, bad faith, or negligence by the Company in
the performance of its duties or obligations hereunder, or reckless disregard of
its duties and obligations hereunder.
(c) In any case in which one party (the "Indemnifying Party") may be
asked to indemnify or hold the other party (the "Indemnified Party") harmless,
the Indemnified Party will notify the Indemnifying Party promptly after
indentifying any situation which it believes presents or appears likely to
present a claim for indemnification against the Indemnifying Party although the
failure to do so in good faith shall not prevent recovery by the Indemnified
Party and shall keep the Indemnifying Party advised with respect to all
developments concerning such situation. The Indemnifying Party shall have the
option to defend the Indemnified Party against any Claim which may be the
subject of this indemnification, and in the event that the Indemnifying Party
so elects, such defense shall be conducted by counsel chosen by the Indemnifying
Party and satisfactory to the Indemnified Party whose approval shall not be
unreasonably withheld, and thereupon the Indemnifying Party shall take over
complete defense of the Claim and the Indemnified Party shall sustain no further
legal or other expenses in respect of such Claim. If the Indemnifying Party
elects to assume the defense of any suit and retains counsel, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it.
The Indemnified Party will not confess any Claim or make any compromise in any
case in which the Indemnifying party will be asked to provide indemnification,
except with the Indemnifying Party's prior written consent. The obligations of
the parties hereto under this Section 6 shall survive the termination of the
Agreement.
(d) Except for remedies which cannot be waived as a matter of law
(and injunctive or provisional relief), the provisions of this Article 6 shall
be the Indemnified Party's sole and exclusive remedy for claims or other actions
or proceedings to which the Indemnifying Party's indemnification obligations
pursuant to this Article 6 apply.
(e) In the event that the Indemnifying Party does not elect to assume
the defense of any such suit or in the case the Indemnified Party reasonably
does not approve of counsel chosen by the Indemnifying Party, or in the case
there is a conflict of interest between the Company and Investor Services Group,
the Indemnifying party will reimburse the Indemnified Party, its officers,
trustees, directors and employees, or the controlling person or persons named as
defendant or defendants in such suit, for the reasonable fees and expenses of
any counsel retained by the Indemnified Party or such defendant(s). The
Indemnifying Party's indemnification agreement contained in this Section 6 and
the Indemnifying Party's representations and warranties contained in this
Agreement shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Party, its officers,
directors, trustees or employees, or any controlling person(s). This agreement
of indemnity will inure exclusively to the Indemnified Party's benefit to the
benefit of its several officer, directors, trustees and employees, and their
respective estates and to the benefit of the controlling person(s) and their
successors. The Indemnifying Party agrees promptly to notify the Indemnified
Party of the commencement of any litigation or proceedings against the
Indemnifying Party or any of its officer, directors, trustees, or employees in
connection with the services rendered hereunder.
7 EXCLUSION OF WARRANTIES. THIS IS A SERVICE AGREEMENT EXCEPT AS
-----------------------
EXPRESSLY PROVIDED IN THIS AGREEMENT, INVESTOR SERVICES GROUP DISCLAIMS ALL
OTHER REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED MADE TO THE FUND OR ANY
OTHER PERSON, INCLUDING WITHOUT LIMITATION, ANY WARRANTIES REGARDING QUALITY,
SUITABILITY, MERCHANTABILITY, FITNESS FOR A PARTICULAR
-6-
<PAGE>
PURPOSE OR OTHERWISE (IRRESPECTIVE OF ANY COURSE OF DEALING, CUSTOM OR USAGE OF
TRADE) OF ANY SERVICES OR ANY GOODS PROVIDED INCIDENTAL TO SERVICES PROVIDED
UNDER THIS AGREEMENT. INVESTOR SERVICES GROUP DISCLAIMS ANY WARRANTY OF TITLE OR
NON-ENFRINGEMENT EXCEPT AS OTHERWISE SET FORTH IN THIS AGREEMENT.
8. Term and Termination of Agreement.
---------------------------------
(a) This Agreement shall be effective on the date first written above
and shall continue for a period of three (3) years (the "Initial Term"), unless
earlier terminated pursuant to the terms of this Agreement. Thereafter, this
Agreement shall automatically be renewed for successive terms of three (3) years
("Renewal Terms") each.
(b) Either party may terminate this Agreement at the end of the
Initial Term or at the end of any subsequent Renewal Term upon not than less
than ninety (90) days prior written notice to the other party. This Agreement
may be terminated by mutual written agreement of the parties.
(c) In the event a termination notice is given by the Company, all
reasonable expenses associated with movement of records and materials and
conversion thereof will be borne by the Company, provided, however, that
Investor Services Group shall use its best efforts to mitigate the costs
associated with such conversion.
