<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 4, 1999.
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. 18 [X]
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [_]
AMENDMENT NO. 19 [X]
ABN AMRO FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (617) 535-0518
COLEEN DOWNS DINNEEN, ESQ.
FIRST DATA INVESTOR SERVICES GROUP, INC.
101 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110
(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
1701 MARKET STREET 1701 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19103 PHILADELPHIA, PENNSYLVANIA 19103
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b)
______
______ on [date] pursuant to paragraph (b)
______ 60 days after filing pursuant to paragraph (a)
______ on [date] pursuant to paragraph (a); or
______ 75 days after filing pursuant to paragraph (a) of Rule 485
<PAGE>
Prospectus--Common Shares
May 3, 1999
- ---------------------------------------------------------
Stock Funds Bond Funds
.Value Fund(US) .Fixed Income Fund(US)
.Growth Fund(US) .Intermediate Government Fixed Income
.Small Cap Growth Fund(US) Fund(US)
.Small Cap Value Fund(US) .Tax-Exempt Fixed Income Fund(US)
.Limited Volatility Fixed Income Fund(US)
.Real Estate Fund(US)
Money Market Funds
Balanced Fund
.Treasury Money Market Fund(US)
.Balanced Fund(US) .Government Money Market Fund(US)
.Money Market Fund(US)
International Funds .Tax-Exempt Money Market Fund(US)
.International Equity Fund(US)
.TransEurope Fund(US)
.Asian Tigers Fund(US)
.Latin America Equity Fund(US)
.International Fixed Income Fund(US)
- --------------------------------------------------------------------------------
This Prospectus gives you important information about ABN AMRO Funds that can
help you decide if a Fund's investment goals match your own. Please read it
carefully before you invest, and keep it on hand for future reference.
Common Shares are offered to individuals and institutional investors directly
and through wrap programs, retirement plans, discount brokerage programs, and
various brokerage firms.
The Securities and Exchange Commission (SEC) has not approved or disapproved of
these shares or determined whether this Prospectus is accurate or complete. It
is a crime for anyone to tell you otherwise.
For more information, please call 1-800-443-4725 or visit the Funds' website at
www.abnamrofunds-usa.com.
<PAGE>
.
Contents
This Prospectus gives you important information that you should know about the
Funds before investing. We arranged the Prospectus into different sections so
that you can easily review this important information.
If you would like more detailed
information about each Fund,
please see:
<TABLE>
<S> <C>
Value Fund(US) 5
Growth Fund(US) 7
Small Cap Growth Fund(US) 9
Small Cap Value Fund(US) 11
Real Estate Fund(US) 13
Balanced Fund(US) 15
International Equity Fund(US) 19
TransEurope Fund(US) 21
Asian Tigers Fund(US) 23
Latin America Equity Fund(US) 26
International Fixed Income
Fund(US) 29
Fixed Income Fund(US) 32
Intermediate Government Fixed
Income
Fund(US) 35
Tax-Exempt Fixed Income Fund(US) 37
Limited Volatility Fixed Income
Fund(US) 39
Treasury Money Market Fund(US) 42
Government Money Market Fund(US) 44
Money Market Fund(US) 46
Tax-Exempt Money Market Fund(US) 48
</TABLE>
If you would like more information about
the following topics, please see:
<TABLE>
<S> <C>
The Risks of Investing in Mutual Funds 3
The Stock Funds 4
The International Funds 18
The Bond Funds 31
The Money Market Funds 41
More information about risk 50
Guidance on opening and maintaining an account in any Fund 54
Information about receiving dividends and distributions from the Funds 58
A general guide to important tax issues and considerations 59
Information about the investment advisor 60
Detailed information about historical Fund performance 65
Additional information See Back Cover
</TABLE>
ABN AMRO is a service mark of ABN AMRO Holding, N.V., an indirect parent of
ABN AMRO Asset Management (USA) Inc., the investment advisor to the ABN AMRO
Funds. ABN AMRO Funds are distributed by First Data Distributors, Inc., which
is not a bank affiliate.
2
<PAGE>
.......................
What are Fund Goals
and Strategies?
Each Fund's goal is
a statement of what
it seeks to
achieve. It is im-
portant to make
sure that the ob-
jective matches
your own financial
needs and circum-
stances. The Prin-
cipal Investment
Strategies section
describes how each
Fund attempts to
meet its objective.
.......................
.
................................................................................
................................................................................
The Risks of Investing in Mutual Funds ____________________________________
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in
mutual funds.
Each Fund has its own investment goal and strategies for reaching its goal. We
cannot guarantee that a Fund will achieve its goal, and a Fund's goal may be
changed without shareholder approval. Each Fund invests in different types of
securities. As a result, each Fund has its own risks.
The Advisor invests each Fund's assets in a way that
the Advisor believes will help the Fund achieve its
goal. The Advisor's judgements about the securities
markets, economy and companies, or selecting
investments may not reflect actual market movements,
economic conditions or company performance. In
addition, the Advisor may need to change the Fund's
investment strategy in response to changing market
or economic conditions.
The value of your investment in a Fund is based on
the market prices of the securities the Fund holds.
Fund share prices (except the Money Market Funds)
will change daily due to economic and other events
that affect securities markets
generally, as well as those that affect particular companies or governments.
These price movements, sometimes called volatility, will vary depending on the
types of securities a Fund owns and the markets where these securities trade.
Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.
As used in any sentence in this Prospectus, the term "primarily invests" means
that a Fund, under normal conditions, invests at least 65% of its assets in the
securities described in that sentence.
3
<PAGE>
.
THE STOCK FUNDS ________________________________________________________________
The Stock Funds invest in common stocks and other equity securities. These
include public and privately issued common and preferred stocks, warrants,
rights to subscribe to common stock and convertible securities. Investments in
equity securities in general are subject to market risks that may cause their
prices to fluctuate over time. In other words, the Funds are subject to the
risk that stock prices will fall over short or extended periods of time.
Historically, the equity markets have moved in cycles, and the value of a Stock
Fund's equity securities may fluctuate drastically from day-to-day. Individual
portfolio companies may report poor results or be negatively affected by
industry or economic trends and developments, or even year 2000 issues. The
prices of securities issued by such companies may suffer a decline in response.
Fluctuations in the value of equity securities in which a Fund invests will
cause the net asset value of the Fund to fluctuate.
The Stock Funds have investment goals of high total return. Total return is a
combination of income, from dividends or interest, and capital appreciation,
which results from an increase in the value of a security (called unrealized
appreciation) or from selling a security for more than its cost (called
realized appreciation). The current strategies of the Stock Funds generally
focus on capital appreciation rather than income. As a result, in market
conditions that favor funds that focus on income, the Funds may not be able to
achieve the same level of total return as other mutual funds. For these Funds,
income is typically incidental.
Each Stock Fund is subject to additional risks, which are described on the
following pages and in the Statement of Additional Information.
4
<PAGE>
.
VALUE FUND(US)
_______________________________________________________________________________
Investment Goal High level of total return through capital appreciation
and current income
Principal
Investment The Value Fund invests in common stocks and other equity
Strategies securities of U.S. companies with market capitalizations
greater than $1 billion. Further, the Fund primarily
invests in securities that are undervalued relative to
those of the average large U.S. company based on one or
more of the following criteria:
. lower than average price to earnings ratios;
. lower than average price to book value ratios;
. lower than average price to sales ratios;
. lower than average price to cash flow ratios; or
. higher than average dividend yield.
Generally, stocks may be undervalued because:
. they are out of favor with investors;
. they may have disappointed investors in some way; or
. investors think that the prospects for the industry
or economic sector are uninteresting.
By investing in undervalued securities with quality
earnings and combining this with improving momentum
factors (such as price movements), the Fund tries to
provide better return, over the long-term, than other
value-style managers.
Principal Risk of The Fund's large-cap, value-style securities are cyclical.
Investing in this So, in addition to the general risks of investing in any
Fund Stock Fund, this Fund's large-cap, value-style securities
may under perform mid-cap, small-cap or growth-style
securities, or the equity markets as a whole when they are
out-of-favor or when they remain undervalued.
5
<PAGE>
.
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares from
year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ----- ----- ----- ----
<S> <C> <C> <C> <C>
0.00% 32.02% 20.43% 30.49% 5.47%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
15.69%
6/30/97
<CAPTION>
Worst Quarter
-------------
<S> <C>
-18.05%
9/30/98
</TABLE>
[Performance Graph Appears Here]
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the S&P 500 Index. An index measures the
market prices of a specific group of securities in a particular market or
securities in a market sector. You cannot invest directly in an index. An index
does not have an investment advisor and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower. The S&P 500
Index is a widely recognized index of 500 stocks designed to mimic the overall
equity market's industry weightings.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Value Fund 5.47% 18.34% 16.96% 15.20%*
S&P 500 Index 28.74% 28.27% 24.08% 21.60%*
</TABLE>
* Fund inception (1/4/93). Index inception computed from (12/31/92).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Other Expenses .23%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.03%
- -------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$105 $328 $569 $1,259
</TABLE>
6
<PAGE>
.
GROWTH FUND(US)
_______________________________________________________________________________
Investment Goal High level of total return primarily through capital
appreciation
Principal
Investment The Growth Fund invests in common stocks and other equity
Strategies securities of U.S. companies. Further, the Fund primarily
invests in companies that, in the Advisor's opinion, have
strong prospects for capital appreciation through earnings
growth. The Advisor chooses investments by focusing on
companies with above average earnings growth rates. The
Advisor seeks a fundamental understanding of each company,
using a combination of valuation and momentum factors,
which may include:
. valuation
. price appreciation
. positive earnings changes
. earnings surprises
. accelerated earnings
. price strength over time
In addition, the Advisor focuses on companies that have a
competitive advantage in their industry or market niche.
The Advisor uses a bottom-up approach (emphasis on
individual industries and companies) to select investments
and diversifies the Fund's assets broadly across industry
sectors. In selecting investments, the Advisor combines
quantitative screens that focus on earnings consistency
and momentum with fundamental understandings of the
companies that focus on the dynamics of the company.
Principal Risk of In addition to the general risks of investing in any Stock
Investing in this Fund, this Fund's growth-style securities may under
Fund perform value-style securities or the equity markets as a
whole when they are out-of-favor or when they do not
achieve anticipated growth levels.
7
<PAGE>
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares from
year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -2.05% 31.60% 21.88% 23.98% 30.23%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
26.49%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-13.97%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the S&P 500 Index. An index measures the
market prices of a specific group of securities in a particular market or
securities in a market sector. You cannot invest directly in an index. An index
does not have an investment advisor and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower. The S&P 500
Index is a widely recognized index of 500 stocks designed to mimic the overall
equity market's industry weightings.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Growth Fund 30.23% 25.25% 20.43% 17.74%*
S&P 500 Index 28.74% 28.27% 24.08% 21.60%*
</TABLE>
* Fund inception (1/4/93). Index inception computed from (12/31/92).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Other Expenses .22%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.02%
- -------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$104 $325 $563 $1,248
</TABLE>
8
<PAGE>
.
SMALL CAP GROWTH FUND(US) (formerly, the Small Cap Fund)
_______________________________________________________________________________
Investment Goal High level of total return primarily through capital
appreciation
Principal
Investment The Small Cap Growth Fund primarily invests in common
Strategies stocks and other equity securities of domestic companies
that have smaller capitalization levels (market
capitalizations of less than $1.5 billion) and that the
Advisor believes have strong prospects for capital
appreciation through earnings growth. In selecting
investments for the Fund, the Advisor reviews a company's
sales and earnings growth rates, and evaluates the
strength of its balance sheet. The Advisor seeks
investments that have above average sales growth, earnings
growth or return on equity relative to their industry
peers. Although the Advisor targets growth sectors of the
U.S. economy, such as technology, health care, and
consumer and business services, the Advisor diversifies
broadly across industry sectors. The Fund also focuses on
companies that the Advisor believes have a competitive
advantage in their industry or market niche.
Principal Risks
of Investing in In addition to the general risks of investing in any Stock
this Fund Fund, this Fund is subject to the risks of investing in
small-cap companies. Investments in small-cap companies
involve greater risk than is customarily associated with
larger, more established companies due to the greater
business risks of small size, limited markets and
financial resources, narrow product lines and frequent
lack of depth of management. The securities of small-sized
companies may be subject to more abrupt or erratic market
movements than securities of larger, more established
companies.
The Fund is subject to the risk that its small-cap growth-
style securities may under perform mid-cap, large-cap or
value-style securities, or the equity markets as a whole
when they are out-of-favor or when they do not achieve
anticipated growth levels.
Due to its investment strategy, the Fund may have a high
portfolio turnover rate. A portfolio turnover rate of 100%
or more may result in higher transaction costs, higher
levels of realized capital gains and additional taxes than
if the turnover rate was lower. In seeking total return
opportunities, the Advisor considers such costs and
potential gains and taxes in determining whether to sell a
particular security.
9
<PAGE>
.
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares from
year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -6.27% 32.13% 19.42% 15.89% -6.52%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
19.13%
6/30/97
<CAPTION>
Worst Quarter
-------------
<S> <C>
-23.88%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Russell 2000 Growth Index. An index
measures the market prices of a specific group of securities in a particular
market or securities in a market sector. You cannot invest directly in an
index. An index does not have an investment advisor and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower. The Russell 2000 Growth Index is comprised of securities in the Russell
2000 Index with above-average growth orientation.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Small Cap Growth Fund -6.52% 8.96% 9.89% 8.69%*
Russell 2000 Growth Index 1.23% 8.35% 10.22% 10.73%*
</TABLE>
* Fund inception (1/4/93). Index inception computed from (12/31/92).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Other Expenses .40%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.20%
- -------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$122 $381 $660 $1,455
</TABLE>
10
<PAGE>
.
SMALL CAP VALUE FUND(US)
_______________________________________________________________________________
Investment Goal High level of total return primarily through capital
appreciation
Principal
Investment The Small Cap Value Fund primarily invests in undervalued
Strategies common stocks and other equity securities of domestic
companies with smaller capitalization levels (market
capitalizations of less than $1.5 billion). In selecting
investments for the Fund, the Advisor focuses on
undervalued investments based on such measures as
price/earnings, price/cash flow, price/book and
price/sales ratios. The Advisor typically uses a
quantitative screen that ranks the attractiveness of an
investment based on a combination of valuation measures,
such as price/earnings and price/cash flow ratios. In
further evaluating the attractiveness of an investment,
the Advisor considers business conditions in the company's
industry and its competitive position in that industry.
The Advisor conducts fundamental research on certain
investments, which often includes reviewing SEC filings,
examining financial statements and meeting with top-level
company executives. While broadly diversifying the Fund's
assets across many industry sectors, the Advisor seeks
companies with solid profit prospects and returns on
capital.
Principal Risks In addition to the general risks of investing in any Stock
of Investing in Fund, this Fund is subject to the risks of investing in
this Fund small-cap companies. Investments in small-cap companies
involve greater risk than is customarily associated with
larger, more established companies due to the greater
business risks of small size, limited markets and
financial resources, narrow product lines and frequent
lack of depth of management. The securities of small-sized
companies may be subject to more abrupt or erratic market
movements than securities of larger, more established
companies.
The Fund's small-cap value-style securities may under
perform mid-cap, large-cap or growth-style securities, or
the equity markets as a whole when they are out-of-favor
or when they remain undervalued.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Other Expenses/1/ 1.14%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.94%
- -------------------------------------------
Fee Waiver/2/ -.55%
- -------------------------------------------
Net Expenses 1.39%
- -------------------------------------------
</TABLE>
/1/Since the Fund has not completed a full fiscal year, Other Expenses are
based on estimated amounts for the current fiscal year.
/2/The Administrator has agreed to waive its fees through April 2000 in an
amount necessary to limit administration fees (included in Other Expenses) to
.07% of the Fund's net assets.
11
<PAGE>
.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$142 $556
</TABLE>
Prior Performance of a Managed Account _________________________________________
The performance information on the following page relates to an account managed
by Mr. Edwin Bruere, who currently serves as lead portfolio manager of the
Fund. The account has an investment objective, policies, and restrictions
substantially similar to that of the Fund. Mr. Bruere has also managed other
accounts with similar investment objectives, policies and restrictions as that
of the Fund; however, the performance information below reflects the account
with the longest performance history.
This account was not subject to certain investment limitations, requirements,
and other restrictions imposed by the Investment Company Act of 1940 and the
Internal Revenue Code. If these had been imposed, the account's performance
would have been adversely affected. Furthermore, the account belongs to an
affiliate of the Advisor and was funded with the affiliate's own money. As a
proprietary account, it did not incur any expenses, such as the advisory,
administrative, and other fees to which the Fund is subject. If the account had
incurred these expenses, its performance would have been lower.
You should not rely on the following performance information as an indication
of future performance of the Fund. The performance reflected below does not
represent the historical performance of the Fund. The performance information
relates to a period of time before the effective date of the Fund's
registration with the SEC as an open-end investment company.
The performance information below represents equity-only returns and assumes
reinvestment of net income and capital gain distributions. The Fund normally
holds a portion of its assets in cash to meet redemptions and make purchases.
Unlike the Fund, the account did not hold any cash during the period shown. If
it had, the account's performance would have been lower. Since the period shown
occurred during a rising market, the absence of cash in the account results in
even higher returns. The performance information is calculated using the same
methods for valuation of portfolio securities used by the Fund.
<TABLE>
<CAPTION>
Russell 2000
Period Ended Small Cap
May 31, 1998 Account Value index*
--------------------------------- ------- ------------
<S> <C> <C>
Since Inception (January 1, 1997) 44.06% 25.79%
12 Month (May 31, 1997-May 31, 1998) 48.10% 26.66%
Year Ended 12/31/97 52.67% 31.78%
</TABLE>
* The Russell 2000 Small Cap Value Index shows total return assuming the
reinvestment of dividends but does not reflect the deduction of fees,
expenses and taxes. Source: Frank Russell Company. The Russell 2000 Small Cap
Value Index is comprised of securities in the Russell 2000 Index with less
than average growth orientation. Companies in this Index generally have low
price-to-book and price-earnings ratios.
12
<PAGE>
.
REAL ESTATE FUND(US)
________________________________________________________________________________
Investment Goal High level of total return, a combination of growth and
income
Principal
Investment The Real Estate Fund primarily invests in real estate
Strategies investment trusts, and common stocks and other equity
securities of U.S. and foreign companies principally
engaged in the real estate industry. The Fund does not
invest in real estate directly.
In selecting investments for the Fund, the Advisor
analyzes long-term trends in property types and
geographic regions. The Advisor attempts to identify long
term patterns in the real estate industry through a
combination top-down (emphasis on markets and sectors)
and bottom-up (emphasis on individual industries and
companies) approach. In the top-down approach, the
Advisor analyzes demographic and economic trends, and
reviews the real estate cycle to determine which
geographic regions and property types will receive focus.
In the bottom-up approach, the Advisor researches
individual companies. The Advisor focuses on companies
whose management has a stake in the company's performance
and that have strong balance sheets and/or consistent
earnings, and monitors both internal growth prospects for
each company and growth from acquisitions or development.
Principal Risks
of Investing in In addition to the general risks of investing in any
this Fund Stock Fund, this Fund is subject to the risk of
concentrating its investments in the real estate
industry, which includes the risk that the real estate
industry will under perform other industries, as well as
the risk that issuers in the real estate industry will be
impacted by market conditions, legislative or regulatory
changes, or competition. In addition, there are risks
associated with the direct ownership of real estate,
including the cyclical nature of real estate values,
overbuilding and increased competition, increases in
property taxes and operating expenses, and increases in
interest rates.
The Fund is non-diversified, which means that it may
invest in the securities of relatively few issuers. As a
result, the Fund may be more susceptible to a single
adverse economic, political or regulatory occurrence
affecting one or more of these issuers, and may
experience increased volatility due to its investments in
those securities.
Investing in foreign countries poses distinct risks,
since political and economic events unique to a country
or region will affect those markets and their issuers.
These events will not necessarily affect the U.S. economy
or similar issuers located in the U.S. In addition,
investment in foreign countries are generally denominated
in a foreign currency. As a result, changes in the value
of those currencies compared to the U.S. dollar may
affect (positively or negatively) the value of a Fund's
investments. These currency movements may happen
separately from and in response to events that do not
otherwise affect the value of the security in the
issuer's home country.
13
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
1998
- ------
- -12.35%
<TABLE>
<CAPTION>
Best Quarter
------------
<C> <S>
-0.09%
12/31/98
<CAPTION>
Worst Quarter
-------------
<C> <S>
-8.28%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Russell 2000 Index and Morgan Stanley
REIT Index. An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You cannot
invest directly in an index. An index does not have an investment advisor and
does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Russell 2000 Index is a widely recognized
index of the 2000 smallest companies of the 3000 largest U.S. companies based
on market capitalization. The Morgan Stanley REIT Index is a market
capitalization weighted total return index of 93 REITs that exceed certain
minimum liquidity criteria concerning market capitalization, shares
outstanding, trading volume and per share market price.
<TABLE>
<CAPTION>
Since Inception
---------------
<S> <C>
Real Estate Fund -12.35%*
Russell 2000 Index -2.55%*
Morgan Stanley REIT Index -16.90%*
</TABLE>
* Fund inception and index inceptions computed from (12/31/97).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Other Expenses 1.42%
- -------------------------------------------
Total Annual Fund Operating Expenses 2.42%
- -------------------------------------------
Fee Waivers/1/ -.89%
- -------------------------------------------
Net Expenses 1.53%
- -------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .70%
and .07%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$156 $669 $1,210 $2,689
</TABLE>
14
<PAGE>
.
BALANCED FUND(US)
_______________________________________________________________________________
Investment Goal Favorable total rate of return through current income and
capital appreciation consistent with preservation of
capital
Principal
Investment The Balanced Fund invests in domestic and foreign stocks,
Strategies bonds and cash. The Advisor allocates the Fund's assets
broadly among common and preferred stocks, convertible
securities, corporate bonds, U.S. government obligations
and mortgage-backed securities. Although the Advisor
focuses the Fund's fixed income securities on securities
rated in one of the four highest ratings categories by a
nationally recognized rating agency (commonly called
"investment grade"), the Fund may invest in lower rated
securities (commonly called "high yield" or "junk" bonds).
In allocating the Fund's assets, the Advisor uses a multi-
tiered diversification strategy. The Advisor begins by
allocating the Fund's assets between stocks and bonds,
with at least 25% of its total assets in senior fixed
income securities (i.e., a security with a claim on the
issuer's assets that would be paid before the issuer's
other obligations in the event of bankruptcy). Then, the
Advisor allocates assets invested in stocks between U.S.
and foreign stocks, further allocating assets invested in
U.S. stocks among large and small cap stocks. The Advisor
also allocates assets invested in large-cap stocks between
growth and value styles. The Advisor believes that this
multi-tiered approach allows the Fund to provide investors
with added value while reducing the effects of market
swings as investment strategies and styles go in and out
of favor.
There are no restrictions on the average maturity of the
Fund's fixed income securities or the maturity of any
single fixed income investment. Although the Advisor
focuses on bonds with intermediate maturities, maturities
may vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market
factors.
Principal Risks The Fund is subject to the risk that its allocation of
of Investing in assets between stocks and fixed income securities may
this Fund under perform other allocations.
Investments in equity securities in general are subject to
market risks that may cause their prices to fluctuate over
time. In other words, the risk that stock prices will fall
over short or extended periods of time. Historically, the
equity markets have moved in cycles, and the value of the
Fund's equity securities may fluctuate drastically from
day-to-day. Individual companies may report poor results
or be negatively affected by industry or economic trends
and developments. The prices of securities issued by such
companies may suffer a decline in response.
15
<PAGE>
.
The prices of bonds and other fixed income securities
respond to economic developments, particularly interest
rate changes, as well as changes in the actual or
perceived creditworthiness of individual issuers,
including governments. Generally, fixed income securities
decrease in value if interest rates rise and vice versa.
Also, longer term securities are generally more volatile,
so the average maturity or duration of these securities
affects risk. High yield bonds involve greater risk of
default, or price declines than investment-grade
securities. The market prices of these securities can
change significantly for a number of reasons, such as
changes in interest rates, credit quality and stock
market activity. In addition, the trading market for
these securities is generally less liquid than for higher
rated securities.
The Fund may invest in mortgage-backed securities (and
collateralized mortgage obligations, a type of mortgage-
backed security). Mortgage-backed securities are fixed
income securities representing an interest in a pool of
underlying mortgage loans. They are sensitive to changes
in interest rates, but may respond to these changes
differently from other fixed income securities due to the
possibility of prepayment of the underlying mortgage
loans. Prepayment risk may make it difficult to calculate
the average maturity of a portfolio of mortgage-backed
securities and, therefore, to assess volatility risk.
The Fund is subject to additional risks, which are
discussed in the Statement of Additional Information.
16
<PAGE>
.
Performance Information __________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C>
- -2.11% 21.85% 13.16% 22.10% 9.97%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
12.94%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-11.86%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Russell 3000 Index and the Lehman
Brothers Aggregate Bond Index. An index measures the market prices of a
specific group of securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an index
had expenses, its performance would be lower. The Russell 3000 Index is a
widely recognized index of the 3000 largest U.S. companies based on market
capitalization. The Lehman Brothers Aggregate Bond Index is a widely
recognized index of U.S. government obligations, corporate bonds and mortgage-
backed securities.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Balanced Fund 9.97% 14.96% 12.63% 11.81%*
70% Russell 3000 Index/30% Lehman
Brothers Aggregate Bond Index 19.50% 20.28% 17.76% 16.50%*
</TABLE>
* Fund inception (1/4/93). Index inceptions computed from (12/31/92).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .70%
Other Expenses .30%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.00%
- -------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$102 $318 $552 $1,225
</TABLE>
17
<PAGE>
.
THE INTERNATIONAL FUNDS ________________________________________________________
Because the International Funds invest in foreign markets, either directly or
indirectly, each of these Funds is subject to the market and economic risks in
these foreign markets, including year 2000 issues. Investments in securities of
foreign companies or governments can be more volatile than investments in U.S.
companies or governments. Investing in foreign countries poses distinct risks,
since events unique to a country or region will affect those markets and their
issuers. These events will not necessarily affect the U.S. economy or similar
issuers located in the U.S. Diplomatic, political, or economic developments,
including nationalization or appropriation, also could affect investments in
foreign countries. Foreign securities markets generally have less trading
volume and less liquidity than U.S. markets. Foreign companies or governments
generally are not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to domestic U.S. companies
or governments. Transaction costs are generally higher than those in the U.S.
Expenses for custodial arrangements of foreign securities may be somewhat
greater than typical expenses for custodial arrangements of similar U.S.
securities. Some foreign governments levy withholding taxes against dividend
and interest income. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion will reduce the income received from the
securities comprising the portfolio.
Investments in foreign countries are generally denominated in a foreign
currency. As a result, changes in the value of those currencies compared to the
U.S. dollar and in exchange control regulations may affect (positively or
negatively) the value of a Fund's investments and the dividends from those
securities. These currency movements may happen separately from and in response
to events that do not otherwise affect the value of the security in the
issuer's home country. Investments in foreign securities denominated in foreign
currencies involve additional risks. For example, a Fund may incur substantial
costs in connection with conversions between various currencies. The Funds
typically do not engage in hedging transactions, and the Advisor may choose not
to hedge under certain market or economic conditions. Further, a Fund may be
unable to hedge against possible variations in foreign exchange rates or to
hedge a specific security transaction or portfolio position, particularly with
respect to Latin American and Asian markets.
The International Funds, except the Asian Tigers, Latin America Equity and
International Fixed Income Funds, have investment goals of high total return.
Total return is a combination of income, from dividends or interest, and
capital appreciation, which results from an increase in the value of a security
(called unrealized appreciation) or from selling a security for more than its
cost (called realized appreciation). The current strategies of the
International Funds generally focus on capital appreciation rather than income.
As a result, in market conditions that favor funds that focus on income, these
Funds may not be able to achieve the same level of total return as other mutual
funds. For these Funds, income is typically incidental.
Each International Fund is subject to additional risks, which are described on
the following pages and in the Statement of Additional Information.
18
<PAGE>
.
INTERNATIONAL EQUITY FUND(US)
_______________________________________________________________________________
Investment Goal High level of total return through capital appreciation
and current income
Principal
Investment The International Equity Fund primarily invests in common
Strategies stocks and other equity securities of foreign companies.
The Fund focuses on developed countries in Europe,
Australia and the Far East. The Advisor diversifies the
Fund's investments across three or more foreign countries
and seeks securities of companies with above average
growth potential and/or consistent earnings. In selecting
investments for the Fund, the Advisor uses a bottom-up
approach to identify attractive industries and companies
in various countries. The Advisor adjusts the Fund's
portfolio in response to changing growth scenarios for
various industry sectors and regions. While the Advisor
may not necessarily spread the Fund's investments among
more than three foreign countries, the Advisor intends to
diversify the Fund's investments among various countries
in an effort to reduce risks.
Principal Risks In addition to the general risks of investing in any
of Investing in International Fund, this Fund is subject to the risks
this Fund associated with equity investing. Investments in equity
securities in general are subject to market risks that may
cause their prices to fluctuate over time. In other words,
the risk that stock prices will fall over short or
extended periods of time. Historically, the equity markets
have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day.
Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
On January 1, 1999, various European countries implemented
a plan to convert or tie their currencies to a new
currency unit, the euro. Although it is not possible to
predict the impact of this conversion on the Fund, the
ongoing conversion to the euro may change the economic
environment and behavior of investors, particularly in
European markets. The Advisor may need to modify the
Fund's strategy in response to these changes. The ongoing
conversion to the euro may adversely affect financial
markets worldwide and may cause fluctuations in the value
of the U.S. dollar and other major currencies.
19
<PAGE>
.
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares from
year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ----- ----- ---- -----
<S> <C> <C> <C> <C>
3.32% 14.03% 10.09% 4.56% 25.43%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
22.35%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-13.75%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those the Morgan Stanley Capital International
Europe, Australasia and Far East Index (MSCI EAFE Index). An index measures the
market prices of a specific group of securities in a particular market or
securities in a market sector. You cannot invest directly in an index. An index
does not have an investment advisor and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower. The MSCI
EAFE Index is a widely recognized index of over 900 securities listed on the
stock exchanges in Europe, Australia and the Far East.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
International Equity Fund 25.43% 13.02% 11.21% 13.61%*
MSCI EAFE Index 20.00% 9.00% 9.19% 12.78%*
</TABLE>
* Fund inception (1/4/93). Index inception computed from (12/31/92)
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Other Expenses .31%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.31%
- -------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$133 $415 $718 $1,579
</TABLE>
20
<PAGE>
.
TRANSEUROPE FUND(US) (not currently available for purchase)
_______________________________________________________________________________
Investment Goal High level of total return through capital appreciation
and current income
Principal
Investment The TransEurope Fund primarily invests in common stocks
Strategies and other equity securities of companies headquartered or
based in European countries. The Fund's investments are
diversified among issuers located in various European
countries, such as Belgium, Denmark, France, Germany,
Italy and Finland. The Fund focuses on developed
countries, but may invest in countries with emerging
markets, such as Hungary, Poland and Slovakia.
Principal Risks In addition to the general risks of investing in any
of Investing in International Fund, this Fund is subject to the risks
this Fund associated with equity investing. Investments in equity
securities in general are subject to market risks that may
cause their prices to fluctuate over time. In other words,
the risk that stock prices will fall over short or
extended periods of time. Historically, the equity markets
have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day.
Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
Since the Fund's investments are focused on securities of
issuers located in Europe, the Fund is subject to the risk
that securities of companies headquartered or based in
Europe will under perform the equity markets as a whole,
as well as the risk that issuers in Europe will be
impacted by the market conditions, legislative or
regulatory changes, competition, or political, economic,
or other developments in Europe. Government regulation and
restriction in many European countries may limit the
amount and extent of the Fund's investments in those
countries. Regional economics are often closely
interrelated, and political and economic developments,
affecting one region or country often affect other regions
or countries, thus subjecting the Fund to additional
risks.
On January 1, 1999, various European countries implemented
a plan to convert or tie their currencies to a new
currency unit, the euro. Although it is not possible to
predict the impact of this conversion on the Fund, the
ongoing conversion to the euro may change the economic
environment and behavior of investors, particularly in
European markets. The Advisor may need to modify the
Fund's strategy in response to these changes. The
conversion to the euro may adversely affect financial
markets worldwide and may cause fluctuations in the value
of the U.S. dollar and other major currencies.
21
<PAGE>
.
The Fund's investments in emerging market countries can
be considered speculative and, therefore, may offer
higher potential for gains and losses than investments in
developed markets of the world. Emerging market countries
are countries that the World Bank or the United Nations
considers to be emerging or developing. With respect to
any emerging market country, the risks associated with
foreign investing are greater. The economies of emerging
market countries generally are heavily dependent upon
international trade. These economies have been and may
continue to be adversely affected by trade barriers,
exchange or currency controls, managed adjustments in
relative currency value and other protectionist measures
imposed or negotiated by the countries with which they
trade. Emerging markets may be more likely to experience
political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition,
the financial stability of issuers in emerging market
countries may be more precarious than in other countries.
As a result, there will tend to be more price volatility
in emerging market countries, which may be magnified by
currency fluctuations relative to the U.S. dollar.
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Other Expenses* .54%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.54%
- -------------------------------------------
</TABLE>
* Since the Fund has not started operations, Other Expenses are based on
estimated amounts for the current fiscal year.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$157 $486
</TABLE>
22
<PAGE>
.
ASIAN TIGERS FUND (US)
_______________________________________________________________________________
Investment Goal Capital Appreciation
Principal
Investment The Asian Tigers Fund primarily invests in common stocks
Strategies and other equity securities of companies headquartered or
based in Asian countries (other than Japan). The Advisor
diversifies the Fund's investments among various Asian
countries, such as Hong Kong, Singapore, South Korea,
Thailand, Taiwan and Indonesia, some of which have
emerging markets. The Fund does not intend to invest in
Japan. The Advisor allocates the Fund's investments
according to the relative attractiveness of the countries
and within those, the relative attractiveness of the
stocks. At the same time the Fund is managed in an effort
to reduce risk. In selecting investments for the Fund, the
Advisor evaluates each company using a combined top-down
(emphasis on market and sectors) and bottom-up (emphasis
on individual industries and companies) approach. The
Advisor tries to identify large capitalization, liquid
companies with growth potential.
Principal Risks In addition to the general risks of investing in any
of Investing in International Fund, this Fund is subject to the risks
this Fund associated with equity investing. Investments in equity
securities in general are subject to market risks that may
cause their prices to fluctuate over time. In other words,
the risk that stock prices will fall over short or
extended periods of time. Historically, the equity markets
have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day.
Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
Since the Fund's investments are focused on securities of
issuers located in Asia, the Fund is subject to the risk
that securities of companies headquartered or based in
Asia will under perform the equity markets as a whole, as
well as the risk that issuers in Asia will be impacted by
the market conditions, legislative or regulatory changes,
competition, or political, economic or other developments
in Asia. Government regulation and restrictions in many
Asian countries may limit the amount and extent of the
Fund's investments in those countries. Regional economics
are often closely interrelated, and political and economic
developments affecting one region or country often affect
other regions or countries, thus subjecting the Fund to
additional risks.
23
<PAGE>
.
The Fund's investments in emerging market countries can
be considered speculative and, therefore, may offer
higher potential for gains and losses than investments in
developed markets of the world. Emerging market countries
are countries that the World Bank or the United Nations
considers to be emerging or developing (e.g., South
Korea, Thailand). With respect to any emerging market
country, the risks associated with foreign investing are
greater. The economies of emerging market countries
generally are heavily dependent upon international trade.
These economies have been and may continue to be
adversely affected by trade barriers, exchange or
currency controls, managed adjustments in relative
currency value and other protectionist measures imposed
or negotiated by the countries with which they trade.
Emerging markets may be more likely to experience
political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition,
the financial stability of issuers in emerging market
countries may be more precarious than in other countries.
As a result, there will tend to be more price volatility
in emerging market countries, which may be magnified by
currency fluctuations relative to the U.S. dollar.
24
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1995 1996 1997 1998
- ----- ----- ------ ------
<S> <C> <C> <C>
11.61% 14.55% -36.98% -11.37%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
26.85%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-28.21%
6/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Morgan Stanley Capital International
(MSCI) All Asia Free ex-Japan Index. An index measures the market prices of a
specific group of securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an index
had expenses, its performance would be lower. The MSCI All Asia Free ex-Japan
Index is a widely recognized index that tracks seven Pacific Basin countries,
excluding Japan, and represents only those securities that are available for
investment by international investors.
<TABLE>
<CAPTION>
1 Year 3 Years Since Inception
------- ------- ---------------
<S> <C> <C> <C>
Asian Tigers Fund -11.37% -13.37% -7.19%*
MSCI All Asia Free ex-Japan Index -7.79% -15.39% -12.15%*
</TABLE>
* Fund inception (1/3/94). Index inception computed from (12/31/93).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Other Expenses .59%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.59%
- -------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$162 $502 $866 $1,889
</TABLE>
25
<PAGE>
.
LATIN AMERICA EQUITY FUND (US)
________________________________________________________________________________
Investment Goal Long-term capital appreciation
Principal
Investment The Latin America Equity Fund primarily invests in common
Strategies stocks and other equity securities of companies
headquartered or based in Latin American countries. The
Advisor diversifies the Fund's investments among various
Latin American countries, such as Argentina, Brazil,
Chile, Colombia, Mexico, Peru and Venezuela. In selecting
investments for the Fund, the Advisor seeks to benefit
from economic and other developments in Latin America.
The Advisor tries to identify companies with long-term
growth prospects whose securities are trading at
reasonable prices. The Advisor considers a company's
competitive advantages and its ability to sustain
earnings growth in comparison to its peers. The Advisor
selects the Fund's investments using a combination of
top-down (emphasis on market and sectors) and bottom-up
(emphasis on individual industries and companies)
approaches, with an emphasis on the latter. In an effort
to reduce risk, the Advisor diversifies the Fund's
investments among economic sectors.
Principal Risks In addition to the general risks of investing in any
of Investing in International Fund, this Fund is subject to the risks
this Fund associated with equity investing. Investments in equity
securities in general are subject to market risks that
may cause their prices to fluctuate over time. In other
words, the risk that stock prices will fall over short or
extended periods of time. Historically, the equity
markets have moved in cycles, and the value of the Fund's
equity securities may fluctuate drastically from day-to-
day. Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
Since the Fund's investments are focused on securities of
issuers located in Latin America, the Fund is subject to
the risk that Latin American securities will under
perform the equity markets as a whole, as well as the
risk that issuers in Latin America will be impacted by
the market conditions, legislative or regulatory changes,
competition, or political, economic or other developments
in Latin America. Government regulation and restrictions
in many Latin American countries may limit the amount and
extent of the Fund's investments in those countries.
Regional economies are often closely interrelated, and
political and economic developments affecting one region
or country often affect other regions or countries, thus
subjecting the Fund to additional risks.
26
<PAGE>
.
The Fund's investments in emerging market countries can be
considered speculative and, therefore, may offer higher
potential for gains and losses than investments in
developed markets of the world. Emerging market countries
are countries that the World Bank or the United Nations
considers to be emerging or developing (e.g., Peru,
Venezuela). With respect to any emerging market country,
the risks associated with foreign investing are greater.
The economies of emerging market countries generally are
heavily dependent upon international trade. These
economies have been and may continue to be adversely
affected by trade barriers, exchange or currency controls,
managed adjustments in relative currency value and other
protectionist measures imposed or negotiated by the
countries with which they trade. Emerging markets may be
more likely to experience political turmoil or rapid
changes in market or economic conditions than more
developed countries. In addition, the financial stability
of issuers in emerging market countries may be more
precarious than in other countries. As a result, there
will tend to be more price volatility in emerging market
countries, which may be magnified by currency fluctuations
relative to the U.S. dollar.
The Fund is non-diversified, which means that it may
invest in the securities of relatively few issuers. As a
result, the Fund may be more susceptible to a single
adverse economic or political/regulatory occurrence
affecting one or more of these issuers, and may experience
increased volatility due to its investments in those
securities.
27
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1997 1998
- ----- ------
<S> <C>
35.00% -36.33%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
22.73%
6/30/97
<CAPTION>
Worst Quarter
-------------
<S> <C>
-32.83%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Morgan Stanley Capital International
(MSCI) Emerging Markets Latin America Free Index. An index measures the market
prices of a specific group of securities in a particular market or securities
in a market sector. You cannot invest directly in an index. An index does not
have an investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The MSCI Emerging Markets
Latin America Free Index is a widely recognized index of stocks from Latin
American countries.
<TABLE>
<CAPTION>
1 Year Since Inception
------- ---------------
<S> <C> <C>
Latin America Equity Fund -36.33% -4.82%*
MSCI Emerging Markets Latin America Free Index -35.11% -4.63%*
</TABLE>
* Fund inception (7/1/96). Index inception computed from (6/30/96).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Other Expenses .91%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.91%
</TABLE>
- -----------------------------------------
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$194 $600 $1,032 $2,233
</TABLE>
28
<PAGE>
.
INTERNATIONAL FIXED INCOME FUND (US)
_______________________________________________________________________________
Investment Goal High level of total return, relative to funds with like
investment goals, measured in U.S. dollar terms, from
income and capital appreciation
Principal
Investment The International Fixed Income Fund primarily invests in
Strategies debt securities of foreign companies and debt securities
issued by foreign governments (commonly called sovereign
debt). In selecting investments for the Fund, the Advisor
manages currency, interest rates, yield curve and credit
exposure in an effort to maximize returns. There are no
restrictions on the average maturity of the Fund or the
maturity of any single investment. Although the Advisor
generally focuses on investment grade bonds with
intermediate maturities, maturities may vary widely
depending on the Advisor's assessment of interest rate
trends and other economic and market factors.
Principal Risks
of Investing in In addition to the general risks of investing in any
this Fund International Fund, this Fund is subject to the risks of
investing in corporate debt and other fixed income
securities. The prices of bonds and other fixed income
securities respond to economic developments, particularly
interest rate changes, as well as to changes in the actual
or perceived creditworthiness of individual issuers,
including governments. Generally, fixed income securities
decrease in value if interest rates rise and vice versa.
Also, longer term securities are generally more volatile,
so the average maturity or duration of these securities
affects risk. The volatility of lower rated securities is
even greater since the prospects for repayment of
principal and interest are more speculative.
Investing in sovereign debt involves a high degree of
risk, since the government that controls the repayment of
the debt may not be willing or able to repay principal or
interest when it is due. This may happen as a result of
political constraints, cash flow problems and other
national economic factors. As a result, government may
default on their debt obligations, which may require the
Fund to participate in debt rescheduling or other
proceedings.
The Fund is non-diversified, which means that it may
invest in the securities of relatively few issuers. As a
result, the Fund may be more susceptible to a single
adverse economic or political/regulatory occurrence
affecting one or more of these issuers, and may experience
increased volatility due to its investments in those
securities.
Although the International Funds typically do not engage
in hedging activities, this Fund may do so occasionally.
29
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ----- ----- ---- ----- ----
<S> <C> <C> <C> <C>
- -1.47% 20.99% 2.82% -6.88% 15.15%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
12.05%
3/31/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
-5.96%
3/31/97
</TABLE>
[Bar Chart appears here]
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the J.P. Morgan Global Non-U.S.
Government Bond Index. An index measures the market prices of a specific group
of securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The J.P. Morgan Global Non-U.S.
Government Bond Index is a widely recognized index of bonds issued by
governments other than the U.S.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
International Fixed Income Fund 15.15% 3.68% 5.85% 7.42%*
J.P. Morgan Global Non-U.S. Government
Bond Index 18.28% 6.21% 8.77% 9.61%*
</TABLE>
* Fund inception (2/7/93). Index inception computed from (1/31/93).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Other Expenses .76%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.56%
- -------------------------------------------
Fee Waiver/1/ -.05%
- -------------------------------------------
Net Expenses 1.51%
- -------------------------------------------
</TABLE>
/1/The Administrator has agreed to waive its fees through April 2000 in an
amount necessary to limit administration fees (included in Other Expenses) to
.10% of the Fund's net assets.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and the Total Annual Fund Operating Expenses for the remaining
years. Although your actual costs and returns might be different, your
approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$154 $488 $845 $1,852
</TABLE>
30
<PAGE>
.
THE BOND FUNDS ________________________________________________________________
The Bond Funds are subject to the risks of investing in bonds and other fixed
income securities. The prices of bonds and other fixed income securities
respond to economic developments, particularly interest rate changes, as well
as to changes in the actual or perceived creditworthiness and even year 2000
readiness of individual issuers, including governments. Generally, fixed
income securities decrease in value if interest rates rise and vice versa.
Also, longer term securities are generally more volatile, so the average
maturity or duration of these securities affects risk. Lower rated securities
are also volatile, since the prospects for repayment of principal and interest
are more speculative.
Each Bond Fund is subject to additional risks, which are described on the
following pages and in the Statement of Additional Information.
31
<PAGE>
.
FIXED INCOME FUND (US)
________________________________________________________________________________
Investment Goal High level of total return, relative to funds with like
investment goals, from income, and to a lesser degree,
capital appreciation
Principal
Investment The Fixed Income Fund primarily invests in debt
Strategies securities, such as corporate bonds and U.S. Treasury and
government agency obligations, mortgage-backed securities
and asset-backed securities. In selecting investments for
the Fund, the Advisor seeks securities that show
improving fundamentals not yet reflected in their price.
The Advisor broadly emphasizes all fixed income
securities, including mortgage-backed, corporate and U.S.
government securities, in an effort to reduce risk. The
Advisor actively manages four key components of portfolio
risk:
. Duration (the sensitivity of a bond's price to
changes in interest rates) is targeted in an
attempt to position the Fund's portfolio to take
advantage of changing economic conditions,
inflation and market values.
. Yield curve (the range of yields offered from short
term securities to long-term) allocations are based
on a detailed analysis of interest rates, the
portfolio's duration targets and a review of
Federal Reserve policy.
. Sector allocation (the percentage of assets in
corporate bonds, governments, etc.) is determined
by analysis of such factors as economic conditions,
current prices and market sentiment.
. Security selection is based on a fundamental
understanding of each holding including credit
analysis, market value and price volatility.
There are no restrictions on the average maturity of the
Fund or the maturity of any single investment. Although
the Advisor generally focuses on investment grade
securities with intermediate to long maturities,
maturities may vary widely depending on the Advisor's
assessment of interest rate trends and other economic and
market factors. In addition, the Fund may invest in fixed
income securities rated below investment grade (commonly
called "high yield" or "junk" bonds).
Principal Risks
of Investing in In addition to the general risks of investing in any Bond
this Fund Fund, this Fund is subject to the risks of investing in
U.S. government and mortgage-backed securities. Although
investments in U.S. government securities are considered
to be among the safest investments, they are not
guaranteed against price movements due to changing
interest rates. Obligations issued by some U.S.
government agencies are backed by the U.S. Treasury,
while others are backed solely by the ability of the
agency to borrow from the U.S. Treasury or by the
agency's own resources. High yield bonds involve greater
risk of default or price declines than investment-grade
securities. The market prices of these securities can
change significantly for a number of reasons, such as
changes in interest rates, credit quality and stock
market activity. In addition, the trading market for
these securities is generally less liquid than for higher
rated securities.
32
<PAGE>
.
Mortgage backed securities are fixed income securities
representing an interest in a pool of underlying mortgage
loans. They are sensitive to changes in interest rates,
but may respond to these changes differently from other
fixed income securities due to the possibility of
prepayment of the underlying mortgage loans. Prepayment
risk may make it difficult to calculate the average
maturity of a portfolio of mortgage-backed securities and,
therefore, to assess volatility risk.
Due to its investment strategy, the Fund may have a high
portfolio turnover rate. A portfolio turnover rate of 100%
or more may result in higher transaction costs, higher
levels of realized capital gains and additional taxes than
if the turnover rate was lower. In seeking total return
opportunities the Advisor considers such costs and
potential gains and taxes in determining whether to sell a
particular security.
33
<PAGE>
.
Performance Information __________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C>
- -3.82% 17.75% 3.42% 9.22% 7.13%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
5.93%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
-2.89%
3/31/94
</TABLE>
[Bar Chart appears here]
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Brothers Aggregate Bond Index.
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. An index does not have an investment advisor and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower. The Lehman Brothers Aggregate Bond Index is a widely recognized index
of U.S. government obligations, corporate bonds and mortgage-backed
securities.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Fixed Income Fund 7.13% 6.56% 6.50% 7.06%*
Lehman Brothers Aggregate Bond Index 8.69% 7.29% 7.27% 7.68%*
</TABLE>
* Fund inception (1/4/93). Index inception computed from (12/31/92).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Other Expenses .23%
- -------------------------------------------
Total Annual Fund Operating Expenses .83%
- -------------------------------------------
Fee Waivers/1/ -.15%
- -------------------------------------------
Net Expenses .68%
- -------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .50%
and .10%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$69 $250 $446 $1,011
</TABLE>
34
<PAGE>
.
INTERMEDIATE GOVERNMENT FIXED INCOME FUND (US)
_______________________________________________________________________________
Investment Goal High level of total return, relative to funds with like
investment goals, consistent with preservation of capital,
from income and, to a lesser degree, capital appreciation
Principal
Investment The Fund invests substantially all of its assets in U.S.
Strategies government obligations, including U.S. Treasury
obligations, U.S. government agency securities and
mortgage-backed securities issued by such agencies. The
Advisor anticipates that, under normal circumstances, the
Fund's dollar-weighted average maturity will range from
three to ten years.
In selecting investments for the Fund, the Advisor
actively manages four key components of portfolio risk:
. Duration (the sensitivity of a bond to changes in
interest rates) is targeted in an attempt to
position the Fund's portfolio to take advantage of
changing economic conditions, inflation and market
values.
. Yield curve (the range of yields offered from short
term securities to long-term) allocations are based
on a detailed analysis of interest rates, the
portfolio's duration targets and a review of Federal
Reserve policy.
. Sector allocation (the percentage of assets in
Treasuries, mortgage-backed securities, etc.) is
determined by analysis of such factors as economic
conditions, current prices and market sentiment.
. Security selection is based on a fundamental
understanding of each holding including market value
and price volatility.
Principal Risks
of Investing in In addition to the general risks of investing in any Bond
this Fund Fund, this Fund is subject to the risks of investing in
U.S. government and mortgage-backed securities issued by
such agencies. Although investments in U.S. government
securities are considered to be among the safest
investments, they are not guaranteed against price
movements due to changing interest rates. Obligations
issued by some U.S. government agencies are backed by the
U.S. Treasury, while others have an implied backing, plus
the ability of the agency to borrow from the U.S. Treasury
or by the agency's own resources.
Mortgage backed securities (including collateralized
mortgage obligations, a type of mortgage-backed security)
are fixed income securities representing an interest in a
pool of underlying mortgage loans. They are sensitive to
changes in interest rates, but may respond to these
changes differently from other fixed income securities due
to the possibility of prepayment of the underlying
mortgage loans. Prepayment risk may make it difficult to
calculate the average maturity of a portfolio of mortgage-
backed securities and, therefore, to assess volatility
risk. The Advisor actively manages this risk.
Due to its investment strategy, the Fund may have a high
portfolio turnover rate. A portfolio turnover rate of 100%
or more may result in higher brokerage transaction costs,
higher levels of realized capital gains and additional
taxes than if the turnover rate was lower. In seeking
total return opportunities, the Advisor considers such
costs and potential gains and taxes in determining whether
to sell a particular security.
35
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C>
- -2.78% 13.86% 3.51% 7.83% 8.16%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
4.87%
9/30/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-2.42%
3/31/94
</TABLE>
[GRAPH]
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Brothers Intermediate
Government Bond Index. An index measures the market prices of a specific group
of securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Lehman Brothers Intermediate
Government Bond Index is a widely recognized index of U.S. government
obligations, corporate bonds and mortgage-backed securities.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Intermediate Government Fixed Income
Fund 8.16% 6.51% 5.99% 6.00%*
Lehman Brothers Intermediate Government
Bond Index 8.49% 6.73% 6.45% 6.74%*
</TABLE>
* Fund inception (1/4/93). Index inception computed from (12/31/92).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Other Expenses .39%
- -------------------------------------------
Total Annual Fund Operating Expenses .99%
- -------------------------------------------
Fee Waivers/1/ -.15%
- -------------------------------------------
Net Expenses .84%
- -------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .50%
and .10%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$86 $300 $532 $1,199
</TABLE>
36
<PAGE>
.
TAX-EXEMPT FIXED INCOME FUND (US)
- -------------------------------------------------------------------------------
Investment Goal High level of total return, relative to funds with like
investment goals, from income, consistent with
preservation of capital
Principal
Investment The Tax-Exempt Fixed Income Fund primarily invests in debt
Strategies securities and invests at least 80% of its net assets in
securities that pay income exempt from Federal income and
alternative minimum taxes. The issuers of these securities
may be located in any U.S. state, territory or possession.
The Advisor varies the Fund's concentration of investments
among regions based on its analysis of market conditions
and seeks to take advantage of economic developments. In
selecting investments for the Fund, the Advisor focuses on
securities of municipal issuers with improving credit,
while limiting risk as much as possible.
There are no restrictions on the average maturity of the
Fund or the maturity of any single investment. Although
the Advisor focuses on investment grade securities with
intermediate to longer-term securities, maturities may
vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market
factors.
The Advisor actively manages four key components of
portfolio risk:
. Duration (the sensitivity of a bond to changes in
interest rates) is targeted in an attempt to
position the Fund's portfolio to take advantage of
changing economic conditions, inflation and market
values.
. Yield curve (the range of yields offered from short
term securities to long-term) allocations are based
on a detailed analysis of interest rates, the
portfolio's duration targets and a review of Federal
Reserve policy.
. Sector allocation (the percentage of assets in
securities issued to fund housing projects, airports
or hospitals for example) is determined by analysis
of such factors as economic conditions, current
prices and market sentiment.
. Security selection is based on a fundamental
understanding of each holding including credit
analysis, market value and price volatility.
Principal Risks
of Investing in In addition to the general risks of investing in any Bond
this Fund Fund, this Fund is subject to the risks of investing in
municipal securities. There may be economic or political
changes that impact the ability of municipal issuers to
repay principal and to make interest payments on municipal
securities. Changes to the financial condition or credit
rating or year 2000 difficulties of municipal issuers may
also adversely affect the value of the Fund's municipal
securities. Constitutional or legislative limits on
borrowing by municipal issuers may result in reduced
supplies of municipal securities. Moreover, certain
municipal securities are backed only by a municipal
issuer's ability to levy and collect taxes.
37
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C>
- -4.93% 15.67% 2.96% 9.36% 5.79%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
5.94%
3/31/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
-5.34%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Brothers Municipal Bond Index.
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. An index does not have an investment advisor and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower. The Lehman Brothers Municipal Bond Index is a widely recognized index
of municipal bonds with maturities of at least one year.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Tax-Exempt Fixed Income Fund 5.79% 6.00% 5.55% 6.05%*
Lehman Brothers Municipal Bond Index 6.48% 6.69% 6.23% 7.21%*
</TABLE>
*Fund inception (1/4/93). Index inception computed from (12/31/92).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Other Expenses .42%
- -------------------------------------------
Total Annual Fund Operating Expenses 1.02%
- -------------------------------------------
Fee Waivers/1/ -.15%
- -------------------------------------------
Net Expenses .87%
- -------------------------------------------
</TABLE>
/1/The Advisor and the Administrator have agreed to waive their fees through
April 2000 in amounts to limit advisory and administration fees to .50% and
.10%, respectively, of the Fund's net assets. Administration fees are included
in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5%. The example is based on Net Expenses for the first
year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$89 $310 $549 $1,234
</TABLE>
38
<PAGE>
.
LIMITED VOLATILITY FIXED INCOME FUND (US) (not currently available
for purchase)
_______________________________________________________________________________
Investment Goal High level of current income, consistent with relative
stability of principal
Principal
Investment The Limited Volatility Fixed Income Fund primarily invests
Strategies in a diversified portfolio of investment grade corporate
bonds, U.S. government agency securities, municipal
securities and sovereign debt securities. Under normal
circumstances, the Fund's dollar-weighted average maturity
will be less than six years.
Principal Risks In addition to the general risks of investing in any Bond
of Investing in Fund, this Fund is subject to the risks of investing in
this Fund municipal securities, foreign securities and sovereign
debt.
There may be economic or political changes that impact the
ability of municipal issuers to repay principal and to
make interest payments on municipal securities. Changes to
the financial condition or credit rating of municipal
issuers may also adversely affect the value of the Fund's
municipal securities. Constitutional or legislative limits
on borrowing by municipal issuers may result in reduced
supples of municipal securities. Moreover, certain
municipal securities are backed only by a municipal
issuer's ability to levy and collect taxes.
Investing in foreign countries poses distinct risks, since
political and economic events unique to a country or
region will affect those markets and their issuers. These
events will not necessarily affect the U.S. economy or
similar issuers located in the U.S. In addition,
investments in foreign countries are generally denominated
in a foreign currency. As a result, changes in the value
of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's
investments. These currency movements may happen
separately from and in response to events that do not
otherwise affect the value of the security in the issuer's
home country.
Investing in sovereign debt involves a high degree of
risk, since the government that controls the repayment of
the debt may not be willing or able to repay principal or
interest when it is due. This may happen as a result of
political constraints, cash flow problems and other
national economic factors. As a result, government may
default on their debt obligations, which may require the
Fund to participate in debt rescheduling or other
proceedings.
39
<PAGE>
.
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Other Expenses/1/ .24%
- -------------------------------------------
Total Annual Fund Operating Expenses .84%
- -------------------------------------------
Fee Waiver/2/ -.10%
- -------------------------------------------
Net Expenses .74%
- -------------------------------------------
</TABLE>
/1/Since the Fund has not started operating, Other Expenses are based on
estimated amounts for the current fiscal year.
/2/ The Advisor has agreed to waive its fees through April 2000 in an amount
necessary to limit advisory fees to .50% of the Fund's net assets.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$76 $258
</TABLE>
40
<PAGE>
.
THE MONEY MARKET FUNDS ________________________________________________________
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These generally include CDs,
bankers' acceptances, U.S. Treasury securities, some municipal securities,
commercial paper, and repurchase agreements involving these instruments.
