<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 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. 13 /X/
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 14 /X/
REMBRANDT FUNDS(R)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
2 OLIVER STREET
BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (800) 342-5734
DAVID G. LEE
C/O SEI INVESTMENTS
OAKS, PENNSYLVANIA 19456
(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)
______ immediately upon filing pursuant to paragraph (b)
______ on [date] pursuant to paragraph (b)
X 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>
REMBRANDT FUNDS(R)
POST-EFFECTIVE AMENDMENT NO. 13
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
Item 3. Condensed Financial Information *
Item 4. General Description of Registrant Fund Highlights
General Information--The Trust; Investment Objective
and 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
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>
REMBRANDT FUNDS (R)
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
. SMALL CAP FUND . TAX-EXEMPT FIXED INCOME FUND
. INTERNATIONAL EQUITY FUND . INTERNATIONAL FIXED INCOME FUND
. TRANSEUROPE FUND . LIMITED VOLATILITY FIXED INCOME FUND
. ASIAN TIGERS FUND Money Market Funds
. LATIN AMERICA EQUITY FUND . TREASURY MONEY MARKET FUND
. REAL ESTATE FUND . GOVERNMENT MONEY MARKET FUND
. MONEY MARKET FUND
Balanced Fund . TAX-EXEMPT MONEY MARKET 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 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 Statement of
Additional Information is incorporated into this Prospectus by reference.
Common Shares of the Rembrandt Funds(R) (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.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
---------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK. 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 Funds
before investing. Brief descriptions are also provided throughout the
Prospectus to better explain certain key points. To find these helpful guides,
look for this symbol. [SYMBOL APPEARS HERE]
FUND HIGHLIGHTS ________________________________________________________________
The following summary provides basic information about the Common Shares of the
following Funds: Value Fund, Growth Fund, 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 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
Statement of Additional Information.
................................................................................
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...................................... 15
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................... 43
</TABLE>
................................................................................
INVESTMENT
OBJECTIVES
AND POLICIES Below are the investment objectives and some basic investment
policies of each Fund. For more information, see "Investment
Objectives and Policies," "General Investment Policies" and
"Description of Permitted Investments and Risk Factors."
EQUITY AND The Growth Fund and Small Cap Fund both seek a high level
BALANCED FUNDS of total return primarily through capital appreciation.
The Value Fund, International Equity Fund and TransEurope
Fund all seek a high level of total return through capital
appreciation and current income.
The 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.
2
<PAGE>
The Balanced Fund seeks to obtain a favorable total rate
of return through current income and capital appreciation
consistent with the preservation of capital, derived from
investing in a portfolio comprised of fixed income and
equity securities.
FIXED INCOME The Fixed Income Fund seeks a high level of total return
FUNDS relative to funds with like investment objectives from
income and, to a lesser degree, capital appreciation derived
from investing in a portfolio consisting primarily of
quality intermediate- and long-term fixed income securities.
The Intermediate Government Fixed Income Fund seeks a
high level of total return relative to funds with like
investment objectives, consistent with preservation of
capital, from income and, to a lesser degree, capital
appreciation, derived from investing in a portfolio
consisting of primarily short- and intermediate-term U.S.
Government securities.
The Tax-Exempt Fixed Income Fund seeks a high level of
total return, relative to funds with like investment
objectives, consistent with preservation of capital, from
income derived from investing in a portfolio consisting
primarily of securities that are exempt from Federal income
tax and not subject to taxation as a preference item for
purposes of the Federal alternative minimum tax.
The International Fixed Income Fund seeks a high level of
total return, relative to funds with like objectives,
measured in U.S. dollar terms, from income and capital
appreciation derived from investing in a portfolio
consisting of quality fixed income securities denominated in
foreign currencies.
The Limited Volatility Fixed Income Fund seeks a high
level of current income, consistent with relative stability
of principal, derived from investing in a portfolio
consisting primarily of short- and intermediate-term fixed
income securities. The Limited Volatility Fund currently is
not offering its shares to the public.
MONEY MARKET The Treasury Money Market Fund seeks to preserve principal
FUNDS value and maintain a high degree of liquidity while
providing current income.
The Government Money Market Fund and the Money Market
Fund seek to provide as high a level of current income as is
consistent with preservation of capital and liquidity.
The Tax-Exempt Money Market Fund seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income exempt from Federal income
taxes.
UNDERSTANDING Each Fund invests in different securities. Values of equity
RISK securities may be affected by the financial markets as well
as by developments impacting specific issuers. Values of
fixed income securities tend to vary inversely with interest
rates and may be affected by other market and economic
factors as well. The International Equity, TransEurope,
Asian Tigers, International Fixed Income, and Latin America
Equity Funds will, and certain other Funds may invest in
securities of foreign issuers. Securities of foreign issuers
are subject to certain risks not typically associated with
domestic securities, including, among other risks,
3
<PAGE>
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 regulation of securities
markets, withholding taxes and changes in taxes on income on
securities, and possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits.
Investments in certain Latin American countries also may
involve additional risks of political instability, high
inflation rates, and limited trading markets. See "General
Investment Policies," "Risk Factors" and "Description of
Permitted Investments and Risk Factors" in this prospectus,
and the Statement of Additional Information.
MANAGEMENT ABN AMRO Asset Management (USA) Inc. (the "Advisor")
PROFILE (formerly LaSalle Street Capital Management, Ltd.) 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.
First Data Investor Services Group, Inc. serves 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" and "The Distributor."
YOUR ACCOUNT You may open a Common Shares account with a minimum amount
AND DOING of $2,000 per Fund and make additional investments with as
BUSINESS WITH little as $100. A Common Shares account may be opened by
US contacting the transfer agent or your financial
intermediary. Redemptions of a Fund's shares are made at net
asset value per share. See "Your Account and Doing Business
With Us."
DIVIDENDS Substantially all of the net investment income (exclusive of
capital gains) of each of the Equity, Balanced and Fixed
Income Funds is distributed in the form of periodic
dividends. Substantially all of the net investment income
(exclusive of capital gains) of each of the Money Market
Funds is distributed in the form of daily dividends. Any
capital gain is distributed at least annually. Distributions
are paid in additional shares unless 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 CONTACTS financial intermediary.
4
<PAGE>
PORTFOLIO EXPENSES _____________________________________________________________
The purpose of the following table is to help you understand the various cost
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in COMMON SHARES.
SHAREHOLDER TRANSACTION EXPENSES/1/ (As a percentage of offering price)
- --------------------------------------------------------------------------------
Maximum Sales Charge Imposed on Purchases None
Redemption Fee(2) None
- --------------------------------------------------------------------------------
(1) Certain financial intermediaries may impose account fees or other charges.
(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 .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(1) .23% .22% .25% .36% .54% .54% .70% .61% .24%
- --------------------------------------------------------------------------------------------------------
Total Operating Expenses 1.03% 1.02% 1.05% 1.36% 1.54% 1.54% 1.70% 1.31% .94%
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) "Other Expenses" for the TransEurope Fund and Real Estate Fund are based on
estimated amounts for the current fiscal year.
- --------------------------------------------------------------------------------
<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) .23% .24% .25% .31% .24%
- ---------------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)(3) .73% .74% .73% 1.11% .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 terminate its waiver at any time in its sole
discretion. Absent such waiver, Advisory Fees for the other Funds would be
as follows: Fixed Income Fund--.60%, Intermediate Government Fixed Income
Fund--.60%, Tax-Exempt Fixed Income Fund--.60%, and Limited Volatility
Fixed Income Fund--.60%. See "The Advisor."
(2) "Other Expenses" for the Limited Volatility Fixed Income Fund are based on
estimated amounts for the current fiscal year.
(3) Absent the voluntary waivers described above, Total Operating Expenses for
the Funds would be as follows: Fixed Income Fund--.83%, Intermediate
Government Fixed Income Fund--.84%, Tax-Exempt Fixed Income Fund--.85%, and
Limited Volatility Fixed Income Fund--.84%.
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 Operating Expenses .24% .24% .23% .21%
- ---------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(2) .44% .44% .43% .40%
- ---------------------------------------------------------------------------
</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 terminate its waiver at any time in its sole
discretion. Absent such waiver, Advisory Fees for the Funds would be as
follows: Treasury Money Market Fund--.35%, Money Market Fund--.35% and Tax-
Exempt Money Market Fund--.35%. Additional information may be found under
"The Advisor."
(2) Absent the voluntary waiver described above, Total Operating Expenses for
the Funds would be as follows: Treasury Money Market Fund--.59%, Money
Market Fund--.58% and Tax-Exempt Money Market Fund--.56%. This waiver is
voluntary and may be discontinued at any time at the Advisor's discretion.
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 re-
turn and (2) redemption at the end of each time
period:
Value Fund $11 $33 $57 $126
Growth Fund 10 32 56 125
Small Cap Fund 11 33 58 128
International Equity Fund 14 43 74 164
TransEurope Fund 16 49 -- --
Asian Tigers Fund 16 49 84 183
Latin America Equity Fund 17 54 92 201
Real Estate Fund 16 51 -- --
Balanced Fund 10 30 52 115
Fixed Income Fund 7 23 41 91
Intermediate Government Fixed Income Fund 8 24 41 92
Tax-Exempt Fixed Income Fund 7 23 41 91
International Fixed Income Fund 11 35 61 135
Limited Volatility Fixed Income Fund 8 24 -- --
Treasury Money Market Fund 4 12 20 46
Government Money Market Fund 4 12 20 46
Money Market Fund 4 11 20 44
Tax-Exempt Money Market Fund 3 10 18 41
- ----------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED UPON TOTAL OPERATING EXPENSES, EXCEPT WITH RESPECT TO 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 the Common Shares of the Funds.
If you purchase shares through a financial institution, you may be charged
separate fees by the financial institution. See "The Advisor," "The
Administrator" and "The Distributor."
6
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following information has been audited by the Trust's independent auditors,
as indicated in their report dated January 24, 1997 on the Trust's financial
statements as of December 31, 1996 incorporated by reference to the Trust's
Statement of Additional Information under "Financial Information." This table
should be read in conjunction with the Trust's financial statements and related
notes thereto. As of December 31, 1996, the TransEurope Fund, Real Estate 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
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
----------
1996 $12.26 $ 0.29 $ 2.18 $(0.29) $(1.20) $0.00 $13.24 20.43% $164,710 1.01% 2.19 % 1.03%
1995 9.79 0.34 2.74 (0.35) (0.26) 0.00 12.26 32.02 131,243 1.03 3.07 1.05
1994 10.30 0.35 (0.35) (0.34) (0.17) 0.00 9.79 0.00 61,557 1.06 3.45 1.06
1993(1) 10.00 0.28 0.38 (0.28) (0.08) 0.00 10.30 6.73 54,340 1.10 2.85 1.10
GROWTH FUND
-----------
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 FUND
--------------
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
-------------------------
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
-----------------
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
-------------------------
1996(3) $10.00 $(0.02) $ 0.26 $ 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
----------
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
-----------
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 FUND
--------------
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
-------------------------
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
-----------------
1996 0.23 % 24% $0.0106
1995 1.30 28 N/A
1994(2) 0.34 13 N/A
LATIN AMERICA EQUITY FUND
-------------------------
1996(3) (0.55)% 10% $0.0004
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
* Known as Trust Class, prior to October 10, 1997.
** Ratios are high as a result of the low initial asset levels during the
Common 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 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.
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>
-------------
BALANCED FUND
-------------
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(1) 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
-----------------
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(1) 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
-----------------------------------------
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(1) 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>
-------------
BALANCED FUND
-------------
1996 104% $0.0496
1995 85 N/A
1994 85 N/A
1993(1) 126 N/A
-----------------
FIXED INCOME FUND
-----------------
1996 194% N/A
1995 59 N/A
1994 126 N/A
1993(1) 163 N/A
-----------------------------------------
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
1996 179% N/A
1995 115 N/A
1994 124 N/A
1993(1) 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 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
----------------------------
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
-------------------------------
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
--------------------------
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
----------------------------
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
-----------------
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
----------------------------
1996 98% N/A
1995 129 N/A
1994 146 N/A
1993(1) 149 N/A
-------------------------------
INTERNATIONAL FIXED INCOME FUND
-------------------------------
1996 85% N/A
1995 105 N/A
1994 138 N/A
1993(2) 146 N/A
--------------------------
TREASURY MONEY MARKET FUND
--------------------------
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
----------------------------
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
-----------------
MONEY MARKET FUND
-----------------
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
----------------------------
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
----------------------------
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 of a Fund are sold on a continuous basis and may be purchased
directly from the Rembrandt Funds, 4400 Computer Drive, Westborough,
Massachusetts 01581, either by mail, telephone or by 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, Lombard Institutional, and Quick & Reilly. For
more information about the following topics, see "Additional Information About
Doing Business with Us."
- --------------------------------------------------------------------------------
HOW TO BUY
COMMON SHARES
FROM THE
TRANSFER AGENT
................................................................................
[SYMBOL APPEARS HERE] 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 form and mailing it, along
Mail with a check (or other negotiable bank instrument or money
order) payable to "Rembrandt Funds(R), [Fund Name]," to
Rembrandt Funds, P.O. Box 419402, Kansas City, Missouri 64141-
6402. Subsequent purchases of shares may be made at any time by
mailing a check (or other negotiable bank instrument or
money order) to the Transfer Agent.
All purchases made by check should be in U.S. dollars and
made payable to the Rembrandt Funds(R). Third party checks,
credit cards, credit card checks and cash will not be
accepted. When purchases are made by check, redemptions will
not be allowed until the investment being redeemed has been
in the account for 15 days.
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: United Missouri Bank, N.A.; ABA #10-10-00695; for Account
Number 98-7052-349-3; Further Credit: [Name of Fund]. Your
name and account number must be specified in the wire. Your
bank may impose a fee for investments by wire.
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: Rembrandt Funds,
P.O. Box [ ], Westborough, Massachusetts 01581.
Subsequent Purchases: Additional investments may be made
at any time through the wire procedures described above,
which must include your name and account number.
Other Other shareholders who desire to transfer the registration of
Information their shares should contact the Administrator by calling 1-
Regarding 800-443-4725.
Purchases
11
<PAGE>
................................................................................
[LOGO OF REMBRANDT APPEARS HERE]
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.
................................................................................
Purchases of Common Shares may be made by direct deposit
or Automated Clearing House transactions.
No certificates representing shares will be issued.
Automatic You may systematically buy Common Shares through deductions
Investment from your checking accounts, provided these accounts are
Plan ("AIP") maintained through banks which are part of the Automated
Clearing House system. Upon notice, the amount you commit to
the AIP may be changed or canceled at any time. The minimum
pre-authorized investment amount is $50 per month. 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. You may obtain an AIP application form by
calling 1-800-443-4725. If you purchased shares through a
financial intermediary, contact your intermediary to find out
if the AIP is available to you. See "Doing Business Through
Intermediaries."
EXCHANGING
SHARES
When Can You Once payment for your shares has been received and accepted
Exchange (i.e., an account has been established), you may exchange some
Shares? or all of your Common Shares for Common Shares of other Funds
within the Trust. Exchanges are made at net asset value. For
an established account, exchanges will be made only after
instructions in writing or by telephone (an "Exchange
Request") are received by the Transfer Agent.
The Trust reserves the right to change the terms and
conditions of the exchange privilege discussed herein, or to
terminate the exchange privilege, upon 60 days' notice.
Requesting an To request an exchange, you must provide proper written
Exchange of instructions to the Transfer Agent. Telephone exchanges will
Shares also be accepted if you previously elected this option on
your account application.
If an Exchange Request in good order is received by the
Transfer Agent by 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, the exchange usually will occur on that day.
Exchange orders for the Government Money Market Fund and
the Money Market Fund submitted to the Transfer Agent before
5:00 p.m., Eastern time, by accounts for which ABN AMRO North
America, Inc. or 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.
REDEMPTION OF You may redeem your shares on any Business Day, by mail or by
SHARES telephone. Redemption orders for the Equity, Balanced and
Fixed Income Funds must be received by the time net
12
<PAGE>
................................................................................
[SYMBOL APPEARS HERE] 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.
................................................................................
asset value is calculated. Redemption orders for the Money
Market Funds must be received by 1:00 p.m., Eastern time.
Redemption orders for the Government Money Market Fund and the
Money Market Fund submitted to the Transfer Agent before 5:00
p.m., Eastern time, by accounts for which ABN AMRO North
America, Inc. or 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 written request for redemption must be received
by the Transfer Agent in order to constitute a valid request
for redemption. The Transfer Agent may require that the
signature on the written request be guaranteed by a bank
which is a member of the Federal Deposit Insurance
Corporation, a trust company, broker, dealer, credit union
(if authorized under state law), securities exchange or
association, clearing agency or savings association. The
signature guarantee requirement will be waived if all of the
following conditions apply: (1) the redemption is for $5,000
worth of shares or less, (2) the redemption check is payable
to the Shareholder(s) of record, and (3) the redemption check
is mailed to the Shareholder(s) at the address of record 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
request for redemption. 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 in converting such securities to cash.
You may have the 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 request for
redemption. 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.
13
<PAGE>
Communicating Neither the Trust nor the Transfer Agent will be
with the responsible for any loss, liability, cost or expense for
Transfer Agent acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The
Trust and the Transfer Agent will each employ reasonable
procedures to confirm that instructions communicated by
telephone are genuine, including requiring a form of
personal identification prior to acting upon instructions
received by telephone and recording telephone instructions.
If market conditions are extraordinarily active, or other
extraordinary circumstances exist, and 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 All redemption orders are effected at the net asset value
Information per share next determined after receipt of a valid request
Regarding for redemption, as described above.
Redemptions At various times, a Fund may be requested to redeem
shares for which it has not yet received good payment. In
such circumstances, the forwarding of proceeds will be
delayed for at least 15 days from the date of purchase or
until payment has been collected for the purchase of such
shares.
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 via check or Automated
Clearing House of $50 or more on a monthly, quarterly,
semi-annual or annual basis. A SWP Application Form may be
obtained by calling 1-800-443-4725.
You should realize that if 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, their 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 Common Shares
SERVICE shareholders in the Money Market Funds. You may redeem your
(Money Market money market fund common shares by writing checks on your
Funds) account for $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 the 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
14
<PAGE>
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 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."
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 buy, sell and exchange
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 _____________________________________________________________________
VALUE FUND The Value Fund seeks a high level of total return through
capital appreciation and current income.
................................................................................
[SYMBOL APPEARS HERE] 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.
................................................................................
The Value Fund will invest at least 65% of its total assets
in U.S. common stocks that the Advisor believes are undervalued
and present the opportunity to increase shareholder value. The
Value Fund will invest in common stocks that are traded on a
national securities exchange or are actively traded in the
over-the-counter market and that: (i) have below average price
to earnings, price to book value, price to sales or 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 assets of the Fund may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks rated in the highest four
rating categories by a nationally recognized statistical
rating organization ("NRSRO")
15
<PAGE>
or determined by the Advisor to be of comparable quality at
the time of purchase; (iii) preferred stock convertible into
common stocks; and (iv) U.S. dollar denominated equity
securities of foreign issuers (including sponsored American
Depositary Receipts ("ADRs")). The Fund will invest in
securities of foreign issuers only if they are listed on
national securities exchanges or actively traded in the
over-the-counter market. The Fund will invest in options and
futures for hedging purposes only.
GROWTH FUND The Growth Fund seeks a high level of total return primarily
through capital appreciation.
The Growth Fund will invest at least 65% of its total
assets in the common stock of corporations of any size that,
in the Advisor's opinion, have strong prospects for
appreciation through growth in earnings. The Growth Fund
invests primarily in common stocks that: (i) are traded on a
national securities exchange or are actively traded in the
over-the-counter market and have an average trading volume
of more than $1 million per day; (ii) have sales and
earnings growth rates that exceed the growth rate of the
Gross Domestic Product; and (iii) maintain a positive return
on equity and total assets.
Any remaining Fund assets may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks; (iii) preferred stock
convertible into common stocks; and (iv) U.S. dollar
denominated equity securities of foreign issuers (including
sponsored ADRs). The Fund will invest in securities of
foreign issuers only if they are listed on national
securities exchanges or actively traded in the over-the-
counter market. The Fund will invest in options and futures
for hedging purposes only.
SMALL CAP FUND The Small Cap Fund seeks a high level of total return
primarily through capital appreciation.
The Small Cap Fund will invest at least 65% of its total
assets in the common stocks of corporations with smaller
capitalization levels that the Advisor believes have strong
prospects for appreciation through growth in earnings. The
Advisor's emphasis will be on a diversified portfolio of
common stocks of companies with aggregate market
capitalization of less than $1 billion. In selecting stocks
for the Fund, factors reviewed will include sales and
earnings growth rates and the strength of the issuer's
balance sheet.
Because the Fund invests primarily in common stocks of
smaller capitalization companies, the Fund's shares may
fluctuate significantly in value, and thus may be more
suitable for long-term investors who can bear the risk of
short-term fluctuations.
Any remaining Fund assets may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks; (iii) preferred stock
convertible into common stocks; and (iv) U.S. dollar
denominated equity securities of foreign issuers (including
sponsored ADRs). The Fund will invest in equity securities
of foreign issuers that satisfy in substance the criteria
for investing in smaller capitalization stocks set forth
above. The Fund will invest in equity securities of foreign
issuers only if they are listed on national securities
exchanges or actively traded in the over-the-counter market.
The Fund will invest in options and futures for hedging
purposes only.
16
<PAGE>
INTERNATIONAL The International Equity Fund seeks a high level of total
EQUITY FUND return through capital appreciation and current income.
The International Equity Fund will invest at least 65% of
its total assets in equity securities of issuers in at least
three countries other than the U.S.
While the Fund will not necessarily spread its
investments among more than three countries other than the
U.S., the Advisor intends to diversify its investments among
countries to reduce currency risk. Investments will be made
primarily in common stocks of companies domiciled in
developed countries, but may be made in the securities of
companies domiciled in developing countries, as well.
Although the Fund will invest primarily in securities listed
on national stock exchanges, it will also invest in
securities actively traded in over-the-counter markets.
Securities of companies in developing countries may pose
liquidity risks. The Fund may invest or hold a portion of
its assets in U.S. dollars and foreign currencies, including
multinational currency units. A portion of the Fund's total
assets normally will be held in U.S. dollars.
Any remaining Fund assets will be invested in common
stocks of closed-end management investment companies that
invest primarily in international common stocks, stocks of
U.S. issuers listed on national securities exchanges or
actively traded in the over-the-counter market, convertible
securities of U.S. issuers (whether or not they are listed
on national securities exchanges) and money market
instruments. The Fund will invest in options and futures for
hedging purposes only.
TRANSEUROPE The TransEurope Fund seeks a high level of total return
FUND through capital appreciation and current income.
The TransEurope Fund will invest as fully as feasible
(and at least 65% of its total assets) in equity securities
of European issuers located in Belgium, Denmark, Finland,
France, Germany, Italy, the Netherlands, Norway, Spain,
Sweden, Switzerland and the United Kingdom. Investments may
also be made in the equity securities of issuers located in
the smaller and emerging markets of Europe. The Fund may
also invest in the equity securities of issuers in the
following Eastern European countries: the Czech Republic,
Hungary, Poland and Slovakia. Emerging markets are subject
to special risks not associated with domestic markets. See
"Certain Risk Factors."
The Fund's remaining assets will be invested in money
market instruments of European issuers. The Fund will invest
in options and futures for hedging purposes only. The Fund
may invest or hold a portion of its assets in U.S. dollars
and European currencies, including multinational currency
units. A portion of the Fund's total assets normally 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 will invest primarily in equity
securities that are traded on recognized stock exchanges of
the countries of Asia and in equity securities of companies
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organized under the laws of an Asian country. The Fund may
also invest in sponsored ADRs of Asian issuers that are
traded on stock exchanges in the United States. The Fund
does not intend to invest in securities which are
principally traded in markets in Japan or in companies
organized under the laws of Japan.
Under normal circumstances, at least 65% of the total
assets of the Fund will be invested in equity securities of
issuers located in some or all of the following Asian
countries: China, Hong Kong, Indonesia, Malaysia, the
Philippines, Singapore and Thailand. The Fund may also
invest in common stocks traded on markets in India,
Pakistan, Sri Lanka, South Korea and Taiwan, and may invest
up to 5% of its net assets in other developing markets. The
Fund has no set policy for allocating investments among the
several Asian countries. Allocation of investments among the
various countries will depend on the relative attractiveness
of the stocks of issuers in the respective countries.
Government regulation and restrictions in many of the
countries of interest may limit the amount, mode, and extent
of investment in companies of such countries.
Any of the Fund's remaining assets will be invested in
common stocks of closed-end management investment companies
that invest primarily in common stocks of Asian countries or
money market instruments of Asian issuers.
In selecting industries and particular issuers, the
Advisor will evaluate costs of labor and raw materials,
access to technology, export of products and government
regulation. Although the Fund seeks to invest in larger
companies, it may invest in medium and small companies that,
in the Advisor's opinion, have potential for growth.
While the Fund intends to invest primarily in securities
listed on stock exchanges, it may also invest in securities
traded in over-the-counter markets, which may pose liquidity
risks. No more than 5% of the Fund's net assets will be
invested in unlisted securities. The Fund will invest in
options and futures for hedging purposes only. The Fund may
invest or hold a portion of its assets in U.S. dollars and
Asian currencies. A portion of the Fund's total assets
normally will be held in U.S. dollars.
LATIN AMERICA The Latin America Equity Fund seeks long-term capital
EQUITY FUND appreciation.
The Fund will invest primarily in equity securities of
(i) companies organized in, or for which the principal
securities trading market is in Latin America, and (ii)
companies, wherever organized, that, in one of the last two
fiscal years derived more than 50% of their annual revenues
or profits from goods produced, sales made or services
performed in Latin America ("Latin American issuers"). Under
normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities of Latin
American issuers.
The Fund seeks to benefit from economic and other
developments in Latin America. The Advisor and Sub-Advisor
believe that investment opportunities may be present in
Latin America as a result of an evolving long-term
international trend encouraging greater market orientation
and diminishing governmental intervention in economic
affairs. This trend may be facilitated by local or
international political, economic or financial developments
that could benefit the capital markets of certain Latin
American countries.
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<PAGE>
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.
Although the Fund intends to invest primarily in equity
securities listed on stock exchanges, it may also invest in
securities traded in over-the-counter markets and in
securities for which there is no organized market.
The Fund may invest in investment grade debt securities,
including debt securities issued or guaranteed by a Latin
American government or governmental entity ("Sovereign
Debt"), obligations of supranational entities, Brady Bonds
and money market instruments.
For hedging purposes only, the Fund may also enter into
options, futures, interest rate swaps, currency
transactions, caps, collars and floors. The Fund may also
write (i.e., sell) covered call options on the securities in
which it may invest. The Fund may invest or hold a portion
of its assets in U.S. dollars and Latin American currencies.
A portion of the Fund's total assets normally will be held
in U.S. dollars.
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 in the real estate industry. Equity securities
include common stock, shares or units of beneficial
interests of real estate investment trusts ("REITs"),
limited partnership interests in master limited
partnerships, rights or warrants to purchase common stock,
preferred stock and securities convertible into or
exchangeable for common stock.
The Fund will normally invest 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
19
<PAGE>
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 will 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 whether or
not they are listed on national securities exchanges.