(d) If a party hereto is guilty of a material failure to perform its
duties and obligations hereunder (a "Defaulting Party") resulting in a material
loss to the other party, such other party (the "Non-Defaulting Party") may give
written notice thereof of the Defaulting Party, and if such material breach
shall not have been remedied within thirty (30) days after such written notice
is given or such material breach is incapable of being remedied, as reasonably
determined by the Non-Defaulting Party, then the Non-Defaulting Party may
terminate this Agreement by giving thirty (30) days written notice of such
termination to the Defaulting Party. If Investor Services Group is the Non-
Defaulting Party, its termination of this Agreement shall not constitute a
waiver of any other rights or remedies of Investor Services Group with respect
to services performed prior to such termination or rights of Investor Services
Group to be reimbursed for out-of-pocket expenses. In all cases, termination by
the Non-Defaulting Party shall not constitute a waiver by the Non-Defaulting
Party of any other rights it might have under this Agreement or otherwise
against the Defaulting Party.
(e) Notwithstanding anything contained in this Agreement to the
contrary, in the event that this Agreement is terminated by the Company and such
termination arises, either directly or indirectly as a result of the Company's
dissolution or the Company's acquisition of or consolidation or merger into or
with a mutual fund (the "New Company") for which Investor Services Group does
not provide services substantially similar to those provided to the Company
hereunder, prior to the effective date of such termination and the conversion of
the Company's records to the New Fund, or its agent the Company shall pay to
Investor Services Group the fee set forth in Schedule B (the "Early Termination
Fee"). In the event that the Transfer Agency and Services Agreement of even date
herewith between the Company and Investor Services Group (the "Transfer Agency
Agreement") is terminated by the Company in accordance with Section 13.5 of the
Transfer Agency Agreement, this Agreement shall automatically terminate, such
termination to be effective as of the effective date of the termination of the
Transfer Agency Agreement.
(f) This Agreement may be terminated by the Company without penalty
in the event of its assignment, as such term is defined in the 1940 Act by
Investor Services Group, provided that 45
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days prior written notice of termination must be given to Investor Services
Group within 120 days following the assignment.
9. Modifications and Waivers: Authority to Act. No change, termination,
-------------------------------------------
modification or waiver of any term or condition of the Agreement shall be valid
unless in writing signed by each party. No such writing shall be effective as
against Investor Services Group unless said writing is executed by a Senior Vice
President, Executive Vice President or President of Investor Services Group. A
party's waiver of a breach of any term or condition in the Agreement shall not
be deemed a waiver of any subsequent breach of the same or another term or
condition. Any officer, director, partner, employee or agent of the Company who
is also an officer, director, partner, employee or agent of Investor Services
Group shall be deemed to be rendering services to or acting solely for the
Company, except when rendering services or conducting business in connection
with Investor Services Group's duties hereunder.
10. No Presumption Against Drafter. Investor Services Group and the
------------------------------
Company have jointly participated in the negotiation and drafting of this
Agreement. The Agreement shall be construed as if drafted jointly by the Company
and Investor Services Group, and no presumptions arise favoring any party by
virtue of the authorship of any provision of this Agreement.
11. Publicity. Neither Investor Services Group nor the Company shall
---------
release or publish news releases, public announcements, advertising or other
publicity relating to this Agreement or to the transactions contemplated by it,
other than factual statements concerning the existence of the relationship,
without prior review and written approval of the other party; provided, however,
that either party may make such disclosures as are required by legal, accounting
or regulatory requirements after making reasonable efforts in the circumstances
to consult in advance with the other party.
12. Severability. The parties intend every provision of this Agreement to
------------
be severable. If a court of competent jurisdiction determines that any term or
provision is illegal or invalid for any reason, the illegality or invalidity
shall not affect the validity of the remainder of this Agreement. In such case,
the parties shall in good faith modify or substitute such provision consistent
with the original intent of the parties. Without limiting the generality of this
paragraph, if a court determines that any remedy stated in this Agreement has
failed of its essential purpose, then all other provisions of this Agreement,
including the limitations on liability and exclusion of damages, shall remain
fully effective.