Money market funds follow strict rules about credit risk, maturity and
diversification of its investments. An investment in a money market fund
is not a bank deposit. Although a money market fund seeks to keep a
constant price per share of $1.00, you may lose money by investing in a
money market fund.
Each Money Market Fund is subject to additional risks, which are described
on the following pages and in the Statement of Additional Information.
41
<PAGE>
.
TREASURY MONEY MARKET FUND (US)
________________________________________________________________________________
Investment Goal
To preserve principal value and maintain a high degree of
liquidity while providing current income
Principal
Investment The Treasury Money Market Fund invests substantially all
Strategies of its assets in high-quality U.S. Treasury money market
instruments, repurchase agreements involving these
obligations, and shares of money market funds that invest
in U.S. Treasury obligations. The Advisor structures the
Fund's portfolio based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor adjusts the average maturity of the Fund in
anticipation of changes in short-term interest rates.
Important factors include an assessment of Federal
Reserve policy and an analysis of the yield curve (the
range of yields offered).
Principal Risks An investment in the Fund is subject to the risk that the
of Investing in Fund's yield will decline due to falling interest rates.
This Fund A Fund share is not a bank deposit and is not insured or
guaranteed by the FDIC or any government agency. In
addition, although the Fund tries to keep a constant
price per share of $1.00, you may lose money by investing
in the Fund.
42
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
3.58% 5.28% 4.80% 4.97% 4.90%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
1.34%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
.65%
3/31/94
</TABLE>
[BAR CHART FOR CALENDAR YEARS 1994-1998]
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC U.S. Treasury Average. An average
measures the share prices of a specific group of mutual funds with a
particular investment objective. You cannot invest directly in an average. The
IBC U.S. Treasury Average is a composite of mutual funds with investment goals
similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Treasury Money Market Fund 4.90% 4.89% 4.71% 4.35%*
IBC U.S. Treasury Average 4.65% 4.73% 4.60% 4.27%*
</TABLE>
*Fund inception (1/4/93). Average inception computed from (12/31/92).
To obtain the Fund's current yield, please call 1-800-443-4725.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .35%
Other Expenses .21%
- -------------------------------------------
Total Annual Fund Operating Expenses .56%
- -------------------------------------------
Fee Waivers/1/ -.23%
- -------------------------------------------
Net Expenses .33%
- -------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .20%
and .07%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$34 $156 $290 $679
</TABLE>
43
<PAGE>
.
GOVERNMENT MONEY MARKET FUND (US)
________________________________________________________________________________
Investment Goal To provide as high a level of current income as is
consistent with the preservation of capital and liquidity
Principal
Investment The Government Money Market Fund invests 100% of its
Strategies assets in U.S. government money market instruments, such
as U.S. Treasury obligations and U.S. government agency
securities, and repurchase agreements involving these
instruments. The Advisor structures the Fund's portfolio
based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor monitors the Fund's investments and adjusts
the average maturity of the Fund in anticipation of
changes in short-term interest rates. Important factors
include an assessment of Federal Reserve policy and an
analysis of the yield curve (the range of yields
offered).
Principal Risks An investment in the Fund is subject to the risk that the
of Investing in Fund's yield will decline due to falling interest rates.
This Fund A Fund share is not a bank deposit and is not insured or
guaranteed by the FDIC or any government agency. Although
the Fund tries to keep a constant price per share of
$1.00, you may lose money by investing in the Fund.
44
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
3.89% 5.59% 5.08% 5.33% 5.24%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
1.40%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
.74%
3/31/94
</TABLE>
[BAR CHART FOR CALENDAR YEARS 1994-1998]
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC Total Government Average. An
average measures the share prices of a specific group of mutual funds with a
particular investment goal. You cannot invest directly in an average. The IBC
Total Government Average is a composite of mutual funds with investment goals
similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Government Money Market Fund 5.24% 5.22% 5.03% 4.69%*
IBC Total Government Average 4.97% 4.97% 4.81% 4.45%*
</TABLE>
*Fund inception (1/4/93). Average inception computed from (12/31/92).
To obtain the Fund's current yield, please call 1-800-443-4725.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .20%
Other Expenses .19%
- -------------------------------------------
Total Annual Fund Operating Expenses .39%
- -------------------------------------------
Fee Waiver/1/ -.08%
- -------------------------------------------
Net Expenses .31%
- -------------------------------------------
</TABLE>
/1/The Administrator has agreed to waive its fees through April 2000 in an
amount necessary to limit administration fees (included in Other Expenses) to
.07% of the Fund's net assets.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$32 $117 $211 $485
</TABLE>
45
<PAGE>
.
MONEY MARKET FUND (US)
________________________________________________________________________________
Investment Goal To provide as high a level of current income as is
consistent with the preservation of capital and liquidity
Principal
Investment The Money Market Fund invests substantially all of its
Strategies assets in high quality money market instruments issued by
corporations, banks and the U.S. government or its
agencies or instrumentalities, as well as repurchase
agreements involving these instruments. The Advisor
structures the Fund's portfolio based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor monitors the Fund's investments for credit
quality changes and may adjust the average maturity of
the Fund in anticipation of changes in short-term
interest rates. Important factors include an assessment
of Federal Reserve policy and an analysis of the yield
curve (the range of yields offered).
Principal Risks
of Investing in An investment in the Fund is subject to the risk that the
This Fund Fund's yield will decline due to falling interest rates.
A Fund share is not a bank deposit and is not insured or
guaranteed by the FDIC or any government agency. In
addition, the Fund is subject to the risk that an issuer
will be unable to make timely payments of principal or
interest. Changes in the credit ratings of issuers could
affect the Fund's share price. Although the Fund tries to
keep a constant price per share of $1.00, you may lose
money by investing in the Fund.
46
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
3.89% 5.69% 5.08% 5.33% 5.24%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
1.42%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
.76%
3/31/94
</TABLE>
[BAR CHART FOR CALENDAR YEARS 1994-1998]
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC Total Taxable Average. An average
measures the share prices of a specific group of mutual funds with a
particular investment goal. You cannot invest directly in an average. The IBC
Total Taxable Average is a composite of mutual funds with investment goals
similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Money Market Fund 5.33% 5.29% 5.10% 4.75%*
IBC Total Taxable Average 5.04% 5.04% 4.87% 4.50%*
</TABLE>
*Fund inception (1/4/93). Average inception computed from (12/31/92).
To obtain the Fund's current yield, please call 1-800-443-4725.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .35%
Other Expenses .18%
- -------------------------------------------
Total Annual Fund Operating Expenses .53%
- -------------------------------------------
Fee Waivers/1/ -.23%
- -------------------------------------------
Net Expenses .30%
- -------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .20%
and .07%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return.The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$31 $147 $253 $643
</TABLE>
47
<PAGE>
.
TAX-EXEMPT MONEY MARKET FUND (US)
________________________________________________________________________________
Investment Goal To preserve principal value and maintain a high degree of
liquidity while providing current income exempt from
Federal income tax and not included as a preference item
under the Federal alternative minimum tax
Principal
Investment The Tax-Exempt Money Market Fund invests substantially
Strategies all of its assets in high quality money market
instruments issued by municipalities and other issuers.
Under normal circumstances, the Fund invests at least 80%
of its net assets in securities that pay income exempt
from Federal income and alternative minimum taxes. These
issuers may be located in any state, territory or
possession of the U.S., or the District of Columbia. The
Advisor emphasizes particular sectors of the municipal
money market that it expects will outperform the market
as a whole. The Advisor structures the Fund's portfolio
based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor monitors the Fund for credit quality changes
and adjusts maturities in anticipation of changes in
interest rates. Important factors include an assessment
of Federal Reserve policy and an analysis of the yield
curve (the range of yields offered).
Principal Risks An investment in the Fund is subject to the risk that the
of Investing in Fund's yield will decline due to falling interest rates.
This Fund In addition, since the Fund may purchase securities
supported by credit enhancements from banks and other
financial institutions, changes in the credit quality of
these institutions could cause losses to the Fund and
affect its share price. A Fund share is not a bank
deposit and is not insured or guaranteed by the FDIC or
any government agency. Although the Fund tries to keep a
constant price per share of $1.00, you may lose money by
investing in the Fund.
48
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Common Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.50% 3.49% 3.14% 3.36% 3.21%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
.91%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
.50%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC Total Tax-Free Average. An
average measures the share prices of a specific group of mutual funds with a
particular investment goal. You cannot invest directly in an average. The IBC
Total Tax-Free Average is a composite of mutual funds with investment goals
similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Tax-Exempt Money Market Fund 3.21% 3.24% 3.14% 2.95%*
IBC Total Tax-Free Average 2.94% 3.03% 2.96% 2.79%*
</TABLE>
*Fund inception (1/4/93). Average inception computed from (12/31/92).
To obtain the Fund's current yield, please call 1-800-443-4725.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .35%
Other Expenses .20%
- -------------------------------------------
Total Annual Fund Operating Expenses .55%
- -------------------------------------------
Fee Waivers/1/ -.23%
- -------------------------------------------
Net Expenses .32%
- -------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .20%
and .07%, respectively, of the Fund's net assets. Administration fees are
included in Other Exepnses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$33 $153 $284 $667
</TABLE>
49
<PAGE>
.
More Information About Risk ____________________________________________________
This section gives you more information about the risks of investing in the
Funds. The Funds may invest in other securities, use other strategies and
engage in other investment practices than those described in this Prospectus.
These are discussed in detail in the Statement of Additional Information.
Type of Risk Funds Subject to Risk
Early Closing Risk--Unanticipated early All Funds
closings of markets or exchanges may result in
a Fund being unable to sell or buy securities
on that day. If an exchange or market closes
early on a day when a Fund needs to execute a
high volume of securities trades late in a
trading day, a Fund might incur substantial
trading losses
Convertible Securities--Convertible securities Stock Funds Balanced Fund
have characteristics of both fixed income and International Funds Bond
equity securities. The value of the convertible Funds
security tends to move with the market value of
the underlying stock, but may also be affected
by interest rates, credit quality of the issuer
and any call provisions.
Fixed Income Risk--In addition to the general
risks of investing in bonds and other fixed Balanced Fund
income securities, different types of fixed International Fixed Income
income securities may be subject to the Fund Bond Funds
following additional risks:
Call Risk--During periods of falling
interest rates, debt obligations with high
interest rates may be prepaid (or "called")
by the issuer prior to maturity. This may
cause a Fund's average weighted maturity to
fluctuate, and may require a Fund to invest
the resulting proceeds elsewhere, at
generally lower interest rates.
Credit Risk--The possibility that an issuer
will be unable to make timely payments of
either principal or interest.
Since a Fund may purchase securities backed
by credit enhancements from banks and other
financial institutions, changes in the
credit ratings of these institutions could
cause the Fund to lose money and may affect
the Fund's share price.
Event Risk--Securities may suffer
substantial declines in credit quality and
market value due to corporate or
governmental restructurings. While this risk
may be high for certain securities held by a
Fund, the overall risk should be reduced
because of the Fund's multiple holdings.
50
<PAGE>
.
Type of Risk
Funds Subject to Risk
Hedging Risk--Hedging is a strategy designed to Stock Funds Balanced Fund
offset investment risks. Hedging activities Internationa l Funds
include, among other things, the use of Bond Funds
forwards, options and futures. The Funds
typically do not engage in hedging
transactions. Further, the Advisor may choose
not to hedge under certain market or economic
conditions. [/R]
There are risks associated with hedging
activities, including:
. The success of a hedging strategy depends
on an ability to predict movements in the
prices of individual securities,
fluctuations in markets, and movements in
interest and currency exchange rates;
. There may be an imperfect or no
correlation between the changes in market
value of the securities held by the Fund
or the currencies in which those
securities are denominated and the prices
of forward contracts, futures and options
on futures;
. There may not be a liquid secondary
market for a futures contract or option;
. Trading restrictions or limitations may
be imposed by an exchange, and government
regulations may restrict trading in
currencies, futures contracts and
options. Currently, only a limited
market, if any, exists for hedging
transactions relating to currencies in
certain markets, including Latin
American, Asian and emerging markets
generally. This may limit a Fund's
ability to effectively hedge its
investments in those markets.
Futures--The Funds may, but typically do Stock Funds Balanced Fund
not, use futures contracts and related Internationa l Funds
options for bona fide hedging purposes to Bond Funds
offset changes in the value of securities
held or expected to be acquired. They may
also be used to gain exposure to a
particular market or instrument, to create
a certain market position, and for certain
other tax-related purposes. Futures
contracts and options on 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 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. Index
futures are futures contracts for various
indices that are traded on registered
securities exchanges. [/R]
51
<PAGE>
.
Type of Risk Funds Subject to Risk
Options--The buyer of an option acquires
the right to buy (a call option) or sell Stock Funds Balanced Fund
(a put option) a certain quantity of a International Funds Bond
security (the underlying security) or Funds
instrument at a certain price up to a
specified point in time. The seller or
writer of an option is obligated to sell
(a call option) or buy (a put option) the
underlying security. When writing
(selling) call options on securities, the
Funds may cover its positions by owning
the underlying security on which the
option is written or by owning a call
option on the underlying security.
Alternatively, the Funds may cover its
position by maintaining in a segregated
account cash or liquid securities equal
in value to the exercise price of the
call option written by the Funds.
Because option premiums paid or received
by the Funds are small in relation to the
market value of the investments
underlying the options, buying and
selling put and call options can be more
speculative than investing directly in
securities. The aggregate value of option
positions may not exceed 10% of a Fund's
net assets at the time the Fund enters
into an option contract.
All Funds
Year 2000 Risk--The Funds depend on the
smooth functioning of computer systems in
almost every aspect of their business. Like
other mutual funds, businesses and
individuals around the world, the Funds could
be adversely affected if the computer systems
used by its service providers do not properly
process dates on and after January 1, 2000,
and distinguish between the year 2000 and the
year 1900. The Funds have asked their service
providers whether they expect to have their
computer systems adjusted for the year 2000
transition, and are seeking assurances from
their service providers that they are
devoting significant resources to prevent
material adverse consequences to the Funds.
While it is likely that such assurances will
be obtained, the Funds and their shareholders
may experience losses if these assurances
prove to be incorrect or as a result of year
2000 computer difficulties experienced by
U.S. and foreign issuers of portfolio
securities, particularly governmental
issuers, or third parties, such as
custodians, banks, broker-dealers or others
with which the Funds do business.
Furthermore, many foreign countries are not
as prepared as the U.S. for the year 2000
transition. As a result, computer
difficulties in foreign markets and with
foreign institutions as a result of the year
2000 may add to the possibility of losses of
the Funds and shareholders.
52
<PAGE>
.
Type of Risk
Funds Subject to Risk
All Funds
Temporary Defensive Investing--The investments
and strategies described throughout the
prospectus are those the Advisor uses under
normal market conditions. When the Advisor
determines that market conditions warrant, each
Fund may invest up to 100% of its assets in
money market instruments, hold U.S. dollars and
foreign currencies, including multinational
currency units (such as the euro) or shorten
its average weighted maturity. This may occur,
for example, if securities markets or issuers
experience difficulties with the year 2000
transition. When a Fund is investing for
temporary, defensive purposes, it is not
pursuing its investment goal.
53
<PAGE>
..............................................
How Do I Obtain an Application?
Account Applica-
tion forms can be
obtained by call-
ing 1-800-443-4725
..............................................
.
................................
................................
How to Purchase, Exchange and Sell Your Shares ___________________________
Purchasing Common Shares
How To Purchase You may purchase Common Shares of the Funds by mail,
Common Shares telephone or wire directly from us. You also may purchase
Common Shares through a variety of channels, including
wrap programs, retirement plans, discount brokerage
programs, and through various brokerage firms and
financial institutions that are authorized to sell Common
Shares (intermediaries). Common Shares are offered
continuously and without a sales charge. (See Doing
Business Through An Intermediary) [/R]
To buy shares directly from us, please call 1-800-443-
4725 to obtain an Account Application. You should make
your check or money order payable in U.S. dollars to ABN
AMRO Funds and include the name of the appropriate Fund(s)
on your check.
We cannot accept third party checks, credit cards,
credit card checks or cash. Please note that if you
purchase shares with a check and then sell these shares
within a short period of time, we may delay payment to you
until your check clears (which may take up to 15 Business
Days). If your check does not clear, your purchase will be
canceled and you could be liable for any costs incurred.
By Mail [/R]
You can mail your Account Application and check or money
order to:
ABN AMRO Funds
P.O. Box 60549
King of Prussia, Pennsylvania 19406-0549
By Telephone If we have already received your Account Application, you
may purchase shares over the telephone by calling us at 1-
800-443-4725. We will complete your purchase order when we
receive your payment. [/R]
By Wire Before you wire funds, you must call us at 1-800-443-4725
to obtain an Account Application. After you have sent us
your account application and established an account, you
may purchase shares by wire as long as you: [/R]
. first, call us at 1-800-443-4725
. second, include your name, account number, taxpayer
identification number or Social Security number,
address and the Fund(s) you wish to purchase in the
wire instructions
. and third, wire Federal Funds to:
BSDT of Boston Massachusetts
ABN #01-10-01234
Account Number 14272
Further credit [Fund Name]
You can make additional investments by wire at any time
using the above procedure.
Fund shares cannot be purchased by wire on Federal
holidays that restrict wire transfers.
You may purchase a Fund's shares on any business day,
excluding major holidays ("Business Day"). Currently, the
Funds observe the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day, and Christmas Day.
54
<PAGE>
.
The price per share (the offering price) will be the net
asset value (NAV) per share next determined after we
receive your purchase order and payment. We calculate each
Fund's NAV once each Business Day. For the Non-Money
Market Funds, we calculate NAV as of the close of regular
trading on the NYSE (normally, 4:00 p.m., Eastern time).
So, for these Funds, to receive the current Business Day's
NAV, generally we must receive your purchase order in good
order from your financial institution before 4:00 p.m.,
Eastern time.
For the Money Market Funds, we must receive your
purchase order in good order and payment before 1:00 p.m.,
Eastern time for you to receive the current Business Day's
NAV and that day's dividend. You may not purchase shares
of a Money Market Fund by Federal Reserve wire on days the
Federal Reserve is closed. Purchase requests for the Money
Market Funds submitted to the Transfer Agent before 5:00
p.m., Eastern time, by accounts for which ABN AMRO North
America, Inc. or certain of its affiliates act in a
fiduciary, agency, investment advisory or custodian
capacity, will become effective at the net asset value
determined as of 5:00 p.m., Eastern time, and will be
entitled to receive the dividend declared, on that same
Business Day.
If we receive your order and payment after the above
cut-off times, your purchase order will be effective the
next Business Day and your purchase price per share will
be the NAV calculated on the next Business Day.
In calculating NAV for the Non-Money Market Funds, we
generally value a Fund's portfolio at market price. In
calculating NAV for the Money Market Funds, we generally
value a Fund's portfolio using the amortized cost
valuation method, which is described in detail in the
Statement of Additional Information. If market prices are
unavailable, or we think that the market prices or the
amortized cost valuation method are unreliable, fair value
prices may be determined in good faith using methods
approved by the Board of Trustees. Some Funds hold
portfolio securities that trade on foreign exchanges.
These securities may trade on weekends or other days when
the Funds do not calculate NAV. As a result, the NAV of a
Fund's shares may change on days when you cannot purchase
or sell Fund shares. Although we cannot assure this, we
expect the NAV for the Money Market Funds to remain
constant at $1.00 per share.
Buy, Exchange and Sell Requests are in "Good Order"
when
. The account number and Fund name are shown
. The amount of the transaction is specified in
dollars or shares
. Signatures of all owners appear exactly as they
are registered on the account
. Any required signature guarantees (if
applicable) are included
. Other supporting legal documents (as necessary)
are present
To purchase Common Shares of any Fund for the first
time, you must invest at least $2,000 in any Fund. To
purchase additional shares of any Fund, you must invest at
least $100. However, we may waive the investment minimums
at any time at our discretion.
55
<PAGE>
....................................................
How Does
an
Exchange
Take
Place?
When you exchange
your shares, you
authorize the sale
of your shares in
one Fund to pur-
chase shares of an-
other Fund. In
other words, you
are requesting a
sale and then a
purchase. This sale
of your shares may
be a taxable event
for you.
....................................................
.
................................................................................
................................................................................
If you have arranged to purchase shares through the
Automatic Investment Plan (see below), then you must
invest at least $50.
You may purchase Common Shares by direct deposit or
Automated Clearing House transactions.
The Advisor and Distributor reserve the right to refuse
any order for the purchase of shares.
Automatic With the Automatic Investment Plan ("AIP"), you may
Investment Plan purchase additional shares automatically through regular
deductions from your checking account. After you have
established an account with us, you may begin regularly
scheduled investments of at least $50 per month. Please
contact us at 1-800-443-4725 for more information. [/R]
Exchanging Common Shares __________________________________________________
How To Exchange You may exchange Common
Your Shares Shares of any [/R]
Fund for Common Shares of any
other Fund on any Business
Day. You can request an
exchange by mail, or by
telephone if you elected the
telephone exchange option on
your Account Application. You
will receive the current
Business Day's NAV if we
receive your exchange request
in good order before NAV is
calculated for the Non-Money
Market Funds and by 1:00
p.m., Eastern time
for the Money Market Funds. If your request
is for more than $5,000, we may require a written exchange
request with a signature guarantee from an eligible
guarantor (a notarized signature is not sufficient). The
Funds may change or cancel the exchange privilege at any
time upon 60 days' notice. Exchange requests for the Money
Market Funds submitted to the Transfer Agent before 5:00
p.m., Eastern time, on behalf of accounts for which ABN
AMRO North America, Inc,. or any of its affiliates act in
a fiduciary, agency, investment advisory or custodian
capacity, will become effective at the net asset value
determined as of 5:00 p.m., Eastern time that same
Business Day.
Exchanges By In the case of market timing or allocation services
Timing Accounts ("Timing Accounts"), the Distributor will deduct an
administrative service fee of $5.00 per exchange. Timing
Accounts generally include accounts administered so as to
redeem or purchase Shares based upon certain predetermined
market indicators. [/R]
The Funds reserve the right to temporarily or
permanently terminate the exchange privilege or reject any
specific purchase order for any Timing Account or any
person whose transactions seem to follow a timing pattern
who: (i) makes an exchange request out of a Fund within
two weeks of an earlier exchange request out of the Fund;
(ii) makes more than two exchanges out of a Fund per
calendar quarters; or (iii) exchanges Shares equal in
value to at least $5 million, or more than 1% of a Fund's
net assets. Accounts under common ownership or control
including accounts administered so as to redeem to
purchase Shares based upon certain predetermined market
indicators will be aggregated for purposes of the exchange
limits.
In addition, the Funds reserve the right to refuse the
purchase and/or exchange requests by any Timing Account,
person, or groups if, in the Advisor's judgment a Fund
56
<PAGE>
.................................................
What is a Signature Guarantee?
A signature guar-
antee verifies
the authenticity
of your signature
and may be ob-
tained from
banks, broker-
dealers, certain
credit unions,
clearing agencies
or savings asso-
ciations. A
notary public
cannot provide a
signature guaran-
tee.
.................................................
.
.................................................
.................................................
would be unable to invest effectively in accordance with
its investment objectives and policies or would otherwise
potentially be adversely affected. A shareholder's exchange
into a Fund may be restricted or refused if the Fund
receives or anticipates simultaneous orders affecting
significant portions of the Fund's assets, in particular, a
pattern of exchanges that coincides with a market timing
strategy may be disruptive to the Fund and therefore may be
refused.
The Advisor and the Distributor reserve the right to
refuse any order for the purchase of shares.
Selling Common Shares _____________________________________________________
How To Sell Your You may sell (redeem) your
Shares shares on any
[/R]
Business Day by mail or
telephone. If your redemption
request is for more than
$5,000, or if you are
requesting that the proceeds
from your redemption be sent
to an address or an account
that is different from what we
have on our records, then we
may require a written
redemption request with a
signature guarantee from an
eligible guarantor (a
notarized signature is not
sufficient).
You will receive the current Business Day's
NAV if we receive your redemption request in good order
before NAV is calculated for the Non-Money Market Funds and
by 1:00 p.m., Eastern time for the Money Market Funds.
Redemption requests for the Money Market Funds submitted to
the Transfer Agent before 5:00 p.m., Eastern Time, by
accounts for which ABN AMRO North America, Inc. or certain
of its affiliates act in a fiduciary, agency, investment
advisory or custodian capacity, will become effective at
the net asset value determined as of 5:00 p.m., Eastern
time that same Business Day.
Receiving Your Normally, we will send your redemption proceeds within
Money seven Business Days after we
[/R]
receive your request. Your proceeds can be mailed to you or
mailed or wired to your bank account. To request a wire
transfer, please contact your bank or financial
intermediary. You will be charged a $10.00 fee by the Fund
for each wire transfer. If you recently purchased your
shares by check or through an AIP, then your proceeds may
not be available until your check has cleared (which may
take up to 15 days).
We intend to pay your redemption proceeds in cash.
However, under unusual conditions that make the payment of
cash unwise (and for the protection of the remaining
shareholders of the Fund), we may pay all or part of your
redemption proceeds in portfolio securities that have a
market value equal to the redemption price. Although it is
highly unlikely that your shares would ever actually be
redeemed in kind, if it did happen, you would probably have
to pay brokerage costs to sell the securities distributed
to you, as well as taxes on any gain from the sale.
Systematic Under the Systematic Withdrawal Plan ("SWP"), you may
Withdrawal Plan arrange monthly, quarterly,
[/R]
semi-annual, or annual automatic withdrawals of $50 or more
from any Fund. The proceeds can be mailed to you or wired
to your bank account. You may use the SWP if you
automatically reinvest your dividends (see dividends and
distributions below) and your account has a current value
of $5,000 or more.
57
<PAGE>
.
Involuntary If your account balance drops below $2,000 (the required
Redemptions minimum initial purchase
[/R]
amount) due to redemptions, including redemptions through
the SWP, you may be required to redeem your remaining
shares. You will always be given at least 60 days'
written notice to give you time to add to your account
and avoid involuntary redemption.
More Information About Share Transactions _________________________________
Checkwriting You may elect the Money Market Funds' checkwriting
Service For Money services which allow you to write
Market Fund
Investors checks in amounts of $100 or more. You may not, however,
use a check to close your account. You may not write
checks against Common Shares of the Money Market Funds in
your account which you purchased within the last 15 days,
except for shares you purchased by wire (which are
immediately available). [/R]
Telephone Telephone transactions are extremely convenient, but not
Transactions without risk. To try to keep
[/R]
your telephone transactions as safe, secure, and risk-
free as possible, we have developed certain safeguards
and procedures for determining the identity of callers
and authenticity of instructions. We will not be
responsible for any loss, liability, cost, or expense for
following telephone or wire instructions we reasonably
believe to be genuine. If you choose to make telephone
transactions, you will generally bear the risk of any
loss. You may not close your account by telephone.
Doing Business Common Shares are sold without a sales load, 12b-1 fee or
Through an shareholder servicing
Intermediary [/R]
fee. However, intermediaries may charge fees for services
provided in connection with buying, selling or exchanging
Fund shares on your behalf. Each intermediary may impose
its own rules about share transactions, including earlier
deadlines for purchase, sale and exchange requests.
If you own shares that are registered in your
intermediary's name, and you want to transfer the
registration to another intermediary or want the shares
registered in your name, then you should contact your
intermediary for instructions to make the change.
Dividends andDistributions ________________________________________________
The Funds distribute their net investment income as
follows:
.Stock Funds
Declared and distributed monthly
Balanced Fund
Bond Funds
.International Funds
Declared and distributed at least
annually
.Money Market Funds
Declared daily and distributed monthly
58
<PAGE>
.......................
Distributions
The Funds dis-
tribute income
dividends and
capital gains.
Income dividends
represent the
earnings from a
Fund's invest-
ments; capital
gains occur when
a Fund sells a
portfolio secu-
rity for more
than the original
purchase price.
.......................
.
The Funds distribute capital gains, if any, at least
annually. If you own Fund shares on a
Fund's record date, you will be
entitled to receive the
distribution. If a Fund does not
have income or capital gains
available to distribute, as
determined under tax laws, you
will not receive a distribution.
You will receive dividends
and distributions in the form
of additional shares unless you
have elected to receive payment
in cash. To elect cash payment,
you must notify us in writing
prior to the date of
distribution. Your election
will become effective for
dividends paid after we receive
your written notice.
To cancel your election, simply send
us written notice.
.......................
Taxes
Distributions you
receive from a Fund
may be taxable
whether or not you
reinvest them.
.......................
Tax Information _______________________________________________________________
The following is a summary of some important tax issues
that affect the Funds and their shareholders. The summary
is based on current tax laws, which may be changed by
legislative, judicial or administrative action. We have
not tried to present a detailed explanation of the tax
treatment of the Funds or their shareholders. More
information about taxes is in our Statement of Additional
Information. We urge you to
consult your tax advisor
regarding specific questions
about federal, state and local
income taxes.
Tax Status of
Distributions Each Fund will distribute
substantially all of its income
and capital gains, if any.
The dividends and
distributions you
receive may be subject to federal, state and local
taxation, depending on your tax situation. You may be
taxed on each sale of Fund shares.