Convertible Securities that are fixed income securities will
be 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 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.
The Balanced Fund will invest at least 80% of its net
assets in fixed income and equity securities, with at least
25% of its assets in fixed income senior securities.
Permissible investments for the Fund include: (i) corporate
bonds and debentures of U.S. or foreign issuers rated in the
highest four rating categories by an NRSRO or determined by
the Advisor to be of comparable quality at the time of
purchase; (ii) securities denominated in U.S. dollars or in
foreign currencies, issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or
instrumentalities or issued or guaranteed by foreign
governments, their political subdivisions, agencies or
instrumentalities; (iii) short-term commercial paper of U.S.
or foreign issuers rated in the highest two rating
categories by an NRSRO or determined by the Advisor to be of
comparable quality at the time of investment; (iv)
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) obligations denominated in U.S.
dollars or foreign currencies of supranational entities
rated in the highest three rating categories by an NRSRO;
(vi) mortgage-backed securities rated in the highest three
rating categories by an NRSRO; (vii) asset-backed securities
rated in the highest three rating categories by an NRSRO;
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<PAGE>
(viii) STRIPS and receipts; (ix) repurchase agreements
involving such securities; (x) loan participations, in which
the Fund will not invest more than 5% of its total assets;
(xi) guaranteed investment contracts ("GICs") and bank
investment contracts ("BICs") deemed by the Advisor to be of
investment grade; (xii) swaps; (xiii) municipal notes rated
in the highest two rating categories by an NRSRO or, if
unrated, determined by the Advisor to be of comparable
quality; and (xiv) municipal bonds rated in the highest
three rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality. The
Balanced Fund is not subject to maturity restrictions. The
Balanced Fund may invest up to 15% of its assets in fixed
income securities that are either denominated in foreign
currencies or issued by foreign issuers, provided that
assets invested in such securities will not constitute more
than 50% of the assets of the Balanced Fund invested in
fixed income securities.
The remainder of the Fund's assets will be invested in:
(i) common stocks; (ii) warrants to purchase common stocks;
(iii) debt securities convertible into common stocks; (iv)
preferred stocks convertible into common stocks; (v) U.S.
dollar denominated equity securities of foreign issuers
(including sponsored ADRs); (vi) foreign securities; and
(vii) equity options. The equity securities in which the
Fund will invest are listed on national securities exchanges
or actively traded in the over-the-counter market. The Fund
will invest, based on dividend paying characteristics and
growth potential, in equity securities of companies of all
sizes. There are no minimum rating criteria applicable to
convertible securities.
The Balanced Fund is also permitted to invest in options
and futures (for hedging purposes only), engage in
securities lending, acquire floating and variable rate
securities, enter into dollar roll transactions with
selected banks and broker-dealers and purchase securities on
a when-issued basis where the purchase is for investment in
the securities, not for leveraging, and subject to the
investment restrictions described above.
FIXED INCOME The Fixed Income Fund seeks a high level of total return
FUND relative to funds with like investment objectives, from
income and, to a lesser degree, capital appreciation by
investing in a portfolio consisting primarily of quality
intermediate- and long-term fixed income securities.
The Fixed Income Fund will invest as fully as feasible
(and at least 65% of its total assets) in the following
fixed income securities: (i) corporate bonds and debentures
rated in the highest four rating categories by an NRSRO or,
if unrated, determined by the Advisor to be of comparable
quality at the time of purchase; (ii) obligations issued or
guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities; (iii) short-
term commercial paper rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality at the time of
investment; (iv) obligations (certificates of deposit, time
deposits, and bankers' acceptances) of U.S. commercial
banks, U.S. savings and loan institutions, and
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<PAGE>
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 evidencing separately traded interest and principal
component parts of U.S. Government obligations ("Receipts");
(x) repurchase agreements involving such securities; (xi)
loan participations, in which the Fund will not invest more
than 5% of its total assets; (xii) GICs; (xiii) BICs; (xiv)
swaps; (xv) municipal notes rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality; and (xvi) municipal
bonds rated in the highest three rating categories by an
NRSRO or, if unrated, determined by the Advisor to be of
comparable quality.
There are no restrictions on the average maturity of the
Fund or on the maturity of any single instrument. Maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market factors.
The estimated dollar-weighted average portfolio maturity of
the Fund is approximately eight years.
Any remaining assets of the Fund may be invested in
variable and floating rate obligations, dollar rolls,
forward commitments, when-issued securities, and securities
of foreign issuers. In addition, the Fund may lend the
securities in which it is invested. The Fund may invest in
options and futures for hedging purposes only.
INTERMEDIATE The Intermediate Government Fixed Income Fund seeks a high
GOVERNMENT level of total return relative to funds with like investment
FIXED INCOME objectives, consistent with preservation of capital from
FUND income and, to a lesser degree, capital appreciation, by
investing in a portfolio consisting of short- and
intermediate-term U.S. Government securities.
The Intermediate Government Fixed Income Fund will invest
100% of its total assets in government securities, which
include obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or
instrumentalities. The Fund may invest up to 100% of its
assets in mortgage-backed securities.
Normally, the Fund will maintain an average weighted
maturity of three to ten years; under certain circumstances,
however, the average weighted maturity may fall below three
years. The Fund may invest in options and futures for
hedging purposes only.
TAX-EXEMPT The Tax-Exempt Fixed Income Fund seeks a high level of total
FIXED INCOME return, relative to funds with like investment objectives,
FUND consistent with preservation of capital, from income by
investing in a portfolio consisting primarily of securities
that are exempt from Federal income tax and not subject to
taxation as a preference item for purposes of the Federal
alternative minimum tax.
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<PAGE>
The Tax-Exempt Fixed Income Fund will invest as fully as
feasible (at least 65% of the value of its total assets) in
fixed income securities issued by or on behalf of the
states, territories and possessions of the United States and
the District of Columbia and their political subdivisions,
agencies and instrumentalities, rated in the highest four
rating categories by an NRSRO or, if unrated, determined by
the Advisor to be of comparable quality, and will invest at
least 80% of its net assets in comparably-rated fixed income
securities the interest on which is exempt from Federal
income tax and which are not subject to taxation as a
preference item for purposes of the Federal alternative
minimum tax.
The remainder of the Fund's assets may be invested in:
(i) short-term, tax-exempt commercial paper rated in the
highest two rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality at the
time of investment; (ii) municipal notes rated in the
highest two rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality; (iii)
fixed income options and futures; (iv) asset-backed
securities; (v) Receipts; (vi) securities issued or
guaranteed by the U.S. Government or its agencies; and (vii)
corporate bonds rated in one of the three highest categories
by an NRSRO.
There are no restrictions on the average maturity of the
Fund or the maturity of any single instrument. Maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market factors.
The Fund may invest in options and futures for hedging
purposes only.
INTERNATIONAL The International Fixed Income Fund, formerly the Global
FIXED INCOME Fixed Income Fund, seeks a high level of total return
FUND relative to funds with like investment objectives, measured
in U.S. dollar terms, from income and capital appreciation
by investing in a portfolio consisting of investment quality
fixed income securities denominated in foreign currencies.
The International Fixed Income Fund will invest as fully
as feasible (at least 65% of its total assets) in investment
quality fixed income securities of issuers in at least three
of the following countries: Austria, Australia, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, The Netherlands, New Zealand, Norway,
Spain, Sweden, Switzerland and the United Kingdom.
The Fund strives to take maximum advantage of financial
and economic developments and currency fluctuations. All
investments will be in high quality securities denominated
in various currencies, including the European Currency Unit.
Fixed income securities consist of: (i) corporate bonds
and debentures rated in the highest four rating categories
by an NRSRO or, if unrated, determined by the Advisor to be
of comparable quality at the time of purchase; (ii) short-
term commercial paper rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality at the time of
investment; (iii) securities issued or guaranteed by foreign
governments, their political subdivisions, agencies or
instrumentalities; (iv) obligations of supranational
entities; (v) repurchase agreements involving such
23
<PAGE>
securities; (vi) loan participations, in which the Fund will
not invest more than 5% of its total assets; and (vii)
swaps, fixed income options and futures.
Any remaining Fund assets will be invested in: (i)
securities denominated in U.S. dollars or foreign currencies
comparable in quality to the fixed income instruments
described above; (ii) obligations issued or guaranteed as to
principal and interest by the U.S. Government or its
agencies and instrumentalities; (iii) 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; (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. A portion of the Fund's total
assets normally will be 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 may invest in options and futures for hedging
purposes only.
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 or, if unrated,
determined by the Advisor to be of comparable quality at the
time of purchase; (ii) obligations issued or guaranteed as
to principal and interest by the U.S. Government, its
agencies or instrumentalities; (iii) short-term commercial
paper rated in the highest two rating categories by an NRSRO
or, if unrated, determined by the Advisor to be of
comparable quality at the time of purchase; (iv) 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
24
<PAGE>
categories by an NRSRO; (viii) asset-backed securities rated
in the highest three rating categories by an NRSRO; (ix)
Receipts; (x) repurchase agreements involving such
securities; (xi) swaps; (xii) municipal notes rated in the
highest two rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality; and
(xiii) municipal bonds rated in the highest three rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality. The Fund will also
invest in fixed income options and futures for hedging
purposes only.
The Fund may also invest in dollar roll transactions,
variable and floating rate obligations, forward commitments,
when-issued securities, and securities of foreign issuers.
In addition, the Fund may lend the securities in which it is
invested under certain conditions.
The dollar-weighted average maturity of the Fund will be
less than six years. The Advisor may shorten the average
maturity substantially, as a temporary defensive position,
in anticipation of a change in the interest rate
environment. 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 will be limited to
components with maturities of less than 397 days. Investing
in these securities entails certain risks, including that
interest components may be more volatile in value than
comparable maturity Treasury bills, as further described in
"Description of Permitted Investments and Risk Factors." The
Fund will invest primarily in U.S. Treasury Obligations
other than STRIPS and repurchase agreements.
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.
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<PAGE>
MONEY MARKET The Money Market Fund seeks to provide as high a level of
FUND current income as is consistent with the preservation of
capital and liquidity by investing exclusively in high
quality money market instruments.
The Money Market Fund invests exclusively in the
following: (i) U.S. Treasury Obligations; (ii) obligations
issued or guaranteed as to principal and interest by the
U.S. Government or its agencies and instrumentalities; (iii)
commercial paper of U.S. and foreign issuers rated in the
highest two short-term rating categories of an NRSRO at the
time of investment or, if unrated, determined by the Advisor
to be of comparable quality; (iv) obligations (certificates
of deposit, time deposits, and bankers' acceptances) of U.S.
commercial banks, U.S. savings and loan institutions, and
U.S. and London branches of foreign banks that have total
assets of $500 million or more as shown on their last
published financial statements at the time of investment;
(v) short-term corporate obligations of U.S. and foreign
issuers whose commercial paper the Fund may purchase; (vi)
repurchase agreements involving such obligations; (vii)
obligations of supranational entities; (viii) loan
participations; (ix) receipts evidencing separately traded
interest and principal component parts of U.S. Government
obligations; (x) standby commitments; and (xi) municipal
securities. The Fund may not invest more than 25% of its
total assets in obligations issued by foreign branches of
U.S. banks and London branches of foreign banks.
TAX-EXEMPT The Tax-Exempt Money Market Fund seeks to preserve principal
MONEY MARKET value and maintain a high degree of liquidity while
FUND providing current income exempt from Federal income tax and
not included as a preference item under the Federal
alternative minimum tax.
The Tax-Exempt Money Market Fund invests at least 80% of
its total assets in eligible securities issued by or on
behalf of the states, territories and possessions of the
United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the
interest of which, in the opinion of bond counsel for the
issuer, is exempt from Federal income tax (collectively,
"Municipal Securities"). In pursuing this policy, the Fund
may purchase municipal bonds, municipal notes, tax-exempt
commercial paper rated in the highest two short-term rating
categories by an NRSRO in accordance with SEC regulations at
the time of investment or, if unrated, determined by the
Advisor to be of comparable quality, and shares of tax-
exempt money market funds.
The Advisor has discretion to invest up to 20% of the
Fund's assets in the aggregate in taxable money market
instruments (including repurchase agreements) and securities
subject to the Federal alternative minimum tax.
GENERAL
INVESTMENT
POLICIES _____________________________________________________________________
THE EQUITY AND Each Fund will invest in equity securities only if they are
BALANCED FUNDS listed on national securities exchanges or actively traded
in the over-the-counter market. Each Fund may invest in
convertible securities whether or not they are listed on
national securities exchanges.
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<PAGE>
Each Fund will invest not more than 15% of its total
assets in restricted securities. Each Fund will not invest
more than 15% of its net assets in illiquid securities.
A Fund may enter into futures contract transactions only
to the extent that obligations under such contracts
represent less than 20% of the Fund's assets. The aggregate
value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a
Fund.
THE FIXED Each Fund may purchase mortgage-backed securities issued or
INCOME AND guaranteed as to payment of principal and interest by the
BALANCED FUNDS U.S. Government, its agencies or instrumentalities. 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.
The Fixed Income Fund, Intermediate Government Fixed
Income Fund, Limited Volatility Fixed Income Fund and
Balanced Fund may enter into dollar roll transactions with
selected banks and broker-dealers.
The quality standards of debt securities and other
obligations as described for the Funds must be satisfied at
the time an investment is made. In the event that an
investment held by a Fund is assigned a lower rating or
ceases to be rated, the Advisor will promptly reassess
whether such security presents suitable credit risks and
whether the Fund should continue to hold the security or
obligation in its portfolio. If a portfolio security or
obligation no longer presents suitable credit risks or is in
default, the Fund will dispose of the security or obligation
as soon as reasonably practicable unless the Trustees of the
Trust determine that to do so is not in the best interest of
the Fund.
Each Fund will invest not more than 15% of its total
assets in restricted securities. Each Fund will not invest
more than 15% of its net assets in illiquid securities.
A Fund may enter into futures contract transactions only
to the extent that obligations under such contracts
represent less than 20% of the Fund's assets. The aggregate
value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a
Fund.
THE MONEY Each Money Market Fund intends to comply with regulations of
MARKET FUNDS the SEC applicable to funds using the amortized cost method
for calculating net asset value found in Rule 2a-7 under the
1940 Act. These regulations impose certain quality, maturity
and diversification restraints on investments by the Funds.
Under these regulations, the Funds will invest only in U.S.
dollar denominated securities, will maintain an average
maturity on a dollar-weighted basis of 90 days or less, and
will acquire only "eligible securities" that present minimal
credit risks and have a maturity of 397 days or less. These
constraints effectively preclude the Funds from investing in
securities with interest rates as high as those of
securities that may be acquired by Funds that are permitted
to buy lower rated or longer
27
<PAGE>
term securities. For a further discussion of these rules,
see the "Description of Permitted Investments and Risk
Factors--Restraints on Investments by Money Market Funds".
Each Money Market Fund will not invest more than 10% of
its net assets in illiquid securities.
ALL FUNDS All Funds may invest in variable and floating rate
obligations and may purchase securities on a when-issued
basis. A Fund (except the Money Market Funds) may enter into
futures contracts and options on futures for bona fide
hedging purposes only.
In addition, each Fund reserves the right to engage in
securities lending.
There will be no limit to the percentage of portfolio
securities that a Fund may purchase subject to a standby
commitment, but the amount paid directly or indirectly for a
standby commitment held by the Fund will not exceed 1/2 of
1% of the value of the total assets of the Fund.
For temporary defensive purposes, when the Advisor
determines that market conditions warrant, each of the
Equity Funds, Fixed Income Funds and Balanced Fund may
invest up to 100% of its assets in money market instruments,
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 have an adequate capacity to pay
principal and interest but may have speculative
characteristics as well.
For a description of ratings, see the Statement of
Additional Information.
CERTAIN RISK FACTORS ___________________________________________________________
The investment policies of each Fund entail certain risks
and considerations of which an investor should be aware.
The Real Estate Because the Real Estate Fund invests primarily in the
Industry securities of companies principally engaged in the real
estate industry, its 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 will 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 fluctuate, and a shareholder's investment
when redeemed may be worth more or less than its original
cost.
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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.
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 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 Investment Company Act of 1940 (the
"1940 Act"). Rising interest rates may cause the value of
the debt securities in which a Fund will invest to fall.
Conversely, falling interest rates may cause their value to
rise. Changes in the value of portfolio securities will not
necessarily affect cash income derived from these securities
but will effect a Fund's net asset value.
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 a Fund to fluctuate.
Fixed Income There is a risk that the current interest rate on floating
Securities 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 The International Equity, TransEurope, Latin America Equity,
Securities Asian Tigers and International Fixed Income Funds will, and
certain other Funds may, invest in securities of foreign
issuers. Securities of foreign issuers are subject to
certain risks not typically associated with domestic
securities, including, among other risks, changes in
currency rates and in exchange control regulations, costs in
connection with conversions between various currencies,
limited publicly available information regarding foreign
issuers, lack of uniformity in accounting, auditing and
financial standards and requirements, greater securities
market volatility, less liquidity of securities, less
government supervision and regulations of securities
markets, withholding taxes and changes in taxes on income on
securities, and possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits.
29
<PAGE>
Certain Latin American countries are among the largest
debtors to commercial banks and foreign governments. Trading
in Sovereign Debt involves a high degree of risk, since the
governmental entity that controls the repayment of Sovereign
Debt may not be willing or able to repay the principal
and/or interest of such debt obligations when it becomes
due, due to factors such as debt service burden, political
constraints, cash flow problems and other national economic
factors. As a result, Latin American governments may default
on their Sovereign Debt, which may require holders of such
Sovereign Debt to participate in debt rescheduling or
additional lending to defaulting governments. There is no
bankruptcy proceeding by which defaulted Sovereign Debt may
be collected in whole or in part.
Investments in securities of foreign issuers are
frequently denominated in foreign currencies and the value
of 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 Markets. This may limit a
Fund's ability to effectively hedge its investments in such
markets.
Non- A non-diversified Fund for purposes of the Investment
Diversification Company Act of 1940, as amended (the "1940 Act"), means that
it is not limited by the 1940 Act in the proportion of its
assets that it may invest in the obligations of a single
issuer. The Fund may be more susceptible to any single
economic, political or regulatory occurrence than a
diversified investment company. The investment of a large
percentage of the Fund's assets in the securities of a small
number of issuers may cause the Fund's share price to
fluctuate more than that of a diversified investment
company.
Concentration The Real Estate Fund will concentrate its investments in
securities of companies primarily engaged in the real estate
industry. As a result, 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 investments in this manner.
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
30
<PAGE>
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.
No Money Market Fund may:
1. Purchase securities of any issuer if, as a result, the
Fund would violate the diversification provisions under
Rule 2a-7 of 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 will apply at the time of the
purchase of a security. Additional investment limitations are
set forth in the Statement of Additional Information.
THE ADVISOR ____________________________________________________________________
The Trust and ABN AMRO Asset Management (USA) Inc. (the
"Advisor") (formerly LaSalle Street Capital Management, Ltd.),
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.
................................................................................
[SYMBOL APPEARS HERE] INVESTMENT ADVISOR
A Fund's investment advisor manages the investment activities and is
responsible for the performance of the Fund. The advisor conducts investment
research, executes investment strategies based on an assessment of economic and
market conditions, and determines which securities to buy, hold or sell.
................................................................................
31
<PAGE>
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 this voluntary fee waiver at any time.
For the fiscal year ended December 31, 1996, the Advisor
received an advisory fee of .80% for the Value Fund, .80%
for the Growth Fund, .80% for the Small Cap Fund, 1.00% for
the International Equity Fund, 1.00% for the Asian Tigers
Fund, 1.00% for the Latin America Equity Fund, 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, .19% 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.
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, 1996, total assets under
management by the Advisor were approximately $3.4 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 and Balanced Funds
since their inception. Mr. Cerney has been associated with
the Advisor and its predecessor since April, 1990.
Keith Dibble, Senior Vice President of the Advisor, has
served as portfolio manager for the Growth Fund since its
inception. Mr. Dibble has been associated with the Advisor
and its predecessor since 1987.
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. 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.
32
<PAGE>
Marc G. Borghans, Vice President of the Advisor, has
served as co-manager of the Small Cap Fund since March, 1997
and as manager since July, 1997. Mr. Borghans has been
associated with the Advisor or its affiliates since 1988.
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 August 1996. He served as a Vice President,
Portfolio Manager with Norwest Investment Management and
Trust and a predecessor firm from May, 1985 to July, 1996.
Charles H. Self, III, Senior Vice President of the
Advisor, has served as portfolio manager for the Fixed
Income Fund since October, 1995. He served as the portfolio
manager for the Tax-Exempt Fixed Income Fund since
September, 1996 to June, 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. He served as a
Vice President with CSI Asset Management from December, 1988
to July, 1995.
Phillip P. Mierzwa, Assistant Vice President of the
Advisor, has served as co-manager of the Tax-Exempt Fixed
Income Fund since April, 1997 and manager of the Tax-Exempt
Money Market Fund since [ ]. He has been associated with
the Advisor or its affiliates since February, 1990.
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. He served as Manager,
Fixed Income Division of First Citizens Bank from November,
1989 to March, 1997.
The Funds may execute brokerage or other agency
transactions through an affiliate of the Advisor.
THE SUB-ADVISOR ________________________________________________________________
ABN AMRO-NSM International Funds Management B.V. (the "Sub-
Advisor"), 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
with the Advisor. The Sub-Advisor is a holding company
affiliate of the Advisor. Under the Sub-Advisory Agreement,
the Sub-Advisor manages the Funds, selects investments and
places all orders for purchases and sales of the Funds'
securities, subject to the general supervision of the
Trustees of the Trust and the Advisor. The Sub-Advisor has
approximately $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.
33
<PAGE>
Alex Ng has served as portfolio manager for the Asian
Tigers Fund since July, 1995. Mr. Ng has been associated
with the Sub-Advisor and/or its parent since 1988. Mr. Ng
also serves as the Far East Director of Asset Management for
a Hong Kong-based affiliate of the Advisor.
Felix Lanters, portfolio manager for the TransEurope
Fund, has been associated with the Sub-Advisor and/or its
parent since 1987.
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, AANIFM is entitled to receive
from the Advisor a fee, which is computed daily and paid
quarterly, at the annual rate of .50% of the average daily
net assets of each of the International Equity Fund,
TransEurope Fund, Latin America Equity Fund and Asian Tigers
Fund, and .40% of the average daily net assets of the
International Fixed Income Fund. The Sub-Advisor received
fees from the Advisor of .50% for the Asian Tigers Fund,
.50% for the Latin America Equity Fund and International
Equity Fund and .40% for the International Fixed Income Fund
for the fiscal year ended December 31, 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 the
Funds.
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. (the "Distributor"),
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 financial 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
1996 Annual Report to Shareholders, and is available upon
request and without charge by calling 1-800-443-4725.
The portfolio turnover rates for the Small Cap, Balanced,
Fixed Income, and Intermediate Government Fixed Income Funds
for the fiscal year ended December 31, 1996, were 158%, 104%,
194%, and 179%, respectively. A high turnover rate will
result in higher transaction costs and may result in
additional tax consequences for shareholders.
The performance of Common Shares of each Fund will
normally be higher than that of Investor Shares because of
the additional distribution and administrative 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
Statement of Additional Information.
Tax Status of the Funds
Each Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other Funds. Each Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code . As long as each Fund qualifies for
this special tax treatment, it will be relieved of Federal income
...............................................................................
[SYMBOL APPEARS HERE] TAXES
You must pay taxes on your Fund's earnings, whether you take your payments in
cash or additional shares.
...............................................................................
36
<PAGE>
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.
...............................................................................
[SYMBOL APPEARS HERE] DISTRIBUTIONS
The Fund distributes income dividends and capital gains. Income dividends
represent the earnings from the Fund's investments; capital gains distributions
occur when investments in the Fund are sold for more than the original purchase
price.
................................................................................
Tax Status of Distributions
Each Fund will distribute all of its net investment income (including, for this
purpose, net short-term capital gain) to shareholders. Dividends 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.
Each 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 all of its
net investment income to its Shareholders, a Fund may have to sell portfolio
securities to distribute such imputed income, which may occur at a time when the
Advisor would not have chosen to sell such securities and which may result in a
taxable gain or loss.
Income received on U.S. obligations is exempt from tax at the state level
when received directly by a Fund and may be exempt, depending on the state, when
received by 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 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,
37
<PAGE>
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 conditions are met, qualify for the dividends received
deduction for corporate shareholders. Distributions of net
capital gains from any Fund do not qualify for the dividends
received deduction.
Dividends paid by the Fixed Income Funds will not qualify
for the dividends received deduction for corporate
shareholders.
Each of the Tax-Exempt Fixed Income Fund and Tax-Exempt
Money Market Fund intends to qualify to pay "exempt interest
dividends" by satisfying the Code's requirement that at the
close of each quarter of its taxable year at least 50
percent of the value of its total assets consists of
obligations, the interest on which is exempt from federal
income tax. So long as this and certain other requirements
are met, dividends consisting of such Funds' net tax-exempt
interest income will be exempt interest dividends, which are
exempt from federal income tax in the hands of the
shareholders of the Fund, but may have alternative minimum
tax consequences. See the Statement of Additional
Information.
Current federal income tax laws limit the types and
volume of bonds qualifying for the federal income tax
exemption of interest, which may have an effect on the
ability of the Tax-Exempt Fixed Income Fund and the Tax-
Exempt Money Market Fund to purchase sufficient amounts of
tax-exempt securities to satisfy the Code's requirements for
the payment of "exempt interest dividends." Accordingly,
municipal funds may not be an appropriate investment for
persons (including corporations and other business entities)
who are "substantial users" (or persons related to
"substantial users") of facilities financed by private
activity bonds or certain industrial development bonds.
"Substantial user" is defined generally as including a "non-
exempt person" who regularly uses in a trade or business a
part of a facility financed from the proceeds of industrial
development bonds. Current federal tax law also makes
interest on certain tax-exempt bonds a tax preference item
for purposes of the individual and corporate alternative
minimum tax.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Tax-Exempt Fixed Income Fund
and the Tax-Exempt Money Market Fund is generally not
deductible for federal income tax purposes.
Each sale, exchange, or redemption of Fund shares is a
taxable event to you.
38
<PAGE>
................................................................................
[LOGO OF REMBRANDT APPEARS HERE]
BUY, EXCHANGE AND
SELL REQUESTS ARE IN
"GOOD ORDER" WHEN:
(R)
. The account number and Fund name are shown
. The amount of the transaction is specified in dollars or shares
. Signatures of all owners appear exactly as they are registered on the account
. Any required signature guarantees (if applicable) are included
. Other supporting legal documents (as necessary) are present
................................................................................
................................................................................
ADDITIONAL INFORMATION ABOUT DOING BUSINESS WITH US ____________________________
Business Days You may buy, redeem or exchange shares on days on which the
New York Stock Exchange is open for business (a "Business
Day"). However, shares of a Money Market Fund cannot be
purchased by Federal Reserve wire on Federal holidays
restricting wire transfers.
A purchase order for Common Shares of the Equity, Balanced
and Fixed Income Funds will be effective as of the day
received by the Transfer Agent if the Transfer Agent receives
the order before net asset value is calculated. However, an
order may be canceled if the Custodian does not receive
federal funds before 4:00 p.m., Eastern time on the next
Business Day, and the investor could be liable for any fees or
expenses incurred by the Trust. The purchase price of Common
Shares of the Fund is the net asset value next determined
after a purchase order is effective.