13. Notices. Any notice or other instrument authorized or required by this
-------
Agreement to be given in writing to the Company or Investor Services Group shall
be sufficiently given if addressed to the party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Company:
Rembrandt Funds
208 South La Salle Street
Chicago, Illinois 60604
To Investor Services Group:
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
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<PAGE>
Attention: President
with a copy to Investor Services Group's General Counsel
14. Assignment and Subcontracting. This Agreement, its benefits and
-----------------------------
obligations shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns and is not intended to
confer upon any other person any rights or remedies hereunder. This Agreement
may not be assigned or otherwise transferred by either party hereto, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld; provided, however, that Investor Services Group may, in
its sole discretion, assign all its right, title and interest in this Agreement
to an affiliate, parent or subsidiary, or to the purchaser of substantially all
of its business. Investor Services Group may, in its sole discretion, engage
subcontractors to perform any of the obligations contained in this Agreement to
be performed by Investor Services Group; provided, however that Investor
Services Group may not engage subcontractors to perform a substantial part of
the services to be performed by Investor Services Group without the prior
written consent of the Company, which consent may not be unreasonably withheld.
15. Governing Law/Venue. The laws of the Commonwealth of Massachusetts,
-------------------
excluding the laws on conflicts of laws, shall govern the interpretation,
validity, and enforcement of this Agreement. All actions arising from or related
to this Agreement shall be brought in the state and federal courts sitting in
the City of Boston, and Investor Services Group and the Company hereby submit
themselves to the exclusive jurisdiction of those courts. To the extent that the
provisions of Massachusetts law or the provisions hereof conflict with the 1940
Act, the 1940 Act shall control.
16. Counterparts. This Agreement may be executed in any number of
-------------
counterparts, each of which shall be deemed to be an original and which
collectively shall be deemed to constitute only one instrument.
17. Captions. The captions of this Agreement are included for convenience
--------
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
18. Obligations of the Company. The Company and Investor Services Group
--------------------------
agree that the obligations of the Company under the Agreement shall not be
binding upon any of the Trustees, shareholders, nominees, officers, employees or
agents, whether past, present or future, of the Company individually, but are
binding only upon the assets and property of the Company, as provided in the
Declaration of Trust. The execution and delivery of this Agreement have been
authorized by the Trustees of the Company, and signed by an authorized officer
of the Company, acting as such, and neither such authorization by such Trustees
nor such execution and delivery by such officer shall be deemed to have been
made by any of them or any shareholder of the Company individually or to impose
any liability on any of them or any shareholder of the Company personally, but
shall bind only the assets and property of the Company as provided in the
Declaration of Trust. The Company and Investor Services Group further agree that
the obligations of a Fund under the Agreement shall not be binding upon any
other Fund, but are binding only upon the assets and property of such Fund, as
provided in the Declaration of Trust.
19. Arbitration.
-----------
(a) Any claim or controversy arising out of or related to this
Agreement or breach hereof, shall be settled by arbitration administered by the
American Arbitration Association in Boston Massachusetts in accordance with its
applicable rules, except that the Federal Rules of Evidence and the
-9-
<PAGE>
Federal Rules of Civil Procedure with respect to the discovery process shall
apply. The parties hereby agree that judgment upon the award rendered by
arbitrator may be entered in any court having jurisdiction.
(b) The parties acknowledge and agree that the performance of the
obligations under this Agreement necessitates the use of instrumentalities of
interstate commerce and, notwithstanding other general choice of law provisions
in this Agreement, the parties agree that the Federal Arbitration Act shall
govern and control with respect to the provisions of this Article.
20. Additional Funds. In the event that the Company establishes one or
----------------
more Funds in addition to those identified in Schedule A, with respect to which
the Company desires to have Investor Services Group render services as
administrator under the terms hereof, the Company shall so notify Investor
Services Group in writing, and if Investor Services Group agrees in writing to
provide such services, Schedule A shall be amended to include such additional
Funds.
21. Confidentiality; Ownership
--------------------------
(a) Confidentiality. In the course of performance under this
---------------
Agreement, each party may have access to and receive disclosure of confidential
information about the other party, including but not limited to that party's
financial information, financial strategies, marketing plans, customer profiles,
sales estimates, business plans and a variety of other information which the
receiving party should reasonably consider to be confidential and proprietary
(hereinafter referred to as "Confidential Information"). The contents of this
Agreement are also Confidential Information. Each party shall exercise
reasonable care to safeguard the confidentiality of the Confidential Information
of the other Confidential Information of the disclosing party shall be used by
the receiving party solely in the performance of the receiving party's
obligations pursuant to this Agreement. The receiving party shall receive
Confidential Information in confidence and not disclose Confidential Information
of the disclosing party to any third party, except as may be necessary for the
receiving party to perform its obligations pursuant to this Agreement, as
required by law or a court of competent jurisdiction or by a regulatory agency
with supervisory responsibilities over the disclosing party, for confidential
consultations with accountants or attorneys, or as may otherwise be agreed upon
in writing by the disclosing party. Each party may, however, disclose
Confidential Information to its parent corporation, affiliates, subsidiaries and
affiliated companies and employees, provided that each shall use reasonable
efforts to ensure that the Confidential Information is not duplicated or
disclosed in breach of this Agreement.