The Tax-Exempt Fixed Income and Tax-Exempt Money Market
Funds intend to distribute federally tax-exempt income.
This income may be subject to state and local taxes. Each
Fund, however, may invest a portion of its assets in
securities that generate taxable income for federal or
state income taxes. Any capital gains distributed by these
Funds may be taxable.
More information about taxes is in the Statement of
Additional Information.
59
<PAGE>
..................
Investment
Advisor
The Funds' Advi-
sor manages
investment activ-
ities and is re-
sponsible for the
performance
of the Funds. The
Advisor conducts
research, exe-
cutes Fund strat-
egies based on an
assessment of
economic and mar-
ket conditions,
and determines
which portfolio
securities to
buy, hold or
sell.
.......................
.
................................................................................
................................................................................
InvestmentAdvisor _________________________________________________________
The Advisor makes investment
decisions for the Funds and
reviews, supervises, and
administers each Fund's
investment program. The
Trustees of the Funds supervise
the Advisor and establish
policies that the Advisor must
follow in its day-to-day
management activities.
ABN AMRO Asset Management
(USA) Inc. (the Advisor), 208
South LaSalle Street, Chicago,
IL 60604, was organized in
March 1991 under the laws of
the State of Delaware. The
Advisor manages assets for
individuals, corporations,
unions, governments, insurance
companies, and charitable
organizations. As of
December 31, 1998, the Advisor managed approximately $7.4
billion in assets.
For the fiscal year ended December 31, 1998, the Funds
paid the following in advisory fees: 80% for the Value
Fund, .80% for the Growth Fund, .80% for the Small Cap
Growth Fund, 1.00% for the International Equity Fund,
1.00% for the Asian Tigers Fund, 1.00% for the Latin
America Equity Fund, .70% for the Real Estate Fund, .70%
for the Balanced Fund, .50% for the Fixed Income Fund,
.50% for the Intermediate Government Fixed Income Fund,
.50% for the Tax-Exempt Fixed Income Fund, .80% for the
International Fixed Income Fund, .20% for the Treasury
Money Market Fund, .20% for the Government Money Market
Fund, .20% for the Money Market Fund and .20% for the
Tax-Exempt Money Market Fund.
As of December 31, 1998, the TransEurope and Limited
Volatility Fixed Income Funds had not yet commenced
operations. The Advisor is entitled to receive .80% from
the Small Cap Value Fund, which, as of December 31, 1998,
had not been in operation for a full fiscal year.
The Advisor may use its affiliates as brokers for the
Funds' portfolio transactions. The affiliates may receive
compensation from the Funds for their brokerage services.
The Advisor is an indirect, wholly-owned subsidiary of
ABN AMRO Bank, N.V. The Advisor may, from time to time
and at its own expense, provide promotional incentives,
in the form of cash or other compensation, to certain
financial institutions whose representatives have sold or
are expected to sell significant amounts of the Funds'
shares. Some of these financial institutions may be
affiliated with the Advisor.
Jac A. Cerney, C.F.A., Senior Vice President of the
Advisor, has served as portfolio manager for the Value
Fund and the equity portion of the Balanced Fund since
their inception. Mr. Cerney has been associated with the
Advisor and its predecessor since April, 1990 as a
portfolio manager. Prior to joining the Advisor's
predecessor firm in 1990, Mr. Cerney was the equity
portfolio manager for Commonwealth Edison's internally
managed pension fund. Mr. Cerney earned a B.A. in
Chemistry from Oberlin College, an M.S. in Chemistry from
the University of Chicago and an M.B.A., in Finance from
the University of Chicago. He is a member of the
Investment Analysts Society of Chicago.
60
<PAGE>
.
A. Keith Dibble, C.F.A., Senior Vice President of the
Advisor, has served as portfolio manager for the Growth
Fund since its inception. Mr. Dibble has been associated
with the Advisor and its predecessor since 1987 as a
portfolio manager. Mr. Dibble received two B.S. degrees in
Engineering from Washington State University and an M.B.A.
in Finance from Northwestern University. Mr. Dibble is a
member of the Institute of Chartered Financial Analysts, a
past president of the Milwaukee Investment Analysts
Society and a member of various other professional
organizations.
Nancy Holland, C.P.A., Senior Vice President of the
Advisor, has served as portfolio manager of the Real
Estate Fund since its inception. Ms. Holland has been
associated with the Advisor and its predecessor since
January, 1997 as a portfolio manager. Prior to joining the
Advisor, Ms. Holland 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 CenterMark Properties from
November, 1988 to January, 1995. Ms. Holland graduated
from Saint Louis University with a B.S. in Accounting.
Mary E. Ras, Vice President of the Advisor, has served
as co-manager of the Small Cap Growth Fund since
September, 1998. She is responsible for equity research
and equity trading. Ms. Ras has been associated with the
Advisor and its predecessor since 1983 as a tax shelter
analyst. Prior to joining the Asset Management Group, Ms.
Ras worked in debt finance and tax-advantaged investments.
Ms. Ras holds an M.B.A. degree from the University of
Chicago and a B.S. degree from Northeastern Illinois
University.
Kenneth A. Tyszko, C.F.A., C.P.A., Vice President of
the Advisor, has served as co-manager of the Small Cap
Growth Fund since September, 1998. Mr. Tyszko has been
associated with the Advisor or its affiliates since 1996
as an investment manager. Previously, he managed a $250
million portfolio of publicly traded small and mid-size
capitalization growth stocks for Sears Investment
Management Co., which he joined in 1984. Mr. Tyszko earned
his B.S. in Accounting from the University of Illinois.
Mr. Tyszko is a member of the Illinois CPA Society, the
Investment Analysts Society of Chicago, and the
Association for Investment Management and Research.
Kurt S. Moeller, Vice President of the Advisor, has
served as co-manager of the Small Cap Value Fund since
March 1, 1999. Mr. Moeller began his investment career in
1995 as a research assistant for the Indiana University
Foundation. Mr. Moeller was a fundamental equity analyst
at Grantham, Mayo, Van Otterloo & Co., LLC, a Boston money
management firm, from 1996 through 1998. Mr. Moeller
earned a B.A. in Economics and History from Rice
University in 1991 and an M.B.A. in Finance from Indiana
University in 1996.
Edwin M. Bruere, C.F.A., Senior Vice President of the
Advisor has served as lead portfolio manager of the Small
Cap Value Fund since June 30, 1998. Mr. Bruere has been
assoicated with the Advisor and its predecessors since
1988. He was involved initially associated with client
services and then later as a member of a portfolio
management committee and as a portfolio manager.
Previously, Mr. Bruere spent two years as Managing
Director of an investment management firm. Before this, he
spent six years at Continental Bank (Bank of America) as a
Senior Director. He spent 1995 and 1996 in London working
in the Merchant Bank on securities origination and
distribution. Mr. Bruere graduated from Iowa State
University with a B.S. in business and received his M.B.A.
from Indiana University. He is a member of the Association
for
61
<PAGE>
.
Investment Management and Research and the Investment
Analysts Society of Chicago. He is a Director of the
Indiana University Reese Foundation.
Richard Butler, Senior Vice President of the Advisor
has served as co-manager of the Growth Fund since June
1998. Mr. Butler is also responsible for equity research.
Mr. Butler joined the Advisor's predecessor firm in 1983
as a trader and then a portfolio manager, and is the
Advisor's senior equity trader. Mr. Butler graduated from
Williams College with a B.A. in International Relations
and received his M.B.A. from the University of Chicago.
Mark W. Karstrom, Senior Vice President of the
Advisor, has served as portfolio manager for the Limited
Volatility Fixed Income Fund since September, 1996 and
served as portfolio manager for the Intermediate
Government Fixed Income Fund from September, 1996 to
January, 1999. Mr. Karstrom joined the Advisor in August,
1996 as a portfolio manager. He served as Vice President,
Portfolio Manager with Norwest Investment Management and
Trust and a predecessor firm from May, 1985 to July, 1996
where he managed portfolios comprised of government,
corporate, and mortgage-backed securities. Mr. Karstrom
received his B.A. in Economics from the University of
Denver.
Gregory D. Boal, C.F.A., Senior Vice President of the
Advisor, has served as portfolio manager of the fixed
income portion of the Balanced Fund from April, 1997 to
January, 1999, and as portfolio manager of the Fixed
Income Fund from June, 1998 to January, 1999. Mr. Boal
joined the Advisor in March, 1997 as a portfolio manager.
He served as Manager, Fixed Income Division of First
Citizens Bank Capital Management, a division of First
Citizens Bank, Raleigh, N.C. from November, 1989 to
March, 1997. Prior to that, Mr. Boal was the senior
investment officer at Wyoming National Bank and Trust in
Casper, Wyoming. Mr. Boal graduated from the University
of Wyoming in 1981 with a Bachelor of Science degree in
Broadcasting. He received a Master of Science degree in
Finance from the same institution in 1985. Mr. Boal is a
member of the Association of Investment Management and
Research and the Investment Analyst Society of Chicago.
Todd J. Youngberg, C.F.A., Senior Vice President of
the Advisor, has served as portfolio manager of the
Balanced Fund since November, 1998, and as portfolio
manager of the Fixed Income Fund from November 1998 to
January 1999. Mr. Youngberg joined the Advisor in
November, 1998 as a portfolio manager. Prior to joining
the Advisor, Mr. Youngberg served as Vice President and
Portfolio Manager for Amerus Life Holdings Inc. in Des
Moines, Iowa from 1992 to November, 1998. He was
responsible for managing high yield portfolios. Prior to
joining Amerus Life, Mr. Youngberg worked as a securities
analyst for Central Life Assurance/American Mutual Life
Insurance Company. Mr. Youngberg received a B.A. in
Economics from Central College in Pella, Iowa and his
M.B.A. in Finance from Drake University. He is a member
of the Association of Investment Management and Research.
Messrs. Karstrom, Boal and Youngberg, members of the
Fixed Income Portfolio Management Team, have been jointly
and primarily responsible for the day-to-day management
of the Fixed Income Fund and the fixed income portion of
the Balanced Fund since January, 1999.
Phillip P. Mierzwa, Vice President of the Advisor, has
served as portfolio manager of the Tax-Exempt Fixed
Income Fund and Tax-Exempt Money Market Fund since April,
1997. He has been associated with the Advisor or its
affiliates since
62
<PAGE>
.
February, 1990 as a portfolio manager and a trader. Mr.
Mierzwa has a B.A. and M.B.A. degree in Finance from
Governors State University.
Karen Van Cleave, Senior Vice President of the Advisor,
has served as portfolio manager of the Money Market Fund,
Treasury Money Market Fund and Government Money Market
Fund since January, 1994. Ms. Van Cleave joined the
Advisor in January, 1994 as a portfolio manager. Prior to
1994, Ms. Van Cleave was a Vice President/Portfolio
Manager at Chemical Investment Group, Ltd. for three
years. Prior to that, she worked at Shearson Lehman Hutton
(and its predecessors) for seven years in their money
market fund complex. Ms. Van Cleave earned her B.S. in
Business Administration from Boston University.
Messrs. Postma, Ploeger, Bettink, Leo, Maas,
Moolenburgh and Neihoff, and Mrs. Pals-de Groot, members
of the International Equity Team, have been jointly and
primarily responsible for the day-to-day management of the
International Equity Fund since April, 1999.
Wiepke Postma served as portfolio manager for the
International Equity Fund from March, 1997 to April, 1999.
Mr. Postma started his banking career as an analyst at
former ABN AMRO Bank's Investment Research Department.
Later, he became a strategist. From 1976 to 1984, he
worked in the Equity and Loan Department of a leading
Dutch insurance company, where he was appointed head of
the department in 1982. In 1984, he joined former ABN AMRO
Bank's Asset Management Department and was appointed Vice
President in the same year. In 1993, he became Head of the
Global Equity Group being responsible for the Global
Equity, European Equity, Dutch Equity and Business
research. Mr. Postma holds a Master's degree in Economics.
Willem Ploeger has been associated with the Advisor
and/or its affiliates since 1980. Initially, he served in
the Investment Research Department and later in the Asset
Management Department as senior account manager. Mr.
Ploeger holds a Master's degree in Business Administration
of the University of Rotterdam.
Jaap Bettink has been associated with the Advisor
and/or its affiliates since 1978. From 1978 to 1985, he
was a credit manager at a local branch of ABN AMRO Bank.
He has been managing institutional portfolios since 1985,
and has been a portfolio manager since 1994. Mr. Bettink
started his career as a portfolio manager of private
accounts in 1972. He holds a degree in Economics.
Loes Pals-de Groot has been associated with the Advisor
and/or its affiliates since 1971 in various investment
management positions. Mrs. Pals-de Groot holds a degree in
Business Economics from the Instituut voor Sociale
Wetenschappen.
Luigi Leo has been associated with the Advisor and/or
its affiliates since 1991 as a portfolio manager. Mr. Leo
holds a Master's degree in Business Administration from
the Instituto de Estudios Superiores de la Empresa (IESE)
in Barcelona, Spain.
Theo Maas has been associated with the Advisor and/or
its affiliates since 1994 as a portfolio manager.
Previously, Mr. Maas worked with a financial consultant,
specializing in treasury management and research
management consultancy. He holds a Master's degree in
Financial Economics from the University of Groningen.
63
<PAGE>
.
Edward Moolenburgh has been associated with the
Advisor and/or its affiliates since 1993. Initially, he
served as Secretary to the Advisor's Regional Investment
Committee North America and Far East, and later as a
portfolio manager. Mr. Moolenburgh holds a Master's
degree from the Economics Faculty of the Erasmus
University in Rotterdam and is a Register Beleggings
Analyst, which is comparable to a Certified European
Financial Analyst.
Edward Neihoff has been associated with the Advisor
and/or its affiliates since 1993, initially as an
investment analyst. After three years, Mr. Neihoff
assumed the responsibility for implementing a new asset
management system and then, during 1998, returned to the
position of portfolio manager. He holds a Master's degree
in Technical Management Studies and is a Certified
European Financial Analyst.
Alex Ng has served as portfolio manager for the Asian
Tigers Fund since July, 1995. Mr. Ng has been associated
with the Advisor and/or its affiliates since 1988 as a
portfolio manager. Mr. Ng also serves as the Far East
Director of Asset Management for a Hong Kong-based
affiliate of the Advisor. Mr. Ng joined ABN AMRO's
Investment Banking Representative Office in Singapore in
January 1988 before being transferred to the Securities
subsidiary in Hong Kong. Previously, Mr. Ng worked as a
financial analyst in Malaysia. Mr. Ng holds a degree in
Economics from the University of California in Los
Angeles.
Felix Lanters, portfolio manager for the TransEurope
Fund, has been associated with the Advisor and/or its
affiliates since 1987 as a portfolio manager.
Wouter Weijand has served as portfolio manager of the
International Fixed Income Fund since september, 1997.
Mr. Weijand has worked as a portfolio manager with the
Advisor and/or its affiliates since 1984.
Luiz M. Ribeiro, Jr., C.F.A., served as the portfolio
manager of the Latin America Equity Fund from November,
1997 to April, 1999. Currently, he serves as co-manager
of the Fund. Mr. Ribeiro has worked as an investment
analyst with the Advisor and/or its affiliates since
1994. From March, 1990 to June, 1993, he served with the
trading desk of Dibran DTVM Ltd. Mr. Ribeiro obtained a
Business Degree at the University of Sao Paulo in 1990.
In 1993, he concluded an M.B.A. offered by IBMEC
(Brazilian Institute of Capital Markets) in Sao Paulo.
Roberto Lampl has served as co-manager of the Latin
America Equity Fund since April, 1999. Mr. Lampl has been
associated with the Advisor and/or its affiliates since
1993 as corporate finance adviser (Latin America) in the
Investment Banking Division. He obtained a Bachelor's
degree in Economics from Boston University in 1990. In
1993, he completed an M.B.A. at Babson Graduate School of
Business in Wellesley, Massachusetts.
64
<PAGE>
.
Financial Highlights __________________________________________________________
The tables that follow present performance information
about Common Shares of each Fund. This information is
intended to help you understand each Fund's financial
performance for the past five years, or, if shorter, the
period of the Fund's operations. Some of this information
reflects financial information for a single Fund share.
The total returns in the tables represent the rate that
you would have earned (or lost) on an investment in a
Fund, assuming you reinvested all of your dividends and
distributions. As of December 31, 1998, the TransEurope
and Limited Volatility Fixed Income Funds had not
commenced operations.
This information has been audited by Ernst & Young LLP,
the Funds' independent auditors. Their report, along with
each Fund's financial statements and related notes,
appears in the annual report that accompanies the
Statement of Additional Information. You can obtain the
Funds' annual report, which contains more performance
information, at no charge by calling 1-800-443-4725.
For a Share Outstanding for the Years Ended December 31,
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Net Investment
Net Ratio of Investment Ratio of Income
Net Realized Distri- Asset Net Expenses Income Expenses to
Asset Net and Dividends butions Value Assets to to to Average Average
Value Invest- Unrealized from Net from End End of Average Average Net Assets Net Assets
Beginning ment Gains on Investment Capital of Total Period Net Net (Excluding (Excluding
of Period Income Securities Income Gains Period Return (000) Assets Assets Waivers) Waivers)
- ----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------
Treasury Money Market Fund
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Share Class
1998 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 4.90% $328,222 0.37% 4.79% 0.59% 4.58%
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 4.97 188,761 0.33 4.86 0.57 4.62
1996 1.00 0.05 0.00 (0.05) 0.00 1.00 4.80 156,455 0.44 4.70 0.59 4.55
1995 1.00 0.05 0.00 (0.05) 0.00 1.00 5.28 110,475 0.44 5.16 0.59 5.01
1994 1.00 0.04 0.00 (0.04) 0.00 1.00 3.58 111,545 0.45 3.50 0.61 3.34
- ----------------------------------------------------
Government Money Market Fund
- ----------------------------------------------------
Common Share Class
1998 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 5.24% $396,797 0.35% 5.12% 0.42% 5.04%
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 5.33 255,259 0.32 5.21 0.40 5.13
1996 1.00 0.05 0.00 (0.05) 0.00 1.00 5.08 256,392 0.44 4.96 0.44 4.96
1995 1.00 0.05 0.00 (0.05) 0.00 1.00 5.59 207,615 0.42 5.45 0.42 5.45
1994 1.00 0.04 0.00 (0.04) 0.00 1.00 3.89 157,140 0.42 3.81 0.42 3.81
- -------------------------------
Money Market Fund
- -------------------------------
Common Share Class
1998 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 5.33% $941,295 0.33% 5.21% 0.56% 4.98%
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 5.41 737,736 0.32 5.29 0.56 5.05
1996 1.00 0.05 0.00 (0.05) 0.00 1.00 5.13 598,715 0.43 5.02 0.58 4.87
1995 1.00 0.06 0.00 (0.06) 0.00 1.00 5.64 475,688 0.41 5.50 0.56 5.35
1994 1.00 0.04 0.00 (0.04) 0.00 1.00 3.97 460,583 0.41 3.93 0.56 3.78
- ----------------------------------------------------
Tax-Exempt Money Market Fund
- ----------------------------------------------------
Common Share Class
1998 $1.00 $0.03 $0.00 $(0.03) $0.00 $1.00 3.21% $272,834 0.35% 3.17% 0.56% 2.95%
1997 1.00 0.03 0.00 (0.03) 0.00 1.00 3.36 250,260 0.33 3.32 0.57 3.08
1996 1.00 0.03 0.00 (0.03) 0.00 1.00 3.14 187,629 0.40 3.10 0.56 2.94
1995 1.00 0.03 0.00 (0.03) 0.00 1.00 3.49 167,945 0.41 3.44 0.56 3.29
1994 1.00 0.02 0.00 (0.02) 0.00 1.00 2.50 161,054 0.43 2.52 0.59 2.36
</TABLE>
65
<PAGE>
.
Financial Highlights (Continued) __________________________________________
For a Share Outstanding for the Years Ended December 31,
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Net Investment
Net Ratio of Investment Ratio of Income
Net Distri- Asset Net Expenses Income Expenses to
Asset Net Realized and Dividends butions Value Assets to to to Average Average
Value Invest- Unrealized from Net from End End of Average Average Net Assets Net Assets
Beginning ment Gains (Losses) Investment Capital of Total Period Net Net (Excluding (Excluding
of Period Income on Securities Income Gains Period Return (000) Assets Assets Waivers) Waivers)
- ----------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Share Class
1998 $10.35 $0.57 $0.16 $(0.59) $(0.13) $10.36 7.13% $171,753 0.72% 5.43% 0.86% 5.28%
1997 10.06 0.60 0.30 (0.60) (0.01) 10.35 9.22 141,148 0.71 5.95 0.81 5.85
1996 10.32 0.59 (0.26) (0.59) 0.00 10.06 3.42 123,930 0.73 5.92 0.83 5.82
1995 9.30 0.59 1.02 (0.59) 0.00 10.32 17.75 125,563 0.74 5.97 0.84 5.87
1994 10.23 0.54 (0.93) (0.54) 0.00 9.30 (3.82) 92,402 0.72 5.45 0.82 5.35
<CAPTION>
Portfolio
Turnover
Rate
- -------------------------------
<S> <C> <C> <C>
Common Share Class
1998 157%
1997 233
1996 194
1995 59
1994 126
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
Intermediate Government Fixed Income Fund
Common Share Class
1998 $10.04 $0.52 $0.28 $(0.52) $ 0.00 $10.32 8.16% $ 43,062 0.81% 5.04% 0.95% 4.90%
1997 9.85 0.56 0.19 (0.56) 0.00 10.04 7.93 51,934 0.71 5.69 0.81 5.59
1996 10.06 0.54 (0.21) (0.54) 0.00 9.85 3.51 56,895 0.74 5.38 0.84 5.28
1995 9.33 0.54 0.73 (0.54) 0.00 10.06 13.86 73,466 0.73 5.48 0.83 5.38
1994 10.08 0.47 (0.75) (0.47) 0.00 9.33 (2.78) 91,002 0.74 4.88 0.84 4.78
Common Share Class
1998 106%
1997 283
1996 179
1995 115
1994 124
- ---------------------------------------------------
- ---------------------------------------------------
- ------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund
Common Share Class
1998 $10.41 $0.47 $0.12 $(0.47) $ 0.00 $10.53 5.79% $ 35,161 0.83% 4.44% 0.97% 4.30%
1997 9.99 0.49 0.42 (0.49) 0.00 10.41 9.36 40,441 0.73 4.84 0.84 4.73
1996 10.20 0.50 (0.21) (0.50) 0.00 9.99 2.96 39,756 0.73 4.95 0.85 4.83
1995 9.26 0.48 0.94 (0.48) 0.00 10.20 15.67 50,079 0.75 4.84 0.87 4.72
1994 10.23 0.44 (0.94) (0.44) (0.03) 9.26 (4.93) 53,588 0.71 4.54 0.84 4.41
Common Share Class
1998 41%
1997 54
1996 98
1995 129
1994 146
- -----------------------------------------------------
- -----------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
International Fixed Income Fund
Common Share Class
1998 $ 9.64 $0.39 $1.07 $(0.18) $(0.10) $10.82 15.15% $ 17,482 1.38% 3.62% 1.42% 3.57%
1997 10.24 0.43 (1.03) 0.00 0.00 9.64 (5.86) 15,574 1.22 4.08 1.22 4.08
1996 10.58 0.48 (0.18) (0.64) 0.00 10.24 2.82 17,561 1.11 4.66 1.11 4.66
1995 9.54 0.62 1.38 (0.96) 0.00 10.58 20.99 17,433 1.10 5.86 1.16 5.80
1994 10.43 0.56 (0.72) (0.55) (0.18) 9.54 (1.47) 15,021 1.16 5.09 1.22 5.03
Common Share Class
1998 79%
1997 52
1996 85
1995 105
1994 138
- ------------------------
- ------------------------
- ------------------------------------------------
Balanced Fund
Common Share Class
1998 $12.73 $0.27 $0.82 $(0.27) $(1.72) $11.83 9.97% $ 75,793 1.03% 2.06% 1.03% 2.06%
1997 10.98 0.32 2.06 (0.32) (0.31) 12.73 22.10 68,523 0.93 2.68 0.93 2.68
1996 10.75 0.35 1.02 (0.35) (0.79) 10.98 13.15 54,546 0.94 3.14 0.94 3.14
1995 9.53 0.39 1.65 (0.39) (0.43) 10.75 21.85 49,899 0.92 3.74 0.92 3.74
1994 10.04 0.30 (0.50) (0.30) (0.01) 9.53 (2.11) 72,086 0.94 3.11 0.94 3.11
Common Share Class
1998 84%
1997 111
1996 104
1995 85
1994 85
- ------------------
- ------------------
- ------------------------------------
Value Fund
Common Share Class
1998 $16.51 $0.19 $0.86 $(0.19) $(5.04) $12.33 5.47% $170,945 1.05% 1.23% 1.05% 1.23%
1997 13.24 0.24 3.75 (0.24) (0.48) 16.51 30.49 220,618 1.01 1.57 1.01 1.57
1996 12.26 0.29 2.18 (0.29) (1.20) 13.24 20.43 164,710 1.03 2.19 1.03 2.19
1995 9.79 0.34 2.74 (0.35) (0.26) 12.26 32.02 131,243 1.05 3.07 1.05 3.07
1994 10.30 0.35 (0.35) (0.34) (0.17) 9.79 0.00 61,557 1.06 3.45 1.06 3.45
Common Share Class
1998 55%
1997 79
1996 58
1995 37
1994 38
- --------------------
- --------------------
- ----------------------------------------
Growth Fund
Common Share Class
1998 $14.57 $0.00 $4.20 $(0.02) $(1.65) $17.10 30.23% $184,601 1.06% 0.01% 1.06% 0.01%
1997 13.06 0.12 2.97 (0.12) (1.46) 14.57 23.98 132,649 1.02 0.79 1.02 0.79
1996 11.61 0.17 2.31 (0.17) (0.86) 13.06 21.69 95,215 1.02 1.36 1.02 1.36
1995 9.73 0.16 2.88 (0.16) (1.00) 11.61 31.60 78,216 1.02 1.37 1.02 1.37
1994 10.21 0.16 (0.36) (0.16) (0.12) 9.73 (2.05) 82,710 1.02 1.58 1.03 1.57
Common Share Class
1998 65%
1997 62
1996 58
1995 71
1994 68
</TABLE>
66
<PAGE>
.
Financial Highlights (Continued) _________________________________________
For a Share Outstanding for the Years Ended December 31,
<TABLE>
<CAPTION>
Ratio of
Net
Realized Investment
and Net Ratio of Income Ratio of
Net Net Unrealized Distri- Asset Net Expenses (Loss) Expenses
Asset Invest- Gains Dividends butions Value Assets to to to Average
Value ment (Losses) from Net from Contribution End End of Average Average Net Assets
Beginning Income on Investment Capital (Return of of Total Period Net Net (Excluding
of Period (Loss) Securities Income Gains Capital) Period Return (000) Assets Assets Waivers)
- --------------------------------------------------------------------------------------------------------------------------------
International Equity Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Common Share Class
1998 $15.38 $ 0.01 $ 3.85 $(0.09) $(0.18) $ 0.00 $18.97 25.43% $142,862 1.38% 0.02% 1.38%
1997 15.83 0.04 0.68 (0.08) (1.09) 0.00 15.38 4.56 85,440 1.35 0.23 1.35
1996 14.56 0.06 1.37 (0.04) (0.15) 0.03 15.83 10.09(A) 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
<CAPTION>
Ratio of
Net
Investment
Income
(Loss)
to
Average
Net Assets Portfolio
(Excluding Turnover
Waivers) Rate
- -----------------------------------------
<S> <C> <C>
Common Share Class
1998 0.02% 31%
1997 0.23 17
1996 0.44 9
1995 0.70 11
1994 0.18 6
- --------------------------------------
- --------------------------------------
- ----------------------------------------------------------------------------
Small Cap Growth Fund
Common Share Class
1998 $13.38 $(0.11) $(0.82) $ 0.00 $(0.23) $ 0.00* $12.22 (6.52)% $ 45,899 1.17% (0.84)% 1.17%
1997 13.03 (0.09) 2.07 0.00 (1.63) 0.00 13.38 15.89 41,945 1.04 (0.72) 1.04
1996 12.46 (0.03) 2.38 0.00 (1.78) 0.00 13.03 19.42 36,375 1.05 (0.27) 1.05
1995 9.57 0.02 3.05 (0.02) (0.16) 0.00 12.46 32.13 23,844 1.10 0.18 1.10
1994 10.24 0.03 (0.67) (0.03) 0.00 0.00 9.57 (6.27) 31,527 1.06 0.27 1.06
Common Share Class
1998 (0.84)% 151%
1997 (0.72) 170
1996 (0.27) 158
1995 0.18 142
1994 0.27 43
- ---------------------------
- ---------------------------
- ------------------------------------------------------
Real Estate Fund
Common Share Class
1998 $ 9.95 $ 0.37 $(1.58) $(0.31) $ 0.00 $(0.06) $ 8.37 (12.35)% $ 7,022 1.41% 4.68% 1.78%
1997(1) 10.00 0.00 (0.05) 0.00 0.00 0.00 9.95 0.00 2,985 1.31 (1.31) 1.61
Common Share Class
1998 4.31% 13%
1997(1) (1.61) 0*
- -----------------------------
- -----------------------------
- ----------------------------------------------------------
Asian Tigers Fund
Common Share Class
1998 $ 7.60 $ 0.07 $(0.93) $(0.01) $ 0.00 $ 0.00 $ 6.73 (11.37)% $ 28,202 1.67% 0.91% 1.67%
1997 11.91 0.04 (4.32) (0.02) (0.01) 0.00 7.60 (35.98) 34,664 1.60 0.50 1.60
1996 10.45 0.02 1.48 (0.04) (0.02) 0.02 11.91 14.55(B) 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
Common Share Class
1998 0.91% 57%
1997 0.50 42
1996 0.23 24
1995 1.30 28
1994(2) 0.34 13*
- -------------------------------------------
- -------------------------------------------
- --------------------------------------------------------------------------------------
Latin America Equity Fund
Common Share Class
1998 $13.13 $ 0.18 $(4.96) $(0.15) $(0.08) $ 0.00 $ 8.12 (36.33)% $ 17,993 1.75% 1.38% 1.75%
1997 10.24 0.05 3.54 (0.03) (0.67) 0.00 13.13 35.50 33,271 1.50 0.56 1.50
1996(3) 10.00 (0.02) 0.26 0.00 0.00 0.00 10.24 2.40 11,490 2.09 (0.55) 2.09
Common Share Class
1998 1.38% 92%
1997 0.56 45
1996(3) (0.55) 10*
- -----------------------------------
- -----------------------------------
- ----------------------------------------------------------------------
Small Cap Value Fund
Common Share Class
1998(4) $10.00 $ 0.01 $(1.28) $(0.01) $ 0.00 $ 0.00+ $ 8.72 (12.68)% $ 8,295 1.53% 0.20% 1.61%
Common Share Class
1998(4) 0.12% 54%*
</TABLE>
- -------------------------------------------------------------------------------
+Per share was less than $0.005.