A purchase order for Common Shares of the Money Market
Funds will be effective as of the day received by the Transfer
Agent and eligible to receive dividends declared the same day
if the Transfer Agent receives the order and the Custodian
receives Federal funds payment before 1:00 p.m., Eastern time
on such day. Otherwise, the purchase order will be effective
the next Business Day. Purchase orders for the Government
Money Market Fund and the Money Market Fund submitted to the
Transfer Agent before 5:00 p.m., Eastern time, by accounts for
which ABN AMRO North America, Inc. or 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. Your Intermediary may
have earlier cutoff times for share transactions. If you
purchased shares through an Intermediary, please contact your
Intermediary for more information about its order
requirements.
Minimum The minimum initial investment is $2,000; however, the
Investment minimum investment may be waived at the Distributor's
discretion. All subsequent purchases 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 for Common Shares when the Trust or
the Transfer Agent determines that it is not in the best
interest of the
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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, at net
Balance asset value, your shares 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 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 Statement of
Additional Information for examples of when the 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 purchase price of a share of the Funds is the net asset
value per share next computed after the order is received
and accepted by the Trust. The selling price of a share of
the Funds is the net asset value per share next determined
after receipt of the request for redemption in good order.
The net asset value per share of the Money Market Funds is
calculated as of 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 regular close of business of
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 Statement of Additional Information. 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 and October 20, 1992.
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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 Fund,
International Equity Fund, TransEurope Fund, Asian Tigers
Fund and Balanced Fund. All consideration received by the
Trust for shares of any Fund and all assets of such Fund
belong to that fund, and would be subject to liabilities
related thereto. The Trust reserves the right to create and
issue shares of additional funds. As of December 31, 1996,
the Limited Volatility Fixed Income Fund and TransEurope
Fund had not commenced operations. The Latin America Equity
Fund is not available for purchase in Investor Shares. Each
Fund offers 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.
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 shareholder
services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. Shareholders of each Fund or class will vote
separately on matters relating solely to that Fund or class.
As a Massachusetts business trust, the Trust is not required
to hold annual 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
Inquiries Shareholder inquiries should be directed to the
Administrator, Westborough, Massachusetts, 01581, at 1-800-
443-4725.
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Dividends Substantially all of the net investment income (not
including capital gains) of the Value, Growth, Small Cap,
Balanced, Fixed Income, Intermediate Government Fixed
Income, Tax-Exempt Fixed Income, Real Estate and Limited
Volatility Fixed Income Funds is distributed in the form of
monthly dividends, and that of the International Equity,
Latin America Equity, TransEurope, Asian Tigers and
International Fixed Income Funds is distributed in the form
of dividends at least annually. Shareholders who own shares
at the close of business on the record date will be entitled
to receive the dividend. Currently, capital gains of the
Funds, if any, will be distributed at least annually.
The net investment income (exclusive of capital gains) of
each of the Money Market Funds is distributed in the form of
dividends, which are declared daily and distributed monthly
to shareholders. Currently, capital gains of the Funds, if
any, will be distributed at least annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to the Transfer Agent at least 15 days prior
to the distribution.
Dividends and distributions of the Funds are paid on a
per-share basis. The value of each share will be reduced by
the amount of the payment. If shares are purchased shortly
before the record date for a dividend or the distribution of
capital gains, a shareholder will pay the full price for the
shares and receive some portion of the price back as a
taxable dividend or distribution.
The Trust believes that as of April 1, 1998, banking
affiliates of ABN AMRO Capital Markets Holding, Inc. owned
of record or beneficially, substantially all of the Common
Shares of the Value, Growth, Small Cap, 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
banking affiliates may be deemed to "control" these Funds
within the meaning of the 1940 Act.
Counsel and Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Auditors serves as independent auditors of the
--------------------
Trust.
Custodians CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, acts as Custodian of
the Trust. Morgan Stanley Trust Company, serves as foreign
Sub-Custodian of the Trust. The Custodians hold cash,
securities and other assets of the Trust as required by the
1940 Act.
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DESCRIPTION OF
PERMITTED
INVESTMENTS
AND RISK FACTORS _______________________________________________________________
The following is a description of certain of the permitted
investments and risk factors for the Funds:
American ADRs are securities, typically issued by a U.S. financial
Depositary institution (a "depositary"), that evidence ownership
Receipts interests in a security or a pool of securities issued by a
("ADRs") foreign issuer and deposited with the depositary. ADRs may
be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by
the issuer of the security underlying the receipt and a
depositary, whereas an unsponsored facility may be
established by a depositary without participation by the
issuer of the underlying security. Holders of unsponsored
depositary receipts generally bear all the costs of the
unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the
deposited security or to pass through, to the holders of the
receipts, voting rights with respect to the deposited
securities.
Asset-Backed Asset-backed securities consist of securities secured by
Securities company receivables, truck and auto loans, leases and credit
(Non-mortgage) card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which
are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity,
such as a trust, organized solely for purpose of owning such
assets and issuing such debt. A Fund may invest in other
asset-backed securities that may be created in the future if
the Advisor determines they are suitable.
Bankers' Bankers' acceptances are bills of exchange or time drafts
Acceptances drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the shipment
and storage of goods. Maturities are generally six months or
less.
Bank Investment BICs are contracts issued by U.S. banks and savings and loan
Contracts ("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 will be considered
illiquid.
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Commercial Commercial paper is a term used to describe unsecured short-
Paper term promissory notes issued by banks, municipalities,
corporations and other entities. Maturities on these issues
vary from a few to 270 days.
Convertible Convertible securities are corporate securities that are
Securities exchangeable for a set number of shares of another security
at a prestated price. Convertible securities have
characteristics similar to both fixed income and equity
securities. Because of the conversion feature, the market
value of convertible securities tends to move together with
the market value of the underlying stock. The value of
convertible securities is also affected by prevailing
interest rates, the credit quality of the issuer, and any
call provisions.
Dollar Rolls Dollar roll transactions consist of the sale of mortgage-
backed securities to a bank or broker-dealer, together with
a commitment to purchase similar, but not necessarily
identical, securities at a future date. Any difference
between the sale price and the purchase price is netted
against the interest income foregone on the securities to
arrive at an implied borrowing (reverse repurchase) rate.
Alternatively, the sale and purchase transactions which
constitute the dollar roll can be executed at the same
price, with 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 are common stocks and common stock
Securities equivalents consisting of securities convertible into common
stocks and securities having common stock characteristics
(i.e., rights and warrants to purchase common stocks,
sponsored and unsponsored ADRs, REITs, and equity securities
of closed-end investment companies. Investments in common
stocks are subject to market risks which may cause their
prices to fluctuate over time. Changes in the value of
portfolio securities will not necessarily affect cash income
derived from these securities but will not affect a Fund's
net asset value.
Fixed Income The market value of fixed income investments will change in
Securities response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities
with longer maturities tend to produce higher yields, the
prices of securities with longer maturities are also subject
to greater market fluctuations as a result of changes in
interest rates. Changes by NRSROs in the rating of any fixed
income security and in the ability of an issuer to make
payments of interest and principal also affect the value of
these investments.
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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
U.S. Treasury securities known as "initial margin."
Subsequent payments, called "variation margin," to and from
the broker, are made on a daily basis as the value of the
futures position varies (a process known as "marking to
market"). The margin is in the nature of a performance bond
or good-faith deposit on a futures contract.
In order to avoid leveraging and related risks, when a
Fund purchases futures contracts, it will collateralize its
position by depositing an amount of liquid securities, cash
or cash equivalents, equal to the market value of the
futures positions held, less margin
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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 by a Fund 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.
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.
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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. During periods of
declining interest rates, prepayment of mortgages underlying
mortgage-backed securities can be expected to accelerate.
Prepayment of mortgages which underlie securities purchased
at a premium often results in capital losses, while
prepayment of mortgages purchased at a discount often
results in capital gains. Because of these unpredictable
prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities
that are issued or guaranteed by a U.S. Government agency
representing an interest in a pool of mortgage loans. The
primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. GNMA, Fannie Mae
and FHLMC guarantee timely distributions of interest to
certificate holders. GNMA and Fannie Mae also guarantee
timely distributions of scheduled principal. Fannie Mae and
FHLMC obligations are not backed by the full faith and
credit of the U.S. Government as GNMA certificates are, but
Fannie Mae and FHLMC securities are supported by the
instrumentalities' right to borrow from the U.S. Treasury.
Private Pass-Through Securities: These are mortgage-
backed securities issued by a non-governmental entity, such
as a trust or corporation. These securities include
collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). While they are
generally structured with one or more types of credit
enhancement, private pass-through securities typically lack
a guarantee by an entity having the credit status of a
governmental agency or instrumentality.
In a CMO, series of bonds or certificates are usually
issued in multiple classes. Principal and interest paid on
the underlying mortgage assets may be allocated among the
several classes of a series of a CMO in a variety of ways.
Principal payments on the underlying mortgage assets may
cause CMOs to be retired substantially earlier then their
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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
Securities and Exchange Commission that OTC options are
illiquid.
A Fund may purchase and write put and call options on
foreign currencies (traded on U.S. and foreign exchanges or
over-the-counter markets) to manage its exposure to exchange
rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an
equal amount of the underlying foreign currency. With
respect to put options on foreign currency written by a
Fund, the Fund will establish
49
<PAGE>
a segregated account with its custodian bank consisting of
cash, cash equivalents or liquid securities in an amount
equal to the amount the Fund would be required to pay upon
exercise of the put.
A Fund may purchase and write put and call options on
indices and enter into related closing transactions. Put and
call options on indices are similar to options on securities
except that options on an index give the holder the right to
receive, upon exercise of the option, an amount of cash if
the closing level of the underlying index is greater than
(or less than, in the case of puts) the exercise price of
the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise
price of the option, expressed in dollars multiplied by a
specified number. Thus, unlike options on individual
securities, all settlements are in cash, and gain or loss
depends on price movements in the particular market
represented by the index generally, rather than the price
movements in individual securities. All options written on
indices must be covered. When a Fund writes an option on an
index, it will establish a segregated account containing
cash or cash equivalents 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.
Risk Factors. Risks associated with options transactions
include: (1) the success of a hedging strategy may depend on
an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation
between the movement in prices of options and the securities
underlying them; (3) there may not be a liquid secondary
market for options; and (4) while a Fund will receive a
premium when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security. A Fund may choose to terminate an
option position by entering into a closing transaction. The
ability of a Fund to enter into closing transactions depends
upon the existence of a liquid secondary market for such
transactions.
Receipts Receipts are interests in separately traded interest and
principal component parts of U.S. Treasury obligations that
are issued by banks and brokerage firms and are created by
depositing U.S. Treasury obligations into a special account
at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners
of the certificates or receipts. The custodian arranges for
the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts are sold as
zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or
principal. This discount is amortized over the life of the
security, and such amortization will constitute the income
earned on the security for both accounting and tax purposes.
Because of these features, receipts may be subject to
greater price volatility than interest paying U.S. Treasury
obligations.
50
<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 regulations adopted by the SEC.
Money Market Under these regulations, money market funds may acquire only
Funds obligations that present minimal credit risks and that are
"eligible securities," which means they are (i) rated, at
the time of investment, by at least two NRSROs (one if it is
the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be
of comparable quality (a "first tier security"), or (ii)
rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated,
determined to be of comparable quality ("second tier
security"). A security is not considered to be unrated if
its issuer has outstanding obligations of comparable
priority and security that have a short-term rating. The
Advisor will determine that an obligation presents minimal
credit risks or that unrated instruments are of comparable
quality in accordance with guidelines established by the
Trustees. In addition, in the case of taxable money market
funds, investments in second tier securities are subject to
the further constraints that (i) no more than 5% of a Fund's
assets may be invested in such securities in the aggregate,
and (ii) any investment in such securities of one issuer is
limited to the greater of 1% of the Fund's total assets or
$1 million. A taxable money market fund may hold up to 25%
its assets in first tier securities of a single issuer for
three Business Days.
51
<PAGE>
Restricted Restricted securities are securities that may not be sold
Securities freely to the public absent registration under the
Securities Act of 1933 or an exemption from registration.
Rights Rights are instruments giving shareholders the right to
purchase shares of newly issued common stock below the
public offering price before they are offered to the public.
Securities In order to generate additional income, a Fund may lend the
Lending securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by
collateral consisting of cash, securities of the U.S.
Government or its agencies equal at all times to 100% of the
market value plus accrued interest of the loaned securities.
Collateral is marked to market daily. A Fund continues to
receive interest on the loaned securities while
simultaneously earning interest on the investment of cash
collateral in U.S. Government securities. There may be risks
of delay in recovery of the securities or even loss of
rights in the collateral should the borrower of the
securities fail financially.
Securities of There are certain risks connected with investing in foreign
Foreign Issuers securities. These include risks of adverse political and
economic developments (including possible governmental
seizure or nationalization of assets), the possible
imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less
information on such securities and their issuers available
to the public, the difficulty of obtaining or enforcing
court judgments abroad, restrictions on foreign investments
in other jurisdictions, difficulties in effecting
repatriation of capital invested abroad, and difficulties in
transaction settlements and the effect of delay on
shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable
U.S. securities. The value of the Fund's investments
denominated in foreign currencies will depend on the
relative strengths of those currencies and the U.S. dollar,
and the Fund may be affected favorably or unfavorably by
changes in the exchange rates or exchange control
regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect
the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income
and gains, if any, to be distributed to shareholders by the
Fund.
Standby Securities subject to standby commitments or puts permit the
Commitments holder thereof to sell the securities at a fixed price prior
and Puts to maturity. Securities subject to a standby commitment or
put may be sold at any time at the current market price.
However, unless the standby commitment or put was an
integral part of the security as originally issued, it may
not be marketable or assignable; therefore, the standby
commitment or put would only have value to the Fund owning
the security to which it relates. In certain cases, a
premium may be paid for a standby commitment or put, which
premium will have the effect of reducing the yield otherwise
payable on the underlying security.
Swaps, Caps, Interest rate swaps, mortgage swaps, currency swaps and
Floors and other types of swap agreements such as caps, floors and
Collars collars are designed to permit the purchaser to preserve a
return or spread on a particular investment or portion of
its portfolio, and to protect against any
52
<PAGE>
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
Treasury (e.g., Federal Farm Credit Bank securities), while
still others are supported only by the credit of the
instrumentality (e.g., Fannie Mae securities). Guarantees of
principal by agencies or instrumentalities of the U.S.
Government may be a guarantee of payment at the maturity of
the obligation so that in the event of a default prior to
maturity there might not be a market and thus no means of
realizing on the obligation prior to maturity. Guarantees as
to the timely payment of principal and interest do not
extend to the value or yield of these securities nor to the
value of the Fund's shares.
U.S. Treasury U.S. Treasury obligations consist of bills, notes and bonds
Obligations issued by the U.S. Treasury.
Variable and Certain obligations may carry variable or floating rates of
Floating Rate interest, and may involve conditional or unconditional
Instruments demand features. Such instruments bear interest at rates
which are not fixed, but which vary with changes in
specified market rates or indices. The interest rates on
these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current
interest rate on such obligations may not accurately reflect
existing market interest rates.
Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy shares of a company at a given price
during a specified period.
When-Issued and When-issued or delayed delivery basis transactions involve
Delayed the purchase of an instrument with payment and delivery
Delivery taking place in the future. Delivery of and payment for
Securities these securities may occur a month or more after the date of
the purchase commitment. A Fund
53
<PAGE>
will maintain with the Custodian a separate account with
liquid securities, cash or cash equivalents in an amount at
least equal to these commitments. The interest rate realized
on these securities is fixed as of the purchase date and no
interest accrues to the Fund before settlement. These
securities are subject to market fluctuations due to changes
in market 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.
54
<PAGE>
REMBRANDT FUNDS (R)
INVESTOR SHARES
APRIL 30, 1998
- --------------------------------------------------------------------------------
Equity Funds Fixed Income Funds
. VALUE FUND . FIXED INCOME FUND
. GROWTH FUND . INTERMEDIATE GOVERNMENT FIXED INCOME FUND
. SMALL CAP FUND . TAX-EXEMPT FIXED INCOME FUND
. INTERNATIONAL EQUITY FUND . INTERNATIONAL FIXED INCOME FUND
. TRANSEUROPE FUND . LIMITED VOLATILITY FIXED INCOME FUND
. ASIAN TIGERS FUND Money Market Funds
. LATIN AMERICA EQUITY FUND . TREASURY MONEY MARKET FUND
. REAL ESTATE FUND . GOVERNMENT MONEY MARKET FUND
. MONEY MARKET FUND
Balanced Fund . TAX-EXEMPT MONEY MARKET 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 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 Statement of
Additional Information is incorporated into this Prospectus by reference.
Investor Shares are offered to individuals and institutional investors through
financial intermediaries which have established a dealer agreement with the
Distributor. Investors in the Investor Shares are referred to hereinafter as
"Shareholders."
AN INVESTMENT IN ANY OF THE TRUST'S MONEY MARKET FUNDS IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT, AND THERE CAN BE NO ASSURANCE THAT ANY MONEY
MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------------------------------------------------------------
THE TRUST'S SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK. 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 Funds
before investing. Brief descriptions are also provided throughout the
Prospectus to better explain certain key points. To find these helpful guides,
look for this symbol. [SYMBOL APPEARS HERE]
FUND HIGHLIGHTS ________________________________________________________________
The following summary provides basic information about the Investor Shares of
the following Funds: Value Fund, Growth Fund, 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 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 Statement of Additional Information.
................................................................................
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....................................... 27
Certain Risk Factors.............................................. 29
Investment Limitations............................................ 31
The Advisor....................................................... 32
The Sub-Advisor................................................... 34
The Administrator................................................. 35
The Transfer Agent................................................ 35
Distribution and Shareholder Servicing............................ 35
Performance...................................................... 36
Taxes............................................................ 38
Additional Information About Doing Business with Us.............. 39
General Information.............................................. 42
Description of Permitted Investments and Risk Factors............ 44
</TABLE>
................................................................................
INVESTMENT OBJECTIVES
AND POLICIES
Below are the investment objectives and some basic investment
policies of each Fund. For more information, see "Investment
Objectives and Policies," "General Investment Policies" and
"Description of Permitted Investments and Risk Factors."
EQUITY AND The Growth Fund and Small Cap Fund both seek a high level
BALANCED FUNDS of total return primarily through capital appreciation.
The Value Fund, International Equity Fund and TransEurope
Fund all seek a high level of total return through capital
appreciation and current income.
The 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, derived from
investing in a portfolio comprised of fixed income and equity
securities.
2
<PAGE>
FIXED INCOME The Fixed Income Fund seeks a high level of total return
FUNDS relative to funds with like investment objectives from
income and, to a lesser degree, capital appreciation derived
from investing in a portfolio consisting primarily of
quality intermediate- and long-term fixed income securities.
The Intermediate Government Fixed Income Fund seeks a
high level of total return relative to funds with like
investment objectives, consistent with preservation of
capital, from income and, to a lesser degree, capital
appreciation, derived from investing in a portfolio
consisting of primarily short- and intermediate-term U.S.
Government securities.
The Tax-Exempt Fixed Income Fund seeks a high level of
total return, relative to funds with like investment
objectives, consistent with preservation of capital, from
income derived from investing in a portfolio consisting
primarily of securities that are exempt from Federal income
tax and not subject to taxation as a preference item for
purposes of the Federal alternative minimum tax.
The International Fixed Income Fund seeks a high level of
total return, relative to funds with like objectives,
measured in U.S. dollar terms, from income and capital
appreciation derived from investing in a portfolio
consisting of quality fixed income securities denominated in
foreign currencies.
The Limited Volatility Fixed Income Fund seeks a high
level of current income, consistent with relative stability
of principal, derived from investing in a portfolio
consisting primarily of short- and intermediate-term fixed
income securities.
MONEY MARKET The Treasury Money Market Fund seeks to preserve principal
FUNDS value and maintain a high degree of liquidity while
providing current income.
The Government Money Market Fund and the Money Market
Fund seek to provide as high a level of current income as is
consistent with preservation of capital and liquidity.
The Tax-Exempt Money Market Fund seeks to preserve
principal value and maintain a high degree of liquidity
while providing current income exempt from Federal income
taxes.
UNDERSTANDING Each Fund invests in different securities. Values of equity
RISK securities may be affected by the financial markets as well
as by developments impacting specific issuers. Values of
fixed income securities tend to vary inversely with interest
rates and may be affected by other market and economic
factors as well. The International Equity, TransEurope,
Asian Tigers, International Fixed Income, and Latin America
Equity Funds will, and certain other Funds may invest in
securities of foreign issuers. Securities of foreign issuers
are subject to certain risks not typically associated with
domestic securities, including, among other risks, changes
in currency rates and in exchange control regulations, costs
in connection with conversions between various currencies,
limited publicly available information regarding foreign
issuers, lack of uniformity in accounting, auditing and
financial standards and requirements, greater securities
market volatility, less liquidity of securities, less
3
<PAGE>
government supervision and regulation of securities markets,
withholding taxes and changes in taxes on income on
securities, and possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits.
Investments in certain Latin American countries also may
involve additional risks of political instability, high
inflation rates, and limited trading markets. See "General
Investment Policies," "Risk Factors" and "Description of
Permitted Investments and Risk Factors" in this prospectus,
and the Statement of Additional Information.
MANAGEMENT ABN AMRO Asset Management (USA) Inc. (the
PROFILE "Advisor")(formerly LaSalle Street Capital Management, Ltd.)
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. First Data Investor Services
Group, Inc. serves 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"
and "The Distributor."
YOUR ACCOUNT You may generally open an Investor Shares account with a
AND DOING minimum amount of $2,000 per Fund and make additional
BUSINESS WITH investments with as little as $100. However, please contact
US your financial intermediary for their 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
capital gains) of each of the Equity, Balanced and Fixed
Income Funds is distributed in the form of periodic
dividends. Substantially all of the net investment income
(exclusive of capital gains) of each of the Money Market
Funds is distributed in the form of daily dividends. Any
capital gain is distributed at least annually. Distributions
are paid in additional shares unless 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 cost
and expenses that you, as a shareholder, will bear directly or indirectly in
connection with an investment in INVESTOR SHARES.
SHAREHOLDER TRANSACTION EXPENSES(1)(As a percentage of offering price)
- --------------------------------------------------------------------------------
<TABLE>
<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.
(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 .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(1) .48% .47% .50% .61% .79% .79% .95% .86% .49%
- -----------------------------------------------------------------------------------------------
Total Operating Expenses 1.53% 1.52% 1.55% 1.86% 2.04% 2.04% 2.20% 1.81% 1.44%
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) "Other Expenses" for the TransEurope, Real Estate and Latin America Equity
Funds are based on estimated amounts for the current fiscal year.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FIXED INCOME FUNDS
------------------
INTERMEDIATE INTERNATIONAL LIMITED
FIXED GOVERNMENT TAX-EXEMPT FIXED VOLATILITY
INCOME FIXED INCOME FIXED INCOME INCOME FIXED INCOME
------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Advisory Fees (after fee
waivers)(1) .50% .50% .48% .80% .50%
12b-1 Fees .25% .25% .25% .25% .25%
Other Expenses(2) .48% .49% .50% .55% .49%
- -------------------------------------------------------------------------------------
Total Operating Expenses
(after fee waivers)(3) 1.23% 1.24% 1.23% 1.60% 1.24%
- -------------------------------------------------------------------------------------
</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fee from
each Fixed Income Fund (except the International Fixed Income Fund). The
Advisor reserves the right to terminate its waiver at any time in its sole
discretion. Absent such waiver, Advisory Fees for the Funds would be as
follows: Fixed Income Fund--.60%, Intermediate Government Fixed Income
Fund--.60%, Tax-Exempt Fixed Income Fund-- .60% and Limited Volatility
Fixed Income Fund-- .60%. See "The Advisor."
(2) "Other Expenses" for the Limited Volatility Fixed Income Fund are based on
estimated amounts for the current fiscal year.
(3) Absent waivers described above, Total Operating Expenses for the Funds
would be as follows: Fixed Income Fund--1.33%, Intermediate Government
Fixed Income Fund--1.34%, Tax-Exempt Fixed Income Fund--1.35%, and Limited
Volatility Fixed Income Fund--1.34%. These fee waivers are voluntary and
may be discontinued at any time at the Advisor's discretion.
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 Operating Expenses (after fee
waivers)(2) .24% .31% .34% .21%
- ---------------------------------------------------------------------------
Total Operating Expenses (after fee
waivers)(3) .69% .76% .79% .65%
- ---------------------------------------------------------------------------
</TABLE>
(1) The Advisor is waiving, on a voluntary basis, a portion of its fees from
each Fund (except the Government Money Market Fund). The Advisor reserves
the right to terminate its waiver at any time in its sole discretion.
Absent such waiver, Advisory Fees would be as follows: Treasury Money
Market Fund--.35%, Money Market Fund--.35% and Tax-Exempt Money Market
Fund--.35%. See "The Advisor."
(2) "Other Expenses" have been restated to reflect current fee waivers. Absent
such waivers, "Other Expenses" for the Funds would be as follows: Treasury
Money Market Fund--.79%, Government Money Market Fund--.49%, Money Market
Fund--.48% and Tax-Exempt Money Market Fund--.46%.
(3) Absent waivers described above, Total Operating Expenses for the Funds
would be as follows: Treasury Money Market Fund--1.09%, Government Money
Market Fund--.94%, Money Market Fund--1.08% and Tax-Exempt Money Market
Fund--1.06%. These fee waivers are voluntary and may be discontinued at any
time the discretion of the service provider that is waiving its fee.
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 - - - -
Growth Fund - - - -
Small Cap Fund - - - -
International Equity Fund - - - -
TransEurope Fund - - - -
Asian Tigers Fund - - - -
Latin America Equity Fund - - - -
Real Estate Fund 18 57 - -
Balanced Fund - - - -
Fixed Income Fund - - - -
Intermediate Government Fixed Income Fund - - - -
Tax-Exempt Fixed Income Fund - - - -
International Fixed Income Fund - - - -
Limited Volatility Fixed Income Fund - - - -
- ----------------------------------------------------------------------------
</TABLE>
THE EXAMPLE IS BASED ON TOTAL OPERATING EXPENSES, EXCEPT FOR THE LATIN AMERICA
EQUITY FUND, TRANSEUROPE FUND, AND LIMITED VOLATILITY FIXED INCOME FUND, FOR
WHICH IT IS BASED ON ESTIMATED EXPENSES FOR THE CURRENT FISCAL YEAR. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this
table is to assist you in understanding the various costs and expenses that may
be directly or indirectly borne by investors in the Investor Shares of the
Funds. If you purchase shares through a financial institution, you may be
charged separate fees by the financial institution. See "The Advisor," "The
Administrator" and "The Distributor."
6
<PAGE>
FINANCIAL HIGHLIGHTS ___________________________________________________________
The following information has been audited by the Trust's independent auditors,
as indicated in their report dated January 24, 1997 on the Trust's financial
statements as of December 31, 1996 incorporated by reference to the Trust's
Statement of Additional Information under "Financial Information." This table
should be read in conjunction with the Trust's financial statements and related
notes thereto. As of December 31, 1996, the TransEurope Fund and Limited
Volatility Fixed Income Fund had not yet commenced operations. In addition, as
of December 31, 1996, 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
----------
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
-----------
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 FUND
--------------
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
----------
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
-----------
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 FUND
--------------
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.