Each party acknowledges that breach of the restrictions on use,
dissemination or disclosure of any Confidential Information of the other party
would result in immediate and irreparable harm, and money damages would be
inadequate to compensate the other party for that harm. Each party shall be
entitled to equitable relief, in addition to all other available remedies, to
redress any such breach.
(b) Ownership. In the course of performance under this Agreement,
---------
Investor Services Group may create reports, marketing materials, promotional
materials, and other materials relating to the Company ("Results"). The Company
acknowledges and agrees that Investor Services Group is the sole owner of all
rights (including, but not limited to, copyrights) to any Results, or aspects of
Results, that are used by Investor Services Group for administering its clients
generally and are not created solely for the Company. Notwithstanding the
foregoing, all rights (including, but not limited to, copyrights) to any Results
that are created solely for the Company (including, but not limited to, any
marketing materials and promotional materials created solely in connection with
the Company) are solely owned by the Company and are assigned to the Company by
Investor Services Group and the Company shall have a perpetual.
-10-
<PAGE>
royalty free, worldwide, transferable license to use, copy, transmit, distribute
and modify any Results owned by Investor Services Group as may reasonably be
necessary for the Company to exploit fully all of its rights in any Results
owned by the Company.
22. Records. Notwithstanding any other provisions in this Agreement
-------
Investor Services Group, directly or through third parties, shall maintain and
preserve for the periods prescribed therein, records relating to the services to
be performed under this Agreement which are required under the 19-10 Act and the
rules and regulations thereunder. Any records required to be maintained and
preserved under the 1940 Act which are prepared or maintained by Investor
Services Group on behalf of the Company shall be prepared and maintained at the
expense of the Investor Services Group, but shall be the property of the
Company, shall be readily accessible during normal business hours to the Company
and its duly authorized agents and shall be surrendered promptly to the Company
on written request or upon termination of this Agreement. Records shall be
surrendered in usable machine readable form. In the case of any request or
demand for the inspection of such records by another party, Investor Services
Group shall notify the Company and follow the Company's instructions as to
permitting or refusing such inspection; provided that Investor Services Group,
may exhibit such records to any person in any case where it is advised by its
counsel that it may be held liable for failure to do so, unless (in cases
involving potential exposure only to civil liability) the Company has agreed to
indemnify Investor Services Group against such liability and any expenses
incurred.
23. Force Majeure. No party shall be liable for any default or delay in
-------------
the performance of its obligations under this Agreement if and to the extent
such default or delay is caused, directly or indirectly by (i) fire, flood,
elements or nature or other acts of God; (ii) and outbreak or escalation of
hostilities, war, riots or civil disorders in any country, (iii) any act or
omission of the other party or any governmental authority; (iv) any labor
disputes (whether or not the employees' demands are reasonable or within the
party's power to satisfy); or (v) nonperformance by a third party or any similar
cause beyond the reasonable control of such party, including without limitation,
failures or fluctuations in telecommunications or other equipment. In any such
event, the non-performing party shall be excused from any further performance
and observance of the obligations so affected only for so long as such
circumstances prevail and such party continues to use commercially reasonably
efforts to recommence performance or observance as soon as practicable.
24. Equipment Failures. Notwithstanding any other provision in this
------------------
Agreement, in the event of equipment failures or the occurence of events beyond
Investor Services Group's control which is render its performance under this
Agreement impossible, Investor Services Group shall at no additional expense to
the Company take reasonable steps to minimize service interruptions. Investor
Services Group represents that the various procedures and systems which Investor
Services Group has implemented with regard to safekeeping from lost or damage
attributable to fire, theft or any other cause of the records, and other data of
the Company and Investor Services Group's records, data, equipment, facilities
and other property used in performance of its obligations hereunder are
reasonably adequate and are covered by a reasonably adequate disaster recovery
plan, and it will make such changes therein from time to time as are reasonably
required for the secure performance of its obligations hereunder.
25. Year 2000. Investor Service Group's services hereunder shall be
---------
rendered, and its computer systems used in rendering such services shall operate
and function, without any Year 2000 Error. The term "Year 2000 Error" means:
-11-
<PAGE>
(a) any failure of Investor Services Group's systems to properly
record, store, process, calculate or present calendar dates falling on and after
(and, if applicable, spans of time including) January 1, 2000 as a result of the
occurrence or use of data consisting of such dates;
(b) any failure of Investor Services Group's systems to calculate any
information dependent on or relating to dates on or after January 1, 2000 in the
same manner, and with the same functionality, date integrity and performance, as
such systems record, store, process, calculate and present calendar dates on or
before December 31, 1999, or information dependent on or relating to such dates:
or
(c) any loss of functionality or performance with respect to the
introduction of records or processing of data containing dates falling on or
after January 1, 2000.