(A) 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 Class would have
been 9.87%.
(B) 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 Class would have
been 14.36%.
1.Commenced operations on December 31, 1997. All ratios except the total
return for the period have been annualized.
2.Commenced operations on January 3, 1994. All ratios and the total return for
the period have been annualized.
3.Commenced operations on July 1, 1996. All ratios and the total return for
the period have been annualized.
4.Commenced operations on June 30, 1998. All ratios except the total return
for the period have been annualized.
*Not Annualized
67
<PAGE>
More information about the Funds is available without charge through the
following:
Statement of
Additional More detailed information about the Funds is in the
Information Statement of Additional Information. The Statement of
Additional Information has been filed with the SEC and is
incorporated by reference into this Prospectus. This
means that the Statement of Additional Information, for
legal purposes, is a part of this Prospectus.
Annual and These reports list the Fund's holdings and contain
Semi-Annual information from the Fund's portfolio managers about the
Reports Fund strategies and recent market conditions and trends.
By Telephone: Call 1-800-443-4725
By Mail: Write to the Funds c/o
ABN AMRO Funds
P.O. Box 60549
King of Prussia, PA 19406-0549
On the World www.abnamrofunds-usa.com
Wide Web:
From the SEC:
You can also obtain the Statement of Additional
Information, annual and semi-annual reports and other
information about Funds from the SEC's website
(http://www.sec.gov). You may review and copy documents
at the SEC Public Reference Room in Washington, D.C. (for
information, call 1-800-SEC-0330). You may request
documents by mail from the SEC, upon payment of a
duplicating fee by writing to: Securities and Exchange
Commission, Public Reference Room, Washington, D.C.
20549-6009. The ABN AMRO Fund's Investment Company Act
registration number is 811-07244.
Investment Advisor: ABN AMRO Asset Management (USA) Inc. 208 South LaSalle
Street 4th Floor Chicago, IL 60604-1003
Distributor: First Data Distributors,
Inc. 4400 Computer Drive Westborough,
MA 01581
No one has been authorized to give any information or to make any
representations not contained in the Prospectus or Statement of Additional
Information in connection with the offering of Fund shares. Do not rely on any
such information or representations as having been authorized by the Funds or
First Data Distributors, Inc. This Prospectus does not constitute an offering
by the Funds in any jurisdiction where such an offering is not lawful.
For more information, please call 1-800-443-4725.
<PAGE>
Prospectus--Investor Shares
May 3, 1999
- ---------------------------------------------------------
Stock Funds Bond Funds
.Value Fund(US) .Fixed Income Fund(US)
.Growth Fund(US) .Intermediate Government Fixed Income
.Small Cap Growth Fund(US) Fund(US)
.Small Cap Value Fund(US) .Tax-Exempt Fixed Income Fund(US)
.Limited Volatility Fixed Income Fund(US)
.Real Estate Fund(US)
Money Market Funds
Balanced Fund
.Treasury Money Market Fund(US)
.Balanced Fund(US) .Government Money Market Fund(US)
.Money Market Fund(US)
International Funds .Tax-Exempt Money Market Fund(US)
.International Equity Fund(US)
.TransEurope Fund(US)
.Asian Tigers Fund(US)
.Latin America Equity Fund(US)
.International Fixed Income Fund(US)
- --------------------------------------------------------------------------------
This Prospectus gives you important information about ABN AMRO Funds that can
help you decide if a Fund's investment goals match your own. Please read it
carefully before you invest, and keep it on hand for future reference.
Investor Shares are offered to individuals and institutional investors through
intermediaries, such as banks, broker-dealers and other financial institutions.
The Securities and Exchange Commission (SEC) has not approved or disapproved of
these shares or determined whether this Prospectus is accurate or complete. It
is a crime for anyone to tell you otherwise.
For more information, please call 1-800-443-4725 or visit the Funds' website at
www.abnamrofunds-usa.com.
<PAGE>
.
Contents
This Prospectus gives you important information that you should know about the
Funds before investing. We arranged the Prospectus into different sections so
that you can easily review this important information. On the next page, we
discuss general information you should know about investing in the Funds.
If you would like more detailed
information about each Fund, please
see:
<TABLE>
<C> <S>
Value Fund(US) 5
Growth Fund(US) 7
Small Cap Growth Fund(US) 9
Small Cap Value Fund(US) 11
Real Estate Fund(US) 13
Balanced Fund(US) 15
International Equity Fund(US) 19
TransEurope Fund(US) 21
Asian Tigers Fund(US) 23
Latin America Equity Fund(US) 26
International Fixed Income Fund(US) 29
Fixed Income Fund(US) 32
Intermediate Government Fixed Income Fund(US) 35
Tax-Exempt Fixed Income Fund(US) 37
Limited Volatility Fixed Income Fund(US) 39
Treasury Money Market Fund(US) 42
Government Money Market Fund(US) 44
Money Market Fund(US) 46
Tax-Exempt Money Market Fund(US) 48
</TABLE>
If you would like more information
about the following topics, please
see:
<TABLE>
<S> <C>
The Risks of Investing in Mutual 3
Funds
The Stock Funds 4
The International Funds 18
The Bond Funds 31
The Money Market Funds 41
More Information about risk 50
Guidance on opening and 54
maintaining an account in any
Fund
Information about receiving 58
dividends
and distributions from the
Funds
A general guide to important tax 58
issues
and considerations
Information about the investment 59
advisor
Information about the 63
Distribution
(12b-1) Plan
Detailed information about 64
historical
Fund performance
Additional information See Back
Cover
</TABLE>
ABN AMRO is a service mark of ABN AMRO Holding, N.V., an indirect parent of ABN
AMRO Asset Management (USA) Inc., the investment advisor to the ABN AMRO Funds.
ABN AMRO Funds are distributed by First Data Distributors, Inc., which is not a
bank affiliate.
2
<PAGE>
.......................
What are Fund Goals
and Strategies?
Each Fund's goal is
a statement of what
it seeks to
achieve. It is im-
portant to make
sure that the ob-
jective matches
your own financial
needs and circum-
stances. The Prin-
cipal Investment
Strategies section
describes how each
Fund attempts to
meet its objective.
.......................
.
................................................................................
................................................................................
The Risks of Investing in Mutual Funds ____________________________________
Each Fund is a mutual fund. A mutual fund pools shareholders' money and, using
professional investment managers, invests it in securities like stocks and
bonds. Before you invest, you should know a few things about investing in
mutual funds.
Each Fund has its own investment goal and strategies for reaching its goal. We
cannot guarantee that a Fund will achieve its goal, and a Fund's goal may be
changed without shareholder approval. Each Fund invests in different types of
securities. As a result, each Fund has its own risks.
The Advisor invests each Fund's assets in a way that
the Advisor believes will help the Fund achieve its
goal. The Advisor's judgements about the securities
markets, economy and companies, or selecting
investments may not reflect actual market movements,
economic conditions or company performance. In
addition, the Advisor may need to change the Fund's
investment strategy in response to changing market or
economic conditions.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. Fund share prices (except the Money Market Funds)
will change daily due to economic and other events that affect securities
markets generally, as well as those that affect particular companies or
governments. These price movements, sometimes called volatility, will vary
depending on the types of securities a Fund owns and the markets where these
securities trade.
Like other investments, you could lose money on your investment in a Fund. Your
investment in a Fund is not a bank deposit. It is not insured or guaranteed by
the FDIC or any government agency.
As used in any sentence in this Prospectus, the term "primarily invests" means
that a Fund, under normal circumstances, invests at least 65% of its assets in
the securities described in that sentence.
3
<PAGE>
.
THE STOCK FUNDS ________________________________________________________________
The Stock Funds invest in common stocks and other equity securities. These
include public and privately issued common and preferred stocks, warrants,
rights to subscribe to common stock and convertible securities. Investments in
equity securities in general are subject to market risks that may cause their
prices to fluctuate over time. In other words, the Funds are subject to the
risk that stock prices will fall over short or extended periods of time.
Historically, the equity markets have moved in cycles, and the value of a Stock
Fund's equity securities may fluctuate drastically from day-to-day. Individual
portfolio companies may report poor results or be negatively affected by
industry or economic trends and developments, or even year 2000 issues. The
prices of securities issued by such companies may suffer a decline in response.
Fluctuations in the value of equity securities in which a Fund invests will
cause the net asset value of the Fund to fluctuate.
The Stock Funds have investment goals of high total return. Total return is a
combination of income, from dividends or interest, and capital appreciation,
which results from an increase in the value of a security (called unrealized
appreciation) or from selling a security for more than its cost (called
realized appreciation). The current strategies of the Stock Funds generally
focus on capital appreciation rather than income. As a result, in market
conditions that favor funds that focus on income, the Funds may not be able to
achieve the same level of total return as other mutual funds. For these Funds,
income is typically incidental.
Each Stock Fund is subject to additional risks, which are described on the
following pages and in the Statement of Additional Information.
4
<PAGE>
.
VALUE FUND (US)
________________________________________________________________________________
Investment Goal High level of total return through capital appreciation
and current income
Principal
Investment The Value Fund invests in common stocks and other equity
Strategies securities of U.S. companies with market capitalizations
greater than $1 billion. Further, the Fund primarily
invests in securities that are undervalued relative to
those of the average large U.S. company based on one or
more of the following criteria:
. lower than average price to earnings ratios;
. lower than average price to book value ratios;
. lower than average price to sales ratios;
. lower than average price to cash flow ratios; or
. higher than average dividend yield.
Generally, stocks may be undervalued because:
. they are out of favor with investors;
. they may have disappointed investors in some way;
or
. investors think that the prospects for the industry
or economic sector are uninteresting.
By investing in undervalued securities with quality
earnings and combining this with improving momentum
factors (such as price movements), the Fund tries to
provide better return, over the long-term, than other
value-style managers.
Principal Risk of The Fund's large-cap, value-style securities are
Investing in this cyclical. So, in addition to the general risks of
Fund investing in any Stock Fund, this Fund's large-cap,
value-style securities may underperform mid-cap, small-
cap or growth-style securities, or the equity markets as
a whole when they are out-of-favor or when they remain
undervalued.
5
<PAGE>
.
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
0.20% 31.72% 20.09% 30.20% 4.66%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
15.67%
6/30/97
<CAPTION>
Worst Quarter
-------------
<S> <C>
-18.40%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the S&P 500 Index. An index measures the
market prices of a specific group of securities in a particular market or
securities in a market sector. You cannot invest directly in an index. An index
does not have an investment advisor and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower. The S&P 500
Index is a widely recognized index of 500 stocks designed to mimic the overall
equity market's industry weightings.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Value Fund 4.66% 17.84% 16.56% 14.55%*
S&P 500 Index 28.74% 28.27% 24.08% 21.75%*
</TABLE>
* Fund inception (3/26/93). Index inception computed from (3/30/93).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Distribution and Service (12b-1) Fees .25%
Other Expenses .48%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.53%
- --------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$156 $483 $834 $1,824
</TABLE>
6
<PAGE>
.
GROWTH FUND(US)
________________________________________________________________________________
Investment Goal High level of total return primarily through capital
appreciation
Principal
Investment The Growth Fund invests in common stocks and other equity
Strategies securities of U.S. companies. Further, the Fund primarily
invests in companies that, in the Advisor's opinion, have
strong prospects for capital appreciation through
earnings growth. The Advisor chooses investments by
focusing on companies with above average earnings growth
rates. The Advisor seeks a fundamental understanding of
each company, using a combination of valuation and
momentum factors which may include:
. valuation
. price appreciation
. positive earnings changes
. earnings surprises
. accelerated earnings
. price strength over time
In addition, the Advisor focuses on companies that have a
competitive advantage in their industry or market niche.
The Advisor uses a bottom-up approach (emphasis on
individual industries and companies) to select
investments and diversifies the Fund's assets broadly
across industry sectors. In selecting investments, the
Advisor combines quantitative screens that focus on
earnings consistency and momentum with fundamental
understandings of the companies that focus on the
dynamics of the company.
Principal Risk of In addition to the general risks of investing in any
Investing in this Stock Fund, the Fund's growth-style securities may
Fund underperform value-style securities or the equity markets
as a whole when they are out-of-favor or when they do not
achieve anticipated growth levels.
7
<PAGE>
.
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -2.42% 31.29% 21.41% 23.65% 29.52%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
26.30%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-14.15%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the S&P 500 Index. An index measures the
market prices of a specific group of securities in a particular market or
securities in a market sector. You cannot invest directly in an index. An index
does not have an investment advisor and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower. The S&P 500
Index is a widely recognized index of 500 stocks designed to mimic the overall
equity market's industry weightings.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Growth Fund 29.52% 24.81% 20.03% 17.03%*
S&P 500 Index 28.74% 28.27% 24.08% 21.85%*
</TABLE>
* Fund inception (3/8/93). Index inception computed from (2/28/93).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Distribution and Service (12b-1) Fees .25%
Other Expenses .47%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.52%
- --------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$155 $480 $829 $1,813
</TABLE>
8
<PAGE>
.
SMALL CAP GROWTH FUND(US) (formerly, the Small Cap Fund)
________________________________________________________________________________
Investment Goal High level of total return primarily through capital
appreciation
Principal
Investment The Small Cap Growth Fund primarily invests in common
Strategies stocks and other equity securities of domestic companies
that have smaller capitalization levels (market
capitalizations of less than $1.5 billion) and that the
Advisor believes have strong prospects for capital
appreciation through earnings growth. In selecting
investments for the Fund, the Advisor reviews a company's
sales and earnings growth rates, and evaluates the
strength of its balance sheet. The Advisor seeks
investments that have above average sales growth,
earnings growth or return on equity relative to their
industry peers. Although the Advisor targets growth
sectors of the U.S. economy, such as technology, health
care, and consumer and business services, the Advisor
diversifies broadly across industry sectors. The Fund
also focuses on companies that the Advisor believes have
a competitive advantage in their industry or market
niche.
Principal Risks In addition to the general risks of investing in any
of Investing in Stock Fund, this Fund is subject to the risks of
this Fund investing in small-cap companies. Investments in small-
cap companies involve greater risk than is customarily
associated with larger, more established companies due to
the greater business risks of small size, limited markets
and financial resources, narrow product lines and
frequent lack of depth of management. The securities of
small-sized companies may be subject to more abrupt or
erratic market movements than securities of larger, more
established companies.
The Fund is subject to the risk that its small-cap,
growth-style securities may underperform mid-cap, large-
cap or value-style securities, or the equity markets as a
whole when they are out-of-favor or when they do not
achieve anticipated growth levels.
Due to its investment strategy, the Fund may have a high
portfolio turnover rate. A portfolio turnover rate of
100% or more may result in higher transaction costs,
higher levels of realized capital gains and additional
taxes than if the turnover rate was lower. In seeking
total return opportunities, the Advisor considers such
costs and potential gains and taxes in determining
whether to sell a particular security.
9
<PAGE>
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -6.54% 31.73% 19.18% 15.45% -7.25%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
19.02%
6/30/97
<CAPTION>
Worst Quarter
-------------
<S> <C>
-24.16%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Russell 2000 Growth Index. An index
measures the market prices of a specific group of securities in a particular
market or securities in a market sector. You cannot invest directly in an
index. An index does not have an investment advisor and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower. The Russell 2000 Growth Index is comprised of securities in the Russell
2000 Index with above-average growth orientation.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Small Cap Growth Fund -7.25% 8.47% 9.46% 9.60%*
Russell 2000 Growth Index 1.23% 8.35% 10.22% 11.58%*
</TABLE>
* Fund inception (4/12/93). Index inception computed from (3/31/93).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Distribution and Service (12b-1) Fees .25%
Other Expenses .65%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.70%
- --------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$173 $536 $923 $2,009
</TABLE>
10
<PAGE>
.
SMALL CAP VALUE FUND (US)
_______________________________________________________________________________
Investment Goal High level of total return primarily through capital
appreciation
Principal
Investment The Small Cap Value Fund primarily invests in undervalued
Strategies common stocks and other equity securities of domestic
companies with smaller capitalization levels (market
capitalizations of less than $1.5 billion). In selecting
investments for the Fund, the Advisor focuses on
undervalued investments based on such measures as
price/earnings, price/cash flow, price/book and
price/sales ratios. The Advisor typically uses a
quantitative screen that ranks the attractiveness of an
investment based on a combination of valuation measures,
such as price/earnings and price/cash flows ratios. In
further evaluating the attractiveness of an investment,
the Advisor considers business conditions in the company's
industry and its competitive position in that industry.
The Advisor conducts fundamental research on certain
investments, which often includes reviewing SEC filings,
examining financial statements and meeting with top-level
company executives. While broadly diversifying the Fund's
assets across many industry sectors, the Advisor seeks
companies with strong profit prospects and returns on
capital. [/R]
Principal Risks In addition to the general risks of investing in any Stock
of Investing in Fund, this Fund is subject to the risks of investing in
this Fund small-cap companies. Investments in small-cap companies
involve greater risk than is customarily associated with
larger, more established companies due to the greater
business risks of small size, limited markets and
financial resources, narrow product lines and frequent
lack of depth of management. The securities of small-sized
companies may be subject to more abrupt or erratic market
movements than securities of larger, more established
companies.
The Fund's small-cap, value-style securities may
underperform mid-cap, large-cap or growth-style
securities, or the equity markets as a whole when they are
out-of-favor or when they remain undervalued.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Distribution and Service (12b-1) Fees .25%
Other Expenses/1/ 1.39%
- --------------------------------------------
Total Annual Fund Operating Expenses 2.44%
Fee Waiver/2/ -.55%
- --------------------------------------------
Net Expenses 1.89%
- --------------------------------------------
</TABLE>
/1/Since the Fund has not completed a full fiscal year, Other Expenses are
based on estimated amounts for the current fiscal year.
/2/The Administrator has agreed to waive its fees through April 2000 in an
amount necessary to limit administration fees (included in Other Expenses)
to .07% of the Fund's net assets.
11
<PAGE>
.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$192 $708
</TABLE>
Prior Performance of a Managed Account _________________________________________
The performance information on the following pages relates to an account
managed by Mr. Edwin Bruere, who currently serves as lead portfolio manager of
the Fund. The account has an investment objective, policies and restrictions
substantially similar to that of the Fund. Mr. Bruere has also managed other
accounts with similar investment objectives, policies and restrictions as that
of the Fund; however, the performance information below reflects the account
with the longest performance history.
This account was not subject to certain investment limitations, requirements,
and other restrictions imposed by the Investment Company Act of 1940 Act and
the Internal Revenue Code. If these had been imposed, the account's performance
would have been adversely affected. Furthermore, the account belongs to an
affiliate of the Advisor and was funded with the affiliate's own money. As a
proprietary account, it did not incur any expenses, such as the advisory,
administrative, and other fees to which the Fund is subject. If the account had
incurred these expenses, its performance would have been lower.
You should not rely on the following performance information as an indication
of future performance of the Fund. The performance reflected below does not
represent the historical performance of the Fund. The performance information
relates to a period of time before the effective date of the Fund's
registration with the SEC as an open-end investment company.
The performance information below represents equity-only returns and assumes
reinvestment of net income and capital gain distributions. The Fund normally
holds a portion of its assets in cash to meet redemptions and make purchases.
Unlike the Fund, the account did not hold any cash during the period shown. If
it had, the account's performance would have been lower. Since the period shown
occurred during a rising market, the absence of cash in the account results in
even higher returns. The performance information is calculated using the same
methods for valuation of portfolio securities used by the Fund.
<TABLE>
<CAPTION>
Russell 2000
Period Ended Small Cap
May 31, 1998 Account Value Index*
--------------------------------- ------- ------------
<S> <C> <C>
Since Inception (January 1, 1997) 44.06% 25.79%
12 Month (May 31, 1997-May 31, 1998) 48.10% 26.66%
Year Ended 12/31/97 52.67% 31.78%
</TABLE>
* The Russell 2000 Small Cap Value Index shows total return assuming the
reinvestment of dividends but does not reflect the deduction of fees,
expenses and taxes. Source: Frank Russell Company. The Russell 2000 Small Cap
Value Index is comprised of securities in the Russell 2000 Index with less
than average growth orientation. Companies in this index generally have low
price-to-book and price-earnings ratios.
12
<PAGE>
.
REAL ESTATE FUND(US)
_______________________________________________________________________________
Investment Goal High level of total return, a combination of growth and
income
Principal
Investment The Real Estate Fund primarily invests in real estate
Strategies investment trusts, and common stocks and other equity
securities of U.S. and foreign companies principally
engaged in the real estate industry. The Fund does not
invest in real estate directly.
In selecting investments for the Fund, the Advisor
analyzes long-term trends in property types and geographic
regions. The Advisor attempts to identify long-term
patterns in the real estate industry through a combination
top-down (emphasis on markets and sectors) and bottom-up
(emphasis on individual industries and companies)
approach. In the top-down approach, the Advisor analyzes
demographic and economic trends, and reviews the real
estate cycle to determine which geographic regions and
property types will receive focus. In the bottom-up
approach, the Advisor researches individual companies. The
Advisor focuses on companies where management has a stake
in the company's performance and that have strong balance
sheets and/or consistent earnings, and monitors both
internal growth prospects for each company and growth from
acquisitions or development.
Principal Risks
of Investing in In addition to the general risks of investing in a Stock
this Fund Fund, the Fund is subject to the risk of concentrating its
investments in the real estate industry, which includes
the risk that the real estate industry will underperform
other industries, as well as the risk that issuers in the
real estate industry will be impacted by market
conditions, legislative or regulatory changes, or
competition. In addition, there are risks associated with
the direct ownership of real estate, including the
cyclical nature of real estate values, overbuilding and
increased competition, increases in property taxes and
operating expenses, and increases in interest rates.
The Fund is non-diversified, which means that it may
invest in the securities of relatively few issuers. As a
result, the Fund may be more susceptible to a single
adverse economic, political or regulatory occurrence
affecting one or more of these issuers, and may experience
increased volatility due to its investments in those
securities.
Investing in foreign countries poses distinct risks, since
political and economic events unique to a country or
region will affect those markets and their issuers. These
events will not necessarily affect the U.S. economy or
similar issuers located in the U.S. In addition,
investment in foreign countries are generally denominated
in a foreign currency. As a result, changes in the value
of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's
investments. These currency movements may happen
separately from and in response to events that do not
otherwise affect the value of the security in the issuer's
home country.
13
<PAGE>
.
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in Common Shares of the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will perform
in the future. Common Shares are not offered in this Prospectus. The
performance of the Fund's Investor Shares would have substantially similar
performance because the shares are invested in the same portfolio securities.
The performance of the Common and Investor Shares would differ slightly,
however, due to differences in expenses.
<TABLE>
<CAPTION>
1998
- ------
<S> <C>
- -12.35%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
-0.09%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-8.28%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Russell 2000 Index and Morgan Stanley
REIT Index. An index measures the market prices of a specific group of
securities in a particular market or securities in a market sector. You cannot
invest directly in an index. An index does not have an investment advisor and
does not pay any commissions or expenses. If an index had expenses, its
performance would be lower. The Russell 2000 Index is a widely recognized index
of the 2000 smallest companies of the 3000 largest U.S. companies based on
market capitalization. The Morgan Stanley REIT Index is a market capitalization
weighted total return index of 93 REITs that exceed certain minimum liquidity
criteria concerning market capitalization, shares outstanding, trading volume
and per share market price.
<TABLE>
<CAPTION>
Since Inception
---------------
<S> <C>
Real Estate Fund -12.35%*
Russell 2000 Index -2.55%*
Morgan Stanley REIT Index -16.90%*
</TABLE>
* Fund inception and index inceptions computed from (12/31/97).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees .25%
Other Expenses 1.67%
- --------------------------------------------
Total Annual Fund Operating Expenses 2.92%
- --------------------------------------------
Fee Waivers/1/ -.89%
- --------------------------------------------
Net Expenses 2.03%
- --------------------------------------------
</TABLE>
/1/ The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .70%
and .07%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$206 $820 $1,460 $3,179
</TABLE>
14
<PAGE>
.
BALANCED FUND(US)
________________________________________________________________________________
Investment Goal Favorable total rate of return through current income and
capital appreciation consistent with preservation of
capital
Principal
Investment The Balanced Fund invests in domestic and foreign stocks,
Strategies bonds and cash. The Advisor allocates the Fund's assets
broadly among common and preferred stocks, convertible
securities, corporate bonds, U.S. government obligations
and mortgage-backed securities. Although the Advisor
focuses the Fund's fixed income securities on securities
rated in one of the four highest ratings categories by a
nationally recognized rating agency (commonly called
"investment grade"), the Fund may invest in lower rated
securities (commonly called "high yield" or "junk"
bonds). In allocating the Fund's assets, the Advisor uses
a multi-tiered diversification strategy. The Advisor
begins by allocating the Fund's assets between stocks and
bonds, with at least 25% of its total assets in senior
fixed income securities (i.e., a security with a claim on
the issuer's assets that would be paid before the
issuer's other obligations in the event of bankruptcy).
Then, the Advisor allocates assets invested in stocks
between U.S. and foreign stocks, further allocating
assets invested in U.S. stocks among large and small cap
stocks. The Advisor also allocates assets invested in
large-cap stocks between growth and value styles. The
Advisor believes that this multi-tiered approach allows
the Fund to provide investors with added value while
reducing the effects of market swings as investment
strategies and styles go in and out of favor.
There are no restrictions on the average maturity of the
Fund's fixed income securities Maturities may vary widely
depending on the Advisor's assessment of interest rate
trends and other economic and market factors. or the
maturity of any single fixed income investment. Although
the Advisor focuses on bonds with intermediate
maturities, maturities may vary widely depending on the
Advisor's assessment of interest rate trends and other
economic and market factors.
Principal Risks The Fund is subject to the risk that its allocation of
of Investing in assets between stocks and fixed income securities may
this Fund underperform other allocations.
Investments in equity securities in general are subject
to market risks that may cause their prices to fluctuate
over time. In other words, the risk that stock prices
will fall over short or extended periods of time.
Historically, the equity markets have moved in cycles,
and the value of the Fund's equity securities may
fluctuate drastically from day-to-day. Individual
companies may report poor results or be negatively
affected by industry or economic trends and developments.
The prices of securities issued by such companies may
suffer a decline in response.
15
<PAGE>
.
The prices of bonds and other fixed income securities
respond to economic developments, particularly interest
rate changes, as well as changes in the actual or
perceived creditworthiness of individual issuers,
including governments. Generally, fixed income securities
decrease in value if interest rates rise and vice versa.
Also, longer term securities are generally more volatile,
so the average maturity or duration of these securities
affects risk. High yield bonds involve greater risk of
default, or price declines than investment-grade
securities. The market prices of these securities can
change significantly for a number of reasons, such as
changes in interest rates, credit quality and stock
market activity. In addition, the trading market for
these securities is generally less liquid than for higher
rated securities.
The Fund may invest in mortgage-backed securities (and
collateralized mortgage obligations, a type of mortgage-
backed security). Mortgage-backed securities are fixed
income securities representing an interest in a pool of
underlying mortgage loans. They are sensitive to changes
in interest rates, but may respond to these changes
differently from other fixed income securities due to the
possibility of prepayment of the underlying mortgage
loans. Prepayment risk may make it difficult to calculate
the average maturity of a portfolio of mortgage-backed
securities and, therefore, to assess volatility risk.
The Fund is subject to additional risks, which are
discussed in the Statement of Additional Information.