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
-------------------------
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
-----------------
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
-------------------------
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
-----------------
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
-------------
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
-----------------
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
-----------------------------------------
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
-------------
1996 104% $0.0496
1995 85 N/A
1994 85 N/A
1993(1) 126 N/A
-----------------
FIXED INCOME FUND
-----------------
1996 194% N/A
1995 59 N/A
1994 126 N/A
1993(2) 163 N/A
-----------------------------------------
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
-----------------------------------------
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 January 4, 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
----------------------------
1996 $10.18 $0.43 $(0.17) $(0.47) $ 0.00 $ 9.97 2.70%* $ 680 0.98% 4.70% 1.10% 4.58%
1995 9.24 0.43 0.97 (0.46) 0.00 0.18 15.43 * 1,131 1.00 4.59 1.12 4.47
1994 10.22 0.40 (0.93) (0.42) (0.03) 9.24 (5.27)* 1,059 0.97 4.35 1.10 4.22
1993(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
-------------------------------
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
--------------------------
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(1) 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
----------------------------
1996 98% N/A
1995 129 N/A
1994 146 N/A
1993(1) 149 N/A
-------------------------------
INTERNATIONAL FIXED INCOME FUND
-------------------------------
1996 85% N/A
1995 105 N/A
1994 138 N/A
1993(2) 146 N/A
--------------------------
TREASURY MONEY MARKET FUND
--------------------------
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) 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 January 4, 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
----------------------------
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
-----------------
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
----------------------------
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
----------------------------
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(1) N/A N/A
-----------------
MONEY MARKET FUND
-----------------
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
----------------------------
1996 N/A N/A
1995 N/A N/A
1994 N/A N/A
1993(3) N/A N/A
</TABLE>
================================================================================
** Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor 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>
YOUR ACCOUNT AND DOING BUSINESS WITH US
Investor Shares of the Funds 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."
- --------------------------------------------------------------------------------
................................................................................
[SYMBOL APPEARS HERE] 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.
................................................................................
HOW TO BUY,
REDEEM AND Shares of the Funds may be purchased through Intermediaries
EXCHANGE which provide various services to their customers. Each
SHARES 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 Purchases of Investor Shares may be made by direct deposit or
Information Automated Clearing House transactions if your Intermediary
Regarding offers such services. Please contact your Intermediary to
Purchases find out if these services are available to you and for more
information about direct deposit or Automated Clearing House
transactions.
Your Intermediary also may impose a wire charge on
purchases.
No certificates representing shares will be issued.
Automatic You may systematically buy Investor Shares through deductions
Investment from your checking account, provided these accounts are
Plan ("AIP") maintained through banks which are part of the Automated
Clearing House system. Upon notice, the amount you commit to
the AIP may be changed or canceled at any time. The minimum
pre-authorized investment amount is $50 per month. 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. You should contact your Intermediary
12
<PAGE>
................................................................................
[LOGO APPEARS HERE]
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.
................................................................................
................................................................................
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.
EXCHANGING
SHARES
When Can You Once payment for your shares has been received and accepted
Exchange (i.e., an account has been established), you may exchange
Shares? some or all of your Investor Shares for Investor Shares of
other Funds within the Trust. Exchanges are made at net asset
value.
Exchanges will be made only after instructions in writing
or by telephone (an "Exchange Request") are received by the
Transfer Agent.
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 First Data Investor Services Group, Inc., 1400
Computer Drive, Westborough, MA 01581 (the "Transfer Agent")
and effect the exchange on your behalf.
If an Exchange Request in good order is received by the
Transfer Agent by 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 any Money Market Fund, on any Business
Day, the exchange usually will occur on that day. Exchange
orders for the Government Money Market Fund and the Money
Market Fund submitted to the Transfer Agent before 5:00 p.m.,
Eastern time, by accounts for which ABN AMRO North America,
Inc. or 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. Your Intermediary may have earlier cutoff times for
Exchange Requests. Please contact your Intermediary for more
information about their exchange policies.
13
<PAGE>
REDEMPTION OF
SHARES You may redeem your shares on any Business Day. Redemption
requests must be made directly to your Intermediary.
Redemption orders for the Equity, Balanced and Fixed Income
Funds must be received by the time the net asset value is
calculated. Redemption orders for the Money Market Funds must
be received by 5:00 p.m., Eastern time. Redemption orders for
the Government Money Market Fund and the Money Market Fund
submitted to the Transfer Agent before 5:00 p.m., Eastern
time, by accounts for which ABN AMRO North America, Inc. or
its affiliates act in a fiduciary, agency, investment
advisory or custodial capacity will become effective at the
net asset value determined as of 1:00 p.m., Eastern time that
same day. Your Intermediary may have earlier cutoff times for
redeeming shares. Please contact your Intermediary for more
information regarding redemption orders.
................................................................................
[SYMBOL APPEARS HERE] 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.
................................................................................
A written request for redemption must be received by the
Transfer Agent in order to constitute a valid request for
redemption. The Transfer Agent may require that the signature
on the written request be guaranteed by a bank which is a
member of the Federal Deposit Insurance Corporation, a trust
company, broker, dealer, credit union (if authorized under
state law), securities exchange or association, clearing agency
or savings association. The signature guarantee requirement
will be waived if all of the following conditions apply: (1)
the redemption is for $5,000 worth of shares or less, (2) the
redemption check is payable to the shareholder(s) of record,
and (3) the redemption check is mailed to the shareholder(s) at
the address of record or to a commercial bank account
previously designated either on the Account Application or by
written instruction to the Transfer Agent.
Redemption Payment to shareholders for shares redeemed generally will be
Proceeds made within seven days after receipt by the Transfer Agent of
the valid request for redemption. 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 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 request
for redemption. Redemption proceeds may be transferred by
wire for a wire charge of $10.00, which is deducted from the
amount of the redemption. Redemption
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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 their specific requirements for
written and telephone requests for redemptions and signature
guarantee requirements.
Other All redemption orders are effected at the net asset value
Information per share next determined after receipt of a valid request
Regarding for redemption, as described above.
Redemptions At various times, a Fund may be requested to redeem
shares for which it has not yet received good payment. In
such circumstances, the forwarding of proceeds will be
delayed for at least 15 days from the date of purchase or
until payment has been collected for the purchase of such
shares.
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 via check
or Automated Clearing House 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 Form
may be obtained by calling 1-800-443-4725 or by contacting
your Intermediary.
You should realize that if 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.
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.
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<PAGE>
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.
INVESTMENT
OBJECTIVES AND
POLICIES ______________________________________________________________________
VALUE FUND The Value Fund seeks a high level of total return through
capital appreciation and current income.
................................................................................
[SYMBOL APPEARS HERE] 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.
................................................................................
The Value Fund will invest at least 65% of its total assets
in U.S. common stocks that the Advisor believes are undervalued
and present the opportunity to increase shareholder value. The
Value Fund will invest in common stocks that are traded on a
national securities exchange or are actively traded in the
over-the-counter market and that: (i) are below average price
to earnings, price to book value, price to sales, price to cash
below 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 assets of the Fund may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks rated in the highest four
rating categories by a nationally recognized statistical
rating organization ("NRSRO") or determined by the Advisor to
be of comparable quality at the time of purchase; (iii)
preferred stock convertible into common stocks; and (iv) U.S.
dollar denominated equity securities of foreign issuers
(including sponsored American Depositary Receipts ("ADRs")).
The Fund will invest in securities of foreign issuers only if
they are listed on national securities exchanges or actively
traded in the over-the-counter market. The Fund will invest
in options and futures for hedging purposes only.
GROWTH FUND The Growth Fund seeks a high level of total return primarily
through capital appreciation.
The Growth Fund will invest at least 65% of its total
assets in the common stock of corporations of any size that,
in the Advisor's opinion, have strong prospects for
appreciation through growth in earnings. The Growth Fund
invests primarily in common stocks that: (i) are traded on a
national securities exchange or are actively traded in the
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over-the-counter market and have an average trading volume
of more than $1 million per day; (ii) have sales and
earnings growth rates that exceed the growth rate of the
Gross Domestic Product; and (iii) maintain a positive return
on equity and total assets.
Any remaining Fund assets may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks; (iii) preferred stock
convertible into common stocks; and (iv) U.S. dollar
denominated equity securities of foreign issuers (including
sponsored ADRs). The Fund will invest in securities of
foreign issuers only if they are listed on national
securities exchanges or actively traded in the over-the-
counter market. The Fund will invest in options and futures
for hedging purposes only.
SMALL CAP FUND The Small Cap Fund seeks a high level of total return
primarily through capital appreciation.
The Small Cap Fund will invest at least 65% of its total
assets in the common stocks of corporations with smaller
capitalization levels that the Advisor believes have strong
prospects for appreciation through growth in earnings. The
Advisor's emphasis will be on a diversified portfolio of
common stocks of companies with aggregate market
capitalization of less than $1 billion. In selecting stocks
for the Fund, factors reviewed will include sales and
earnings growth rates and the strength of the issuer's
balance sheet.
Because the Fund invests primarily in common stocks of
smaller capitalization companies, the Fund's shares may
fluctuate significantly in value, and thus may be more
suitable for long-term investors who can bear the risk of
short-term fluctuations.
Any remaining Fund assets may be invested in: (i)
warrants to purchase common stocks; (ii) debt securities
convertible into common stocks; (iii) preferred stock
convertible into common stocks; and (iv) U.S. dollar
denominated equity securities of foreign issuers (including
sponsored ADRs). The Fund will invest in equity securities
of foreign issuers that satisfy in substance the criteria
for investing in smaller capitalization stocks set forth
above. The Fund will invest in equity securities of foreign
issuers only if they are listed on national securities
exchanges or actively traded in the over-the-counter market.
The Fund will invest in options and futures for hedging
purposes only.
INTERNATIONAL The International Equity Fund seeks a high level of total
EQUITY FUND return through capital appreciation and current income.
The International Equity Fund will invest at least 65% of
its total assets in equity securities of issuers in at least
three countries other than the U.S.
While the Fund will not necessarily spread its
investments among more than three countries other than the
U.S., the Advisor intends to diversify its investments among
countries to reduce currency risk. Investments will be made
primarily in common stocks of companies domiciled in
developed countries, but may be made in the securities of
companies domiciled in developing countries, as well.
Although the Fund will invest primarily in securities listed
on national stock exchanges, it will also invest in
securities actively traded in over-the-counter markets.
Securities of companies in developing
17
<PAGE>
countries may pose liquidity risks. The Fund may invest or
hold a portion of its assets in U.S. dollars and foreign
currencies, including multinational currency units. A
portion of the Fund's total assets normally will be held in
U.S. dollars.
Any remaining Fund assets will be invested in common
stocks of closed-end management investment companies that
invest primarily in international common stocks, stocks of
U.S. issuers listed on national securities exchanges or
actively traded in the over-the-counter market, convertible
securities of U.S. issuers (whether or not they are listed
on national securities exchanges) and money market
instruments. The Fund will invest in options and futures for
hedging purposes only.
TRANSEUROPE The TransEurope Fund seeks a high level of total return
FUND through capital appreciation and current income.
The TransEurope Fund will invest as fully as feasible
(and at least 65% of its total assets) in equity securities
of European issuers located in Belgium, Denmark, Finland,
France, Germany, Italy, the Netherlands, Norway, Spain,
Sweden, Switzerland and the United Kingdom. Investments may
also be made in the equity securities of issuers located in
the smaller and emerging markets of Europe. The Fund may
also invest in the equity securities of issuers in the
following Eastern European countries: the Czech Republic,
Hungary, Poland and Slovakia. Emerging markets are subject
to special risks not associated with domestic markets. See
"Certain Risk Factors."
The Fund's remaining assets will be invested in money
market instruments of European issuers. The Fund will invest
in options and futures for hedging purposes only. The Fund
may invest or hold a portion of its assets in U.S. dollars
and European currencies, including multinational currency
units. A portion of the Fund's total assets normally 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 will invest primarily in equity
securities that are traded on recognized stock exchanges of
the countries of Asia and in equity securities of companies
organized under the laws of an Asian country. The Fund may
also invest in sponsored ADRs of Asian issuers that are
traded on stock exchanges in the United States. The Fund
does not intend to invest in securities which are
principally traded in markets in Japan or in companies
organized under the laws of Japan.
Under normal circumstances, at least 65% of the total
assets of the Fund will be invested in equity securities of
issuers located in some or all of the following Asian
countries: China, Hong Kong, Indonesia, Malaysia, the
Philippines, Singapore and Thailand. The Fund may also
invest in common stocks traded on markets in India,
Pakistan, Sri Lanka, South Korea and Taiwan, and may invest
up to 5% of its net assets in other developing markets. The
Fund has no set policy for allocating investments among the
several Asian countries. Allocation of investments among the
various countries will depend
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<PAGE>
on the relative attractiveness of the stocks of issuers in
the respective countries. Government regulation and
restrictions in many of the countries of interest may limit
the amount, mode, and extent of investment in companies of
such countries.
Any of the Fund's remaining assets will be invested in
common stocks of closed-end management investment companies
that invest primarily in common stocks of Asian countries or
money market instruments of Asian issuers.
In selecting industries and particular issuers, the
Advisor will evaluate costs of labor and raw materials,
access to technology, export of products and government
regulation. Although the Fund seeks to invest in larger
companies, it may invest in medium and small companies that,
in the Advisor's opinion, have potential for growth.
While the Fund intends to invest primarily in securities
listed on stock exchanges, it may also invest in securities
traded in over-the-counter markets, which may pose liquidity
risks. No more than 5% of the Fund's net assets will be
invested in unlisted securities. The Fund will invest in
options and futures for hedging purposes only. The Fund may
invest or hold a portion of its assets in U.S. dollars and
Asian currencies. A portion of the Fund's total assets
normally will be held in U.S. dollars.
LATIN AMERICA The Latin America Equity Fund seeks long-term capital
EQUITY FUND appreciation.
The Fund will invest primarily in equity securities of
(i) companies organized in, or for which the principal
securities trading market is in Latin America, and (ii)
companies, wherever organized, that, in one of the last two
fiscal years derived more than 50% of their annual revenues
or profits from goods produced, sales made or services
performed in Latin America ("Latin American issuers"). Under
normal circumstances, at least 65% of the Fund's total
assets will be invested in equity securities of Latin
American issuers.
The Fund seeks to benefit from economic and other
developments in Latin America. The Advisor and Sub-Advisor
believe that investment opportunities may be present in
Latin America as a result of an evolving long-term
international trend encouraging greater market orientation
and diminishing governmental intervention in economic
affairs. This trend may be facilitated by local or
international political, economic or financial developments
that could benefit the capital markets of certain Latin
American countries. For the purpose of this prospectus,
Latin America includes Argentina, Bolivia, Brazil, Chile,
Colombia, Costa Rica, the Dominican Republic, Ecuador, El
Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama,
Paraguay, Peru, Uruguay, Venezuela, and the Spanish-speaking
island nations of the Caribbean (not including Cuba and
Haiti). Although the Fund has no set policy for allocating
investments among Latin American countries, it is currently
contemplated that the Fund will emphasize investments in
issuers located in Argentina, Brazil, Chile, Colombia,
Mexico, Peru and Venezuela. The Fund may be precluded from
investing in certain of the remaining eleven countries and
certain Spanish-speaking islands until such time as adequate
custodial arrangements can be established. Government
regulation and restrictions may limit the amount, mode and
extent of investment in companies in such countries.
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<PAGE>
Although the Fund intends to invest primarily in equity
securities listed on stock exchanges, it may also invest in
securities traded in over-the-counter markets and in
securities for which there is no organized market.
The Fund may invest in investment grade debt securities,
including debt securities issued or guaranteed by a Latin
American government or governmental entity ("Sovereign
Debt"), obligations of supranational entities, Brady Bonds
and money market instruments.
For hedging purposes only, the Fund may also enter into
options, futures, interest rate swaps, currency
transactions, caps, collars and floors. The Fund may also
write (i.e., sell) covered call options on the securities in
which it may invest. The Fund may invest or hold a portion
of its assets in U.S. dollars and Latin American currencies.
A portion of the Fund's total assets normally will be held
in U.S. dollars.
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.
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. Equity securities
include common stock, shares or units of beneficial
interests of real estate investment trusts ("REITs"),
limited partnership interests in master limited
partnerships, rights or warrants to purchase common stock,
preferred stock and securities convertible into or
exchangeable for common stock.
The Fund will normally invest 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 will 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.
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<PAGE>
The Fund may invest in convertible securities whether or
not they are listed on national securities exchanges.
Convertible Securities that are fixed income securities will
be 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 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.
The Balanced Fund will invest at least 80% of its net
assets in fixed income and equity securities, with at least
25% of its assets in fixed income senior securities.
Permissible investments for the Fund include: (i) corporate
bonds and debentures of U.S. or foreign issuers rated in the
highest four rating categories by an NRSRO or determined by
the Advisor to be of comparable quality at the time of
purchase; (ii) securities denominated in U.S. dollars or in
foreign currencies, issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or
instrumentalities or issued or guaranteed by foreign
governments, their political subdivisions, agencies or
instrumentalities; (iii) short-term commercial paper of U.S.
or foreign issuers rated in the highest two rating
categories by an NRSRO or determined by the Advisor to be of
comparable quality at the time of investment; (iv)
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) obligations denominated in U.S.
dollars or foreign currencies of supranational entities
rated in the highest three rating categories by an NRSRO;
(vi) mortgage-backed securities rated in the highest two
rating categories by an NRSRO; (vii) asset-backed securities
rated in the highest three rating categories by an NRSRO;
(viii) STRIPS and receipts; (ix) repurchase agreements
involving such securities; (x) loan participations, in which
the Fund will not invest more than 5% of its total assets;
(xi) guaranteed investment contracts ("GICs") and bank
investment contracts ("BICs") deemed by the Advisor to be of
investment grade; (xii) swaps; (xiii) municipal notes rated
in the highest two rating categories by an NRSRO or, if
unrated, determined by the Advisor to be of comparable
quality; and (xiv) municipal bonds rated in the highest
three rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality. The
Balanced Fund is not subject to maturity restrictions. The
Balanced Fund may invest up to 15% of its assets in fixed
income securities that are either denominated in foreign
currencies or issued by foreign issuers, provided that
assets invested in such
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securities will not constitute more than 50% of the assets
of the Balanced Fund invested in fixed income securities.
The remainder of the Fund's assets will be invested in:
(i) common stocks; (ii) warrants to purchase common stocks;
(iii) debt securities convertible into common stocks; (iv)
preferred stocks convertible into common stocks; (v) U.S.
dollar denominated equity securities of foreign issuers
(including sponsored ADRs); (vi) foreign securities; and
(vii) equity options. The equity securities in which the
Fund will invest are listed on national securities exchanges
or actively traded in the over-the-counter market. The Fund
will invest, based on dividend paying characteristics and
growth potential, in equity securities of companies of all
sizes. There are no minimum rating criteria applicable to
convertible securities.
The Balanced Fund is also permitted to invest in options
and futures (for hedging purposes only), engage in
securities lending, acquire floating and variable rate
securities, enter into dollar roll transactions with
selected banks and broker-dealers and purchase securities on
a when-issued basis where the purchase is for investment in
the securities, not for leveraging, and subject to the
investment restrictions described above.
FIXED INCOME The Fixed Income Fund seeks a high level of total return
FUND relative to funds with like investment objectives, from
income and, to a lesser degree, capital appreciation by
investing in a portfolio consisting primarily of quality
intermediate- and long-term fixed income securities.
The Fixed Income Fund will invest as fully as feasible
(and at least 65% of its total assets) in the following
fixed income securities: (i) corporate bonds and debentures
rated in the highest four rating categories by an NRSRO or,
if unrated, determined by the Advisor to be of comparable
quality at the time of purchase; (ii) obligations issued or
guaranteed as to principal and interest by the U.S.
Government, its agencies or instrumentalities; (iii) short-
term commercial paper rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality at the time of
investment; (iv) 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 evidencing separately traded interest and principal
component parts of U.S. Government obligations ("Receipts");
(x) repurchase agreements involving such securities; (xi)
loan participations, in which the Fund will not invest more
than 5% of
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its total assets; (xii) GICs; (xiii) BICs; (xiv) swaps; (xv)
municipal notes rated in the highest two rating categories
by an NRSRO or, if unrated, determined by the Advisor to be
of comparable quality; and (xvi) municipal bonds rated in
the highest three rating categories by an NRSRO or, if
unrated, determined by the Advisor to be of comparable
quality.
There are no restrictions on the average maturity of the
Fund or on the maturity of any single instrument. Maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market factors.
The estimated dollar-weighted average portfolio maturity of
the Fund is approximately eight years.
Any remaining assets of the Fund may be invested in
variable and floating rate obligations, dollar rolls,
forward commitments, when-issued securities, and securities
of foreign issuers. In addition, the Fund may lend the
securities in which it is invested. The Fund may invest in
options and futures for hedging purposes only.
INTERMEDIATE The Intermediate Government Fixed Income Fund seeks a high
GOVERNMENT level of total return relative to funds with like investment
FIXED INCOME objectives, consistent with preservation of capital from
FUND income and, to a lesser degree, capital appreciation, by
investing in a portfolio consisting of short- and
intermediate-term U.S. Government securities.
The Intermediate Government Fixed Income Fund will invest
100% of its total assets in government securities, which
include obligations issued or guaranteed as to principal and
interest by the U.S. Government, its agencies or
instrumentalities. The Fund may invest up to 100% of its
assets in mortgage-backed securities.
Normally, the Fund will maintain an average weighted
maturity of three to ten years; under certain circumstances,
however, the average weighted maturity may fall below three
years. The Fund may invest in options and futures for
hedging purposes only.
TAX-EXEMPT The Tax-Exempt Fixed Income Fund seeks a high level of total
FIXED INCOME return, relative to funds with like investment objectives,
FUND consistent with preservation of capital, from income by
investing in a portfolio consisting primarily of securities
that are exempt from Federal income tax and not subject to
taxation as a preference item for purposes of the Federal
alternative minimum tax.
The Tax-Exempt Fixed Income Fund will invest as fully as
feasible (at least 65% of the value of its total assets) in
fixed income securities issued by or on behalf of the
states, territories and possessions of the United States and
the District of Columbia and their political subdivisions,
agencies and instrumentalities, rated in the highest four
rating categories by an NRSRO or, if unrated, determined by
the Advisor to be of comparable quality, and will invest at
least 80% of its net assets in comparably-rated fixed income
securities the interest on which is exempt from Federal
income tax and which are not subject to taxation as a
preference item for purposes of the Federal alternative
minimum tax.
The remainder of the Fund's assets may be invested in:
(i) short-term, tax-exempt commercial paper rated in the
highest two rating categories by an NRSRO or, if unrated,
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determined by the Advisor to be of comparable quality at the
time of investment; (ii) municipal notes rated in the
highest two rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality; (iii)
fixed income options and futures; (iv) asset-backed
securities; (v) Receipts; (vi) securities issued or
guaranteed by the U.S. Government or its agencies; and (vii)
corporate bonds rated in one of the three highest categories
by an NRSRO.
There are no restrictions on the average maturity of the
Fund or the maturity of any single instrument. Maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market factors.
The Fund may invest in options and futures for hedging
purposes only.
INTERNATIONAL The International Fixed Income Fund, formerly the Global
FIXED INCOME Fixed Income Fund, seeks a high level of total return
FUND relative to funds with like investment objectives, measured
in U.S. dollar terms, from income and capital appreciation
by investing in a portfolio consisting of investment quality
fixed income securities denominated in foreign currencies.
The International Fixed Income Fund will invest as fully
as feasible (at least 65% of its total assets) in investment
quality fixed income securities of issuers in at least three
of the following countries: Austria, Australia, Belgium,
Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, The Netherlands, New Zealand, Norway,
Spain, Sweden, Switzerland and the United Kingdom.
The Fund strives to take maximum advantage of financial
and economic developments and currency fluctuations. All
investments will be in high quality securities denominated
in various currencies, including the European Currency Unit.
Fixed income securities consist of: (i) corporate bonds
and debentures rated in the highest four rating categories
by an NRSRO or, if unrated, determined by the Advisor to be
of comparable quality at the time of purchase; (ii) short-
term commercial paper rated in the highest two rating
categories by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality at the time of
investment; (iii) securities issued or guaranteed by foreign
governments, their political subdivisions, agencies or
instrumentalities; (iv) obligations of supranational
entities; (v) repurchase agreements involving such
securities; (vi) loan participations, in which the Fund will
not invest more than 5% of its total assets; and (vii)
swaps, fixed income options and futures.
Any remaining Fund assets will be invested in: (i)
securities denominated in U.S. dollars or foreign currencies
comparable in quality to the fixed income instruments
described above; (ii) obligations issued or guaranteed as to
principal and interest by the U.S. Government or its
agencies and instrumentalities; (iii) 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; (iv) mortgage-backed securities rated in the
highest two rating categories
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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. A
portion of the Fund's total assets normally will be 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 may invest in options and futures for hedging
purposes only.
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 or, if unrated,
determined by the Advisor to be of comparable quality at the
time of purchase; (ii) obligations issued or guaranteed as
to principal and interest by the U.S. Government, its
agencies or instrumentalities; (iii) short-term commercial
paper rated in the highest two rating categories by an NRSRO
or, if unrated, determined by the Advisor to be of
comparable quality at the time of purchase; (iv) 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 by
an NRSRO; (ix) Receipts; (x) repurchase agreements involving
such securities; (xi) swaps; (xii) municipal notes rated in
the highest two rating categories by an NRSRO or, if
unrated, determined by the Advisor to be of comparable
quality; and (xiii) municipal bonds rated in the highest
three rating categories by an NRSRO or, if unrated,
determined by the Advisor to be of comparable quality. The
Fund will also invest in fixed income options and futures
for hedging purposes only.
The Fund may also invest in dollar roll transactions,
variable and floating rate obligations, forward commitments,
when-issued securities, and securities of foreign issuers.
In addition, the Fund may lend the securities in which it is
invested under certain conditions.
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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 will be limited to
components with maturities of less than 397 days. Investing
in these securities entails certain risks, including that
interest components may be more volatile in value than
comparable maturity Treasury bills, as further described in
"Description of Permitted Investments and Risk Factors." The
Fund will invest primarily in U.S. Treasury Obligations
other than STRIPS and repurchase agreements.
GOVERNMENT The Government Money Market Fund seeks to provide as high a
MONEY MARKET level of current income as is consistent with preservation
FUND of capital and liquidity by investing in obligations of the
U.S. Government, its agencies or instrumentalities.
The Government Money Market Fund invests exclusively in
high quality money market instruments denominated in U.S.
dollars consisting of (i) U.S. Treasury Obligations; (ii)
securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities (e.g., Government National
Mortgage Association ("GNMA"), Fannie Mae, Federal Home Loan
Mortgage Corporation ("FHLMC"), Federal Land Bank); and
(iii) repurchase agreements involving such obligations.
MONEY MARKET The Money Market Fund seeks to provide as high a level of
FUND current income as is consistent with the preservation of
capital and liquidity by investing exclusively in high
quality money market instruments.