26. Entire Agreement. This Agreement, including all Schedules hereto,
----------------
constitutes the entire Agreement between the parties with respect to the subject
manner hereof and supersedes all prior and contemporaneous proposals,
agreements, contracts, representations, and understandings, whether written or
oral, between the parties with respect to the subject matter hereof.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed and delivered by their duly authorized officers as of the date
first written above.
FIRST DATA INVESTOR SERVICES GROUP, INC.
By: /s/ [SIGNATURE ILLEGIBLE]
-------------------------------------
Name: Mark M. [LAST NAME ILLEGIBLE]
-----------------------------------
Title: ?. VICE PRESIDENT SALES
----------------------------------
REMBRANDT FUNDS
By: /s/ Tim J. Leach
-------------------------------------
Name: Tim J. Leach
-----------------------------------
Title: President
----------------------------------
-13-
<PAGE>
SCHEDULE A
Money Market Funds
Treasury Money Market Fund
Government Money Market Fund
Money Market Fund
Tax-Exempt Money Market Fund
Fixed Income Funds
Fixed Income Fund
Intermediate Government Fixed Income Fund
Tax-Exempt Fixed Income Fund
International Fixed Income Fund
Limited Volatility Fixed Income Fund
Balanced Funds
Balanced Fund
Equity Funds
Value Fund
Growth Fund
International Equity Fund
Small Cap Fund
Asian Tigers Fund
TransEurope Fund
Latin America Equity Fund
Real Estate Fund
-14-
<PAGE>
SCHEDULE B
----------
FEE SCHEDULE
For the services to be rendered, the facilities to be furnished and the
payments to be made by Investor Services Group, as provided for in this
Agreement, the Company, on behalf of each Fund, will pay Investor Services Group
a fee for the previous month at the rates listed below. The fee for the period
from the effective date of this Agreement to the end of such month shall be
prorated according to the proportion that such period bears to the full monthly
period. Upon any termination of this Agreement before the end of any month, the
fee for such part of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon the date
of termination of this Agreement.
. Fund Administration Fee:
0.15% of average net assets
. Fund Accounting Fee:
Per Fund $35,000
Each additional class $2,500
. Early Termination Fee:
The Early Termination Fee referred to in Section 8(c) and Section
13.5 of the Transfer Agency Agreement (together with this
Agreement, the "Agreements") shall equal in the aggregate
$1,500,000 if such termination occurs during the first year of
the Agreements and $750,000 if such termination occurs during the
second year of the Agreements.
. Investor Services Group shall be entitled to collect all out-of-pocket
fees described in Schedule C.
-15-
<PAGE>
SCHEDULE C
----------
OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the following:
. Postage of Board meeting materials and other materials to the
Company's Board members and service providers (including overnight or
other courier services)
. Telecommunications charges (including FAX) with respect to
communications with the Company's directors, officers and service
providers
. Travel to and from Board Meetings and other meetings with Fund
management
. Duplicating charges with respect to filings with federal and state
authorities and Board meeting materials
. Courier services
. Pricing services
. Forms and supplies for the preparation of Board meetings and other
materials on behalf of the Company
. Vendor set-up charges for Blue Sky services
. Customized programming requests
. Such other expenses as are agreed to by Investor Services Group and
the Company
-16-
<PAGE>
SCHEDULE D
----------
Fund Accounting and Administrative Services
Routine Projects
. Daily, Weekly, and Monthly Reporting
. Portfolio and General Ledger Accounting
. Daily Pricing of all Securities
. Daily Valuation and NAV Calculation. Monitoring compliance with all
applicable procedures. Support and report delivery to the valuation
committee
. Comparison of NAV to market movement
. Review of price tolerance/fluctuation report
. Research items appearing on the price exception report
. Weekly cost monitoring along with market-to-market valuations in accordance
with Rule 2a7
. Preparation of monthly ex-dividend monitor
. Daily cash reconciliation with the custodian bank
. Daily updating of price and rate information to the Transfer
Agent/Insurance Agent
. Daily support and report delivery to Portfolio Management
. Daily calculation of fund advisor fees and waivers
. Daily calculation of distribution rates
. Daily maintenance of each fund's general ledger including expense accruals
. Daily price notification to order vendors as required
. Calculation of 30-day adjusted SEC yields
. Preparation of month-end reconciliation package
. Monthly reconciliation of fund expense records
. Preparation of monthly pay down gain/loss summaries
. Preparation of all annual and semi-annual audit work papers
. Preparation and Printing of Financial Statements
. Providing Shareholder Tax Information to Transfer Agent
. Producing Drafts of IRS and State Tax Returns
. Treasury Services including:
Provide Officer for the fund
Expense Accrual Monitoring
Determination of Dividends