16
<PAGE>
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ----- ----- ----- ----
<S> <C> <C> <C> <C>
- -2.29% 21.52% 12.86% 21.80% 9.72%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
12.86%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-11.82%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Russell 3000 Index and Lehman Brothers
Aggregate Bond Index. An index measures the market prices of a specific group
of securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had expenses,
its performance would be lower. The Russell 3000 Index is a widely recognized
index of the 3000 largest U.S. companies based on market capitalization. The
Lehman Brothers Aggregate Bond Index is a widely recognized index of U.S.
government obligations, corporate bonds and mortgage-backed securities.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Balanced Fund 9.72% 14.68% 12.36% 11.16%*
70% Russell 3000 Index / 30% Lehman
Brothers Aggregate Bond Index 19.50% 20.28% 17.76% 16.56%*
</TABLE>
* Fund inception (3/9/93). Index inceptions computed from (2/28/93).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .70%
Distribution and Service (12b-1) Fees .25%
Other Expenses .55%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.50%
- --------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$153 $474 $818 $1,791
</TABLE>
17
<PAGE>
.
THE INTERNATIONAL FUNDS ________________________________________________________
Because the International Funds invest in foreign markets, either directly or
indirectly, each of these Funds is subject to the market and economic risks in
these foreign markets, including year 2000 issues. Investments in securities of
foreign companies or governments can be more volatile than investments in U.S.
companies or governments. Investing in foreign countries poses distinct risks,
since events unique to a country or region will affect those markets and their
issuers. These events will not necessarily affect the U.S. economy or similar
issuers located in the U.S. Diplomatic, political, or economic developments,
including nationalization or appropriation, also could affect investments in
foreign countries. Foreign securities markets generally have less trading
volume and less liquidity than U.S. markets. Foreign companies or governments
generally are not subject to uniform accounting, auditing, and financial
reporting standards comparable to those applicable to domestic U.S. companies
or governments. Transaction costs are generally higher than those in the U.S.
Expenses for custodial arrangements of foreign securities may be somewhat
greater than typical expenses for custodial arrangements of similar U.S.
securities. Some foreign governments levy withholding taxes against dividend
and interest income. Although in some countries a portion of these taxes is
recoverable, the non-recovered portion will reduce the income received from the
securities comprising the portfolio.
Investments in foreign countries are generally denominated in a foreign
currency. As a result, changes in the value of those currencies compared to the
U.S. dollar and in exchange control regulations may affect (positively or
negatively) the value of a Fund's investments and the dividends from those
securities. These currency movements may happen separately from and in response
to events that do not otherwise affect the value of the security in the
issuer's home country. Investments in foreign securities denominated in foreign
currencies involve additional risks. For example, Funds may incur substantial
costs in connection with conversions between various currencies. The Funds
typically do not engage in hedging transactions, and the Advisor may choose not
to hedge under certain market or economic conditions. Further, a Fund may be
unable to hedge against possible variations in foreign exchange rates or to
hedge a specific security transaction or portfolio position, particularly with
respect to Latin American and Asian markets.
The International Funds, except the Asian Tigers, Latin America Equity and
International Fixed Income Funds, have investment goals of high total return.
Total return is a combination of income, from dividends or interest, and
capital appreciation, which results from an increase in the value of a security
(called unrealized appreciation) or from selling a security for more than its
cost (called realized appreciation). The current strategies of the
International Funds generally focus on capital appreciation rather than income.
As a result, in market conditions that favor funds that focus on income, these
Funds may not be able to achieve the same level of total return as other mutual
funds. For these Funds, income is typically incidental.
Each International Fund is subject to additional risks, which are described on
the following pages and in the Statement of Additional Information.
18
<PAGE>
.
INTERNATIONAL EQUITY FUND(US)
_______________________________________________________________________________
Investment Goal High level of total return through capital appreciation
and current income
Principal
Investment The International Equity Fund primarily invests in common
Strategies stocks and other equity securities of foreign companies.
The Fund focuses on developed countries in Europe,
Australia and the Far East. The Advisor diversifies the
Fund's investments across three or more foreign countries
and seeks securities of companies with above average
growth potential and/or consistent earnings. In selecting
investments for the Fund, the Advisor uses a bottom-up
approach to identify attractive industries and companies
in various countries. The Advisor adjusts the Fund's
portfolio in response to changing growth scenarios for
various industry sectors and regions. While the Advisor
may not necessarily spread the Fund's investments among
more than three foreign countries, the Advisor intends to
diversify the Fund's investments among various countries
in an effort to reduce risks.
Principal Risks In addition to the general risks of investing in an
of Investing in International Fund, this Fund is subject to the risks
this Fund associated with equity investing. Investments in equity
securities in general are subject to market risks that may
cause their prices to fluctuate over time. In other words,
the risk that stock prices will fall over short or
extended periods of time. Historically, the equity markets
have moved in cycles, and the value of the Fund's equity
securities may fluctuate drastically from day-to-day.
Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
On January 1, 1999, various European countries implemented
a plan to convert or tie their currencies to a new
currency unit, the euro. Although it is not possible to
predict the impact of this conversion on the Fund, the
ongoing conversion to the euro may change the economic
environment and behavior of investors, particularly in
European markets. The Advisor may need to modify the
Fund's strategy in response to these changes. The ongoing
conversion to the euro may adversely affect financial
markets worldwide and may cause fluctuations in the value
of the U.S. dollar and other major currencies.
19
<PAGE>
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
3.08% 13.79% 9.85% 4.28% 24.87%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
22.33%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-13.91%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Morgan Stanley Capital International
Europe, Australasia and Far East (MSCI EAFE) Index. An index measures the
market prices of a specific group of securities in a particular market or
securities in a market sector. You cannot invest directly in an index. An index
does not have an investment advisor and does not pay any commissions or
expenses. If an index had expenses, its performance would be lower. The MSCI
EAFE Index is a widely recognized index of over 900 securities listed on the
stock exchanges in Europe, Australia and the Far East.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
International Equity Fund 24.87% 12.67% 10.90% 12.25%*
MSCI EAFE Index 20.00% 9.00% 9.19% 11.16%*
</TABLE>
* Fund inception (4/12/93). Index inception computed from (3/31/93).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees .25%
Other Expenses .56%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.81%
- --------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$184 $569 $980 $2,127
</TABLE>
20
<PAGE>
.
TRANSEUROPE FUND (US) (not currently available for purchase)
________________________________________________________________________________
Investment Goal High level of total return through capital appreciation
and current income
Principal
Investment The TransEurope Fund primarily invests in common stocks
Strategies and other equity securities of companies headquartered or
based in European countries. The Fund's investments are
diversified among issuers located in various European
countries, such as Belgium, Denmark, France, Germany,
Italy and Finland. The Fund focuses on developed
countries, but may invest in countries with emerging
markets, such as Hungary, Poland and Slovakia.
In addition to the general risks of investing in an
Principal Risks International Fund, this Fund is subject to the risks
of Investing in associated with equity investing. Investments in equity
this Fund securities in general are subject to market risks that
may cause their prices to fluctuate over time. In other
words, the risk that stock prices will fall over short or
extended periods of time. Historically, the equity
markets have moved in cycles, and the value of the Fund's
equity securities may fluctuate drastically from day-to-
day. Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
Since the Fund's investments are focused on securities of
issuers located in Europe, the Fund is subject to the
risk that securities of companies headquartered or based
in Europe will underperform the equity markets as a
whole, as well as the risk that issuers in Europe will be
impacted by the market conditions, legislative or
regulatory changes, competition, or political, economic,
or other developments in Europe. Government regulation
and restriction in many European countries may limit the
amount and extent of the Fund's investments in those
countries. Regional economics are often closely
interrelated, and political and economic developments,
affecting one region or country often affect other
regions or countries, thus subjecting the Fund to
additional risks.
On January 1, 1999, various European countries
implemented a plan to convert or tie their currencies to
a new currency unit, the euro. Although it is not
possible to predict the impact of this conversion on the
Fund, the ongoing conversion to the euro may change the
economic environment and behavior of investors,
particularly in European markets. The Advisor may need to
modify the Fund's strategy in response to these changes.
The conversion to the euro may adversely affect financial
markets worldwide and may cause fluctuations in the value
of the U.S. dollar and other major currencies.
21
<PAGE>
.
The Fund's investments in emerging market countries can be
considered speculative and, therefore, may offer higher
potential for gains and losses than investments in
developed markets of the world. Emerging market countries
are countries that the World Bank or the United Nations
considers to be emerging or developing. With respect to
any emerging market country, the risks associated with
foreign investing are greater. The economies of emerging
market countries generally are heavily dependent upon
international trade. These economies have been and may
continue to be adversely affected by trade barriers,
exchange or currency controls, managed adjustments in
relative currency value and other protectionist measures
imposed or negotiated by the countries with which they
trade. Emerging markets may be more likely to experience
political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition, the
financial stability of issuers in emerging market
countries may be more precarious than in other countries.
As a result, there will tend to be more price volatility
in emerging market countries, which may be magnified by
currency fluctuations relative to the U.S. dollar.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees .25%
Other Expenses* .54%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.79%
- --------------------------------------------
</TABLE>
* Since the Fund has not started operations, Other Expenses are based on
estimated amounts for the current fiscal year.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$182 $563
</TABLE>
22
<PAGE>
.
ASIAN TIGERS FUND (US)
- --------------------------------------------------------------------------------
Investment Goal Capital Appreciation
Principal
Investment The Asian Tigers Fund primarily invests in common stocks
Strategies and other equity securities of companies headquartered or
based in Asian countries (other than Japan). The Advisor
diversifies the Fund's investments among various Asian
countries, such as Hong Kong, Singapore, South Korea,
Thailand, Taiwan and Indonesia, some of which have
emerging markets. The Fund does not intend to invest in
Japan. The Advisor allocates the Fund's investments
according to the relative attractiveness of the countries
and within those, the relative attractiveness of the
stocks. At the same time the Fund is managed in an effort
to reduce risk. In selecting investments for the Fund,
the Advisor evaluates each company using a combined top-
down (emphasis on market and sectors) and bottom-up
(emphasis on individual industries and companies)
approach. The Advisor tries to identify large
capitalization liquid companies with growth potential.
Principal Risks In addition to the general risks of investing in any
of Investing in International Fund, this Fund is subject to the risks
this Fund associated with equity investing. Investments in equity
securities in general are subject to market risks that
may cause their prices to fluctuate over time. In other
words, the risk that stock prices will fall over short or
extended periods of time. Historically, the equity
markets have moved in cycles, and the value of the Fund's
equity securities may fluctuate drastically from day-to-
day. Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
Since the Fund's investments are focused on securities of
issuers located in Asia, the Fund is subject to the risk
that securities of companies headquartered or based in
Asia will underperform the equity markets as a whole, as
well as the risk that issuers in Asia will be impacted by
the market conditions, legislative or regulatory changes,
competition, or political, economic or other developments
in Asia. Government regulation and restrictions in many
Asian countries may limit the amount and extent of the
Fund's investments in those countries. Regional economics
are often closely interrelated, and political and
economic developments affecting one region or country
often affect other regions or countries, thus subjecting
the Fund to additional risks.
23
<PAGE>
.
The Fund's investments in emerging market countries can
be considered speculative and, therefore, may offer
higher potential for gains and losses than investments in
developed markets of the world. Emerging market countries
are countries that the World Bank or the United Nations
considers to be emerging or developing (e.g., South
Korea, Thailand). With respect to any emerging market
country, the risks associated with foreign investing are
greater. The economies of emerging market countries
generally are heavily dependent upon international trade.
These economies have been and may continue to be
adversely affected by trade barriers, exchange or
currency controls, managed adjustments in relative
currency value and other protectionist measures imposed
or negotiated by the countries with which they trade.
Emerging markets may be more likely to experience
political turmoil or rapid changes in market or economic
conditions than more developed countries. In addition,
the financial stability of issuers in emerging market
countries may be more precarious than in other countries.
As a result, there will tend to be more price volatility
in emerging market countries, which may be magnified by
currency fluctuations relative to the U.S. dollar.
24
<PAGE>
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1995 1996 1997 1998
---- ---- ---- ----
<S> <C> <C> <C>
11.18% 14.21% -36.25% -11.89%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
26.57%
12/31/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-28.57%
6/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Morgan Stanley Capital International
(MSCI) All Asia Free ex-Japan Index. An index measures the market prices of a
specific group of securities in a particular market or securities in a market
sector. You cannot invest directly in an index. An index does not have an
investment advisor and does not pay any commissions or expenses. If an index
had expenses, its performance would be lower. The MSCI All Asia Free ex-Japan
Index is a widely recognized index that tracks seven Pacific Basin countries,
excluding Japan, and represents only those securities that are available for
investment by international investors.
<TABLE>
<CAPTION>
1 Year 3 Years Since Inception
------- ------- ---------------
<S> <C> <C> <C>
Asian Tigers Fund -11.89% -13.75% -7.57%*
MSCI All Asia Free ex-Japan Index -7.79% -15.39% -12.15%*
</TABLE>
* Fund inception (1/12/94). Index inception computed from (12/31/93).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees .25%
Other Expenses .84%
- --------------------------------------------
Total Annual Fund Operating Expenses 2.09%
- --------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$212 $655 $1,124 $2,421
</TABLE>
25
<PAGE>
.
LATIN AMERICA EQUITY FUND(US)
- --------------------------------------------------------------------------------
Investment Goal Long-term capital appreciation
Principal
Investment The Latin America Equity Fund primarily invests in common
Strategies stocks and other equity securities of companies
headquartered or based in Latin American countries. In an
effort to reduce risk, the Advisor diversifies the Fund's
investments among economic sectors. In selecting
investments for the Fund, the Advisor seeks to benefit
from economic and other developments in Latin America.
The Advisor tries to identify companies with long-term
growth prospects whose securities are trading at
reasonable prices. The Advisor considers a company's
competitive advantages and its ability to sustain
earnings growth in comparison to its peers. The Advisor
selects the Fund's investments using a combination of
top-down (emphasis on market and sectors) and bottom-up
(emphasis on individual industries and companies)
approaches, with an emphasis on the latter. The Advisor
diversifies the Fund's investments among various Latin
American countries, such as Argentina, Brazil, Chile,
Colombia, Mexico, Peru and Venezuela.
Principal Risks In addition to the general risks of investing in any
of Investing in International Fund, this Fund is subject to the risks
this Fund associated with equity investing. Investments in equity
securities in general are subject to market risks that
may cause their prices to fluctuate over time. In other
words, the risk that stock prices will fall over short or
extended periods of time. Historically, the equity
markets have moved in cycles, and the value of the Fund's
equity securities may fluctuate drastically from day-to-
day. Individual companies may report poor results or be
negatively affected by industry or economic trends and
developments. The prices of securities issued by such
companies may suffer a decline in response. Fluctuations
in the value of equity securities in which the Fund
invests will cause the net asset value of the Fund to
fluctuate.
Since the Fund's investments are focused on securities of
issuers located in Latin America, the Fund is subject to
the risk that Latin American securities will underperform
the equity markets as a whole, as well as the risk that
issuers in Latin America will be impacted by the market
conditions, legislative or regulatory changes,
competition, or political, economic or other developments
in Latin America. Government regulation and restrictions
in many Latin American countries may limit the amount and
extent of the Fund's investments in those countries.
Regional economies are often closely interrelated, and
political and economic developments affecting one region
or country often affect other regions or countries, thus
subjecting the Fund to additional risks.
26
<PAGE>
.
The Fund's investments in emerging market countries can be
considered speculative and, therefore, may offer higher
potential for gains and losses than investments in
developed markets of the world. Emerging market countries
are countries that the World Bank or the United Nations
considers to be emerging or developing (e.g., Peru,
Venezuela). With respect to any emerging market country,
the risks associated with foreign investing are greater.
The economies of emerging market countries generally are
heavily dependent upon international trade. These
economies have been and may continue to be adversely
affected by trade barriers, exchange or currency controls,
managed adjustments in relative currency value and other
protectionist measures imposed or negotiated by the
countries with which they trade. Emerging markets may be
more likely to experience political turmoil or rapid
changes in market or economic conditions than more
developed countries. In addition, the financial stability
of issuers in emerging market countries may be more
precarious than in other countries. As a result, there
will tend to be more price volatility in emerging market
countries, which may be magnified by currency fluctuations
relative to the U.S. dollar.
The Fund is non-diversified, which means that it may
invest in the securities of relatively few issuers. As a
result, the Fund may be more susceptible to a single
adverse economic or political/regulatory occurrence
affecting one or more of these issuers, and may experience
increased volatility due to its investments in those
securities.
27
<PAGE>
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in Common Shares of the Fund. Of course, the
Fund's past performance does not necessarily indicate how the Fund will
perform in the future. Common Shares are not offered in this Prospectus. The
performance of the Fund's Investor Shares would be substantially similar
because the shares are invested in the same portfolio securities, but would
differ slightly, however, due to differences in expenses.
The bar chart shows changes in the Fund's performance from year to year.
<TABLE>
<CAPTION>
1997 1998
---- ----
<S> <C>
35.50% -36.33%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
22.73%
6/30/97
<CAPTION>
Worst Quarter
-------------
<S> <C>
-32.83%
9/30/98
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Morgan Stanley Capital International
Emerging Markets Latin America Free Index. An index measures the market prices
of a specific group of securities in a particular market or securities in a
market sector. You cannot invest directly in an index. An index does not have
an investment advisor and does not pay any commissions or expenses. If an
index had expenses, its performance would be lower. The MSCI Emerging Markets
Latin America Free Index is a widely recognized index of stocks from Latin
American countries.
<TABLE>
<CAPTION>
1 Year Since Inception
------- ---------------
<S> <C> <C>
Latin America Equity Fund -36.33% - 4.82%*
MSCI Emerging Markets Latin America Free Index -35.11% -4.63%*
</TABLE>
* Fund inception (7/1/96). Index inception computed from (6/30/96).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees 1.00%
Distribution and Service (12b-1) Fees .25%
Other Expenses 1.16%
- --------------------------------------------
Total Annual Fund Operating Expenses 2.41%
- --------------------------------------------
</TABLE>
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return and Fund expenses remain the same. Although
your actual costs and returns might be different, your approximate costs of
investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$244 $751 $1,285 $2,746
</TABLE>
28
<PAGE>
.
INTERNATIONAL FIXED INCOME FUND (US)
_______________________________________________________________________________
[LOGO APPEARS HERE]
Investment Goal High level of total return, relative to funds with like
investment goals, measured in U.S. dollar terms, from
income and capital appreciation
[LOGO APPEARS HERE]
Principal
Investment The International Fixed Income Fund primarily invests in
Strategies debt securities of foreign companies and debt securities
issued by foreign governments (commonly called sovereign
debt). In selecting investments for the Fund, the Advisor
manages currency, interest rates, yield curve and credit
exposure in an effort to maximize returns. There are no
restrictions on the average maturity of the Fund or the
maturity of any single investment. Although the Advisor
generally focuses on investment grade bonds with
intermediate maturities, maturities may vary widely
depending on the Advisor's assessment of interest rate
trends and other economic and market factors.
[LOGO APPEARS HERE]
Principal Risks
of Investing in In addition to the general risks of investing in any
this Fund International Fund, this Fund is subject to the risks of
investing in corporate debt and other fixed income
securities. The prices of bonds and other fixed income
securities respond to economic developments, particularly
interest rate changes, as well as to changes in the actual
or perceived creditworthiness of individual issuers,
including governments. Generally, fixed income securities
decrease in value if interest rates rise and vice versa.
Also, longer term securities are generally more volatile,
so the average maturity or duration of these securities
affects risk. The volatility of lower rated securities is
even greater since the prospects for repayment of
principal and interest are more speculative.
Investing in sovereign debt involves a high degree of
risk, since the government that controls the repayment of
the debt may not be willing or able to repay principal or
interest when it is due. This may happen as a result of
political constraints, cash flow problems and other
national economic factors. As a result, government may
default on their debt obligations, which may require the
Fund to participate in debt rescheduling or other
proceedings.
The Fund is non-diversified, which means that it may
invest in the securities of relatively few issuers. As a
result, the Fund may be more susceptible to a single
adverse economic or political/regulatory occurrence
affecting one or more of these issuers, and may experience
increased volatility due to its investments in those
securities.
Although the International Funds typically do not engage
in hedging activities, this Fund may do so occasionally.
29
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -1.71% 20.68% 2.62% -6.16% 14.84%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
11.96%
3/31/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
-6.06%
3/31/97
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the J.P. Morgan Global Non-U.S.
Government Bond Index. An index measures the market prices of a specific group
of securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The J.P. Morgan Global Non-U.S.
Government Bond Index is a widely recognized index of bonds issued by
governments other than the U.S.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
International Fixed Income Fund 14.84% 3.41% 5.58% 5.61%*
J.P. Morgan Global Non-U.S. Government
Bond Index 18.28% 6.21% 8.77% 8.70%*
</TABLE>
* Fund inception (4/26/93). Index inception computed from (4/30/93).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .80%
Distribution and Service (12b-1) Fees .25%
Other Expenses 1.01%
- --------------------------------------------
Total Annual Fund Operating Expenses 2.06%
- --------------------------------------------
Fee Waiver/1/ -.05%
- --------------------------------------------
Net Expenses 2.01%
- --------------------------------------------
</TABLE>
/1/The Administrator has agreed to waive its fees through April 2000 in an
amount necessary to limit administration fees (included in Other Expenses) to
.10% of the Fund's net assets.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$204 $641 $1,104 $2,386
</TABLE>
30
<PAGE>
.
THE BOND FUNDS ________________________________________________________________
The Bond Funds are subject to the risks of investing in bonds and other fixed
income securities. The prices of bonds and other fixed income securities
respond to economic developments, particularly interest rate changes, as well
as to changes in the actual or perceived creditworthiness and even year 2000
readiness of individual issuers, including governments. Generally, fixed
income securities decrease in value if interest rates rise and vice versa.
Also, longer term securities are generally more volatile, so the average
maturity or duration of these securities affects risk. Lower rated securities
are also volatile, since the prospects for repayment of principal and interest
are more speculative.
Each Bond Fund is subject to additional risks, which are described on the
following pages and in the Statement of Additional Information.
31
<PAGE>
.
FIXED INCOME FUND (US)
________________________________________________________________________________
[LOGO APPEARS HERE]
Investment Goal High level of total return, relative to funds with like
investment goals, from income, and to a lesser degree,
capital appreciation
[LOGO APPEARS HERE]
Principal
Investment The Fixed Income Fund primarily invests in debt
Strategies securities, such as corporate bonds and U.S. Treasury and
government agency obligations, mortgage-backed securities
and asset backed securities. In selecting investments for
the Fund, the Advisor seeks securities that show
improving fundamentals not yet reflected in their price.
The Advisor broadly emphasizes all fixed income
securities, including mortgage-backed, corporate and U.S.
government securities, in an effort to reduce risk.
The Advisor actively manages four key components of
portfolio risk:
. Duration (the sensitivity of a bond's price changes
in interest rates) is targeted in an attempt to
position the Fund's portfolio to take advantage of
changing economic conditions, inflation and market
values.
. Yield curve (the range of yields offered from short
term securities to long term) allocations are
based on a detailed analysis of interest rates,
the portfolio's duration targets and a review of
Federal Reserve policy.
. Sector allocation (the percentage of assets in
corporate bonds, governments, etc.) is determined
by analysis of such factors as economic
conditions, current prices and market sentiment.
. Security selection is based on a fundamental
understanding of each holding including credit
analysis, market value and price volatility.
There are no restrictions on the average maturity of the
Fund or the maturity of any single investment. Although
the Advisor generally focuses on investment grade
securities with intermediate to long maturities,
maturities may vary widely depending on the Advisor's
assessment of interest rate trends and other economic and
market factors. In addition, the Fund may invest in fixed
income securities rated below investment grade (commonly
called "high yield" or "junk" bonds).
[LOGO APPEARS HERE]
Principal Risks
of Investing in In addition to the general risks of investing in any Bond
this Fund Fund, this Fund is subject to the risks of investing in
U.S. government and mortgage-backed securities. Although
investments in U.S. government securities are considered
to be among the safest investments, they are not
guaranteed against price movements due to changing
interest rates. Obligations issued by some U.S.
government agencies are backed by the U.S. Treasury,
while others are backed solely by the ability of the
agency to borrow from the U.S. Treasury or by the
agency's own resources. High yield bonds involve greater
risk of default, or price declines than investment-grade
securities. The market prices of such lower rated debt
securities may decline significantly in periods of
general economic difficulty. In addition, the trading
market for these securities is generally less liquid than
for higher rated securities.
32
<PAGE>
.
Mortgage backed securities are fixed income securities
representing an interest in a pool of underlying mortgage
loans. They are sensitive to changes in interest rates,
but may respond to these changes differently from other
fixed income securities due to the possibility of
prepayment of the underlying mortgage loans. Prepayment
risk may make it difficult to calculate the average
maturity of a portfolio of mortgage-backed securities
and, therefore, to assess volatility risk.
Due to its investment strategy, the Fund may have a high
portfolio turnover rate. A portfolio turnover rate of
100% or more may result in higher transaction costs,
higher levels of realized capital gains and additional
taxes than if the turnover rate was lower. In seeking
total return oportunities, the Advisor considers such
costs and potential gains and taxes in determining
whether to sell a particular security.
33
<PAGE>
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -3.97% 17.40% 3.24% 8.92% 6.81%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
5.85%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
-2.94%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Brothers Aggregate Bond Index.
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. An index does not have an investment advisor and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower. The Lehman Brothers Aggregate Bond Index is a widely recognized index of
U.S. government obligations, corporate bonds and mortgage-backed securities.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Fixed Income Fund 6.81% 6.30% 6.25% 6.37%*
Lehman Brothers Aggregate Bond Index 8.69% 7.29% 7.27% 7.24%*
</TABLE>
* Fund inception (3/12/93). Index inception computed from (2/28/93).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Distribution and Service (12b-1) Fees .25%
Other Expenses .48%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.33%
- --------------------------------------------
Fee Waivers/1/ -.15%
- --------------------------------------------
Net Expenses 1.18%
- --------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .50%
and .10%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$120 $407 $714 $1,588
</TABLE>
34
<PAGE>
.
INTERMEDIATE GOVERNMENT FIXED INCOME FUND (US)
_______________________________________________________________________________
[LOGO APPEARS HERE]
Investment Goal High level of total return, relative to funds with like
investment goals, consistent with preservation of capital,
from income and, to a lesser degree, capital appreciation
[LOGO APPEARS HERE]
Principal
Investment The Fund invests substantially all of its assets in U.S.
Strategies government obligations, including U.S. Treasury
obligations, U.S. government agency securities and
mortgage-backed securities issued by such agencies. The
Advisor anticipates that, under normal circumstances, the
Fund's dollar-weighted average maturity will range from
three to ten years.
The Advisor actively manages four key components of
portfolio risk:
. Duration (the sensitivity of a bond changes in
interest rates) is targeted in an attempt to
position the Fund's portfolio to take advantage of
changing economic conditions, inflation and market
values.
. Yield curve (the range of yields offered from short
term securities to long term) allocations are based
on a detailed analysis of interest rates, the
portfolio's duration targets and a review of Federal
Reserve policy.
. Sector allocation (the percentage of assets in
Treasuries, mortgage-backed securities, etc.) is
determined by analysis of such factors as economic
conditions, current prices and market sentiment.
. Security selection is based on a fundamental
understanding of each holding including market value
and price volatility.
[LOGO APPEARS HERE]
Principal Risks
of Investing in In addition to the general risks of investing in any Bond
this Fund Fund, this Fund is subject to the risks of investing in
U.S. government and mortgage-backed securities issued by
such agencies. Although investments in U.S. government
securities are considered to be among the safest
investments, they are not guaranteed against price
movements due to changing interest rates. Obligations
issued by some U.S. government agencies are backed by the
U.S. Treasury, while others have an implied backing, plus
the ability of the agency to borrow from the U.S. Treasury
or by the agency's own resources.
Mortgage-backed securities (including collateralized
mortgage obligations, a type of mortgage-backed security)
are fixed income securities representing an interest in a
pool of underlying mortgage loans. They are sensitive to
changes in interest rates, but may respond to these
changes differently from other fixed income securities due
to the possibility of prepayment of the underlying
mortgage loans. Prepayment risk may make it difficult to
calculate the average maturity of a portfolio of mortgage-
backed securities and, therefore, to assess volatility
risk. The Advisor actively manages this risk.
Due to its investment strategy, the Fund may have a high
portfolio turnover rate. A portfolio turnover rate of 100%
or more may result in higher transaction costs, higher
levels of realized capital gains and additional taxes than
if the turnover rate was lower. In seeking total return
opportunities, the Advisor considers such costs and
potential gains and taxes in determining whether to sell a
particular security.
35
<PAGE>
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -3.03% 13.59% 3.30% 7.88% 7.56%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
4.65%
9/30/98
<CAPTION>
Worst Quarter
-------------
<S> <C>
-2.48%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Brothers Intermediate
Government Bond Index. An index measures the market prices of a specific group
of securities in a particular market or securities in a market sector. You
cannot invest directly in an index. An index does not have an investment
advisor and does not pay any commissions or expenses. If an index had
expenses, its performance would be lower. The Lehman Brothers Intermediate
Government Bond Index is a widely recognized index of U.S. Treasury
securities, U.S. government agency obligations and corporate bonds backed by
the U.S. government.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Intermediate Government Fixed Income
Fund 7.56% 6.16% 5.67% 5.38%*
Lehman Brothers Intermediate Government
Bond Index 8.49% 6.73% 6.45% 6.35%*
</TABLE>
*Fund inception (4/12/93). Index inception computed from (3/31/93).