The Money Market Fund invests exclusively in the
following: (i) U.S. Treasury Obligations; (ii) obligations
issued or guaranteed as to principal and interest by the
U.S. Government or its agencies and instrumentalities; (iii)
commercial paper of U.S. and foreign issuers rated in the
highest two short-term rating categories of an NRSRO at the
time of investment or, if unrated, determined by the Advisor
to be of comparable quality; (iv) obligations (certificates
of deposit, time deposits, and bankers' acceptances) of U.S.
commercial banks, U.S. savings and loan institutions, and
U.S. and London branches of foreign banks that have total
assets of $500 million or more as shown on their last
26
<PAGE>
published financial statements at the time of investment;
(v) short-term corporate obligations of U.S. and foreign
issuers whose commercial paper the Fund may purchase; (vi)
repurchase agreements involving such obligations; (vii)
obligations of supranational entities; (viii) loan
participations; (ix) receipts evidencing separately traded
interest and principal component parts of U.S. Government
obligations; (x) standby commitments; and (xi) municipal
securities. The Fund may not invest more than 25% of its
total assets in obligations issued by foreign branches of
U.S. banks and London branches of foreign banks.
TAX-EXEMPT The Tax-Exempt Money Market Fund seeks to preserve principal
MONEY MARKET value and maintain a high degree of liquidity while
FUND providing current income exempt from Federal income tax and
not included as a preference item under the Federal
alternative minimum tax.
The Tax-Exempt Money Market Fund invests at least 80% of
its total assets in eligible securities issued by or on
behalf of the states, territories and possessions of the
United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, the
interest of which, in the opinion of bond counsel for the
issuer, is exempt from Federal income tax (collectively,
"Municipal Securities"). In pursuing this policy, the Fund
may purchase municipal bonds, municipal notes, tax-exempt
commercial paper rated in the highest two short-term rating
categories by an NRSRO in accordance with SEC regulations at
the time of investment or, if unrated, determined by the
Advisor to be of comparable quality, and shares of tax-
exempt money market funds.
The Advisor has discretion to invest up to 20% of the
Fund's assets in the aggregate in taxable money market
instruments (including repurchase agreements) and securities
subject to the Federal alternative minimum tax.
GENERAL
INVESTMENT
POLICIES ______________________________________________________________________
THE EQUITY AND Each Fund will invest in equity securities only if they are
BALANCED FUNDS listed on national securities exchanges or actively traded
in the over-the-counter market. Each Fund may invest in
convertible securities whether or not they are listed on
national securities exchanges.
Each Fund will invest not more than 15% of its total
assets in restricted securities. Each Fund will not invest
more than 15% of its net assets in illiquid securities.
A Fund may enter into futures contract transactions only
to the extent that obligations under such contracts
represent less than 20% of the Fund's assets. The aggregate
value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a
Fund.
THE FIXED Each Fund may purchase mortgage-backed securities issued or
INCOME AND guaranteed as to payment of principal and interest by the
BALANCED FUNDS U.S. Government, its agencies or instrumentalities. The
Fixed Income Fund, Tax-Exempt Fixed Income Fund,
International Fixed Income Fund,
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<PAGE>
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.
The Fixed Income Fund, Intermediate Government Fixed
Income Fund, Limited Volatility Fixed Income Fund and
Balanced Fund may enter into dollar roll transactions with
selected banks and broker-dealers.
The quality standards of debt securities and other
obligations as described for the Funds must be satisfied at
the time an investment is made. In the event that an
investment held by a Fund is assigned a lower rating or
ceases to be rated, the Advisor will promptly reassess
whether such security presents suitable credit risks and
whether the Fund should continue to hold the security or
obligation in its portfolio. If a portfolio security or
obligation no longer presents suitable credit risks or is in
default, the Fund will dispose of the security or obligation
as soon as reasonably practicable unless the Trustees of the
Trust determine that to do so is not in the best interest of
the Fund.
Each Fund will invest not more than 15% of its total
assets in restricted securities. Each Fund will not invest
more than 15% of its net assets in illiquid securities.
A Fund may enter into futures contract transactions only
to the extent that obligations under such contracts
represent less than 20% of the Fund's assets. The aggregate
value of option positions may not exceed 10% of a Fund's net
assets as of the time such options are entered into by a
Fund.
THE MONEY Each Money Market Fund intends to comply with regulations of
MARKET FUNDS the SEC applicable to funds using the amortized cost method
for calculating net asset value found in Rule 2a-7 under the
1940 Act. These regulations impose certain quality, maturity
and diversification restraints on investments by the Funds.
Under these regulations, the Funds will invest only in U.S.
dollar denominated securities, will maintain an average
maturity on a dollar-weighted basis of 90 days or less, and
will acquire only "eligible securities" that present minimal
credit risks and have a maturity of 397 days or less. These
constraints effectively preclude the Funds from investing in
securities with interest rates as high as those of
securities that may be acquired by Funds that are permitted
to buy lower rated or longer term securities. For a further
discussion of these rules, see the "Description of Permitted
Investments and Risk Factors--Restraints on Investments by
Money Market Funds".
Each Money Market Fund will not invest more than 10% of
its net assets in illiquid securities.
ALL FUNDS All Funds may invest in variable and floating rate
obligations and may purchase securities on a when-issued
basis. A Fund (except the Money Market Funds) may enter into
futures contracts and options on futures for bona fide
hedging purposes only.
In addition, each Fund reserves the right to engage in
securities lending.
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<PAGE>
There will be no limit to the percentage of portfolio
securities that a Fund may purchase subject to a standby
commitment, but the amount paid directly or indirectly for a
standby commitment held by the Fund will not exceed 1/2 of
1% of the value of the total assets of the Fund.
For temporary defensive purposes, when the Advisor
determines that market conditions warrant, each of the
Equity Funds, Fixed Income Funds and Balanced Fund may
invest up to 100% of its assets in money market instruments,
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 have an adequate capacity to pay
principal and interest but may have speculative
characteristics as well.
For a description of ratings, see the Statement of
Additional Information.
CERTAIN RISK FACTORS ___________________________________________________________
The investment policies of each Fund entail certain risks
and considerations of which an investor should be aware.
The Real Estate Because the Real Estate Fund invests primarily in the
Industry securities of companies principally engaged in the real
estate industry, its 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 will 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 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 subject to the risks associated with
investing in foreign securities in addition to the risks
associated with the direct ownership of real estate.
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 property type. REITs depend
generally on their ability to generate cash flow to make
29
<PAGE>
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 Investment Company Act of 1940 (the
"1940 Act"). Rising interest rates may cause the value of
the debt securities in which a Fund will invest to fall.
Conversely, falling interest rates may cause their value to
rise. Changes in the value of portfolio securities will not
necessarily affect cash income derived from these securities
but will affect a Fund's net asset value.
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 a Fund to fluctuate.
Fixed Income There is a risk that the current interest rate on floating
Securities 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 The International Equity, TransEurope, Latin America Equity,
Securities Asian Tigers and International Fixed Income Funds will, and
certain other Funds may, invest in securities of foreign
issuers. Securities of foreign issuers are subject to
certain risks not typically associated with domestic
securities, including, among other risks, changes in
currency rates and in exchange control regulations, costs in
connection with conversions between various currencies,
limited publicly available information regarding foreign
issuers, lack of uniformity in accounting, auditing and
financial standards and requirements, greater securities
market volatility, less liquidity of securities, less
government supervision and regulations of securities
markets, withholding taxes and changes in taxes on income on
securities, and possible seizure, nationalization or
expropriation of the foreign issuer or foreign deposits.
Certain Latin American countries are among the largest
debtors to commercial banks and foreign governments. Trading
in Sovereign Debt involves a high degree of risk, since the
governmental entity that controls the repayment of Sovereign
Debt may not be willing or able to repay the principal
and/or interest of such debt obligations when it becomes
due, due to factors such as debt service burden, political
constraints, cash flow problems and other national economic
factors. As a result, Latin American governments may default
on their Sovereign Debt, which may require holders of such
Sovereign Debt to participate in debt rescheduling or
additional lending to defaulting governments. There is no
bankruptcy proceeding by which defaulted Sovereign Debt may
be collected in whole or in part.
30
<PAGE>
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 markets. This may limit a
Fund's ability to effectively hedge its investments in such
markets.
Non- A non-diversified Fund for purposes of the Investment
Diversification Company Act of 1940, as amended (the "1940 Act"), 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. A 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 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 investment
company.
Concentration The Real Estate Fund will concentrate its investments in
securities of companies primarily engaged in the real estate
industry. As a result, 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 investments in this manner.
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>
................................................................................
INVESTMENT
ADVISOR
[LOGO OF REMBRANDT APPEARS HERE]
A Fund's investment advisor manages the investment activities and is
responsible for the performance of the Fund. The advisor conducts investment
research, executes investment strategies based on an assessment of economic
and market conditions, and determines which securities to buy, hold or sell.
................................................................................
No Money Market Fund may:
1. Purchase securities of any issuer if, as a result, the
Fund would violate the diversification provisions under
Rule 2a-7 of 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 will apply at the time of the
purchase of a security. Additional investment limitations are
set forth in the Statement of Additional Information.
THE ADVISOR ____________________________________________________________________
The Trust and ABN AMRO Asset Management (USA) Inc., (the
"Advisor"), (formerly LaSalle Street Capital Management,
Ltd.), 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.
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 this voluntary fee waiver at any time.
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<PAGE>
For the fiscal year ended December 31, 1996, the Advisor
received an advisory fee of .80% for the Value Fund, .80%
for the Growth Fund, .80% for the Small Cap Fund, 1.00% for
the International Equity Fund, 1.00% for the Asian Tigers
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 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.
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, 1996, total assets under
management by the Advisor were approximately $3.4 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 and Balanced Funds
since their inception. Mr. Cerney has been associated with
the Advisor and its predecessor since April, 1990.
Keith Dibble, Senior Vice President of the Advisor, has
served as portfolio manager for the Growth Fund since its
inception. Mr. Dibble has been associated with the Advisor
and its predecessor since 1987.
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. Prior
to joining the Adviser, 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.
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 August 1996. He served as a Vice President,
Portfolio Manager with Norwest Investment Management and
Trust and a predecessor firm from May, 1985 to July, 1996.
Charles H. Self, III, Senior Vice President of the
Advisor, has served as portfolio manager for the Fixed
Income Fund since October, 1995. He served as the portfolio
33
<PAGE>
manager for the Tax-Exempt Fixed Income Fund since
September, 1996 to June, 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. He served as a
Vice President with CSI Asset Management from December, 1988
to July, 1995.
Phillip P. Mierzwa, Assistant Vice President of the
Advisor, has served as co-manager of the Tax-Exempt Fixed
Income Fund since April, 1997 and manager of the Tax-Exempt
Money Market Fund since [ ]. He has been associated with
the Advisor or its affiliates since February, 1990.
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. He served as Manager,
Fixed Income Division of First Citizens Bank from November,
1989 to March, 1997.
The Funds may execute brokerage or other agency
transactions through an affiliate of the Advisor.
THE SUB-ADVISOR ________________________________________________________________
ABN AMRO-NSM International Funds Management B.V. (the "Sub-
Advisor"), 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
with the Advisor. The Sub-Advisor is a holding company
affiliate of the Advisor. Under the Sub-Advisory Agreement,
the Sub-Advisor manages the Funds, selects investments and
places all orders for purchases and sales of the Funds'
securities, subject to the general supervision of the
Trustees of the Trust and the Advisor. The Sub-Advisor has
approximately $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.
Alex Ng has served as portfolio manager for the Asian
Tigers Fund since July, 1995. Mr. Ng has been associated
with the Sub-Advisor and/or its parent since 1988. Mr. Ng
also serves as the Far East Director of Asset Management for
a Hong Kong-based affiliate of the Advisor.
Felix Lanters, portfolio manager for the TransEurope
Fund, has been associated with the Sub-Advisor and/or its
parent since 1987.
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
34
<PAGE>
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, AANIFM is entitled to receive
from the Advisor a fee, which is computed daily and paid
quarterly, at the annual rate of .50% of the average daily
net assets of each of the International Equity Fund,
TransEurope Fund, Latin America Equity Fund and Asian Tigers
Fund, and .40% of the average daily net assets of the
International Fixed Income Fund. The Sub-Advisor received
fees from the Advisor of .50% for the Asian Tigers Fund,
.50% for the Latin America Equity Fund and International
Equity Fund and .40% for the International Fixed Income Fund
for the fiscal year ended December 31, 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 the
Funds.
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., (the "Distributor"),
Westborough, MA 01581 and the Trust are parties to a
distribution agreement (the "Distribution Agreement").
The Funds have adopted plans under which firms, including
the Distributor, may provide shareholder and administrative
services to Investor Shares 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.
The Trust has a distribution plan with respect to
Investor Shares (the "Distribution Plan"). As provided in
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
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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.
In addition, the Trust has a shareholder servicing plan
with respect to Investor Shares (the "Shareholder Servicing
Plan"). As provided in 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
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
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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
1996 Annual Report to Shareholders, and is available upon
request and without charge by calling 1-800-443-4725.
The portfolio turnover rates for the Small Cap, Balanced,
Fixed Income, and Intermediate Government Fixed Income Funds
for the fiscal year ended December 31, 1996 were 158%, 104%,
194%, and 179%, respectively. A high turnover rate will
result in higher transaction costs and may result in
additional tax consequences for shareholders.
The performance of Common Shares will normally be higher
than that of Investor Shares because of the additional
distribution and administrative services expenses charged to
Investor Shares.
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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
Statement of Additional Information.
...............................................................................
[SYMBOL 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 the Funds
Each Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the Trust's other Funds. Each Fund intends to qualify for the
special tax treatment afforded regulated investment companies as defined under
Subchapter M of the Internal Revenue Code. 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.
...............................................................................
[SYMBOL APPEARS HERE] DISTRIBUTIONS
The Fund distributes income dividends and capital gains. Income dividends
represent the earnings from the Fund's investments; capital gains distributions
occur when investments in the Fund are sold for more than the original purchase
price.
................................................................................
Tax Status of Distributions
Each Fund will distribute all of its net investment income (including, for this
purpose, net short-term capital gain) to shareholders. Dividends 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 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. Each Fund will be required to include as part of its current income
the imputed interest on such obligations even though the Fund has not received
any interest payments on such obligations during that period. Because each Fund
distributes all of its net investment income to its
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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 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 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
39
<PAGE>
payment of "exempt interest dividends." Accordingly,
municipal funds may not be an appropriate investment for
persons (including corporations and other business entities)
who are "substantial users" (or persons related to
"substantial users") of facilities financed by private
activity bonds or certain industrial development bonds.
"Substantial user" is defined generally as including a "non-
exempt person" who regularly uses in a trade or business a
part of a facility financed from the proceeds of industrial
development bonds. Current federal tax law also makes
interest on certain tax-exempt bonds a tax preference item
for purposes of the individual and corporate alternative
minimum tax.
Interest on indebtedness incurred by shareholders to
purchase or carry shares of the Tax-Exempt Fixed Income Fund
and the Tax-Exempt Money Market Fund is generally not
deductible for federal income tax purposes.
Each sale, exchange, or redemption of Fund shares is a
taxable event to you.
ADDITIONAL
INFORMATION
ABOUT DOING
BUSINESS WITH US _____________________________________________________________
Business Days You may buy, redeem or exchange shares on days on which the
New York Stock Exchange is open for business (a "Business
Day"). However, shares of a Money Market Fund cannot be
purchased by Federal Reserve wire on federal holidays
restricting wire transfers.
A purchase order for 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 4:00 p.m.,
Eastern time on the next Business Day, and you could be
liable for any fees or expenses incurred by the Trust. The
purchase price of Investor Shares of a Fund is the net asset
value next determined after a purchase order is effective.
A purchase order for Investor Shares of the Money Market
Funds will be effective as of the day received by the
Transfer Agent and eligible to receive dividends declared
the same day if the Transfer Agent receives the order and
the Custodian receives Federal funds payment before 1:00
p.m., Eastern time on such day. Otherwise, the purchase
order will be effective the next Business Day. Purchase
orders for the Government Money Market Fund and the Money
Market Fund submitted to the Transfer Agent before 5:00
p.m., Eastern time, by accounts for which ABN AMRO North
America, Inc. or 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.
Your Intermediary may have earlier cutoff times for share
transactions. Please contact your Intermediary for more
information about its order requirements.
Minimum The minimum initial investment in the Investor Shares is
Investment $2,000; however, the minimum investment may be waived at the
Distributor's discretion. All subsequent purchases must be
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<PAGE>
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 for Investor Shares when the Trust
or the Transfer Agent determines that it is not in the best
interest of the Trust or its shareholders to accept such
order.
Maintaining a Due to the relatively high cost of handling small
Minimum Account investments, each Fund reserves the right to redeem, at net
Balance asset value, your shares if, because of redemptions of
shares by or on your behalf, your account in any Fund has a
value of less than $2,000. 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 Statement of Additional Information for
examples of when the right of redemption may be suspended.
Your Intermediary may impose its own initial and
subsequent investment requirements. You should contact your
Intermediary for information about any such requirements.
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 purchase price of a share of the Funds is the net asset
value per share next computed after the order is received
and accepted by the Trust. The selling price of a share of
the Funds is the net asset value per share next determined
after receipt of the request for redemption in good order.
The net asset value per share of the Money Market Funds is
calculated as of 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 regular close of business of
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 Statement of Additional Information. 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.
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<PAGE>
GENERAL INFORMATION ____________________________________________________________
The Trust The Trust was organized as a Massachusetts business trust
under a Declaration of Trust dated September 17, 1992, and
amended September 28, 1992 and October 20, 1992. The
Declaration of Trust permits the Trust to offer shares of
separate funds and different classes of each fund. The Trust
consists of the following funds: Money Market Fund,
Government Money Market Fund, Treasury Money Market Fund,
Tax-Exempt Money Market Fund, Fixed Income Fund,
Intermediate Government Fixed Income Fund, Tax-Exempt Fixed
Income Fund, International Fixed Income Fund, Limited
Volatility Fixed Income Fund, Latin America Equity Fund,
Real Estate Fund, Value Fund, Growth Fund, Small Cap Fund,
International Equity Fund, TransEurope Fund, Asian Tigers
Fund and Balanced Fund. All consideration received by the
Trust for shares of any Fund and all assets of such Fund
belong to that fund, and would be subject to liabilities
related thereto. The Trust reserves the right to create and
issue shares of additional funds. As of December 31, 1996,
the Limited Volatility Fixed Income Fund and TransEurope
Fund had not commenced operations. The Latin America Equity
Fund is not available for purchase in Investor Shares.
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 shareholder
services to the Trust.
Voting Rights Each share held entitles the shareholder of record to one
vote. Shareholders of each Fund or class will vote
separately on matters relating solely to that Fund or class.
As a Massachusetts business trust, the Trust is not required
to hold annual 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.
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<PAGE>
Shareholder
Inquiries Shareholder inquiries should be directed to the
Administrator, Westborough, Massachusetts, 01581, at 1-800-
443-4725.
Dividends Substantially all of the net investment income (not
including capital gains) of the Value, Growth, Small Cap,
Balanced, Fixed Income, Intermediate Government Fixed
Income, Tax-Exempt Fixed Income, Real Estate and Limited
Volatility Fixed Income Funds is distributed in the form of
monthly dividends, and that of the International Equity,
Latin America Equity, TransEurope, Asian Tigers and
International Fixed Income Funds is distributed in the form
of dividends at least annually. Shareholders who own shares
at the close of business on the record date will be entitled
to receive the dividend. Currently, capital gains of the
Funds, if any, will be distributed at least annually.
The net investment income (exclusive of capital gains) of
each of the Money Market Funds is distributed in the form of
dividends, which are declared daily and distributed monthly
to shareholders. Currently, capital gains of the Funds, if
any, will be distributed at least annually.
Shareholders automatically receive all income dividends
and capital gain distributions in additional shares at the
net asset value next determined following the record date,
unless the shareholder has elected to take such payment in
cash. Shareholders may change their election by providing
written notice to the Transfer Agent at least 15 days prior
to the distribution.
Dividends and distributions of the Funds are paid on a
per-share basis. The value of each share will be reduced by
the amount of the payment. If shares are purchased shortly
before the record date for a dividend or the distribution of
capital gains, a shareholder will pay the full price for the
shares and receive some portion of the price back as a
taxable dividend or distribution.
The Trust believes that as of April 1, 1998, banking
affiliates of ABN AMRO Capital Markets Holding, Inc. 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 banking affiliates may be
deemed to "control" these Funds within the meaning of the
1940 Act.
Counsel and Morgan, Lewis & Bockius LLP serves as counsel to the Trust.
Auditors ______ serves as independent auditors of the Trust.
Custodians CoreStates Bank, N.A., Broad and Chestnut Streets, P.O. Box
7618, Philadelphia, Pennsylvania 19101, acts as Custodian of
the Trust. Morgan Stanley Trust Company, serves as foreign
Sub-Custodian of the Trust. The Custodians hold cash,
securities and other assets of the Trust as required by the
1940 Act.
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<PAGE>
DESCRIPTION OF
PERMITTED
INVESTMENTS AND
RISK FACTORS ___________________________________________________________________
The following is a description of certain of the permitted
investments and risk factors for the Funds:
American ADRs are securities, typically issued by a U.S. financial
Depositary institution (a "depositary"), that evidence ownership
Receipts interests in a security or a pool of securities issued by a
("ADRs") foreign issuer and deposited with the depositary. ADRs may
be available through "sponsored" or "unsponsored"
facilities. A sponsored facility is established jointly by
the issuer of the security underlying the receipt and a
depositary, whereas an unsponsored facility may be
established by a depositary without participation by the
issuer of the underlying security. Holders of unsponsored
depositary receipts generally bear all the costs of the
unsponsored facility. The depositary of an unsponsored
facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the
deposited security or to pass through, to the holders of the
receipts, voting rights with respect to the deposited
securities.
Asset-Backed Asset-backed securities consist of securities secured by
Securities company receivables, truck and auto loans, leases and credit
(Non-mortgage) card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided
fractional ownership interests in the underlying pools of
assets. Such securities also may be debt instruments, which
are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity,
such as a trust, organized solely for purpose of owning such
assets and issuing such debt. A Fund may invest in other
asset-backed securities that may be created in the future if
the Advisor determines they are suitable.
Bankers' Bankers' acceptances are bills of exchange or time drafts
Acceptances drawn on and accepted by a commercial bank. Bankers'
acceptances are used by corporations to finance the shipment
and storage of goods. Maturities are generally six months or
less.
Bank Investment BICs are contracts issued by U.S. banks and savings and loan
Contracts ("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 will be considered
illiquid.
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<PAGE>
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 are common stocks and common stock
Securities equivalents consisting of securities convertible into common
stocks and securities having common stock characteristics
(i.e., rights and warrants to purchase common stocks,
sponsored and unsponsored ADRs, REITs, and equity securities
of closed-end investment companies. Investments in common
stocks are subject to market risks which may cause their
prices to fluctuate over time. Changes in the value of
portfolio securities will not necessarily affect cash income
derived from these securities but will not affect a Fund's
net asset value.
Fixed Income The market value of fixed income investments will change in
Securities response to interest rate changes and other factors. During
periods of falling interest rates, the values of outstanding
fixed income securities generally rise. Conversely, during
periods of rising interest rates, the values of such
securities generally decline. Moreover, while securities
with longer maturities tend to produce higher yields, the
prices of securities with longer maturities are also subject
to greater market fluctuations as a result of changes in
interest rates. Changes by NRSROs in the rating of any fixed
income security and in the ability of an issuer to make
payments of interest and principal also affect the value of
these investments.
Forward Foreign A forward contract involves an obligation to purchase or
Currency sell a specific currency amount at a future date, agreed
Contracts upon by the parties, at a price set at the time of the
contract.
At the maturity of a forward contract, a Fund may either
sell a portfolio security and make delivery of the foreign
currency, or it may retain the security and terminate its
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<PAGE>
contractual obligation to deliver the foreign currency by
purchasing an "offsetting" contract with the same currency
trader, obligating it to purchase, on the same maturity
date, the same amount of the foreign currency. A Fund may
realize a gain or loss from currency transactions.
Futures Futures contracts provide for the future sale by one party
Contracts and and purchase by another party of a specified amount of a
Options on specific security at a specified future time and at a
Futures specified price. An option on a futures contract gives the
Contracts purchaser the right, in exchange for a premium, to assume a
position in a futures contract at a specified exercise price
during the term of the option. A Fund may use futures
contracts and related options for bona fide hedging
purposes, to offset changes in the value of securities held
or expected to be acquired or be disposed of, to minimize
fluctuations in foreign currencies, or to gain exposure to a
particular market or instrument. A Fund will minimize the
risk that it will be unable to close out a futures contract
by only entering into futures contracts which are traded on
national futures exchanges. In addition, a Fund will only
sell covered futures contracts and options on futures
contracts.
Stock and bond index futures are futures contracts for
various stock and bond indices that are traded on registered
securities exchanges. Stock and bond index futures contracts
obligate the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times
the difference between the value of a specific stock or bond
index at the close of the last trading day of the contract
and the price at which the agreement is made.
Eurodollar futures are U.S. dollar-denominated futures
contracts or options thereon which are linked to the London
Interbank Offered Rate ("LIBOR"), although foreign currency
denominated instruments are available from time to time.
Eurodollar futures contracts enable purchasers to obtain a
fixed rate for the lending of the funds and sellers to
obtain a fixed rate for borrowings.
No price is paid upon entering into futures contracts.
Instead, a Fund is required to deposit an amount of cash or
U.S. Treasury securities known as "initial margin."
Subsequent payments, called "variation margin," to and from
the broker, are made on a daily basis as the value of the
futures position varies (a process known as "marking to
market"). The margin is in the nature of a performance bond
or good-faith deposit on a futures contract.
In order to avoid leveraging and related risks, when a
Fund purchases futures contracts, it will collateralize its
position by depositing an amount of liquid securities, cash
or cash equivalents, equal to the market value of the
futures positions held, less margin deposits, in a
segregated account with the Trust's custodian. Collateral
equal to the current market value of the futures position
will be marked to market on a daily basis.
There are risks associated with these activities,
including the following: (1) the success of a hedging
strategy may depend on an ability to predict movements in
the prices of individual securities, fluctuations in markets
and movements in interest rates; (2) there
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may be an imperfect or no correlation between the changes in
market value of the securities held by a Fund and the prices
of futures and options on futures; (3) there may not be a
liquid secondary market for a futures contract or option;
(4) trading restrictions or limitations may be imposed by an
exchange; and (5) government regulations may restrict
trading in futures contracts and futures options.
Guaranteed GICs are contracts issued by U.S. insurance companies.
Investment Pursuant to such contracts, the Fund makes cash
Contracts contributions to a deposit fund of the insurance company's
("GICs") general account. The insurance company then credits to the
Fund on a monthly basis guaranteed interest at either a
fixed, variable or floating rate. Generally, GICs are not
assignable or transferable without the permission of the
issuing insurance companies. For this reason, GICs are
considered by a Fund to be illiquid investments.
Illiquid Illiquid securities are securities that cannot be disposed
Securities of within 7 days at approximately the price at which they
are being carried on a Fund's books. An illiquid security
includes a demand instrument with a demand notice period
exceeding 7 days, if there is no secondary market for such
security, and repurchase agreements with durations (or
maturities) over 7 days in length.