Prepare materials for review by the board, e.g., 2a-7, 10f-3, 17a-7,
17e-1, Rule 144a
Tax and Financial Counsel
. Monthly Compliance Testing including Section 817H
. Other services ordinarily performed and provided by a fund administrator
and fund accounting department
-17-
<PAGE>
Legal, Regulatory and Board of Trustees Support
Routine Legal Services
Corporate Secretarial
- ---------------------
. Assist in maintaining corporate records and good standing status of Fund in
its state of organization
. Provide Secretary/Assistant Secretary for Fund
. Develop and maintain calendar of annual and quarterly board approvals and
regulatory filings
. Prepare notice, agenda, memoranda, resolutions and background materials for
legal approval at quarterly board meetings; attend meetings; make
presentations where appropriate; prepare minutes; follow up on issues
. Provide support for one special board meeting per year and written consent
votes where needed
Regulatory/Filings
- ------------------
. Prepare and file annual Post-Effective Amendment
. Prepare and file Rule 24e-2 and Rule 24f-2 Notices
. Review and file Form N-SAR
. Review and file Annual and Semi-Annual Financial Reports
. Prepare prospectus supplements as needed
Miscellaneous Routine Legal Services
- ------------------------------------
. Communicate significant regulatory or legislative developments to Fund
management and directors and provide related planning assistance where
needed
. Consult with Fund management regarding portfolio compliance and Fund
corporate and regulatory issues as needed
. Maintain effective communication with outside counsel and review legal
bills of outside counsel
. Coordinate the printing and mailing process with outside printers for all
shareholder publications
. Review sales material and advertising for Fund SEC and NASD compliance
. Arrange D&O/E&O Insurance and fidelity bond coverage for Fund
. Assist in managing SEC audits of Funds
. Assist in monitoring Fund Code of Ethics reporting and provide such reports
to Adviser
. Assist in developing compliance guidelines and procedures to improve
overall compliance by Fund and Service providers
Special Legal Services (billed separately)
. Assist in conversion
Coordinate time and responsibility schedules
Draft notices, agenda, memoranda, resolutions and background materials
for board approval
. Assist in new fund start-up (to the extent requested)
Coordinate time and responsibility schedules
Prepare Fund corporate documents (MTA/by-laws)
Draft/file registration statement (including investment
objectives/policies and prospectuses)
Respond to and negotiate SEC comments
Draft notice, agenda and resolutions for organizational meeting;
attend board meeting; make presentations where appropriate;
prepare minutes and follow up on issues
. Prepare notice, agenda, memoranda and background materials for special
board meetings, make presentations where appropriate, prepare minutes and
follow up on issues
-18-
<PAGE>
* Prepare proxy material for special meeting( including funds merger
documents)
* Prepare PEA for special purpose (e.g. new funds or classes, changes in
advisory relationships, mergers, restructurings)
* Assist in extraordinary non-recurring projects
Arrange CDSC financial programs
Prospectus simplification
Profile prospectuses
Exemptive order applications
* Provide consultative legal services as needed
* Services and changes may vary based on volume. Special Legal Services shall
be billed at a rate of $185 per hour subject to certain project caps as may be
agreed to by Investor Services Group and the Company. No Special Legal Services
shall be undertaken by Investor by Investor Services Group without the prior
written consent of the Company.
-19-
<PAGE>
EXHIBIT 1 TO SCHEDULE D
FIRST DATA SERVICE
PERFORMANCE STANDARDS
Investor Services Group's obligation to meet the following Performance Standards
shall be measured in the aggregate with respect to all Funds of the Company.
Investor Services Group will report to the Company on a monthly basis the
percent of items completed within standard as well as a quality rating.
Reporting will be detailed to the transaction type level. A pass/fail
determination for contractual penalties will however be based on the categories
listed below. For example, the accuracy of NAV calculations will be reported to
the Fund on an individual basis and as a collective group. Investor Services
Group will receive a "fail" for the month if the collective score for all
financials falls below the contractual level. Note that completion standards are
measured in business days.
Fund Accounting/Custody Liaison
- -------------------------------
. NAVs calculated accurately, provided that all information received
from external vendors or Fund managers is correct
. Information to nasdaq is reported accurately and within appropriate
time frames
. Daily bulletin is released by 6:30 p.m. Eastern Time, provided that
all information received from external vendors or Fund managers is
received on a timely basis
. Accurate Cash Availability will be provided by 9:30 a.m. Eastern Time
. Budget analysis
The above standards will be adhered to at least 98% of the time measured on a
monthly basis.