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Distribution and Service (12b-1) Fees .25%
Other Expenses .64%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.49%
- --------------------------------------------
Fee Waivers/1/ -.15%
- --------------------------------------------
Net Expenses 1.34%
- --------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .50%
and .10%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$136 $456 $799 $1,767
</TABLE>
36
<PAGE>
.
TAX-EXEMPT FIXED INCOME FUND (US)
_______________________________________________________________________________
[LOGO APPEARS HERE]
Investment Goal High level of total return, relative to funds with like
investment goals, from income, consistent with
preservation of capital
[LOGO APPEARS HERE]
Principal
Investment The Tax-Exempt Fixed Income Fund primarily invests in debt
Strategies securities and invests at least 80% of its net assets in
securities that pay income exempt from Federal income and
alternative minimum taxes. The issuers of these securities
may be located in any U.S. state, territory or possession.
The Advisor varies the Fund's concentration of investments
among regions based on its analysis of market conditions
and seeks to take advantage of economic developments. In
selecting investments for the Fund, the Advisor focuses on
securities of municipal issuers with improving credit
while limiting risk as much as possible.
There are no restrictions on the average maturity of the
Fund or the maturity of any single investment. Although
the Advisor focuses on investment grade securities with
intermediate to longer-term securities, maturities may
vary widely depending on the Advisor's assessment of
interest rate trends and other economic and market
factors.
The Advisor actively manages four key components of
portfolio risk:
. Duration (the sensitivity of a bond changes in
interest rates) is targeted in an attempt to
position the Fund's portfolio to take advantage of
changing economic conditions, inflation and market
values.
. Yield curve (the range of yields offered from short
term securities to long term) allocations are based
on a detailed analysis of interest rates, the
portfolio's duration targets and a review of Federal
Reserve policy.
. Sector allocation (the percentage of assets in
securities issued to fund housing projects, airports
or hospitals, for example) is determined by analysis
of such factors as economic conditions, current
prices and market sentiment.
. Security selection is based on a fundamental
understanding of each holding including credit
analysis, market value and price volatility.
[LOGO APPEARS HERE]
Principal Risks
of Investing in In addition to the general risks of investing in any Bond
this Fund Fund, this Fund is subject to the risks of investing in
municipal securities. There may be economic or political
changes that impact the ability of municipal issuers to
repay principal and to make interest payments on municipal
securities. Changes to the financial condition or credit
rating or year 2000 difficulties of municipal issuers may
also adversely affect the value of the Fund's municipal
securities. Constitutional or legislative limits on
borrowing by municipal issuers may result in reduced
supplies of municipal securities. Moreover, certain
municipal securities are backed only by a municipal
issuer's ability to levy and collect taxes.
37
<PAGE>
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
- -5.27% 15.43% 2.70% 9.11% 5.31%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
5.89%
3/31/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
-5.50%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the Lehman Brothers Municipal Bond Index.
An index measures the market prices of a specific group of securities in a
particular market or securities in a market sector. You cannot invest directly
in an index. An index does not have an investment advisor and does not pay any
commissions or expenses. If an index had expenses, its performance would be
lower. The Lehman Brothers Municipal Bond Index is a widely recognized index of
municipal bonds with maturities of at least one year.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Tax-Exempt Fixed Income Fund 5.31% 5.67% 5.23% 5.26%*
Lehman Brothers Municipal Bond Index 6.48% 6.69% 6.23% 6.56%*
</TABLE>
*Fund inception (3/9/93). Index inception computed from (2/28/93).
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Distribution and Service (12b-1) Fees .25%
Other Expenses .67%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.52%
- --------------------------------------------
Fee Waivers/1/ -.15%
- --------------------------------------------
Net Expenses 1.37%
- --------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .50%
and .10%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$139 $466 $815 $1,800
</TABLE>
38
<PAGE>
.
LIMITED VOLATILITY FIXED INCOME FUND(US) (not currently available for
purchase)
_______________________________________________________________________________
Investment Goal High level of current income, consistent with relative
stability of principal
Principal
Investment The Limited Volatility Fixed Income Fund primarily invests
Strategies in a diversified portfolio of investment grade corporate
bonds, U.S. government agency securities, municipal
securities and sovereign debt securities. Under normal
circumstances, the Fund's dollar-weighted average maturity
will be less than six years.
Principal Risks In addition to the general risks of investing in any Bond
of Investing in Fund, this Fund is subject to the risks of investing in
this Fund municipal securities, foreign securities and sovereign
debt.
There may be economic or political changes that impact the
ability of municipal issuers to repay principal and to
make interest payments on municipal securities. Changes to
the financial condition or credit rating of municipal
issuers may also adversely affect the value of the Fund's
municipal securities. Constitutional or legislative limits
on borrowing by municipal issuers may result in reduced
supplies of municipal securities. Moreover, certain
municipal securities are backed only by a municipal
issuer's ability to levy and collect taxes.
Investing in foreign countries poses distinct risks, since
political and economic events unique to a country or
region will affect those markets and their issuers. These
events will not necessarily affect the U.S. economy or
similar issuers located in the U.S. In addition,
investments in foreign countries are generally denominated
in a foreign currency. As a result, changes in the value
of those currencies compared to the U.S. dollar may affect
(positively or negatively) the value of a Fund's
investments. These currency movements may happen
separately from and in response to events that do not
otherwise affect the value of the security in the issuer's
home country.
Investing in sovereign debt involves a high degree of
risk, since the government that controls the repayment of
the debt may not be willing or able to repay principal or
interest when it is due. This may happen as a result of
political constraints, cash flow problems and other
national economic factors. As a result, government may
default on their debt obligations, which may require the
Fund to participate in debt rescheduling or other
proceedings.
39
<PAGE>
.
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .60%
Distribution and Service (12b-1) Fees .25%
Other Expenses/1/ .24%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.09%
- --------------------------------------------
Fee Waiver/2/ -.10%
- --------------------------------------------
Net Expenses .99%
- --------------------------------------------
</TABLE>
/1/Since the Fund has not started operating, Other Expenses are based on
estimated amounts for the current fiscal year.
/2/The Advisor has agreed to waive its fees through April 2000 in amounts
necessary to limit advisory fees to .50% of the Fund's net assets.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years
------ -------
<S> <C>
$101 $337
</TABLE>
40
<PAGE>
.
THE MONEY MARKET FUNDS ________________________________________________________
Money market funds invest in high quality, short-term debt securities,
commonly known as money market instruments. These generally include CDs,
bankers' acceptances, U.S. Treasury securities, some municipal securities,
commercial paper, and repurchase agreements involving these instruments. Money
market funds follow strict rules about credit risk, maturity and
diversification of its investments. An investment in a money market fund is
not a bank deposit. Although a money market fund seeks to keep a constant
price per share of $1.00, you may lose money by investing in a money market
fund.
Each Money Market Fund is subject to additional risks, which are described on
the following pages and in the Statement of Additional Information.
41
<PAGE>
.
TREASURY MONEY MARKET FUND (US)
________________________________________________________________________________
[LOGO APPEARS HERE]
Investment Goal To preserve principal value and maintain a high degree of
liquidity while providing current income
[LOGO APPEARS HERE]
Principal
Investment The Treasury Money Market Fund invests substantially all
Strategies of its assets in high-quality U.S. Treasury money market
instruments, repurchase agreements involving these
obligations, and shares of money market funds that invest
in U.S. Treasury obligations. The Advisor structures the
Fund's portfolio based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor adjusts the average maturity of the Fund in
anticipation of changes in short-term interest rates.
Important factors include an assessment of Federal
Reserve policy and an analysis of the yield curve (the
range of yields offered).
[LOGO APPEARS HERE]
Principal Risks An investment in the Fund is subject to the risk that the
of Investing in Fund's yield will decline due to falling interest rates.
This Fund A Fund share is not a bank deposit and is not insured or
guaranteed by the FDIC or any government agency. In
addition, although the Fund tries to keep a constant
price per share of $1.00, you may lose money by investing
in the Fund.
42
<PAGE>
Performance Information ________________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
3.32% 5.02% 4.54% 4.70% 4.64%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
1.28%
6/30/95
<CAPTION>
Worst Quarter
------------- -----
<S> <C>
.59%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC U.S. Treasury Average. An average
measures the share prices of mutual funds with a particular investment goal.
You cannot invest directly in an average. The IBC U.S. Treasury Average is a
composite of mutual funds with investment goals similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Treasury Money Market Fund 4.64% 4.63% 4.44% 4.15%*
IBC U.S. Treasury Average 4.65% 4.73% 4.60% 4.33%*
</TABLE>
*Fund inception (3/25/93). Average inception computed from (3/30/93).
To obtain the Fund's current yield, please call 1-800-443-4752.
Fees and Expenses ______________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .35%
Distribution and Service (12b-1) Fees .25%
Other Expenses .46%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.06%
- --------------------------------------------
Fee Waivers/1/ -.23%
- --------------------------------------------
Net Expenses/2/ .83%
- --------------------------------------------
</TABLE>
/1/ The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .20% and
.07%, respectively, of the Fund's net assets. Administration fees are included
in Other Expenses.
/2/ After voluntary waivers, net expenses are .58%. Voluntary waivers may be
discontinued at any time.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$85 $314 $562 $1,273
</TABLE>
43
<PAGE>
.
GOVERNMENT MONEY MARKET FUND (US)
________________________________________________________________________________
[ICON LOGO]
Investment Goal
To provide as high a level of current income as is
consistent with the preservation of capital and liquidity
[ICON LOGO]
Principal
Investment The Government Money Market Fund invests 100% of its
Strategies assets in U.S. government money market instruments, such
as U.S. Treasury obligations and U.S. government agency
securities, and repurchase agreements involving these
instruments. The Advisor structures the Fund's portfolio
based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor monitors the Fund's investments and adjusts
the average maturity of the Fund in anticipation of
changes in short-term interest rates. Important factors
include an assessment of Federal Reserve policy and an
analysis of the yield curve (the range of yields
offered).
[ICON LOGO]
Principal Risks An investment in the Fund is subject to the risk that the
of Investing in Fund's yield will decline due to falling interest rates.
This Fund A Fund share is not a bank deposit and is not insured or
guaranteed by the FDIC or any government agency. Although
the Fund tries to keep a constant price per share of
$1.00, you may lose money by investing in the Fund.
44
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
3.63% 5.33% 4.82% 5.05% 4.91%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
1.34%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
.68%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC Total Government Average. An
average measures the share prices of a specific group of mutual funds with a
particular investment goal. You cannot invest directly in an average. The IBC
Total Government Average is a composite of mutual funds with investment goals
similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Government Money Market Fund 4.91% 4.93% 4.75% 4.50%*
IBC Total Government Average 4.97% 4.97% 4.81% 4.55%*
</TABLE>
*Fund inception (4/22/93). Average inception computed from (4/30/93).
To obtain the Fund's current yield, please call 1-800-443-4725.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .20%
Distribution and Service (12b-1) Fees .25%
Other Expenses .44%
- --------------------------------------------
Total Annual Fund Operating Expenses .89%
- --------------------------------------------
Fee Waiver/1/ -.08%
- --------------------------------------------
Net Expenses/2/ .81%
- --------------------------------------------
</TABLE>
/1/The Administrator has agreed to waive its fees through April 2000 in an
amount necessary to limit administration fees (included in Other Expenses)
to .07% of the Fund's net assets.
/2/After voluntary waivers, net expenses are .63%. Voluntary waivers may be
discontinued at any time.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$83 $276 $485 $1,089
</TABLE>
45
<PAGE>
.
MONEY MARKET FUND (US)
________________________________________________________________________________
Investment Goal To provide as high a level of current income as is
consistent with the preservation of capital and liquidity
Principal
Investment The Money Market Fund invests substantially all of its
Strategies assets in high quality money market instruments issued by
corporations, banks and the U.S. government or its
agencies or instrumentalities, as well as repurchase
agreements involving these investments. The Advisor
structures the Fund's portfolio based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor monitors the Fund's investments for credit
quality changes and may adjust the average maturity of
the Fund in anticipation of changes in short-term
interest rates. Important factors include an assessment
of Federal Reserve policy and an analysis of the yield
curve ( the range of yields offered).
Principal Risks
of Investing in An investment in the Fund is subject to the risk that the
This Fund Fund's yield will decline due to falling interest rates.
A Fund share is not a bank deposit and is not insured or
guaranteed by the FDIC or any government agency. In
addition, the Fund is subject to the risk that an issuer
will be unable to make timely payments of principal or
interest. Changes in the credit ratings of issuers could
affect the Fund's share price. Although the Fund tries to
keep a constant price per share of $1.00, you may lose
money by investing in the Fund.
46
<PAGE>
.
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
3.71% 5.38% 4.87% 5.12% 4.97%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
1.35%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
.69%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC Total Taxable Average. An average
measures the share prices of a specific group of mutual funds with a
particular investment goal. You cannot invest directly in an average. The IBC
Total Taxable Average is a composite of mutual funds with investment goals
similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Money Market Fund 4.97% 4.99% 4.81% 4.54%*
IBC Total Taxable Average 5.04% 5.04% 4.87% 4.57%*
</TABLE>
* Fund inception and average inception computed from (3/31/93).
To obtain the Fund's current yield, please call 1-800-443-4725.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .35%
Distribution and Service (12b-1) Fees .25%
Other Expenses .43%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.03%
- --------------------------------------------
Fee Waivers/1/ -.23%
- --------------------------------------------
Net Expenses/2/ .80%
- --------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .20%
and .07%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
/2/After voluntary waivers, net expenses are .66%. Voluntary waivers may be
discontinued at any time.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$82 $305 $546 $1,239
</TABLE>
47
<PAGE>
.
TAX-EXEMPT MONEY MARKET FUND (US)
________________________________________________________________________________
Investment Goal To preserve principal value and maintain a high degree of
liquidity while providing current income exempt from
Federal income tax and not included as a preference item
under the Federal alternative minimum tax
Principal
Investment The Tax-Exempt Money Market Fund invests substantially
Strategies all of its assets in short-term, high quality money
market instruments issued by municipalities and other
issuers. Under normal circumstances, the Fund invests at
least 80% of its net assets in securities that pay income
exempt from Federal income and alternative minimum taxes.
These issuers may be located in any state, territory or
possession of the U.S., or the District of Columbia. The
Advisor emphasizes particular market sectors of the
municipal money market that it expects will outperform
the market as a whole. The Advisor structures the Fund's
portfolio based on its outlook on:
. interest rates,
. market conditions, and
. liquidity needs.
The Advisor monitors the Fund for credit quality changes
and adjusts maturities in anticipation of changes in
interest rates. Important factors include an assessment
of Federal Reserve policy and an analysis of the yield
curve (the range of yields offered).
Principal Risks An investment in the Fund is subject to the risk that the
of Investing in Fund's yield will decline due to falling interest rates.
This Fund In addition, since the Fund may purchase securities
supported by credit enhancements from banks and other
financial institutions, changes in the credit quality of
these institutions could cause losses to the Fund and
affect its share price. A Fund share is not a bank
deposit and is not insured or guaranteed by the FDIC or
any government agency. Although the Fund tries to keep a
constant price per share of $1.00, you may lose money by
investing in the Fund.
48
<PAGE>
Performance Information _______________________________________________________
The bar chart and the performance table below illustrate some of the risks and
past volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
The bar chart shows changes in the performance of the Fund's Investor Shares
from year to year.
<TABLE>
<CAPTION>
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
2.24% 3.24% 2.88% 3.10% 2.96%
</TABLE>
<TABLE>
<CAPTION>
Best Quarter
-------------
<S> <C>
.85%
6/30/95
<CAPTION>
Worst Quarter
-------------
<S> <C>
.43%
3/31/94
</TABLE>
This table compares the Fund's average annual total returns for the periods
ending December 31, 1998 to those of the IBC Total Tax-Free Average. An
average measures the share prices of a specific group of mutual funds with a
particular investment goal. You cannot invest directly in an average. The IBC
Total Tax-Free Average is a composite of mutual funds with investment goals
similar to the Fund's goal.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years Since Inception
------ ------- ------- ---------------
<S> <C> <C> <C> <C>
Tax-Exempt Money Market Fund 2.96% 2.98% 2.88% 2.72%*
IBC Total Tax-Free Average 2.94% 3.03% 2.96% 2.82%*
</TABLE>
*Fund inception (3/24/93). Average inception computed from (3/31/93).
To obtain the Fund's current yield, please call 1-800-443-4725.
Fees and Expenses _____________________________________________________________
ANNUAL FUND OPERATING EXPENSES (deducted from Fund assets)
This table describes the Fund's expenses that you may pay indirectly if you
hold Fund shares.
<TABLE>
<S> <C>
Investment Advisory Fees .35%
Distribution and Service (12b-1) Fees .25%
Other Expenses .45%
- --------------------------------------------
Total Annual Fund Operating Expenses 1.05%
- --------------------------------------------
Fee Waivers/1/ -.23%
- --------------------------------------------
Net Expenses/2/ .82%
- --------------------------------------------
</TABLE>
/1/The Advisor and Administrator have agreed to waive their fees through April
2000 in amounts necessary to limit advisory and administration fees to .20%
and .07%, respectively, of the Fund's net assets. Administration fees are
included in Other Expenses.
/2/After voluntary fee waivers, net expenses are .57%. Voluntary waivers may
be discontinued at any time.
EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that you
invest $10,000 in the Fund for the time periods indicated and that you sell
your shares at the end of each period. The example also assumes that each year
your investment has a 5% return. The example is based on Net Expenses for the
first year, and Total Annual Fund Operating Expenses for the remaining years.
Although your actual costs and returns might be different, your approximate
costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
- ------ ------- ------- --------
<S> <C> <C> <C>
$84 $311 $557 $1,262
</TABLE>
49
<PAGE>
.
More Information About Risk ____________________________________________________
This section gives you more information about the risks of investing in the
Funds. The Funds may invest in other securities, use other strategies and
engage in other investment practices than those described in this Prospectus.
These are discussed in detail in the Statement of Additional Information.
Type of Risk Funds Subject to Risk
Early Closing Risk--Unanticipated early All Funds
closings of markets or exchanges may result in
a Fund being unable to sell or buy securities
on that day. If an exchange or market closes
early on a day when a Fund needs to execute a
high volume of securities trades late in a
trading day, a Fund might incur substantial
trading losses.
Convertible Securities--Convertible securities Stock Funds Balanced Fund
have characteristics of both fixed income and International Funds Bond
equity securities. The value of the convertible Funds
security tends to move with the market value of
the underlying stock, but may also be affected
by interest rates, credit quality of the issuer
and any call provisions.
Fixed Income Risk--In addition to the general Balanced Fund
risks of investing in bonds and other fixed International Fixed Income
income securities, different types of fixed Fund Bond Funds
income securities may be subject to the
following additional risks:
Call Risk--During periods of falling
interest rates, debt obligations with high
interest rates may be prepaid (or "called")
by the issuer prior to maturity. This may
cause a Fund's average weighted maturity to
fluctuate, and may require a Fund to invest
the resulting proceeds elsewhere, at
generally lower interest rates.
Credit Risk--The possibility that an issuer
will be unable to make timely payments of
either principal or interest.
Since a Fund may purchase securities backed
by credit enhancements from banks and other
financial institutions, changes in the
credit ratings of these institutions could
cause the Fund to lose money and may affect
the Fund's share price.
Event Risk--Securities may suffer
substantial declines in credit quality and
market value due to corporate or
governmental restructurings. While this risk
may be high for certain securities held by a
Fund, the overall risk should be reduced
because of the Fund's multiple holdings.
50
<PAGE>
.
Type of Risk Funds Subject to Risk
Hedging Risk--Hedging is a strategy designed to Stock Funds Balanced Fund
offset investment risks. Hedging activities International Funds Bond
include, among other things, the use of Funds
forwards, options and futures. The Funds
typically do not engage in hedging activities.
Further, the Advisor may choose not to hedge
under certain market or economic conditions.
[/R]
There are risks associated with hedging
activities, including:
. The success of a hedging strategy depends
on an abiliy to predict movements in the
prices of individual securities,
fluctuations in markets, and movements in
interest and currency exchange rates;
. There may be an imperfect or no
correlation between the changes in market
value of the securities held by the Fund
or the currencies in which those
securities are denominated and the prices
of forward contracts, futures and options
on futures;
. There may not be a liquid secondary market
for a futures contract or option;
. Trading restrictions or limitations may be
imposed by an exchange, and government
regulations may restrict trading in
currencies, futures contracts and options.
Currently, only a limited market, if any,
exists for hedging transactions relating
to currencies in certain markets,
including Latin American, Asian and
emerging markets generally. This may limit
a Fund's ability to effectively hedge its
investments in those markets.
Futures--The Funds may, but typically do Stock Funds Balanced Fund
not, use futures contracts and related International Funds Bond
options for bona fide hedging purposes to Funds
offset changes in the value of securities
held or expected to be acquired. They may
also be used to gain exposure to a
particular market or instrument, to create a
certain market position, and for certain
other tax-related purposes. Futures
contracts and options on 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
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. Index futures
are futures contracts for various indices
that are traded on registered securities
exchanges. [/R]
51
<PAGE>
.
Type of Risk Funds Subject to Risk
Options--The buyer of an option acquires
the right to buy (a call option) or sell Stock Funds Balanced Fund
(a put option) a certain quantity of a International Funds Bond
security (the underlying security) or Funds
instrument at a certain price up to a
specified point in time. The seller or
writer of an option is obligated to sell
(a call option) or buy (a put option) the
underlying security. When writing
(selling) call options on securities, the
Funds may cover its positions by owning
the underlying security on which the
option is written or by owning a call
option on the underlying security.
Alternatively, the Funds may cover its
position by maintaining in a segregated
account cash or liquid securities equal
in value to the exercise price of the
call option written by the Funds.
Because option premiums paid or received
by the Funds are small in relation to the
market value of the investments
underlying the options, buying and
selling put and call options can be more
speculative than investing directly in
securities. The aggregate value of option
positions may not exceed 10% of a Fund's
net assets at the time the Fund enters
into an option contract.
All Funds
Year 2000 Risk--The Funds depend on the
smooth functioning of computer systems in
almost every aspect of their business. Like
other mutual funds, businesses and
individuals around the world, the Funds could
be adversely affected if the computer systems
used by its service providers do not properly
process dates on and after January 1, 2000,
and distinguish between the year 2000 and the
year 1900. The Funds have asked their service
providers whether they expect to have their
computer systems adjusted for the year 2000
transition, and are seeking assurances from
their service providers that they are
devoting significant resources to prevent
material adverse consequences to the Funds.
While it is likely that such assurances will
be obtained, the Funds and their shareholders
may experience losses if these assurances
prove to be incorrect or as a result of year
2000 computer difficulties experienced by
U.S. and foreign issuers of portfolio
securities, particularly governmental
issuers, or third parties, such as
custodians, banks, broker-dealers or others
with which the Funds do business.
Furthermore, many foreign countries are not
as prepared as the U.S. for the year 2000
transition. As a result, computer
difficulties in foreign markets and with
foreign institutions as a result of the year
2000 may add to the possibility of losses of
the Funds and shareholders.
52
<PAGE>
.
Type of Risk
Funds Subject to Risk
All Funds
Temporary Defensive Investing--The investments
and strategies described throughout the
prospectus are those the Advisor uses under
normal market conditions. When the Advisor
determines that market conditions warrant, each
Fund may invest up to 100% of its assets in
money market instruments, hold U.S. dollars and
foreign currencies, including multinational
currency units (such as the euro) or shorten
its average weighted maturity. This may occur,
for example, if securities markets or issuers
experience difficulties with the year 2000
transition. When a Fund is investing for
temporary, defensive purposes, it is not
pursuing its investment goal.
53
<PAGE>
..............................................
How Do I Obtain an Application?
Account Applica-
tion forms can be
obtained by call-
ing 1-800-443-4725
..............................................
.
................................
................................
How to Purchase, Exchange and Sell Your Shares ________________________________
Purchasing Investor Shares
How To Purchase
Investor Shares You may purchase Investor Shares of the Funds through
banks, various brokerage firms and other financial
intermediaries that are authorized to sell Investor Shares
(intermediaries).
Investor Shares are offered
without a sales charge. However,
intermediaries may charge fees for
services provided in connection
with buying, selling or exchanging
shares. Each intermediary also may
have its own rules about shares
transactions. For more information
about how to purchase shares
through an intermediary, you should contact that
intermediary directly.
You may purchase a Fund's shares on any business day,
excluding major holidays ("Business Day"). Currently, the
Funds observe the following holidays: New Year's Day,
Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans Day, Thanksgiving Day, and Christmas Day. The
price per share (the offering price) will be the net asset
value (NAV) per share next determined after we receive
your purchase order and payment. We calculate each Fund's
NAV once each Business Day. For the Non-Money Market
Funds, we calculate NAV as of the close of regular trading
on the NYSE (normally, 4:00 p.m., Eastern time). So, for
these Funds, to receive the current Business Day's NAV,
generally we must receive your purchase order from your
financial institution before 4:00 p.m., Eastern time.
For the Money Market Funds, we must receive your
purchase order and payment before 1:00 p.m., Eastern time
for you to receive the current Business Day's NAV and that
day's dividend. You may not purchase shares of a Money
Market Fund by Federal Reserve wire on days the Federal
Reserve is closed.
Purchase requests for the Money Market Funds submitted
to the Transfer Agent before 5:00 p.m., Eastern time, by
accounts for which ABN AMRO North America, Inc. or certain
of its affiliates act in a fiduciary, agency, investment
advisory or custodian capacity, will become effective at
the net asset value determined as of 5:00 p.m., Eastern
time, and will be entitled to receive the dividend
declared, on that same Business Day.
If we receive your order and payment after the above
cut-off times, your purchase order will be effective the
next Business Day and your purchase price per share will
be the NAV calculated on that next Business Day.
Intermediaries may have earlier cut-off times for
purchases. For more information about how to purchase
through your intermediary, you should contact your
intermediary directly.
In calculating NAV for the Non-Money Market Funds, we
generally value a Fund's portfolio at market price. In
calculating NAV for the Money Market Funds, we generally
value a Fund's portfolio using the amortized cost
valuation method, which is described in detail in the
Statement of Additional Information. If market prices are
unavailable, or we think that the market prices or the
amortized cost valuation method are unreliable, fair value
prices may be determined in good faith using methods
approved by the Board of Trustees. Some Funds hold
portfolio securities that trade on
54
<PAGE>
....................................................
How Does
an
Exchange
Take
Place?
When you exchange
your shares, you
authorize the sale
of your shares in
one Fund to pur-
chase shares of an-
other Fund. In
other words, you
are requesting a
sale and then a
purchase. This sale
of your shares may
be a taxable event
for you.
....................................................
.
................................................................................
................................................................................
foreign exchanges. These securities may trade on weekends
or other days when the Funds do not calculate NAV. As a
result, the NAV of a Fund's shares may change on days when
you cannot purchase or sell Fund shares. Although we
cannot assure this, we expect the NAV for the Money Market
Funds to remain constant at $1.00 per share.
To purchase Investor Shares of any Fund for the first
time, you must invest at least $2,000 in any Fund. To
purchase additional shares of any Fund, you must invest at
least $100. However, we may waive the investment minimums
at any time at our discretion.
If you have arranged to purchase shares through the
Automatic Investment Plan (see below), then you must
invest at least $50.
You may purchase Investor Shares by direct deposit or
Automated Clearing House transactions if your intermediary
offers these services. Please contact your intermediary to
find out if these services are available to you.
The Advisor and Distributor reserve the right to refuse
any order for the purchase of shares.
Automatic With the Automatic Investment Plan ("AIP"), you may
Investment Plan purchase additional shares automatically through regular
deductions from your checking account. After you have
established an account with us, you may begin regularly
scheduled investments of at least $50 per month. Please
contact your intermediary for more information. [/R]
Exchanging Investor Shares _____________________________________________________
How To Exchange You may exchange Investor
Your Shares Shares of any
Fund for Investor Shares of
any other Fund on any
Business Day. You can request
an exchange by contacting
your intermediary who will
then contact us. Exchanges
will be made only after we
receive instructions in
writing or by telephone. You
will receive the current
Business Day's NAV if we
receive your exchange request
in good order before NAV is
calculated for the Non-Money
Market Funds and by 1:00
p.m., Eastern time for the
Money Market Funds. Your
intermediary may have
earlier cutoff times for exchange requests. Please contact
your intermediary for more information about exchange
requests.
Exchange requests for the Money Market Funds submitted
to the Transfer Agent before 5:00 p.m., Eastern time, on
behalf of accounts for which ABN AMRO North America, Inc.
or any of its affiliates act in a fiduciary, agency,
investment advisory or custodian capacity, will become
effective at the net asset value determined as of 5:00
p.m., Eastern time that same Business Day.
If your request is for more than $5,000, we may require
a written exchange request with a signature guarantee from
an eligible guarantor (a notarized signature is not
sufficient). The Funds may change or cancel the exchange
privilege at any time upon 60 days' notice.