Loan Loan participations are interests in loans to U.S.
Participations corporations which are administered by the lending bank or
agent for a syndicate of lending banks, and sold by the
lending bank or syndicate member ("intermediary bank"). In a
loan participation, the borrower corporation will be deemed
to be the issuer of the participation interest except to the
extent 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
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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. During periods of
declining interest rates, prepayment of mortgages underlying
mortgage-backed securities can be expected to accelerate.
Prepayment of mortgages which underlie securities purchased
at a premium often results in capital losses, while
prepayment of mortgages purchased at a discount often
results in capital gains. Because of these unpredictable
prepayment characteristics, it is often not possible to
predict accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities
that are issued or guaranteed by a U.S. Government agency
representing an interest in a pool of mortgage loans. The
primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. GNMA, Fannie Mae
and FHLMC guarantee timely distributions of interest to
certificate holders. GNMA and Fannie Mae also guarantee
timely distributions of scheduled principal. Fannie Mae and
FHLMC obligations are not backed by the full faith and
credit of the U.S. Government as GNMA certificates are, but
Fannie Mae and FHLMC securities are supported by the
instrumentalities' right to borrow from the U.S. Treasury.
Private Pass-Through Securities: These are mortgage-
backed securities issued by a non-governmental entity, such
as a trust or corporation. These securities include
collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). While they are
generally structured with one or more types of credit
enhancement, private pass-through securities typically lack
a guarantee by an entity having the credit status of a
governmental agency or instrumentality.
In a CMO, series of bonds or certificates are usually
issued in multiple classes. Principal and interest paid on
the underlying mortgage assets may be allocated among the
several classes of a series of a CMO in a variety of ways.
Principal payments on the underlying mortgage assets may
cause CMOs to be retired substantially earlier then their
stated maturities or final distribution dates, resulting in
a loss of all or part of any premium paid.
A REMIC is a CMO that qualifies for special tax treatment
under the Internal Revenue Code and invests in certain
mortgages principally secured by interests in real property.
Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC
Certificates") issued by Fannie Mae or FHLMC represent
beneficial ownership
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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 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
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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
Securities and Exchange Commission that OTC options are
illiquid.
A Fund may purchase and write put and call options on
foreign currencies (traded on U.S. and foreign exchanges or
over-the-counter markets) to manage its exposure to exchange
rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an
equal amount of the underlying foreign currency. With
respect to put options on foreign currency written by a
Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash, cash equivalents or
liquid securities in an amount equal to the amount the Fund
would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on
indices and enter into related closing transactions. Put and
call options on indices are similar to options on securities
except that options on an index give the holder the right to
receive, upon exercise of the option, an amount of cash if
the closing level of the underlying index is
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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 cash equivalents 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.
Risk Factors. Risks associated with options transactions
include: (1) the success of a hedging strategy may depend on
an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect correlation
between the movement in prices of options and the securities
underlying them; (3) there may not be a liquid secondary
market for options; and (4) while a Fund will receive a
premium when it writes covered call options, it may not
participate fully in a rise in the market value of the
underlying security. A Fund may choose to terminate an
option position by entering into a closing transaction. The
ability of a Fund to enter into closing transactions depends
upon the existence of a liquid secondary market for such
transactions.
Receipts Receipts are interests in separately traded interest and
principal component parts of U.S. Treasury obligations that
are issued by banks and brokerage firms and are created by
depositing U.S. Treasury obligations into a special account
at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners
of the certificates or receipts. The custodian arranges for
the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts are sold as
zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their
maturity date without interim cash payments of interest or
principal. This discount is amortized over the life of the
security, and such amortization will constitute the income
earned on the security for both accounting and tax purposes.
Because of these features, receipts may be subject to
greater price volatility than interest paying U.S. Treasury
obligations.
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.
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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 regulations adopted by the SEC.
Money Market Under these regulations, money market funds may acquire only
Funds obligations that present minimal credit risks and that are
"eligible securities," which means they are (i) rated, at
the time of investment, by at least two NRSROs (one if it is
the only organization rating such obligation) in the highest
short-term rating category or, if unrated, determined to be
of comparable quality (a "first tier security"), or (ii)
rated according to the foregoing criteria in the second
highest short-term rating category or, if unrated,
determined to be of comparable quality ("second tier
security"). A security is not considered to be unrated if
its issuer has outstanding obligations of comparable
priority and security that have a short-term rating. The
Advisor will determine that an obligation presents minimal
credit risks or that unrated instruments are of comparable
quality in accordance with guidelines established by the
Trustees. In addition, in the case of taxable money market
funds, investments in second tier securities are subject to
the further constraints that (i) no more than 5% of a Fund's
assets may be invested in such securities in the aggregate,
and (ii) any investment in such securities of one issuer is
limited to the greater of 1% of the Fund's total assets or
$1 million. A taxable money market fund may hold up to 25%
its assets in first tier securities of a single issuer for
three Business Days.
Restricted Restricted securities are securities that may not be sold
Securities freely to the public absent registration under the
Securities Act of 1933 or an exemption from registration.
Rights Rights are instruments giving shareholders the right to
purchase shares of newly issued common stock below the
public offering price before they are offered to the public.
Securities In order to generate additional income, a Fund may lend the
Lending securities in which it is invested pursuant to agreements
requiring that the loan be continuously secured by
collateral consisting of cash, securities of the U.S.
Government or its agencies equal at all
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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 There are certain risks connected with investing in foreign
Foreign Issuers securities. These include risks of adverse political and
economic developments (including possible governmental
seizure or nationalization of assets), the possible
imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting
requirements, the possibility that there will be less
information on such securities and their issuers available
to the public, the difficulty of obtaining or enforcing
court judgments abroad, restrictions on foreign investments
in other jurisdictions, difficulties in effecting
repatriation of capital invested abroad, and difficulties in
transaction settlements and the effect of delay on
shareholder equity. Foreign securities may be subject to
foreign taxes, and may be less marketable than comparable
U.S. securities. The value of the Fund's investments
denominated in foreign currencies will depend on the
relative strengths of those currencies and the U.S. dollar,
and the Fund may be affected favorably or unfavorably by
changes in the exchange rates or exchange control
regulations between foreign currencies and the U.S. dollar.
Changes in foreign currency exchange rates also may affect
the value of dividends and interest earned, gains and losses
realized on the sale of securities and net investment income
and gains, if any, to be distributed to shareholders by the
Fund.
Standby Securities subject to standby commitments or puts permit the
Commitments holder thereof to sell the securities at a fixed price prior
and Puts to maturity. Securities subject to a standby commitment or
put may be sold at any time at the current market price.
However, unless the standby commitment or put was an
integral part of the security as originally issued, it may
not be marketable or assignable; therefore, the standby
commitment or put would only have value to the Fund owning
the security to which it relates. In certain cases, a
premium may be paid for a standby commitment or put, which
premium will have the effect of reducing the yield otherwise
payable on the underlying security.
Swaps, Caps, Interest rate swaps, mortgage swaps, currency swaps and
Floors and other types of swap agreements such as caps, floors and
Collars collars are designed to permit the purchaser to preserve a
return or spread on a particular investment or portion of
its portfolio, and to protect against any increase in the
price of securities the Fund anticipates purchasing at a
later date. In a typical interest rate swap, one party
agrees to make regular payments equal to a floating interest
rate times a "notional principal amount," in return for
payments equal to a fixed rate times the same amount, for a
specific period of time. Swaps may also depend on other
prices or rates, such as the value of an index or mortgage
prepayment rates.
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.
Variable and Certain obligations may carry variable or floating rates of
Floating Rate interest, and may involve conditional or unconditional
Instruments demand features. Such instruments bear interest at rates
which are not fixed, but which vary with changes in
specified market rates or indices. The interest rates on
these securities may be reset daily, weekly, quarterly or
some other reset period, and may have a floor or ceiling on
interest rate changes. There is a risk that the current
interest rate on such obligations may not accurately reflect
existing market interest rates.
Warrants Warrants are instruments giving holders the right, but not
the obligation, to buy shares of a company at a given price
during a specified period.
When-Issued and When-issued or delayed delivery basis transactions involve
Delayed the purchase of an instrument with payment and delivery
Delivery taking place in the future. Delivery of and payment for
Securities these securities may occur a month or more after the date of
the purchase commitment. A Fund will maintain with the
Custodian a separate account with liquid securities, cash or
cash equivalents in an amount at least equal to these
commitments. The interest rate realized on these securities
is fixed as of the purchase date and no interest accrues to
the Fund before settlement. These securities are subject to
market fluctuations due to changes in market 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
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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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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
Rembrandt 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 each Fund and the other relates to
Investor shares of each Fund. Prospectuses may be obtained by writing to the
Distributor, First Data Distributors, Inc., 4400 Computer Drive, Westborough,
Massachusetts 01581, or by calling 1-800-443-4725.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
THE TRUST..............................................................
DESCRIPTION OF PERMITTED INVESTMENTS...................................
INVESTMENT LIMITATIONS.................................................
NON-FUNDAMENTAL POLICY.................................................
THE ADVISOR............................................................
THE SUB-ADVISOR........................................................
THE ADMINISTRATOR......................................................
DISTRIBUTION AND SHAREHOLDER SERVICING.................................
TRUSTEES AND OFFICERS OF THE TRUST.....................................
COMPUTATION OF YIELD...................................................
CALCULATION OF TOTAL RETURN............................................
PURCHASE AND REDEMPTION OF SHARES......................................
DETERMINATION OF NET ASSET VALUE.......................................
TAXES..................................................................
PORTFOLIO TRANSACTIONS.................................................
TRADING PRACTICES AND BROKERAGE........................................
DESCRIPTION OF SHARES..................................................
SHAREHOLDER LIABILITY..................................................
5% AND 25% SHAREHOLDERS................................................
LIMITATION OF TRUSTEES' LIABILITY......................................
FINANCIAL STATEMENTS...................................................
APPENDIX............................................................A-1
</TABLE>
APRIL 30, 1998
<PAGE>
THE TRUST
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. Investors may purchase shares through two separate
classes, Common Shares and the Investor Shares, which provide for variations in
distribution costs, voting rights and dividends. 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, Small Cap Fund, Real Estate Fund (collectively, the "Stock
Funds"), Balanced Fund (the "Balanced Fund"), International Equity Fund,
TransEurope Fund, Asian Tigers Fund, Latin America Equity Fund, International
Fixed Income Fund (collectively, the "International Funds"), Fixed Income Fund,
Intermediate Government Fixed Income Fund, Tax-Exempt 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 Stock, Balanced, International and Fixed Income Funds, the "Funds").
DESCRIPTION OF PERMITTED INVESTMENTS
ASSET-BACKED SECURITIES
Asset-backed securities include company receivables, truck and auto loans,
leases, and credit card receivables. These issues may be traded over-the-
counter and typically have a short-intermediate maturity structure depending on
the paydown characteristics of the underlying financial assets which are passed
through to the security holder.
Principal and interest on non-mortgage asset-backed securities may be guaranteed
up to certain amounts and for a certain time period by a letter of credit issued
by a financial institution (such as a bank or insurance company) unaffiliated
with the issuers of such securities. The purchase of non-mortgage asset-backed
securities raises risk considerations peculiar to the financing of the
instruments underlying such securities. For example, there is a risk that
another party could acquire an interest in the obligations superior to that of
the holder of the asset-backed securities. There is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on those securities. Asset-backed securities entail prepayment
risk, which may vary depending on the type of asset, but is generally less than
the prepayment risk associated with mortgage-backed securities. In addition,
unlike most other asset-backed securities, credit card receivables are unsecured
obligations of the card holder.
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<PAGE>
BANKERS' ACCEPTANCES
Bankers' acceptances are bills of exchange or time drafts 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.
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. 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 Latin American 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
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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.
CERTIFICATES OF DEPOSIT
Certificates of deposit are interest bearing instruments 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 will be considered illiquid.
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.
FLOATING RATE NOTES
Floating rate notes will normally involve industrial development or revenue
bonds which provide that the rate of interest is set as a specific percentage of
a designated base rate (such as the prime rate) at a major commercial bank, and
that the Fund can demand payment of the obligation at all times or at stipulated
dates on short notice (not to exceed 30 days) at par plus accrued interest. A
Fund may use the longer of the period required before the Fund is entitled to
prepayment under such obligations or the period remaining until the next
interest rate adjustment date for purposes of determining the maturity. Such
obligations are frequently secured by letters of credit or other credit support
arrangements provided by banks. The quality of the underlying credit or of the
bank, as the case may be, must be rated in the third highest rating category or,
in the Advisor's opinion, be of comparable quality. The Advisor will monitor
the earning power, cash flow and liquidity ratios of the issuers of such
instruments and the ability of an issuer of a demand instrument to pay principal
and interest on demand. The Advisor may purchase other types of tax-exempt
instruments as long as they are of a quality equivalent to the bond or
commercial paper ratings stated above.
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FOREIGN SECURITIES
Foreign securities may be U.S. dollar denominated or non-U.S. dollar denominated
obligations or securities of foreign issuers, including obligations of foreign
branches of U.S. banks and of foreign banks, including European certificates of
deposit, European time deposits, Canadian time deposits and Yankee certificates
of deposit, and investments in Canadian commercial paper, foreign securities and
Europaper. In addition, a Fund may invest in Depositary Receipts. 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 the Fund's agents to keep currently
informed about corporate actions which may affect the prices of portfolio
securities. Communications between the U.S. and foreign countries may be less
reliable than within the U.S., increasing the risk of delayed settlements of
portfolio securities. Certain markets may require payment for securities before
delivery. The Fund's ability and decisions to purchase and sell portfolio
securities may be affected by laws or regulations relating to the convertibility
of currencies and repatriation of assets. Some countries restrict the extent to
which foreigners may invest in their securities markets.
Investments in securities of foreign issuers are frequently denominated in
foreign currencies (including the Euro and 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 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 markets. This may limit a Fund's ability to
effectively hedge its investments in such markets.
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The Latin America Equity Fund may invest in securities denominated in currencies
of Latin American countries. Accordingly, changes in the value of these
currencies against the U.S. dollar will result in corresponding changes in the
U.S. dollar value of the Fund's assets denominated in those currencies. Some
Latin American countries also may have managed currencies, which are not free
floating against the U.S. dollar. In addition, there is risk that certain Latin
American countries may restrict the free conversion of their currencies into
other currencies. Further, it may be difficult to reduce the Fund's Latin
American currency risk through hedging. Any devaluations in the currencies in
which the Fund's portfolio securities are denominated may have a detrimental
impact on the Fund's net asset value.
Certain risks associated with international investments and investing in
smaller, developing capital markets are heightened for investments in Latin
American countries. For example, some of the currencies of Latin American
countries have experienced steady devaluations relative to the U.S. dollar, and
major adjustments have been made in certain of these currencies periodically.
Any devaluations in the currencies in which the Fund's portfolio securities are
denominated may have a detrimental impact on the Fund. Furthermore, Latin
American currencies may not be internationally traded. Also, many Latin
American countries have experienced substantial, and in some periods extremely
high, rates of inflation for many years. Inflation and rapid fluctuations in
inflation rates have had and may continue to have very negative effects on the
economies and securities markets of certain Latin American countries. In
addition, although there is a trend toward less government involvement in
commerce, governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government still owns or controls many companies,
including some of the largest companies in the country. Accordingly, government
actions in the future could have a significant effect on economic conditions in
Latin American countries, which could affect private sector companies and the
Fund, as well as the value of securities in the Fund's portfolio.
Securities of Latin American issuers pose greater liquidity risks and other
risks than securities of companies located in developed countries and traded in
more established markets. Low liquidity in markets may adversely affect the
Fund's ability to buy and sell securities and cause increased volatility. Many
of the countries in Latin America may at various times have less stable
political environments than more developed nations. Changes of control may
adversely affect the pricing of securities from time to time. Some of the Latin
American countries may afford only limited opportunities for investing. In
certain Latin American countries, the Fund may be able to invest solely or
primarily through ADRs or similar securities and government approved investment
vehicles (including closed-end investment funds). For example, due to Chile's
current investment restrictions (in most cases, capital invested directly in
Chile cannot be repatriated for at least one year), the Fund's investments in
Chile primarily will be through investments in ADRs and established Chilean
investment companies not subject to repatriation restrictions. The Fund may
invest up to 10% of its total assets in the securities of closed-end investment
companies. If the Fund invests in closed-end investment companies, the Fund's
shareholders will bear not only their
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proportionate share of the expenses of the Fund, but also will directly bear
duplicative fees (including advisory fees) of the underlying closed-end fund.
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
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a specific security at a specified future
time and at a specified price. An option on a futures contract gives the
purchase 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. The 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. The 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, the Fund
will only sell covered futures contracts and options on futures contracts.
No price is paid upon entering into futures contracts. Instead, the Fund is
required to deposit an amount of cash or U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, are made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.
In order to avoid leveraging and related risks, when the Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
cash equivalents equal to the market value of the futures positions held, less
margin deposits, in a segregated account with the Trust's custodian. Collateral
equal to the current market value of the futures position will be marked to
market on a daily basis.
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.
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No price is paid upon entering into futures contracts. Instead, a Fund is
required to deposit an amount of cash of U.S. Treasury securities known as
"initial margin." Subsequent payments, called "variation margin," to and from
the broker, are made on a daily basis as the value of the futures position
varies (a process known as "marking to market"). The margin is in the nature of
a performance bond or good-faith deposit on a futures contract.
In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of liquid
securities, cash or cash equivalents, equal to the market value of the futures
positions held, less margin deposits, in a segregated account with the Trust's
custodian. Collateral equal to the current market value of the futures position
will be marked to market on a daily basis.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates; (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the 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.
GNMA CERTIFICATES
GNMA Certificates are securities issued by the Government National Mortgage
Association ("GNMA"), a wholly-owned U.S. Government corporation which
guarantees the timely payment of principal and interest. The market value and
interest yield of these instruments can vary due to market interest rate
fluctuations and early prepayments of underlying mortgages. These securities
represent ownership in a pool of federally insured mortgage loans. GNMA
certificates consist of underlying mortgages with a maximum maturity of 30
years. However, due to scheduled and unscheduled principal payments, GNMA
certificates have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to accurately predict the average maturity of a particular
GNMA pool. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. GNMA securities
differ from conventional bonds in that principal is paid back to the certificate
holders over the life of the loan rather than at maturity. As a result, there
will be monthly scheduled payments of principal and interest. In addition,
there may be unscheduled principal payments representing prepayments on the
underlying mortgages. Although GNMA certificates may offer yields higher than
those available from other types of U.S. Government securities, GNMA
certificates may be less effective than other types of securities as a means of
"locking in" attractive long-term rates because of the prepayment feature. For
instance, when interest rates decline, the value of a GNMA certificate likely
will not rise as much as comparable debt securities due to the prepayment
feature. In addition, these prepayments can cause the price of a GNMA
certificate originally purchased at a premium to decline in price to its par
value, which may result in a loss.
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INVESTMENT COMPANY SHARES
Investments in shares of open-end funds and closed-end funds, as described in
the prospectus, may result in the layering of expenses. Since such funds pay
management fees and other expenses, shareholders of a Fund would indirectly pay
both Fund expenses and the expenses of underlying funds with respect to Fund
assets invested therein. Under applicable regulations, the Funds are 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. See also "Investment Limitations."
The Trust has received an exemptive order from the Securities and Exchange
Commission ("SEC") to permit the Funds to invest in shares of the Money Market
Funds. Pursuant to this order, each Fund is permitted to invest in shares of
the Money Market Funds provided that the Advisor and any of its affiliates waive
management fees and other expenses with respect to Fund assets invested therein.
It is the position of the staff of the SEC that certain nongovernmental issuers
of CMOs and REMICs constitute investment companies pursuant to the Investment
Company Act of 1940, as amended ("1940 Act"), and either (a) investments in such
instruments are subject to the limitations set forth above or (b) the issuers of
such instruments have been granted orders from the SEC exempting such
instruments from the definition of investment company.
LOAN PARTICIPATIONS
Loan participations, as described in the prospectus, are interests in loans to
U.S. 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"). 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.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are instruments that entitle the holder to a share of
all interest and principal payments from mortgages underlying the security. The
mortgages backing these securities include conventional thirty-year fixed rate
mortgages, graduated payment mortgages, balloon mortgages and adjustable rate
mortgages. During periods of declining interest rates, prepayment of mortgages
underlying mortgage-backed securities can be expected to accelerate. Prepayment
of mortgages which underlie securities purchased at a premium often results in
capital
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losses, while prepayment of mortgages purchased at a discount often results in
capital gains. Because of these unpredictable prepayment characteristics, it is
often not possible to predict accurately the average life or realized yield of a
particular issue.
Government Pass-Through Securities: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. GNMA, Fannie Mae and FHLMC guarantee
timely distributions of interest to certificate holders. GNMA and Fannie Mae
also guarantee timely distributions of scheduled principal. Fannie Mae and FHLMC
obligations are not backed by the full faith and credit of the U.S. Government
as GNMA certificates are, but Fannie Mae and FHLMC securities are supported by
the instrumentalities' right to borrow from the U.S. Treasury.
Private Pass-Through Securities: These are mortgage-backed securities
issued by a non-governmental entity, such as a trust or corporation. These
securities include collateralized mortgage obligations ("CMOs") and real estate
mortgage investment conduits ("REMICs"). While they are generally structured
with one or more types of credit enhancement, private pass-through securities
typically lack a guarantee by an entity having the credit status of a
governmental agency or instrumentality.
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.
Two principal types of mortgage-backed securities are collateralized mortgage
obligations ("CMOs") and real estate mortgage investment conduits ("REMICs"),
which are rated in one of the two highest rating categories by a nationally
recognized statistical rating organization ("NRSRO"). CMOs are securities
collateralized by mortgages, mortgage pass-throughs, mortgage pay-through bonds
(bonds representing an interest in a pool of mortgages where the cash flow
generated from the mortgage collateral pool is dedicated to bond repayment), and
mortgage-backed bonds (general obligations of the issuers payable out of the
issuers' general funds that are secured by a first lien on a pool of single
family detached properties). Many CMOs are issued with a number of classes or
series which have different maturities and are retired in sequence.
Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
--- ----
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obliga-
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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.
Certain of the Funds also may invest in parallel pay CMOs and Planned
Amortization Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to
provide payments of principal on each payment date to more than one class.
These simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with other CMO
structures, must be retired by its stated maturity date or final distribution
date, but may be retired earlier. PAC Bonds are always parallel pay CMOs with
the required principal payment on such securities having the highest priority
after interest has been paid to all classes.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
MUNICIPAL SECURITIES
Municipal securities consist of (i) debt obligations issued 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 or special obligation bonds, private activity and industrial development
bonds.
Municipal notes include, but are not limited to, general obligation notes, tax
anticipation notes (notes sold to finance working capital needs of the issuer in
anticipation of receiving taxes on a future date), revenue anticipation notes
(notes sold to provide needed cash prior to receipt of expected non-tax revenues
from a specific source), bond anticipation notes, certificates of indebtedness,
demand notes and construction loan notes. A Fund's investments in any of the
notes
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described above will be limited to those obligations (i) rated in the highest
two rating categories by an NRSRO or (ii) if not rated, of equivalent quality in
the Advisor's judgment.
Municipal bonds must be rated in the highest four rating categories by an NRSRO
at the time of investment or, if unrated, must be deemed by the Advisor to have
essentially the same characteristics and quality as bonds rated in the above
rating categories. The Advisor may purchase industrial development and
pollution control bonds if the interest paid is exempt from federal income tax.
These bonds are issued by or on behalf of public authorities to raise money to
finance various privately-operated facilities for business and manufacturing,
housing, sports, and pollution control. These bonds are also used to finance
public facilities such as airports, mass transit systems, ports and 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 appropriate except as limited by each Fund's investment
restrictions, but will not be used for speculative purposes. Among the
strategies the Advisor may use are: protective puts on stocks owned by a Fund,
buying calls on stocks a Fund is attempting to buy and writing covered calls on
stocks a Fund owns.
A put option gives the purchaser of the option the right to sell, and the writer
the obligation to buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction". In
order to close out an option position, a Fund may enter into a "closing
transaction" -- the sale (purchase) of an option contract on the same security
with the same exercise price and expiration date as the option contract
originally opened.
A Fund may buy protective put options from time to time on such portion of its
assets as the Advisor determines is appropriate in seeking the Fund's investment
objective. The advantage to the Fund of buying the protective put is that if
the price of the stock falls during the option period, the Fund may exercise the
put and receive the higher exercise price for the stock. However, if the
security rises in value, the Fund will have paid a premium for the put which
will expire unexercised.
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A Fund may buy call options from time to time as the Advisor determines is
appropriate in seeking the Fund's investment objective. The Fund may elect to
buy calls on stocks that the Fund is trying to buy. The advantage of the Fund
buying the fiduciary call is that if the price of the stock rises during the
option period, the Fund may exercise the call and buy the stock for the lower
exercise price. If the security falls in value, the Fund will have paid a
premium for the call (which will expire worthless) but will be able to buy the
stock at a lower price.
A Fund may write covered call options from time to time on such portion of its
assets as the Advisor determines is appropriate in seeking the Fund's investment
objective. The advantage to the Fund of writing covered call options is that
the Fund receives a premium which is additional income. However, if the
security rises in value, the Fund may not fully participate in the market
appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which a Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written. A closing purchase
transaction cannot be effected with respect to an option once the option writer
has received an exercise notice for such option.
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 that 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.
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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 the 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 the Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash, cash equivalents or liquid securities in an
amount equal to the amount the Fund would be required to pay upon exercise of
the put.
The market value of an option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the pricing volatility of the underlying
security and the time remaining until the expiration date.
There are risks associated with option transactions, including the following:
(i) the success of a hedging strategy may depend on the ability of the Advisor
to predict movements in the prices of the individual securities, fluctuations in
markets and movements in interest rates; (ii) there may be imperfect correlation
between the movement in prices of securities held by a Fund; (iii) there may not
be a liquid secondary market for options; and (iv) while a Fund will receive a
premium when it writes covered call options, it may not participate fully in a
rise in the market value of the underlying security.
RECEIPTS
Receipts are interests in separately traded interest and principal component
parts of U.S. Treasury obligations that are issued by banks and brokerage firms
and are created by depositing U.S. Treasury obligations into a special account
at a custodian bank. The custodian holds the interest and principal payments
for the benefit of the registered owners of the certificates or receipts. The
custodian arranges for the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts are sold as zero coupon
securities which means that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash payments of interest
or principal. This discount is amortized over the life of the security, and
such amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, receipts may be subject
to greater price volatility than interest paying U.S. Treasury obligations. See
also "Taxes."
REPURCHASE AGREEMENTS
Repurchase agreements, into which each of the Funds, except the Treasury Money
Market Fund, is permitted to enter, are agreements by which a person (e.g., a
----
Fund) obtains a security and simultaneously commits to return the security to
the seller (primary securities dealer recognized by the Federal Reserve Bank of
New York or a national member bank as defined in Section 3(d)(1) of the Federal
Deposit Insurance Act, as amended) at an agreed upon price (including principal
and interest) on an agreed upon date within a number of days (usually not more
than seven) from the date of purchase. The resale price reflects the purchase
price plus an agreed upon market rate of interest which is unrelated to the
coupon rate or maturity of the
-14-
<PAGE>
underlying security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value of the underlying security.