Fund Administration (Treasury and Reporting)/Tax Compliance
- -----------------------------------------------------------
. All SEC and IRS regulatory requirements will be met according to the
deadlines set forth by the SEC and the IRS
. Notification to Adviser and Sub-Adviser within two (2) business days
with compliance violations based on procedures established by and
among Investor Services Group and the Company
The above standard will be met 100% of the time.
Legal Administration
- --------------------
. Board materials will be sent to the Company for review fourteen (14)
business days prior to the Board meeting
. Review of sales literature - response within seven (7) business days
The above standard will be met 98% of the time as measured on a quarterly basis.
-20-
<PAGE>
* Timely submission of sales literature to NASD
The above standard will be met 98% of the time as measured an a quarterly basis.
-21-
<PAGE>
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" and "Counsel and Auditors" in the Prospectuses and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference, in Post-Effective Amendment Number 15 to the Registration
Statement (Form N-1A No. 33-52784) and related Prospectuses of ABN AMRO Funds
(formerly "Rembrandt Funds"), of our report dated January 30, 1998 on the
Treasury Money Market Fund, Government Money Market Fund, 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,
Balanced Fund, Value Fund, Growth Fund, International Equity Fund, Small Cap
Growth Fund (formerly "Small Cap Fund"), Latin America Equity Fund, Real Estate
Fund, and Asian Tigers Fund of ABN AMRO Funds (formerly "Rembrandt Funds.")
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
April 28, 1998
<PAGE>
DISTRIBUTION PLAN
ADOPTED DECEMBER 10, 1992 AND
AMENDED SEPTEMBER 27, 1995
LAW: The Board of Trustees (including a majority of the non-interested
Trustees) each year must approve any expenditures of Trust assets
used in the distribution of Trust shares. There must be a written
plan for distribution, and the Board of Trustees must review
distribution expenditures quarterly.
PRINCIPAL
PURPOSE: To provide for careful review, particularly by non-interested
Trustees, of expenditures of moneys of existing shareholders to
finance share distribution to assure that these shareholders
benefit from the expenditures. Section 12(b); Rule 12b-1.
BACKGROUND: The Distribution Plan provides that the Distributor may be
compensated for certain activities specified in the Distribution
Plan.
PRINCIPAL
CONSIDERA-
TIONS: The Securities and Exchange Commission has stated that Trustees
should consider the following factors in deciding whether to
adopt or renew a Distribution Plan:
1. Need for independent counsel or experts to assist the
Trustees in reaching a determination of a plan under
12b-1;
2. Nature of the problem or circumstance which makes
adoption of such a Plan necessary or appropriate;
3. Causes of such problems or circumstances;
4. Way in which the Distribution Plan would address these
problems or circumstances and how it would be expected
to resolve or alleviate them, including the nature and
approximate amount of the expenditures, the
relationship of the expenditures, the overall cost
structure of the Trust, the nature of the anticipated
benefits, and the time it would take for these benefits
to be achieved;
<PAGE>
5. Merits of possible alternative plans;
6. Inter-relationship between the Distribution Plan and
the activities of any other person who finances
distribution of the Trust's shares, including whether
any payments by the Trust to such other person are made
in such a manner as to constitute the indirect
financing of distribution by the Trust;
7. Possible benefits of the Distribution Plan for any
other person relative to those expected to inure to the
Trust;
8. Effect of a Distribution Plan on existing shareholders;
9. Whether the Distribution Plan has in fact produced the
anticipated benefits for the Trust and its
shareholders;
10. The justification of a fixed percentage of fees in
relation to the value of services received by the Fund;
11. The relationship between the NASD limitation on the
maximum sales load (7 1/4%) and the aggregate of the
Fund's sales load and distribution fees over a period
of years;
REQUIRED
BOARD
ACTION: Determine that expenditures proposed are reasonable and likely to
produce benefits for the shareholders;
<PAGE>
REMBRANDT FUNDS
DISTRIBUTION PLAN
Investor Class
WHEREAS, Rembrandt Funds (the "Trust") is engaged in business as an open-
end investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trustees of the Trust have determined that there is a
reasonable likelihood that the following Distribution Plan will benefit the
Trust and the owners of units of beneficial interest (the "Shareholders") in the
Trust;
NOW, THEREFORE, the Trustees of the trust hereby adopt this Distribution
Plan pursuant to Rule 12b-1 under the 1940 Act.
SECTION 1. The Trust has adopted this Investor class Distribution Plan
----------
(the "Plan") to enable the Trust to directly or indirectly bear expenses
relating to the distribution of Investor Class securities of which the Trust is
the issuer.
SECTION 2. The Trust may incur expenses for the items stipulated in
----------
Section 3 of this Plan. All expenditures pursuant to the Plan shall be made only
pursuant to authorization by the President, any Vice President or the Treasurer
of the Trust. If there should be more than one series of Trust shares, expenses
incurred pursuant to this Plan shall be allocated among the several series of
the Trust on the basis of their relative net asset values, unless otherwise
determined by a majority of the Qualified Trustees.
In addition, the Trust will pay the Distributor a fee of up to .25% of the
Investor Class Portfolios' average daily net assets. Compensation of
broker/dealers and service providers which provide specified services shall be
made by the Distributor from such fees. The actual fee paid will be negotiated
based on the extent and quality of services provided.
SECTION 3. Expenses permitted pursuant to this Plan shall include, and be
----------
limited to, the following:
(a) The incremental printing costs incurred in producing for and
distributing to persons other than current Shareholders of the
Trust the reports, prospectuses, notices and similar materials
that are prepared by the Trust for current Shareholders;
(b) advertising;
<PAGE>
(c) the costs of preparing, printing and distributing any
literature used in connection with the offering of the Trust's
Shares and not covered by Section 3(a) of this Plan; and
(d) expenses incurred in connection with the promotion and sale of
the Trust's Shares including, without limitation, travel and
communication expenses and expenses for the compensation of and
benefits for sales personnel.
SECTION 4. This Plan shall not take effect until it has been approved (a)
----------
by a vote of at least a majority of the outstanding voting securities of the
Trust; and (b) together with any related agreements by votes of the majority of
both (i) the Trustees of the Trust and (ii) the Qualified Trustees, cast in
person at a Board of Trustees meeting called for the purpose of voting on this
Plan of such agreement.
SECTION 5. This Plan shall continue in effect for a period of more than
----------
one year after it takes effect only for so long as such continuance is
specifically approved at least annually in the manner provided in Part (b) of
Section 4 herein for the approval of this Plan.
SECTION 6. Any person authorized to direct the disposition of monies paid
----------
or payable by the Trust pursuant to this Plan or any related agreement shall
provide to the Trustees of the Trust, at least quarterly, a written report of
the amounts so expended and the purposes for which such expenditures were made.
SECTION 7. This Plan may be terminated at any time by the vote of a
----------
majority of the Qualified Trustees or by vote of a majority of the Trust's
outstanding voting securities.
SECTION 8. All agreements with any person relating to implementation of
----------
this Plan shall be in writing, and any agreement related to this Plan shall
provide (a) that such agreement may be terminated at any time, without payment
of any penalty, by the vote of a majority of the Qualified Trustees or by the
vote of Shareholders holding a majority of the Trust's outstanding voting
securities, on not more than 60 days written notice to any other party to the
agreement; and (b) that such agreement shall terminate automatically in the
event of its assignment.
SECTION 9. This Plan may not be amended to increase materially the amount
----------
of distribution expenses permitted pursuant to Section 2 hereof without the
approval of Shareholders holding a majority of the outstanding voting securities
of the Trust, and all material amendments to this Plan shall be approved in the
manner provided in Part (b) of Section 4 herein for the approval of this Plan.
SECTION 10. As used in this Plan, (a) the term "Qualified Trustees" shall
-----------
mean those Trustees of the Trust who are not interested persons of the Trust,
and have no direct or indirect financial interest in the operation of this Plan
or any agreements related to it, and (b) the terms "assignment" and "interested
person" shall have the respective meanings specified in the 1940
<PAGE>
Act and the rules and regulations thereunder, subject to such exemptions as may
be granted by the Securities and Exchange Commission.
SECTION 11. While this Plan is in effect, the selection and nomination of
-----------
those Trustees who are not interested persons of the Trust within the meaning of
Section 2(a)(19) of the 1940 Act shall be committed to the discretion of the
Trustees then in office who are not interested persons of the Trust.
SECTION 12. This Plan shall not obligate the Trust or any other party to
-----------
enter into an agreement with any particular person.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000892567
<NAME> REMBRANDT
<SERIES>
<NUMBER> 010
<NAME> FIXED INCOME COMMON
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<INVESTMENTS-AT-COST> 144,052
<INVESTMENTS-AT-VALUE> 146,091
<RECEIVABLES> 2,029
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 146
<TOTAL-ASSETS> 149,091
<PAYABLE-FOR-SECURITIES> 5,161
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,354
<TOTAL-LIABILITIES> 7,515
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 139,183
<SHARES-COMMON-STOCK> 13,635
<SHARES-COMMON-PRIOR> 12,322
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