Repurchase agreements are considered to be loans by the Funds for purposes of
their investment limitations. The repurchase agreements entered into by the
Funds will provide that the underlying security at all times shall have a value
at least equal to 100% of the resale price stated in the agreement (the Advisor
monitors compliance with this requirement). Under all repurchase agreements
entered into by the Funds, the Custodian or its agent must take possession of
the underlying collateral. However, if the seller defaults, the Funds could
realize a loss on the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the resale price
provided in the agreement including interest. In addition, even though the
Bankruptcy Code provides protection for most repurchase agreements, if the
seller should be involved in bankruptcy or insolvency proceedings, the Funds may
incur delay and costs in selling the underlying security or may suffer a loss of
principal and interest if the Funds are treated as an unsecured creditors and
required to return the underlying securities to the seller's estate.
RESTRICTED SECURITIES
Restricted securities are securities that may not be sold to the public without
registration under the Securities Act of 1933 (the "1933 Act") absent an
exemption from registration. Up to 10% of a Fund's assets may consist of
restricted securities that are illiquid and the Advisor may invest up to an
additional 5% of the total assets of a Fund in restricted securities, provided
it determines that at the time of investment such securities are not illiquid
(generally, an illiquid security cannot be disposed of within seven days in the
ordinary course of business at its full value), based on guidelines and
procedures developed and established by the Board of Trustees of the Trust. The
Board of Trustees will periodically review such procedures and guidelines and
will monitor the Advisor's implementation of such procedures and guidelines.
Under these procedures and guidelines, the Advisor will consider the frequency
of trades and quotes for the security, the number of dealers in, and potential
purchasers for, the securities, dealer undertakings to make a market in the
security and the nature of the security and of the marketplace trades. In
purchasing such restricted securities, the Advisor intends to rely upon the
exemption from registration provided by Rule 144A under the 1933 Act.
SECURITIES LENDING
Securities loaned by a Fund pursuant to an agreement which requires collateral
to secure the loan will not be made if, as a result, the aggregate amount of all
outstanding securities loans for the Fund exceed one-third of the value of a
Fund's total assets taken at fair market value. A Fund will continue to receive
interest on the loaned securities while simultaneously earning interest on the
investment of the cash collateral in U.S. Government securities. However, a
Fund will normally
-15-
<PAGE>
pay lending fees to such broker-dealers and related expenses from the
interest earned on invested collateral. Loans are made only to borrowers deemed
by the Advisor to be of good standing and when, in the judgment of the Advisor,
the consideration which can be earned currently from such securities loans
justifies the attendant risk. Any loan may be terminated by either party upon
reasonable notice to the other party. The Funds may use the Distributor or a
broker-dealer affiliate of the Advisor as a broker in these transactions.
SHORT SALES
Selling securities short involves selling securities the seller 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 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, which involve the Fund's agreeing 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
securities 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, Latin American
governments may default on their Sovereign Debt, which may require holders of
such Sovereign Debt to participate in debt rescheduling or additional lending to
defaulting governments. There is no bankruptcy proceeding by which defaulted
Sovereign Debt may be collected in whole or in part.
-16-
<PAGE>
Sovereign Debt Securities are debt securities issued by various foreign
governmental issuers. Investing in foreign Sovereign Debt Securities will expose
a Portfolio to political, social or economic changes in the countries that issue
the securities. The ability of sovereign entities in developing and emerging
market countries or the governmental authorities that control repayment of their
external debt to pay principal and interest when due may depend on a country's
general economic and political conditions. In addition, a country's cash flow
situation, the availability of sufficient foreign exchange, the relative size of
its debt service burden to its economy, and its government's policy towards
supranational agencies will also affect a country's ability or willingness to
repay its debts.
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
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.
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 will issue SPDRs in aggregations of 50,000 known as "Creation Units" in
exchange for a "Portfolio Deposit" consisting of (a) a portfolio of securities
substantially similar to the component securities ("Index Securities") of the
Standard & Poor's 500 Composite Stock Price Index (the "S&P Index"), (b) a cash
payment equal to a pro rata portion of the dividends accrued on the UIT's
portfolio securities since the last dividend payment by the UIT, net of expenses
and liabilities, and (c) a cash payment or credit ("Balancing Amount")
designed to equalize the net asset value of the S&P Index and the net asset
value of a Portfolio Deposit.
-17-
<PAGE>
SPDRs are not individually redeemable, except upon termination of the UIT. To
redeem, the Funds must accumulate enough SPDRs to reconstitute a Creation Unit.
The liquidity of small holdings of SPDRs, therefore, will depend upon the
existence of a secondary market. Upon redemption of a Creation Unit, the Funds
will receive Index Securities and cash identical to the Portfolio Deposit
required of an investor wishing to purchase a Creation Unit that day.
The price of SPDRs is derived and based upon the securities held by the UIT.
Accordingly, the level of risk involved in the purchase or sale of a SPDR is
similar to the risk involved in the purchase or sale of traditional common
stock, with the exception that the pricing mechanism for SPDRs is based on a
basket of stocks. Disruptions in the markets for the securities underlying
SPDRs purchased or sold by the Funds could result in losses on SPDRs. Trading
in SPDRs involves risks similar to those risks, described above under "Options,"
involved in the writing of options on securities.
STANDBY COMMITMENTS, OR PUTS
The Advisor has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit a Fund to meet redemptions and remain as fully invested as
possible in municipal securities. The Funds reserve the right to engage in put
transactions. The right to put the securities depends on the writer's ability
to pay for the securities at the time the put is exercised. The Funds will
limit their put transactions to institutions which the Advisor believes present
minimal credit risks, and the Advisor will use its best efforts to initially
determine and continue to monitor the financial strength of the sellers of the
options by evaluating their financial statements and such other information as
is available in the marketplace. It may, however, be difficult to monitor the
financial strength of the writers because adequate current financial information
may not be available. In the event that any writer is unable to honor a put for
financial reasons, the Fund would be general creditor (i.e., on a parity with
----
all other unsecured creditors) of the writer. Furthermore, particular
provisions of the contract between the Fund and the writer may excuse the writer
from repurchasing the securities; for example, a change in the published
rating of the underlying municipal securities or any similar event that has an
adverse effect on the issuer's credit or a provision in the contract that the
put will not be exercised except in certain special cases, for example, to 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.
The municipal securities purchased subject to a put may be sold to third persons
at any time, even though the put is outstanding, but the put itself, unless it
is an integral part of the security as originally issued, may not be marketable
or otherwise assignable. Therefore, the put would have value
-18-
<PAGE>
only to the Fund. Sale of the securities to third parties or lapse of time with
the put unexercised may terminate the right to put the securities. Prior to the
expiration of any put option, the Fund could seek to negotiate terms for the
extension of such an option. If such a renewal cannot be negotiated on terms
satisfactory to the Fund, the Fund could sell the portfolio security. The
maturity of the underlying security will generally be different from that of the
put. There will be no limit to the percentage of portfolio securities that the
Fund may purchase subject to a put, but the amount paid directly or indirectly
for puts which are not integral parts of the security as originally issued which
are held by the Fund will not exceed 1/2 of 1% of the value of the total assets
of such Fund calculated immediately after any such put is acquired. For the
purpose of determining the "maturity" of securities purchased subject to an
option to put, and for the purpose of determining the dollar-weighted average
maturity of the Fund including such securities, the Trust will consider
"maturity" to be the first date on which it has the right to demand payment from
the writer of the put although the final maturity of the security is later than
such date.
STRIPS
Separately traded interest and principal securities ("STRIPS") are component
parts of U.S. Treasury Securities traded through the Federal Book-Entry System.
The Advisor will purchase only STRIPS that it determines are liquid or, if
illiquid, that do not violate the Fund's investment policy concerning
investments in illiquid securities. Consistent with Rule 2a-7, the Advisor will
purchase for Money Market Funds only STRIPS that have a remaining maturity of
397 days or less; therefore, the Money Market Funds currently may purchase only
interest component parts of U.S. Treasury Securities. While there is no
limitation on the percentage of a Fund's assets that may be comprised of STRIPS,
the Advisor will monitor the level of such holdings to avoid the risk of
impairing shareholders' redemption rights and of deviations in the value of
shares of the Money Market Funds.
SWAPS, CAPS AND FLOORS
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a
result, swaps can be highly volatile and have a considerable impact on the
Fund's performance. Swap agreements are subject to risks related to the
counterparty's ability to perform, and may decline in value if the
counterparty's creditworthiness deteriorates. The Fund may also suffer losses
if it is unable to terminate outstanding swap agreements or reduce its exposure
through offsetting transactions. Any obligation the Fund may have under these
types of arrangements will be covered by setting aside liquid, high grade debt
securities in a segregated account. The Fund will enter into swaps only with
counterparties believed to be creditworthy.
In a typical cap or floor agreement, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specific interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate falls
below an agreed-upon level. An interest rate collar combines elements of buying
a cap and
-19-
<PAGE>
selling a floor. In swap agreements, if the Fund agrees to exchange payments in
dollars for payments in foreign currency, the swap agreement would tend to
decrease the Fund's exposure to U.S. interest rates and increase its exposure to
foreign currency and interest rates. Caps and floors have an effect similar to
buying or writing options. Depending on how they are used, swap agreements may
increase or decrease the overall volatility of the Fund's investment and their
share price and yield.
The quality standards of debt securities and other obligations as described for
the Funds must be satisfied at the time an investment is made. In the event
that an investment held by a Fund is assigned a lower rating or ceases to be
rated, the Advisor will promptly reassess whether such security presents
suitable credit risks and whether the Fund should continue to hold the security
or obligation in its portfolio. If a portfolio security or obligation no longer
presents suitable credit risks or is in default, the Fund will dispose of the
security or obligation as soon as reasonably practicable unless the Trustees of
the Trust determine that to do so is not in the best interest of the Fund.
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.
VARIABLE AND FLOATING RATE INSTRUMENTS
Certain obligations may carry variable or floating rates of interest, and may
involve conditional or unconditional 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.
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
-20-
<PAGE>
on the securities are each fixed at the time the purchaser enters into the
commitment. Purchasing obligations on a when-issued basis may be used as a form
of leveraging because the purchaser may accept the market risk prior to payment
for the securities. The Funds will segregate cash, cash equivalents or liquid
securities in an amount at least equal in value to the Funds' commitments to
purchase when-issued securities. If the value of these assets declines, the
Funds will place additional liquid assets aside on a daily basis so that the
value of the assets set aside is equal to the amount of such commitments.
Consequently, the Funds will not use such purchases for leveraging.
INVESTMENT LIMITATIONS
Each Fund has adopted certain investment limitations which, in addition to those
limitations in the Prospectus, are fundamental and may not be changed without
approval by a majority vote of the Fund's outstanding shares. The term
"majority of the Fund's outstanding shares" means the vote of (i) 67% or more of
the Fund's shares present at a meeting, if more than 50% of the outstanding
shares of the Fund are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding shares, whichever is less.
NO FUND MAY:
1. Underwrite securities issued by others, except to the extent that the Fund
may be considered an underwriter within the meaning of the Securities Act
of 1933 in the disposition of shares of the Fund.
2. 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).
3. Make loans, except as permitted by the 1940 Act, and the rules and
regulations thereunder.
4. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described below or as permitted by rule,
regulation or order of the SEC.
THE MONEY MARKET FUNDS MAY NOT:
1. Borrow money, except 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,
-21-
<PAGE>
except where a Fund has borrowed money for temporary purposes in amounts
not exceeding 5% of its total assets.
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. Purchase securities of any issuer if, as a result, the Fund would violate
the diversification provisions under Rule 2a-7 of the 1940 Act.
THE STOCK, INTERNATIONAL, FIXED INCOME AND BALANCED FUNDS MAY NOT:
1. 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.
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.
The foregoing percentages (except for the limitation on illiquid securities
below) will apply at the time of the purchase of a security and shall not be
considered violated unless an excess occurs or exists immediately after and as a
result of a purchase of such security.
-22-
<PAGE>
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%).
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 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 Market Fund $229,313 $ 291,794 $184,294 $235,779
- ------------------------------------------------------------------------------------------------------------
Government Money Market
Fund $376,824 $ 448,001 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
Money Market Fund $998,172 $1,138,578 $647,771 $853,933
- ------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market
Fund $362,794 $ 318,245 $289,877 $275,379
- ------------------------------------------------------------------------------------------------------------
Fixed Income Fund $576,717 $ 625,690 $100,132 $125,138
- ------------------------------------------------------------------------------------------------------------
Intermediate Government Fixed
Income Fund $419,323 $ 334,912 $ 72,093 $ 66,982
- ------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $249,245 $ 218,761 $ 64,521 $ 56,636
- ------------------------------------------------------------------------------------------------------------
</TABLE>
-23-
<PAGE>
<TABLE>
<CAPTION>
============================================================================================================
Net Fees Paid Fees Waived
---------------------------------------------------------------------------
Fund 1995 1996 1997 1995 1996 1997
============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
International Fixed Income Fund $139,512 $ 140,609 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income
Fund * * * *
- ------------------------------------------------------------------------------------------------------------
Value Fund $788,698 $1,170,294 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
Growth Fund $685,748 $ 723,113 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
Small Cap Fund $163,166 $ 235,012 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
International Equity Fund $643,380 $ 886,424 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * *
- ------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $211,903 $ 312,823 $ 0 $ 0
- ------------------------------------------------------------------------------------------------------------
Latin America Equity Fund * $ 44,270 * $ 0
- ------------------------------------------------------------------------------------------------------------
Real Estate Fund * * * *
- ------------------------------------------------------------------------------------------------------------
Balanced Fund $454,111 $ 391,615 $ 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
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<PAGE>
majority of the Trust's Board of Trustees or by the vote of a majority of all
votes attributable to the outstanding shares of the Fund. Notwithstanding the
foregoing, this Agreement may be terminated as to the Fund at any time, without
the payment of any penalty, on sixty (60) days' written notice by the Advisor or
by the Sub-Advisor. The Sub-Advisory Agreement will immediately terminate in the
event of its assignment.
THE ADMINISTRATOR
The Trust and 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
[_______________].
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 February 28, 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
- -------------------------------------------------------------------------------
Government Money Market Fund $282,618 $336,001
- -------------------------------------------------------------------------------
Money Market Fund $647,771 $853,933
- -------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $277,850 $254,410
- -------------------------------------------------------------------------------
Fixed Income Fund $159,185 $187,707
- -------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund $113,044 $100,473
- -------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 78,442 $ 68,849
- -------------------------------------------------------------------------------
International Fixed Income Fund $ 26,158 $ 26,364
- -------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund * *
- -------------------------------------------------------------------------------
</TABLE>
-25-
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
Net Fees Paid
-----------------------------------
Fund 1995 1996 1997
===============================================================================
<S> <C> <C> <C>
Value Fund $147,881 $219,430
- -------------------------------------------------------------------------------
Growth Fund $128,578 $135,584
- -------------------------------------------------------------------------------
Small Cap Fund $ 30,713 $ 44,065
- -------------------------------------------------------------------------------
International Equity Fund $ 96,507 $132,965
- -------------------------------------------------------------------------------
TransEurope Fund * *
- -------------------------------------------------------------------------------
Asian Tigers Fund $ 31,786 $ 46,924
- -------------------------------------------------------------------------------
Latin America Equity Fund * $ 6,640
- -------------------------------------------------------------------------------
Real Estate Fund * *
- -------------------------------------------------------------------------------
Balanced Fund $ 97,310 $ 83,917
===============================================================================
</TABLE>
* Not in operation during the period.
DISTRIBUTION AND SHAREHOLDER SERVICING
First Data Distributors, Inc., 4400 Computer Drive, Westborough, Massachusetts
01581, and the Trust are parties to a distribution agreement (the "Distribution
Agreement") dated [_________]. The Distribution Agreement shall be reviewed and
ratified at least annually (i) by the Trustees or by the vote of a majority of
the outstanding shares of the Trust, and (ii) by the vote of a majority of the
Trustees of the Trust who are not parties to the Distribution Agreement or
"interested persons" (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement will terminate in the event
of any assignment, as defined in the 1940 Act, and is terminable with respect to
a particular Fund on not less than 60 days' notice by the Trustees, by vote of a
majority of the outstanding shares of such Fund or by the Distributor.
RULE 12B-1 FEES
The Trust has adopted a distribution plan for the Investor Shares of each Fund
(the "Investor Shares Plan") in accordance with the provisions of Rule 12b-1
under the 1940 Act, which regulates circumstances under which an investment
company may directly or indirectly bear expenses relating to the distribution of
its shares. Continuance of the Investor Shares Plan must be approved annually by
a majority of the Trustees of the Trust and by a majority of the Trustees who
are not "interested persons" of the Trust or the Distributor, as that term is
defined in the 1940 Act ("Disinterested Trustees"). The Investor Shares Plan
requires that quarterly written reports of amounts spent under the Investor
Shares 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,
-26-
<PAGE>
the Investor Shares Plan may be terminated with respect to any Fund by a vote of
a majority of the Disinterested Trustees, or by a vote of a majority of the
outstanding shares of that Fund. The Investor Shares 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 Trustee.
Pursuant to the Distribution Agreement and the Investor Shares Plan, Investor
Shares are subject to an ongoing distribution fee calculated on each Fund's
aggregate average daily net assets attri butable to its Investor Shares.
The Investor Shares Plan provides for payments to the Distributor at an annual
rate of .30% of the Investor Shares average daily net assets. The Investor
Shares 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 February 28, 1998, Rembrandt Financial Services Company, Oaks,
Pennsylvania 19456, served as the Trust's distributor and 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 Investor Shares Plan:
<TABLE>
<CAPTION>
===============================================================================
Distribution Amount Paid
Fund 1997
- -------------------------------------------------------------------------------
<S> <C>
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 $ [ ]
- -------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund $ [ ]
- -------------------------------------------------------------------------------
Value Fund $ [ ]
- -------------------------------------------------------------------------------
Growth Fund $ [ ]
- -------------------------------------------------------------------------------
Small Cap Fund $ [ ]
- -------------------------------------------------------------------------------
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
===============================================================================
Distribution Amount Paid
Fund 1997
- -------------------------------------------------------------------------------
<S> <C>
International Equity Fund $ [ ]
- -------------------------------------------------------------------------------
TransEurope Fund $ [ ]
- -------------------------------------------------------------------------------
Asian Tigers Fund $ [ ]
- -------------------------------------------------------------------------------
Balanced Fund $ [ ]
===============================================================================
</TABLE>
* Not in operation during the period.
The distribution-related services that may be provided under the Investor Shares
Plan include establishing and maintaining customer accounts and records;
aggregating and processing purchase and redemption requests from customers;
placing net purchase and redemption orders with the Distributor; automatically
investing customer account cash balances; providing periodic statements to
customers; arranging for wires; answering customer inquiries concerning their
investments; assisting customers in changing dividend options, account
designations, and addresses; performing sub-accounting functions; processing
dividend payments from the Trust on behalf of customers; and forwarding
shareholder communications from the Trust (such as proxies, shareholder reports,
and dividend distribution, and tax notices) to these customers with respect to
investments in the Trust. Certain state securities laws may require those
financial institutions providing such distribution services to register as
dealers pursuant to state law.
Except to the extent that the Administrator or Advisor benefitted through
increased fees from an increase in the net assets of the Trust which may have
resulted in part from the expenditures, no "interested person" of the Trust nor
any Trustee of the Trust who is not an "interested person" of the Trust had a
direct or indirect financial interest in the operation of the Investor Shares
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.
-28-
<PAGE>
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust and their principal occupations for
the last five years are set forth below.
ARNOLD F. BROOKSTONE (4/8/30) -- Trustee and Chairman -- 150 N. Michigan Avenue,
Chicago, Illinois 60601. Retired. Executive Vice President, Chief Financial
Officer and Planning Officer of Stone Container Corporation, 1991-1995. Senior
Vice President, Chief Financial Officer and Planning Officer of Stone Container
Corporation since 1981. Prior thereto, Mr. Brookstone held various other
executive positions with Stone Container Corporation since 1973.
WILLIAM T. SIMPSON (7/26/27) -- Trustee -- 1318 Navajo Court, Louisville,
Kentucky. Consultant, PNC Bank of Kentucky (formerly Citizens Fidelity Bank and
Trust company) (a state chartered bank) since 1992. Senior Vice President, PNC
Bank of Kentucky 1973-1992.
ROBERT FEITLER ( ) -- Trustee -- [ADDRESS]. Chairman of Executive
Committee, Board of Directors, Weyco Group, Inc., since 1996. President and
Director, Weyco Group, Inc., 1968-1996.
JOHN A. WING* ( ) -- Trustee**, President and Chief Executive Officer
- -- 208 South LaSalle Street, Chicago, Illinois 60604. [WORK HISTORY].
RICHARD A. FRODSHAM ( ) -- Vice President** --
CHARLES KLIMKOWSKI ( ) -- Vice President** --
JOHN KRAMER ( ) -- Vice President and Secretary** --
MICHAEL T. CASTINO ( ) -- Vice President** --
KATHRYN L. MARTIN ( ) -- Vice President and Assistant Secretary** --
LAURIE LYNCH ( ) -- Vice President** --
ANN WEIS ( ) -- Vice President --
JULIE TEDESCO ( ) -- Assistant Secretary --
TERESA HAMLIN ( ) -- Assistant Secretary --
JOHN J. BURKE, III ( ) -- Treasurer --
-29-
<PAGE>
JYLANNE DUNNE ( ) -- Assistant Treasurer --
DIANE TARNOW ( ) -- Vice President and Assistant Treasurer --
THERESE HOGAN ( ) -- Vice President and Assistant Treasurer --
JOHN H. GRADY, JR. (6/1/61) -- Assistant Secretary -- 1800 M Street, N.W.
Washington, DC 20036. Partner, Morgan, Lewis & Bockius LLP (law firm) since
1995; Associate, Morgan, Lewis & Bockius LLP, 1993-1995; Associate, Ropes & Gray
(law firm), 1988-1993.
____________________
*Mr. 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 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 Feitler*, N/A N/A N/A N/A
Trustee
- ------------------------------------------------------------------------------------------------------
</TABLE>
_______________
* Messrs. Wing and Feitler 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
-30-
<PAGE>
in a Fund over a seven-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that week is assumed to be generated each
week over a 52-week period and is shown as a percentage of the investment. The
effective yield is calculated similarly but, when annualized, the income earned
by an investment in a Fund is assumed to be reinvested. The effective yield will
be slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
The current yield of the Funds will be calculated daily based upon the seven
days ending on the date of calculation ("base period"). The yield is computed
by determining the net change (exclusive of 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:
-31-
<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 ____% ____% N/A N/A
-----------------------------------------------------------------
Market Fund Investor ____% ____% N/A N/A
- ---------------------------------------------------------------------------------------
Government Money Common ____% ____% N/A N/A
-----------------------------------------------------------------
Market Fund Investor ____% ____% N/A N/A
- ---------------------------------------------------------------------------------------
Money Market Fund Common ____% ____% N/A N/A
-----------------------------------------------------------------
Investor ____% ____% N/A N/A
- ---------------------------------------------------------------------------------------
Tax-Exempt Money Common ____% ____% ____% ____%
-----------------------------------------------------------------
Market Fund Investor ____% ____% ____% ____%
=======================================================================================
</TABLE>
Yields are one basis upon which investors may compare the Funds with other money
market funds; however, yields of other money market funds and other investment
vehicles may not be comparable because of the factors set forth above and
differences in the methods used in valuing portfolio instruments.
The Value Fund, Growth Fund, Small Cap Fund, International Equity Fund,
TransEurope Fund, Asian Tigers Fund, Fixed Income Fund, Intermediate Government
Fixed Income Fund, Tax-Exempt Fixed Income Fund, International Fixed Income
Fund, Limited Volatility Fixed Income Fund, Latin America Equity Fund, 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 ____%
----------------------
Investor ____%
- -------------------------------------------------------------------
Intermediate Government Fixed Income Fund Common ____%
----------------------
Investor ____%
- -------------------------------------------------------------------
Tax-Exempt Fixed Income Fund Common ____%
----------------------
Investor ____%
- -------------------------------------------------------------------
</TABLE>
-32-
<PAGE>
<TABLE>
<CAPTION>
===================================================================
Fund Class 30-Day Yield
===================================================================
<S> <C> <C>
International Fixed Income Fund Common ____%
----------------------
Investor ____%
- -------------------------------------------------------------------
Value Fund Common ____%
----------------------
Investor ____%
- -------------------------------------------------------------------
Growth Fund Common ____%
----------------------
Investor ____%
- -------------------------------------------------------------------
Small Cap Fund Common ____%
----------------------
Investor ____%
- -------------------------------------------------------------------
International Equity Fund Common N/A
----------------------
Investor N/A
- -------------------------------------------------------------------
Asian Tigers Fund Common N/A
----------------------
Investor N/A
- -------------------------------------------------------------------
Latin America Equity Fund Common ____%
----------------------
Investor N/A
- -------------------------------------------------------------------
Real Estate Fund Common ____%
----------------------
Investor N/A
- -------------------------------------------------------------------
Balanced Fund Common ____%
----------------------
Investor ____%
===================================================================
</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 ____% for the Common Shares and ____% for
the Investor Shares.
CALCULATION OF TOTAL RETURN
From time to time, the Value Fund, Growth Fund, Small Cap Fund, International
Equity Fund, TransEurope Fund, Asian Tigers Fund, Latin America Equity Fund,
Fixed Income Fund, Intermediate 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
-33-
<PAGE>
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:
<TABLE>
<CAPTION>
=======================================================================================================
Average Annual Total Return
----------------------------------
Since
Fund Class One Year Three Year Inception
========================================================================================================
<S> <C>
Treasury Money Market Fund Investor-Without sales load /1#/ ____% ____% ____%
---------------------------------------------------------------------
Common/2/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
Government Money Market Fund Investor-Without sales load/3#/ ____% ____% ____%
---------------------------------------------------------------------
Common/2/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
Money Market Fund Investor-Without sales load/4#/ ____% ____% ____%
---------------------------------------------------------------------
Common/2/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund Investor-Without sales load/5 #/ ____% ____% ____%
---------------------------------------------------------------------
Common/2/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
Fixed Income Fund Investor-With sales load/6 #/ ____% ____% ____%
---------------------------------------------------------------------
Investor-Without sales load/6/ ____% ____% ____%
---------------------------------------------------------------------
Common/2/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
Intermediate Government Fixed Investor-With sales load/7 #/ ____% _____% ____%
Income Fund
---------------------------------------------------------------------
Investor-Without sales load/7/ ____% ____% ____%
---------------------------------------------------------------------
Common/2/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund Investor-With sales load/8 #/ ____% ____% ____%
---------------------------------------------------------------------
Investor-Without sales load/8/ ____% ____% ____%
---------------------------------------------------------------------
Common/2/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
International Fixed Income Fund Investor-With sales load/9 #/ ____% ____% ____%
---------------------------------------------------------------------
Investor-Without sales load/9/ ____% ____% ____%
---------------------------------------------------------------------
Common/10/ ____% ____% ____%
- --------------------------------------------------------------------------------------------------------
</TABLE>
-34-
<PAGE>
<TABLE>
<CAPTION>
=======================================================================================================
Average Annual Total Return
----------------------------------
Since
Fund Class One Year Three Year Inception
========================================================================================================
<S> <C> <C> <C> <C>
Limited Volatility Fixed Income Investor-With sales load/#/ * * *
Fund
---------------------------------------------------------------------
Investor-Without sales load * * *
---------------------------------------------------------------------
Common * * *
- --------------------------------------------------------------------------------------------------------
Balanced Fund Investor-With sales load/8 #/ _____% ____% ____%
---------------------------------------------------------------------
Investor-Without sales load/8/ _____% _____% ____%
---------------------------------------------------------------------
Common/2/ _____% _____% ____%
- --------------------------------------------------------------------------------------------------------
Value Fund Investor-With sales load/11 #/ _____% _____% ____%
---------------------------------------------------------------------
Investor-Without sales load/11/ _____% _____% ____%
---------------------------------------------------------------------
Common/2/ _____% _____% ____%
- --------------------------------------------------------------------------------------------------------
Growth Fund Investor-With sales load/12 #/ _____% _____% ____%
---------------------------------------------------------------------
Investor-Without sales load/12/ _____% _____% _____%
---------------------------------------------------------------------
Common/2/ _____% _____% _____%
- --------------------------------------------------------------------------------------------------------
Small Cap Fund Investor-With sales load/7 #/ _____% _____% _____%
---------------------------------------------------------------------
Investor-Without sales load/7/ _____% _____% _____%
---------------------------------------------------------------------
Common/2/ _____% _____% _____%
- --------------------------------------------------------------------------------------------------------
International Equity Fund Investor-With sales load/7 #/ ____% ____% ____%
---------------------------------------------------------------------
Investor-Without sales load/7/ ____% ____% _____%
---------------------------------------------------------------------
Common/2/ _____% ____% _____%
- --------------------------------------------------------------------------------------------------------
Asian Tigers Fund Investor-With sales load/13 #/ ____% * ____%
---------------------------------------------------------------------
Investor-Without sales load/13/ ____% * ____%
---------------------------------------------------------------------
Common/14/ ____% * ____%
- --------------------------------------------------------------------------------------------------------
Latin America Equity Fund Investor-With sales load/#/ * * *
---------------------------------------------------------------------
Investor-Without sales load * * *
---------------------------------------------------------------------
Common ____% * ____%
- --------------------------------------------------------------------------------------------------------
TransEurope Fund Investor-With sales load/#/ * * *
---------------------------------------------------------------------
Investor-Without sales load * * *
---------------------------------------------------------------------
Common * * *
- --------------------------------------------------------------------------------------------------------
Real Estate Fund Common/16/
========================================================================================================
</TABLE>
-35-
<PAGE>
* Not in operation during the period.
/#/ Prior to July 28, 1997 Investor Shares were subject to front-end sales
load
- ---------------
/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
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 ad
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.
The performance of Common Shares will normally be higher than that of Investor
Shares because of the additional distribution and administrative services
expenses charged to Investor Shares.
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 on the sale
of any such securities so received in payment of redemptions. However, a
Shareholder
-36-
<PAGE>
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. Securities of the Treasury Money Market,
Government Money Market, Money Market and Tax-Exempt Money Market Funds will be
valued by the amortized cost method, which involves valuing a security at its
cost on the date of purchase and thereafter (absent unusual circumstances)
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuations in general market rates of interest on
the value of the instrument. While this method provides certainty in valuation,
it may result in periods during which a security's value, as determined by this
method, is higher or lower than the price the Fund would receive if it sold the
instrument. During periods of declining interest rates, the daily yield of the
Fund may tend to be higher than a like computation made by a company with
identical investments utilizing a method of valuation based upon market prices
and estimates of market prices for all of its portfolio securities. Thus, if
the use of amortized cost by the Fund resulted in a lower aggregate portfolio
value on a particular day, a prospective investor in the Fund would be able to
obtain a somewhat higher yield than would result from investment in a 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
-37-
<PAGE>
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 Shareholder's account and to offset each Shareholder's pro rata portion
--- ----
of such loss or liability from the Shareholder's accrued but unpaid dividends or
from future dividends while each other Fund must annually distribute at least
90% of its investment company taxable income.
The securities of the Equity, Balanced and Fixed Income Funds are valued by the
Administrator pursuant to valuations provided by an independent pricing service.
The pricing service relies primarily on prices of actual market transactions as
well as trader quotations. However, the service may also use a matrix system to
determine valuations of fixed income securities, which system considers such
factors as security prices, yields, maturities, call features, ratings and
developments relating to specific securities in arriving at valuations. The
procedures of the pricing service and its valuations are reviewed by the
officers of the Trust under the general supervision of the Trustees. Although
the methodology and procedures are identical, the net asset value per share of
Common Shares and Investor Shares within the Funds may differ because of the
distribution expenses charged to Investor Shares.
TAXES
The following is only a summary of certain income tax considerations generally
affecting a Fund and its Shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations, including their state and local
income tax liabilities.
FEDERAL INCOME TAX
ALL FUNDS
This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986, as amended (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.
-38-
<PAGE>
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;
(b) a Fund must derive less than 30% of its gross income each taxable year from
the sale or other disposition of stocks, securities, options, futures or forward
contracts, or foreign currencies (or options, futures or forward contracts on
foreign currencies) that are not directly related to a Fund's business of
investing in stock or securities, held for less than three months; and (c)
diversify its holdings so that; (i) at the close of each quarter of a Fund's
taxable year, at least 50% of the value of its total assets must be represented
by cash and cash items, U.S. Government securities, securities of other RICs and
other securities, with such other securities limited, in respect to any one
issuer, to an amount that does not exceed 5% of the value of a Fund's assets and
that does not represent more than 10% of the outstanding voting securities of
such issuer; and (ii) at the close of each quarter of a Fund's taxable year, not
more than 25% of the value of its assets may be invested in securities (other
than U.S. Government securities or the securities of other RICs) of any one
issuer or of two or more issuers which are engaged in the same, similar or
related trades or businesses if the Fund owns at least 20% of the voting power
of such issuers. Requirement (b) no longer applies for tax years beginning after
August 5, 1997.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% excise tax to the extent it fails to
distribute by the end of any calendar year 98% of its ordinary income for that
year and 98% of its capital gain net income for the one-year period ending on
October 31 of that year, plus certain other amounts. Each Fund intends to make
sufficient distributions to avoid liability for the 4% federal excise tax.
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.
-39-
<PAGE>
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.
Certain securities purchased by a Fund (such as STRIPS, TRs, TIGRs and CATS) are
sold at original issue discount, and thus do not make periodic cash interest
payments. Each Fund will be required to include as part of its current income
the imputed interest on such obligations even though the Fund has not received
any interest payments on such obligations during that period. Because each Fund
distributes all of its net investment income to its shareholders, a Fund may
have to sell portfolio securities to distribute such 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.
TAX-EXEMPT FUNDS
Interest on indebtedness incurred by a Shareholder in order to purchase or carry
shares in the Tax-Exempt Fixed Income Fund or Tax-Exempt Money Market Fund is
generally not deductible for federal income tax purposes to the extent that the
Fund distributes exempt-interest dividends during the taxable year. If a
Shareholder receives exempt-interest dividends with respect to any share of
these Funds and if such share is held by the Shareholder for six months or less,
then any loss on the sale or exchange of such share will be disallowed to the
extent of the amount of exempt-interest dividends. In addition, the Code may
require a Shareholder who receives exempt-interest dividends to treat as taxable
income a portion of certain social security and railroad retirement benefit
payments. Furthermore, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by "private
activity bonds" or certain industrial development bonds should consult their tax
advisers before purchasing shares in the Tax-Exempt Funds. For these purposes,
the term "substantial user" is defined generally to include a "non-exempt
person" who regularly uses in trade or business a part of a facility financed
from the proceeds of such bonds. Moreover, some or all of dividends received
from the Tax-Exempt Funds may be a specific preference item, or a component of
an adjustment item, for purposes of the federal individual and corporate
alternative minimum taxes. The receipt of these exempt-interest dividends and
distributions also may affect a corporate Shareholder's federal "environmental"
tax liability, a foreign corporate Shareholder's federal "branch profits" tax
liability, and an S corporation Shareholder's federal excess "passive investment
income."
Shareholders of the Tax-Exempt Funds should consult their tax advisers to
determine whether any portion of the income dividends received from such Funds
is considered tax exempt in their particular states.
-40-
<PAGE>
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 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.
STOCK, BALANCED, AND INTERNATIONAL 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 Stock, International
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. Stock, International and Balanced Fund
Shareholders will be advised each year of the portion of ordinary income
dividends eligible for the deduction. Individual shareholders are not entitled
to the dividends received deduction regardless of which fund paid the dividend.
FIXED INCOME, MONEY MARKET AND INTERNATIONAL FIXED INCOME FUNDS
Dividends received from other funds, e.g., Money Market or Fixed Income Funds,
----
will not be eligible for the dividends-received deduction.
-41-
<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 is responsible for
placing the orders to execute transactions for the Fund. In placing orders, it
is the policy of the Trust to seek to obtain the best net results taking into
account such factors as price (including the applicable dealer spread), the
size, type and difficulty of the transaction involved, the firm's general
execution and operational facilities, and the firm's risk in positioning the
securities involved. While the Advisor and Sub-Advisor generally seeks
reasonably competitive spreads or commissions, the Trust will not necessarily be
paying the lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an
-42-
<PAGE>
exchange. Where possible, the Advisor and Sub-Advisor will deal directly with
the dealers who make a market in the securities involved except in those
circumstances where better prices and execution are available elsewhere. Such
dealers usually are acting as principal for their own account. On occasion,
securities may be purchased directly from the issuer. Money market securities
are generally traded on a net basis and do not normally involve either brokerage
commissions or transfer taxes. The cost of executing portfolio securities
transactions of the Trust will primarily consist of dealer spreads and
underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Advisor and Sub-Advisor select brokers or dealers to execute transactions
for the purchase or sale of portfolio securities on the basis of their judgment
of the professional capability of the brokers or dealers to provide the service.
The primary consideration is to have brokers or dealers execute transactions at
best price and execution. Best price and execution refer to many factors,
including the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. The Trust's determination of what are reasonably
competitive rates is based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Trust pays a minimal share
transaction cost when the transaction presents no difficulty. Some trades are
made on a net basis where the Trust either buys securities directly from the
dealer or sells them to the dealer. In these instances, there is no direct
commission charged but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission.
The Trust may allocate out of all commission business generated by all of the
Trust's separate 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 the fund or account
generating the brokerage.
-43-
<PAGE>
As provided in the Securities Exchange Act of 1934 (the "1934 Act"), higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-dealers
who provide such brokerage and research services, the Trust believes that the
commissions paid to such broker-dealers are not, in general, higher than
commissions that would be paid to broker-dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In addition, portfolio transactions which
generate commissions or their equivalent are directed to broker-dealers who
provide daily portfolio pricing services to the Trust. Subject to best price and
execution, commissions used for pricing may or may not be generated by the funds
receiving the pricing service.
The Advisor and Sub-Advisor may place a combined order for two or more accounts
or separate funds engaged in the purchase or sale of the same security if, in
their judgment, joint execution is in the best interest of each participant and
will result in best price and execution. Transactions involving commingled
orders are allocated in a manner deemed equitable to each account or fund. It is
believed that the ability of the accounts to participate in volume transactions
will generally be beneficial to the accounts and funds. Although it is
recognized that, in some cases, the joint execution of orders could adversely
affect the price or volume of the security that a particular account or fund may
obtain, it is the opinion of the Advisor and Sub-Advisor and the Trust's Board
of Trustees that the advantages of combined orders outweigh the possible
disadvantages of separate transactions.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc., and subject to seeking best price and execution, the Funds may
place orders with broker-dealers which have agreed to defray certain Trust
expenses such as custodian fees, and may, at the request of the Distributor,
give consideration to sales of shares of the Trust as a factor in the selection
of brokers and dealers to execute Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of the Advisor or Sub-Advisor, which is
a registered broker-dealer, for commissions in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of the Advisor or Sub-Advisor is permitted to
receive and retain compensation for effecting portfolio transactions for the
Trust on an exchange. These rules 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
-44-
<PAGE>
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:
<TABLE>
<CAPTION>
================================================================================================================================
% of Total Total
Total $ % of Total of Brokerage Commissions Total $
Total $ Amount of Brokerage Transactions Paid to SFS in Amount
Amount of Brokerage Commissions Effected Connection with of Brokerage
Brokerage Commissions Paid to Through Repurchase Commissions
Fund Commissions Paid to Affiliates in Affiliated Agreement Paid for
Paid in 1997 Affiliates in 1997 Brokers in Transactions in Research
1997 1997 1997 in 1997
================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Intermediate
Government Fixed
Income Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed
Income Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
International Fixed
Income Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed
Income Fund * * * * * *
- --------------------------------------------------------------------------------------------------------------------------------
Value Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Growth Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Small Cap Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
International Equity
Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * * * *
- --------------------------------------------------------------------------------------------------------------------------------
Latin America Equity
Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Real Estate Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money
Market Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Money Market Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Treasury Money Market
Fund $ $ % % $ $
- --------------------------------------------------------------------------------------------------------------------------------
Government Money
Market Fund $ $ % % $ $
================================================================================================================================
</TABLE>
-45-
<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
Income Fund $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
International Fixed Income Fund $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income * *
Fund
- -------------------------------------------------------------------------------------------------------------------------------
Value Fund $125,283 $ 2,994
------------------------------------------------------------------------------------------------------------------------------
Growth Fund $117,644 $ 10,080
- -------------------------------------------------------------------------------------------------------------------------------
Small Cap Fund $ 73,502 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
International Equity Fund $169,608 $ 66,033
- -------------------------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $102,905 $ 24,295
- -------------------------------------------------------------------------------------------------------------------------------
TransEurope Fund * *
- -------------------------------------------------------------------------------------------------------------------------------
Latin America Equity Fund * *
- -------------------------------------------------------------------------------------------------------------------------------
Real Estate Fund
- -------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $ 87,467 $ 732
- -------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Money Market Fund $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Treasury Money Market Fund $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------------------------
Government Money Market Fund $ 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.
Except for the Intermediate Government Fixed Income, Fixed Income, Tax Exempt
Fixed Income and International Fixed Income Funds, it is expected that the
portfolio turnover rate will normally not exceed 100% for any Fund. A
portfolio turnover rate would exceed 100% if all of its
-46-
<PAGE>
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 of the Funds was:
<TABLE>
<CAPTION>
===============================================================================
Turnover Rate
Fund 1996 1997
<S> <C> <C>
Value Fund 58%
- -------------------------------------------------------------------------------
Growth Fund 58%
- -------------------------------------------------------------------------------
Small Cap Fund 158%
- -------------------------------------------------------------------------------
International Equity Fund 9%
- -------------------------------------------------------------------------------
TransEurope Fund *
- -------------------------------------------------------------------------------
Asian Tigers Fund 24%
- -------------------------------------------------------------------------------
Latin America Equity Fund 10%
- -------------------------------------------------------------------------------
Fixed Income Fund 194%
- -------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund 179%
- -------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund 98%
- -------------------------------------------------------------------------------
International Fixed Income Fund 85%
- -------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund *
- -------------------------------------------------------------------------------
Balanced Fund 104%
===============================================================================
</TABLE>
* Not in operation during the period.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of the Funds each of which represents an equal proportionate interest in
that Fund with each other share. Shares are entitled upon liquidation to a pro
---
rata share in the net assets of the Funds. 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
-47-
<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 the Shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any Shareholder held personally liable for the
obligations of the Trust.
5% AND 25% SHAREHOLDERS
As of February ___, 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 Trust Class shares of the Funds were held for the record owner's
fiduciary, agency or custodial customers.
TREASURY MONEY MARKET FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
GOVERNMENT MONEY MARKET FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
MONEY MARKET FUND
LaSalle National Bank N.A.
-48-
<PAGE>
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
TAX-EXEMPT MONEY MARKET FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
FIXED INCOME FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
TAX-EXEMPT FIXED INCOME FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
INTERNATIONAL FIXED INCOME FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
-49-
<PAGE>
VALUE FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
GROWTH FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
SMALL CAP FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
INTERNATIONAL EQUITY FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
ASIAN TIGERS FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
BALANCED FUND
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
LATIN AMERICA EQUITY FUND
-50-
<PAGE>
LaSalle National Bank N.A.
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
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.
-51-
<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 some time in the future.
Debt rated Baa is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times or
many times interest requirements, with such stability of applicable earn-
A-2
<PAGE>
ings 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>
REMBRANDT FUNDS(R)
PART C: OTHER INFORMATION
POST EFFECTIVE AMENDMENT NO. 13
Item 24. Financial Statements and Exhibits:
(a) Financial Statements
Part A--Prospectus: N/A
Part B--Statement of Additional Information: N/A
(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.
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.
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
Registrant's Pre-Effective Amendment No. 1 and incorporated by
reference to Exhibit 6 Post-Effective Amendment No. 11, filed
April 29, 1997.
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.
8(a) Sub-Custodian Agreement between CoreStates Bank, N.A. and
Barclays Bank PLC incorporated herein by reference to 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 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.
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.
-4-
<PAGE>
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.
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 Not Applicable.
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.
16 Performance Quotation Computation
17 Financial Data Schedules - N/A
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 and incorporated by reference to Exhibit 24
Post-Effective Amendment No. 11, filed April 29, 1997.
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. The Administrator is a subsidiary of SEI
Corporation, which also controls other corporations engaged in providing various
financial and record keeping services, primarily to bank trust departments,
pension plan sponsors, and investment managers.
Item 26. Number of Holders of Securities:
As of February 6, 1998
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Units of beneficial interest, without par value -
COMMON SHARES
Value Fund.................................................. 9
Growth Fund................................................. 9
Small Cap Fund.............................................. 9
International Equity Fund................................... 9
TransEurope Fund............................................ N/A
Asian Tigers Fund........................................... 15
Fixed Income Fund........................................... 7
Intermediate Government Fixed Income Fund................... 4
Tax-Exempt Fixed Income Fund................................ 4
International Fixed Income Fund............................. 9
Limited Volatility Fixed Income Fund........................ 0
Money Market Fund........................................... 6
Government Money Market Fund................................ 5
Treasury Money Market Fund.................................. 4
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Number of
Title of Class Record Holders
-------------- --------------
<S> <C>
Tax-Exempt Money Market Fund................................. 4
Balanced Fund................................................ 4
Latin America Equity Fund.................................... 21
Real Estate Fund............................................. 17
INVESTOR SHARES
Value Fund................................................... 199
Growth Fund.................................................. 355
Small Cap Fund............................................... 78
International Equity Fund.................................... 196
TransEurope Fund............................................. N/A
Asian Tigers Fund............................................ 95
Fixed Income Fund............................................ 25
Intermediate Government Fixed Income Fund.................... 11
Tax-Exempt Fixed Income Fund................................. 26
International Fixed Income Fund.............................. 26
Limited Volatility Fixed Income.............................. N/A
Money Market Fund............................................ 94
Government Money Market Fund................................. 12
Treasury Money Market Fund................................... 6
Tax Exempt Money Market Fund................................. 30
Balanced Fund................................................ 287
Real Estate Fund............................................. N/A
</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
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 (USA) President, Director
Inc.
Richard A. Frodsham ABN AMRO Chicago Corporation Senior Vice President
President
Chief Executive Officer
Director
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
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
John F. Bonetti LaSalle National Bank Senior Vice President & Assistant
Vice President Secretary
Marc G. Borghans LaSalle National Bank Vice President & Assistant Secretary
Vice President
James J. Baudendistel None
Vice President
Gregory D. Boal LaSalle National Bank Vice President & Assistant Secretary
Vice President
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 Secretary
Senior Vice President
Martin L. Eisenberg ABN AMRO Bank N.V. Vice President
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
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, Inc. Vice President
DBI Holdings, Inc. Vice President
ABN AMRO North America, Inc. Senior Vice President
ABN AMRO Mortgage Corp. Vice President
ABN AMRO Resource Management, Inc. Vice President
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 (USA) Vice President
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
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 Corporation Vice President
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
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
Monroe Corporation of Delaware Vice President
LaSalle National Safe Deposit Corporation Vice President
Rob-Wal Investment Co. Vice President
ENB Realty Co., 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
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
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
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
Montauk YC Corp. Vice President
Moreland Hauppauge Corp. Vice President
Nineteenth Street Development Corp. Vice President
North Hills Links 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
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
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 Land 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. Sinai 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 1/20/92) Vice President
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
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 & Assistant Secretary
Vice President
Kathryn L. Martin ABN AMRO Asset Management (USA) Compliance Officer
Vice President Inc.
Ronald C. Scheuer LaSalle National Bank Vice President & Assistant Secretary
Vice President
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
Roger R. Sullivan LaSalle National Bank Vice President & Assistant Secretary
Vice President
Karen Van Cleave LaSalle National Bank Vice President & Assistant Secretary
Vice President
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 Secretary
Assistant Vice President
Susan M. Wiemeler 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 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.
<TABLE>
<CAPTION>
Name and Position with Name of Other Connection with
Investment Sub-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 Maatshchappij Director
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 Maatshchappij Director
ABN AMRO Luxembourg Investment Management S.A. Director
ABN AMRO Funds Investment Advisory (Luxembourg) S.A. Director
ABN AMRO Interest Growth Fund Investment Advisory Director
(Luxembourg) S.A.
ABN AMRO Valurente Investment Adviosry (Luxembourg) Director
S.A.
ABN AMRO Bank N.V. Vice President
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
Wypke Postma ABN AMRO Investment Management B.V. Officer
Director ABN AMRO Beheer Beleggingsfondsen B.V. Officer
B.V. Hollandsche Belegging en Beheer Maatschappij Officer
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 Maatshchappij Officer
ABN AMRO Bank N.V. Vice President
Erik Eleveld ABN AMRO Bank N.V. Assistant Vice President
Trader
John Vaartjes ABN AMRO Investment Management B.V. Officer
Compliance Officer ABN AMRO Beheer Beleggingsfondsen B.V. Officer
B.V. Hollandsche Belegging en Beheer Maatshchapij Officer
ABN AMRO Bank N.V. Assistant Vice President
</TABLE>
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.
Rembrandt Financial Services Company, a wholly-owned subsidiary of SEI
Financial Services Company, acts as distributor for Rembrandt Funds(R)
pursuant to a distribution agreement dated December 31, 1992.
Rembrandt Financial Services Company does not act as underwriter,
depositor or investment advisor for any other investment company.
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in
the answer to Item 21 of Part B. Unless otherwise noted, the business
address of each director or officer is Oaks, PA 19456.
-13-
<PAGE>
<TABLE>
<CAPTION>
Position and Office Positions and Offices
Name with Underwriter with Registrant
- ---- -------------------- ----------------------
<S> <C> <C>
Alfred P. West, Jr. Chairman of the Board of Directors --
Henry H. Greer Director --
Carmen V. Romeo Director, Executive Vice President --
Carl A. Guarino President --
Leo J. Dolan, Jr. Senior Vice President --
Sandra K. Orlow Senior Vice President & Secretary Vice President & Assistant Secretary
Marc H. Cahn Vice President & Assistant Secretary Vice President & Assistant Secretary
Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant Secretary
Kathy Heilig Vice President & Treasurer --
Maryeva Schmitt Kindelan Vice President --
Barbara A. Nugent Vice President & Assistant Secretary Vice President & Assistant Secretary
Cynthia M. Parrish Vice President & Assistant Secretary --
Kevin P. Robins Vice President & Assistant Secretary Vice President & Assistant Secretary
Kathryn L. Stanton Vice President & Assistant Secretary Vice President & Assistant Secretary
James Dougherty Financial Principal --
Robert Wagner Managing Director --
</TABLE>
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:
CoreStates Bank, N.A. Morgan Stanley Trust Company
Broad and Chestnut Streets One Pierrepont Plaza
P.O. Box 7618 Brooklyn, NY 11201
Philadelphia, PA 19101
(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:
SEI Fund Resources
Oaks, PA 19456
(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.
Registrant hereby undertakes to file a post-effective amendment, including
financial statements which need not be audited, within 4-6 months from the later
of the commencement of operations of the Real Estate Fund of the Registrant or
the effective date of Post-Effective Amendment No. 12 to the Registrant's 1933
Act Registration Statement.
-15-
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for Rembrandt Funds(R)
(formerly 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 has duly caused this Post-
Effective Amendment No. 13 to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Wayne,
State of Pennsylvania, on the 26th day of February 1998
REMBRANDT FUNDS(R)
By: /s/David G. Lee
----------------------------
David G. Lee, 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 February 26, 1998
- ----------------------
Arnold F. Brookstone
* Trustee February 26, 1998
- ----------------------
William T. Simpson
* Trustee February 26, 1998
- ----------------------
Robert A. Nesher
/s/ David G. Lee President & Chief
- ---------------------- February 26, 1998
David G. Lee Executive Officer
/s/James F. Volk Controller & Chief February 26, 1998
- ----------------------
James F. Volk Financial Officer
*By: /s/David G. Lee
------------------------------
David G. Lee, Attorney-in-Fact
-17-
<PAGE>
EXHIBIT INDEX
Name Exhibit
- ---- -------
Agreement and Declaration of Trust and Amendment Ex-99.B1
thereto as originally 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 Ex-99.B1A
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.
Registrant's By-Laws as originally filed as Exhibit 2 Ex-99.B2
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.
Not applicable. Ex-99.B3
Not applicable. Ex-99.B4
Investment Advisory Agreement with LaSalle Street Ex-99.B5
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.
Investment Sub-Advisory Agreement between LaSalle Ex-99.B5A
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.
Distribution Agreement as originally filed as Ex-99.B6
Exhibit 6 with Registrant's Pre-Effective Amendment
No. 1 and incorporated by reference to Exhibit 6
Post-Effective Amendment No. 11, filed April 29, 1997.
Not applicable. Ex-99.B7
Custodian Agreement as originally filed as Ex-99.B8
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.
Sub-Custodian Agreement between CoreStates Bank, N.A. Ex-99.B8A
and Barclays Bank PLC incorporated herein by reference
to 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.
<PAGE>
Form of Transfer Agency Agreement between the Registrant Ex-99.B8B
and Supervised 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.
Administration Agreement as originally filed as Ex-99.B9
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.
Consent to Assignment and Assumption (of the Ex-99.B9A
Administration 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 Ex-99.B9B
Rembrandt Funds and 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.
Opinion and Consent of Counsel as originally Ex-99.B10
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.
Consent of Independent Public Accountants Ex-99.B11
Not applicable. Ex-99.B12
Not applicable. Ex-99.B13
Not applicable. Ex-99.B14
Distribution Plan - Investor Class as originally filed Ex-99.B13
as Exhibit 15 in Registrant's Pre-Effective Amendment
No. 1 and incorporated by reference to Exhibit 15
Post-Effective Amendment No. 11, filed April 29, 1997.
Performance Quotation Computation Ex-99.B16
Rule 18f-3 Plan as originally filed as Exhibit 8 Ex-99.B18
with Registrant's Post-Effective Amendment No. 8
and incorporated by reference to Exhibit 18
Post-Effective Amendment No. 11, filed April 29, 1997.
Powers of Attorney and incorporated by reference to Ex-99.B24
Exhibit 24 Post-Effective Amendment No. 11, filed
April 29, 1997.
Financial Data Schedules - N/A.