In the case of market timing or allocation services
Exchanges By ("Timing Accounts"), the Distributor will deduct an
Timing Accounts administrative service fee of $5.00 per exchange. Timing
Accounts generally include accounts administered so as to
redeem or purchase shares based upon certain predetermined
market indicators. [/R]
55
<PAGE>
.................................................
What is a Signature Guarantee?
A signature guar-
antee verifies
the authenticity
of your signature
and may be ob-
tained from
banks,
brokerdealers,
certain credit
unions, clearing
agencies or sav-
ings associa-
tions. A notary
public cannot
provide a signa-
ture guarantee.
.................................................
.
.................................................
.................................................
The Funds reserve the right to temporarily or
permanently terminate the exchange privilege or reject
any specific purchase order for any Timing Account or any
person whose transactions seem to follow a timing pattern
who: (i) makes an exchange request out of a Fund within
two weeks of earlier exchange request out of the Fund;
(ii) makes more than two exchanges out of a Fund per
calendar quarters; or (iii) exchanges Shares equal in
value to at least $5 million, or more than 1% of a Fund's
net assets. Accounts under common ownership or control
including accounts administered so as to redeem to
purchase shares based upon certain predetermined market
indicators will be aggregated for purposes of the
exchange limits.
In addition, the Funds reserve the right to refuse the
purchase and/or exchange requests by any Timing Account,
person, or group if, in the Advisor's judgment a Fund
would be unable to invest effectively in accordance with
its investment objectives and policies or would otherwise
potentially be adversely affected. A shareholder's
exchange into a Fund may be restricted or refused if the
Fund receives or anticipates simultaneous orders
affecting significant portions of the Fund's assets, in
particular, a pattern of exchanges that coincides with a
market timing strategy may be disruptive to the Fund and
therefore may be refused.
The Advisor and the Distributor reserve the right to
refuse any order for the purchase of shares.
Selling Investor Shares ________________________________________________________
How To Sell Your You may sell (redeem) your
Shares shares on any
Business Day by contacting your
intermediary directly. If your
request is for more than
$5,000, or if you are
requesting that the proceeds
from your redemption be sent to
an address or an account that
is different from what we have
on our records, then we may
require a written redemption
request with a signature
guarantee from an eligible
guarantor (a notarized signature is not sufficient).
You will receive the current Business Day's
NAV if we receive your redemption request in good order
before NAV is calculated for the Non-Money Market Funds
and by 1:00 p.m., Eastern time for the Money Market
Funds. Your intermediary may have earlier cut-off times
for redemption requests. Please contact your intermediary
for more information about redemption requests.
Redemption requests for the Money Market Funds
submitted to the Transfer Agent before 5:00 p.m., Eastern
time, by accounts for which ABN AMRO North America, Inc.
or certain of its affiliates act in a fiduciary, agency,
investment advisory or custodian capacity, will become
effective at the net asset value determined as of
5:00 p.m., Eastern time that same Business Day.
Receiving Your Normally, we will send your redemption proceeds within
Money seven Business Days after we
receive your request. Your proceeds can be mailed to you
or mailed or wired to your bank account. To request a
wire transfer, please contact your intermediary. You will
be charged a $10.00 fee by the Fund for each wire
transfer. If you recently purchased
56
<PAGE>
.
your shares by check or through an AIP, then your proceeds
may not be available until your check has cleared (which
may take up to 15 days).
We intend to pay your redemption proceeds in cash.
However, under unusual conditions that make the payment of
cash unwise (and for the protection of the remaining
shareholders of the Fund), we may pay all or part of your
redemption proceeds in portfolio securities that have a
market value equal to the redemption price. Although it is
highly unlikely that your shares would ever actually be
redeemed in kind, if it did happen, you would probably
have to pay brokerage costs to sell the securities
distributed to you, as well as taxes on any gain from the
sale.
Systematic
Withdrawal Plan Under the Systematic Withdrawal Plan ("SWP"), you may
arrange monthly, quarterly,
semi-annual, or annual automatic withdrawals of $50 or
more from any Fund. The proceeds can be mailed to you or
wired to your bank account. You may use the SWP if you
automatically reinvest your dividends (see Dividends and
Distributions below) and your account has a current value
of $5,000 or more. You should contact your intermediary to
find out if a SWP is available to you and for further
information about the SWP. To change or cancel your SWP,
please contact your intermediary.
Involuntary If your account balance drops below $2,000 (the required
Redemptions minimum initial purchase
amount) due to redemptions, including redemptions through
the SWP, you may be required to redeem your remaining
shares. You will always be given at least 60 days' written
notice to give you time to add to your account and avoid
involuntary redemption.
More Information About Share Transactions _____________________________________
How To Change the If you own shares that are registered in your
Registration of intermediary's name, and you want to
Your Shares transfer the registration to another intermediary or want
the shares registered in your name, then you should
contact your intermediary for instructions to make this
change.
Checkwriting You may elect the Money Market Funds' checkwriting
Service For Money services which allow you to write
Market Fund checks in amounts of $100 or more. You may not, however,
Investors use a check to close your account. You may not write
checks against Investor Shares of the Money Market Funds
in your account which you purchased within the last 15
days, except for shares you purchased by wire (which are
immediately available). Please contact your intermediary
to find out if checkwriting services are available to you
and for more information about checkwriting services.
Telephone Telephone transactions are extremely convenient, but not
Transactions without risk. To try to keep
your telephone transactions as safe, secure, and risk-free
as possible, we have developed certain safeguards and
procedures for determining the identity of callers and
authenticity of instructions. We will not be responsible
for any loss, liability, cost, or expense for following
telephone or wire instructions we reasonably believe to be
genuine. If your intermediary chooses to make telephone
transactions, you and your intermediary will generally
bear the risk of any loss. Your intermediary may not close
your account by telephone.
57
<PAGE>
.......................
Distributions
The Funds dis-
tribute income
dividends and
capital gains.
Income dividends
represent the
earnings from a
Fund's invest-
ments; capital
gains occur when
a Fund sells a
portfolio secu-
rity for more
than the original
purchase price.
.......................
.
Dividends and Distributions ____________________________________________________
The Funds distribute their net investment income as
follows:
Declared and distributed monthly
.Stock Funds
Balanced Fund
Bond Funds
.International Funds
Declared and distributed at
least annually
.Money Market Funds
Declared daily and distributed
monthly
The Funds distribute capital
gains if any, at least annually.
If you own Fund shares on a
Fund's record date, you will be
entitled to receive the
distribution. If a Fund does not
have income or capital gains
available to distribute, as
determined under tax laws, you
will not receive a distribution.
You will receive dividends
and distributions in the form of
additional shares unless you
have elected to receive payment in cash. To elect cash
payment, you must notify us in writing prior to the date of
distribution. Your election will become effective for
dividends paid after we receive your written notice. To
cancel your election, simply send us written notice.
.......................
Taxes
Distributions you
receive from a Fund
may be taxable
whether or not you
reinvest them.
.......................
Tax Information _______________________________________________________________
The following is a summary of some important tax issues
that affect the Funds and their shareholders. The summary
is based on current tax laws, which may be changed by
legislative, judicial or administrative action. We have
not tried to present a detailed explanation of the tax
treatment of the Funds or their shareholders. More
information about taxes is in our Statement of Additional
Information. We urge you to consult your tax advisor
regarding specific questions about federal, state and
local income taxes.
Tax Status of
Distributions Each Fund will distribute
substantially all of its income
and capital gains, if any. The
dividends and distributions you
receive may be subject to
federal, state and local
taxation, depending on your tax
situation. You may be taxed on
each sale of Fund shares.
The Tax-Exempt Fixed
Income and Tax-Exempt Money
Market Funds intend to
distribute federally tax-
exempt income. This income
may be subject to state and
local taxes. Each Fund,
however, may invest a
portion of its assets in
securities that generate
taxable income for federal
or state income taxes. Any
capital gains distributed
by these Funds may be
taxable.
More information about taxes
is in the Statement of Additional
Information.
58
<PAGE>
..................
Investment
Advisor
The Funds' Advi-
sor manages
investment activ-
ities and is re-
sponsible for the
performance
of the Funds. The
Advisor conducts
research, exe-
cutes Fund strat-
egies based on an
assessment of
economic and mar-
ket conditions,
and determines
which portfolio
securities to
buy, hold or
sell.
.......................
.
................................................................................
................................................................................
InvestmentAdvisor ________________________________________________________
The Advisor makes investment
decisions for the assets of the
Funds and continuously reviews,
supervises, and administers each
Fund's investment program. The
Trustees of the Funds supervise
the Advisor and establish
policies that the Advisor must
follow in its day-to-day
management activities.
ABN AMRO Asset Management
(USA) Inc. (the Advisor), 208
South LaSalle Street Chicago, IL
60604, was organized in March
1991 under the
laws of the State of Delaware.
The Advisor
manages assets for individuals,
corporations,
unions, governments, insurance
companies, and
charitable organizations. As of December 31, 1998, the
Advisor managed approximately $7.4 billion in assets.
For the fiscal year ended December 31, 1998, the Funds
paid the following advisory fees: .80% for the Value Fund,
.80% for the Growth Fund, .80% for the Small Cap Growth
Fund, 1.00% for the International Equity Fund, 1.00% for
the Asian Tigers Fund, 1.00% for the Latin America Equity
Fund, .70% for the Real Estate Fund, .70% for the Balanced
Fund, .50% for the Fixed Income Fund, .50% for the
Intermediate Government Fixed Income Fund, .50% for the
Tax-Exempt Fixed Income Fund, .80% for the International
Fixed Income Fund, .20% for the Treasury Money Market
Fund, .20% for the Government Money Market Fund, .20% for
the Money Market Fund and .20% for the Tax-Exempt Money
Market Fund.
As of December 31, 1998, the TransEurope and Limited
Volatility Fixed Income Funds had not yet commenced
operations. The Advisor is entitled to receive .80% from
the Small Cap Value Fund, which, as of December 31, 1998,
had not been in operation for a full fiscal year.
The Advisor may use its affiliates as brokers for the
Funds' portfolio transactions. The affiliates may receive
compensation from the Funds for their brokerage services.
The Advisor is an indirect, wholly-owned subsidiary of
ABN AMRO Bank, N.V. The Advisor may, from time to time and
at its own expense, provide promotional incentives, in the
form of cash or other compensation, to certain financial
institutions whose representatives have sold or are
expected to sell significant amounts of the Funds' shares.
Some of these financial institutions may be affiliated
with the Advisor.
Jac A. Cerney, C.F.A., Senior Vice President of the
Advisor, has served as portfolio manager for the Value
Fund and the equity portion of the Balanced Fund since
their inception. Mr. Cerney has been associated with the
Advisor and its predecessor since April, 1990 as a
portfolio manager. Prior to joining the Advisor's
predecessor firm in 1990, Mr. Cerney was the equity
portfolio manager for Commonwealth Edison's internally
managed pension fund. Mr. Cerney earned a B.A. in
Chemistry from Oberlin College, an M.S. in Chemistry from
the University of Chicago and an M.B.A. in Finance from
the University of Chicago. He is a member of the
Investment Analysts Society of Chicago.
59
<PAGE>
.
A. Keith Dibble, C.F.A., Senior Vice President of the
Advisor, has served as portfolio manager for the Growth
Fund since its inception. Mr. Dibble has been associated
with the Advisor and its predecessor since 1987 as a
portfolio manager. Mr. Dibble received two B.S. degrees
in Engineering from Washington State University and an
M.B.A. in Finance from Northwestern University. Mr.
Dibble is a member of the Institute of Chartered
Financial Analysts, a past president of the Milwaukee
Investment Analysts Society and a member of various other
professional organizations.
Nancy Holland, C.P.A., Senior Vice President of the
Advisor, has served as portfolio manager of the Real
Estate Fund since its inception. Ms. Holland has been
associated with the Advisor and its predecessor since
January, 1997 as a portfolio manager. Prior to joining
the Advisor, Ms. Holland 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 CenterMark Properties from
November, 1988 to January, 1995. Ms. Holland graduated
from Saint Louis University with a B.S. in Accounting.
Mary E. Ras, Vice President of the Advisor, has served
as co-manager of the Small Cap Growth Fund since
September, 1998. She is responsible for equity research
and equity trading. Ms. Ras has been associated with the
Advisor and its predecessor since 1983 as a tax shelter
analyst. Prior to joining the Asset Management Group, Ms.
Ras worked in debt finance and tax-advantaged
investments. Ms. Ras holds an M.B.A. degree from the
University of Chicago and a B.S. degree from Northeastern
Illinois University.
Kenneth A. Tyszko, C.F.A, C.P.A, Vice President of the
Advisor, has served as co-manager of the Small Cap Growth
Fund since September, 1998. Mr. Tyszko has been
associated with the Advisor or its affiliates since 1996
as an investment manager. Previously, he managed a $250
million portfolio of publicly traded small and mid-size
capitalization growth stocks for Sears Investment
Management Co., which he joined in 1984. Mr. Tyszko
earned his B.S. in Accounting from the University of
Illinois. Mr. Tyszko is a member of the Illinois CPA
Society, the Investment Analysts Society of Chicago, and
the Association for Investment Management and Research.
Kurt S. Moeller, Vice President of the Advisor, has
served as co-manager of the Small Cap Value Fund since
March 1, 1999. Mr. Moeller began his investment career in
1995 as a research assistant for the Indiana University
Foundation. Mr. Moeller was a fundamental equity analyst
at Grantham, Mayo, Van Otterloo & Co., LLC, a Boston
money management firm, from 1996 through 1998. Mr.
Moeller earned a B.A. in Economics and History from Rice
University in 1991 and an M.B.A. in Finance from Indiana
University in 1996.
Edwin M. Bruere, C.F.A., Senior Vice President of the
Advisor has served as lead portfolio manager of the Small
Cap Value Fund since June 30, 1998. Mr. Bruere has been
associated with the Advisor and its predecessors since
1988. He was involved initially with client services and
then later as a member of a portfolio management
committee and as a portfolio manager. Previously, Mr.
Bruere spent two years as Managing Director of an
investment management firm. Before this, he spent six
years at Continental Bank (Bank of America) as a Senior
Director. He spent 1995 and 1996 in London working in the
Merchant Bank on securities origination and distribution.
Mr. Bruere graduated from Iowa State University with a
B.S. in business and received his M.B.A. from Indiana
University. He is a member of the Association for
Investment
60
<PAGE>
.
Management and Research and the Investment Analysts
Society of Chicago. He is a Director of the Indiana
University Reese Foundation.
Richard Butler, Senior Vice President of the Advisor
has served as co-manager of the Growth Fund since June
1998. Mr. Butler is also responsible for equity research.
Mr. Butler joined the Advisor's predecessor firm in 1983
as a trader and then a portfolio manager, and is the
Advisor's senior equity trader. Mr. Butler graduated from
Williams College with a B.A. in International Relations
and received his M.B.A. from the University of Chicago.
Mark W. Karstrom, Senior Vice President of the Advisor,
has served as portfolio manager for the Limited Volatility
Fixed Income Fund since September, 1996 and served as
portfolio manager for the Intermediate Government Fixed
Income Fund from September, 1996 to January, 1999. Mr.
Karstrom joined the Advisor in August, 1996 as a portfolio
manager. He served as Vice President, Portfolio Manager
with Norwest Investment Management and Trust and a
predecessor firm from May, 1985 to July, 1996 where he
managed portfolios comprised of government, corporate, and
mortgage-backed securities. My. Karstrom received his B.A.
in Economics from the University of Denver.
Gregory D. Boal, C.F.A., Senior Vice President of the
Advisor, has served as portfolio manager of the fixed
income portion of the Balanced Fund from April, 1997 to
January, 1999 and as portfolio manager of the Fixed Income
Fund from June, 1998 to January, 1999. Mr. Boal joined the
Advisor in March, 1997 as a portfolio manager. He served
as Manager, Fixed Income Division of First Citizens Bank
Capital Management, a division of First Citizens Bank,
Raleigh, N.C. from November, 1989 to March, 1997. Prior to
that, Mr. Boal was the senior investment officer at
Wyoming National Bank and Trust in Casper, Wyoming. Mr.
Boal graduated from the University of Wyoming in 1981 with
a Bachelor of Science degree in Broadcasting. He received
a Master of Science degree in Finance from the same
institution in 1985. Mr. Boal is a member of the
Association of Investment Management and Research and the
Investment Analyst Society of Chicago.
Todd J. Youngberg, C.F.A., Senior Vice President of the
Advisor, has served as portfolio manager of the Balanced
Fund since November, 1998, and as portfolio manager of the
Fixed Income Fund from November 1998 to January 1999. Mr.
Youngberg joined the Advisor in November, 1998 as a
portfolio manager. Prior to joining the Advisor, Mr.
Youngberg served as Vice President and portfolio manager
for Amerus Life Holdings Inc. in Des Moines Iowa from 1992
to November, 1998. He was responsible for managing high
yield portfolios. Prior to joining Amerus Life, Mr.
Youngberg worked as a securities analyst for Central Life
Assurance/American Mutual Life Insurance Company. Mr.
Youngberg received a B.A. in economics from Central
College in Pella, Iowa and his M.B.A. in Finance from
Drake University. He is a member of the Association of
Investment Management and Research.
Messrs. Karstrom, Boal and Youngberg, members of the
Fixed Income Portfolio Management Team, have been jointly
and primarily responsible for the day-to-day management of
the Fixed Income Fund and the fixed income portion of the
Balanced Fund since January, 1999.
Phillip P. Mierzwa, Vice President of the Advisor, has
served as portfolio manager of the Tax-Exempt Fixed Income
Fund and Tax-Exempt Money Market Fund since April, 1997.
He has been associated with the Advisor or its affiliates
since
61
<PAGE>
.
February, 1990 as a portfolio manager and a trader. Mr.
Mierzwa has a B.A. and M.B.A. degree in Finance from
Governors State University.
Karen Van Cleave, Senior Vice President of the
Advisor, has served as portfolio manager of the Money
Market Fund, Treasury Money Market Fund and Government
Money Market Fund since January, 1994. Ms. Van Cleave
joined the Advisor in January, 1994 as a portfolio
manager. Prior to 1994, Ms. Van Cleave was a Vice
President/Portfolio Manager at Chemical Investment Group,
Ltd. for three years. Prior to that, she worked at
Shearson Lehman Hutton (and its predecessors) for seven
years in their money market fund complex. Ms. Van Cleave
earned her B.S. in Business Administration from Boston
University.
Messrs. Postma, Ploeger, Bettink, Leo, Maas,
Moolenburgh and Neihoff and, Mrs. Pals-de-Groot, members
of the International Equity team, have been jointly and
primarily responsible for the day-to-day management of
the International Equity Fund since April, 1999.
Wiepke Postma served as portfolio manager for the
International Equity Fund from March, 1997 to April,
1999. Mr. Postma started his banking career as an analyst
at former ABN AMRO Bank's Investment Research Department.
Later, he became a strategist. From 1976 to 1984, he
worked in the Equity and Loan Department of a leading
Dutch insurance company, where he was appointed head of
the department in 1982. In 1984, he joined former ABN
AMRO Bank's Asset Management Department and was appointed
Vice President in the same year. In 1993, he became Head
of the Global Equity Group being responsible for the
Global Equity, European Equity, Dutch Equity and Business
research. Mr. Postma holds a Master's degree in
Economics.
Willem Ploeger has been associated with the Advisor
and/or its affiliates since 1980. Initially, he served in
the Investment Research Department and later in the Asset
Management Department as senior account manager. Mr.
Ploeger holds a Master's degree in Business
Administration of the University of Rotterdam.
Jaap Bettink has been associated with the Advisor
and/or its affiliates since 1978. From 1978 to 1985, he
was a credit manager at a local branch of ABN AMRO Bank.
He has been managing institutional portfolios since 1985,
and has been a portfolio manager since 1994. Mr. Bettink
started his career as a portfolio manager of private
accounts in 1972. He holds a degree in Economics.
Loes Pals-de Groot has been associated with the
Advisor and/or its affiliates since 1971 in various
investment management positions. Mrs. Pals-de Groot holds
a degree in Business Economics from the Instituut voor
Sociale Wetenschappen.
Luigi Leo has been associated with the Advisor and/or
its affiliates since 1991 as a portfolio manager. Mr. Leo
holds a Master's degree in Business Administration from
the Instituto de Estudios Superiores de la Empresa (IESE)
in Barcelona, Spain.
Theo Maas has been associated with the Advisor and/or
its affiliates since 1994 as a portfolio manager.
Previously, Mr. Maas worked with a financial consultant,
specializing in treasury management and research
management consultancy. He holds a Master's degree in
Financial Economics from the University of Groningen.
Edward Moolenburgh has been associated with the
Advisor and/or its affiliates since 1993. Initially, he
served as Secretary to the Advisor's Regional Investment
Committee North America and Far East, and later as a
portfolio manager. Mr. Moolenburgh holds a Master's
degree from the Economics Faculty of the Erasmus
62
<PAGE>
.
University in Rotterdam and is a Register Beleggings
Analyst, which is comparable to a Certified European
Financial Analyst.
Edward Neihoff has been associated with the Advisor
and/or its affiliates since 1993, initially as an
investment analyst. After three years, Mr. Neihoff assumed
the responsibility for implementing a new asset management
system and then, during 1998, returned to the position of
portfolio manager. He holds a Master's degree in Technical
Management Studies and is a Certified European Financial
Analyst.
Alex Ng has served as portfolio manager for the Asian
Tigers Fund since July, 1995. Mr. Ng has been associated
with the Advisor and/or its affiliates since 1988 as a
portfolio manager. Mr. Ng also serves as the Far East
Director of Asset Management for a Hong Kong-based
affiliate of the Advisor. Mr. Ng joined ABN AMRO's
Investment Banking Representative Office in Singapore in
January 1988 before being transferred to the Securities
subsidiary in Hong Kong. Previously, Mr. Ng worked as a
financial analyst in Malaysia. Mr. Ng holds a degree in
Economics from the University of California in Los
Angeles.
Felix Lanters, portfolio manager for the TransEurope
Fund, has been associated with the Advisor and/or its
affiliates since 1987 as a portfolio manager.
Wouter Weijand has served as portfolio manager of the
International Fixed Income Fund since September, 1997. Mr.
Weijand has worked as a portfolio manager with the Advisor
and/or its affiliates since 1984.
Luiz M. Ribeiro, Jr., C.F.A., served as the portfolio
manager of the Latin America Equity Fund from November,
1997 to April, 1999. Currently, he serves as co-manager of
the Fund. Mr. Ribeiro has worked as an investment analyst
with the Advisor and/or its affiliates since 1994. From
March, 1990 to June, 1993, he served with the trading desk
of Dibran DTVM Ltd. Mr. Ribeiro obtained a Business Degree
at the University of Sao Paulo in 1990. In 1993, he
concluded an M.B.A. offered by IBMEC (Brazilian Institute
of Capital Markets) in Sao Paulo.
Roberto Lampl has served as co-manager of the Latin
American Equity Fund since April, 1999. Mr. Lampl has been
associated with the Advisor and/or its affiliates since
1993 as corporate finance advisor (Latin America) in the
Investment Banking Division. He obtained a Bachelor's
degree in Economics from Boston University in 1990. In
1993, he completed an M.B.A. at Boston Graduate School of
Business in Wellesley, Massachusetts.
Distribution Plan _________________________________________________________
Each Fund has adopted a distribution plan under Rule 12b-1
of the Investment Company Act of 1940 that allows the Fund
to pay distribution and service fees for the sale and
distribution of its shares, and for services provided to
shareholders. Because these fees are paid out of a Fund's
assets continuously, over time, these fees will increase
the cost of your investment and may cost you more than
paying other types of sales charges. The maximum
distribution fee is .25% of the average daily net assets
of each Fund. Affiliates of the Advisor may receive
distribution fees.
63
<PAGE>
.
Financial Highlights ______________________________________________________
The tables that follow present performance information
about Investor Shares of each
Fund. This information is intended to help you understand
each Fund's financial performance for the past five
years, or, if shorter, the period of the Fund's
operations. Some of this information reflects financial
information for a single Fund share. The total returns in
the tables represent the rate that you would have earned
(or lost) on an investment in a Fund, assuming you
reinvested all of your dividends and distributions. As of
December 31, 1998, the Investor Shares of the
TransEurope, Latin America Equity and Limited Volatility
Fixed Income Funds had not commenced operations.
This information has been audited by Ernst & Young
LLP, the Funds' independent auditors. Their report, along
with each Fund's financial statements and related notes,
appears in the annual report that accompanies the
Statement of Additional Information. You can obtain the
Funds' annual report, which contains more performance
information, at no charge by calling 1-800-443-4725.
For a Share Outstanding for the Years Ended December 31,
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Net Investment
Net Ratio of Investment Ratio of Income
Net Realized Distri- Asset Net Expenses Income Expenses to
Asset Net and Dividends butions Value Assets to to to Average Average
Value Invest- Unrealized from Net from End End of Average Average Net Assets Net Assets
Beginning ment Gains on Investment Capital of Total Period Net Net (Excluding (Excluding
of Period Income Securities Income Gains Period Return (000) Assets Assets Waivers) Waivers)
- ----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------
Treasury Money Market Fund
- -----------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investor Share Class
1998 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 4.64% $ 17,625 0.62% 4.54% 1.09% 4.08%
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 4.70 6,722 0.58 4.60 0.88 4.30
1996 1.00 0.04 0.00 (0.04) 0.00 1.00 4.54 10,910 0.69 4.45 0.84 4.30
1995 1.00 0.05 0.00 (0.05) 0.00 1.00 5.02 7,931 0.69 4.89 0.84 4.74
1994 1.00 0.03 0.00 (0.03) 0.00 1.00 3.32 3,231 0.70 3.52 0.86 3.36
- ----------------------------------------------------
Government Money Market Fund
- ----------------------------------------------------
Investor Share Class
1998 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 4.91% $ 89,497 0.67% 4.80% 0.92% 4.54%
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 5.05 8,932 0.59 4.95 0.72 4.82
1996 1.00 0.05 0.00 (0.05) 0.00 1.00 4.82 5,093 0.69 4.71 0.69 4.71
1995 1.00 0.05 0.00 (0.05) 0.00 1.00 5.33 3,002 0.67 5.18 0.67 5.18
1994 1.00 0.04 0.00 (0.04) 0.00 1.00 3.63 2,739 0.67 3.62 0.67 3.62
- --------------------------------
Money Market Fund
- --------------------------------
Investor Share Class
1998 $1.00 $0.05 $0.00 $(0.05) $0.00 $1.00 4.97% $219,576 0.69% 4.85% 1.06% 4.48%
1997 1.00 0.05 0.00 (0.05) 0.00 1.00 5.12 1,282 0.59 5.00 0.85 4.74
1996 1.00 0.05 0.00 (0.05) 0.00 1.00 4.87 1,466 0.68 4.77 0.83 4.62
1995 1.00 0.05 0.00 (0.05) 0.00 1.00 5.38 1,358 0.66 5.22 0.81 5.07
1994 1.00 0.04 0.00 (0.04) 0.00 1.00 3.71 605 0.66 4.13 0.81 3.98
- ----------------------------------------------------
Tax-Exempt Money Market Fund
- ----------------------------------------------------
Investor Share Class
1998 $1.00 $0.03 $0.00 $(0.03) $0.00 $1.00 2.96% $ 67,480 0.60% 2.92% 1.06% 2.45%
1997 1.00 0.03 0.00 (0.03) 0.00 1.00 3.10 2,978 0.58 3.07 0.89 2.76
1996 1.00 0.03 0.00 (0.03) 0.00 1.00 2.88 2,807 0.65 2.85 0.81 2.69
1995 1.00 0.03 0.00 (0.03) 0.00 1.00 3.24 3,244 0.66 3.19 0.81 3.04
1994 1.00 0.02 0.00 (0.02) 0.00 1.00 2.24 4,204 0.68 2.31 0.84 2.15
</TABLE>
64
<PAGE>
.
Financial Highlights
For a Share Outstanding for the Years Ended December 31,
<TABLE>
<CAPTION>
Ratio of
Ratio of Net
Net Investment
Net Ratio of Investment Ratio of Income
Net Distri- Asset Net Expenses Income Expenses to
Asset Net Realized and Dividends butions Value Assets to to to Average Average
Value Invest- Unrealized from Net from End End of Average Average Net Assets Net Assets
Beginning ment Gains (Losses) Investment Capital of Total Period Net Net (Excluding (Excluding
of Period Income on Securities Income Gains Period Return (000) Assets Assets Waivers) Waivers)
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Portfolio
Turnover
Rate
- --------------------------------------------------------------------------------------------------------------------------
- -----------------------------
- -----------------------------
Fixed Income Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investor Share Class
1998 $10.38 $0.53 $ 0.17 $(0.54) $(0.13) $10.41 6.81% $ 436 1.18% 4.97% 1.32% 4.82%
1997 10.09 0.59 0.29 (0.58) (0.01) 10.38 8.92 428 0.96 5.71 1.12 5.55
1996 10.35 0.57 (0.26) (0.57) 0.00 10.09 3.24 459 0.98 5.65 1.08 5.55
1995 9.32 0.55 1.04 (0.56) 0.00 10.35 17.40 646 0.99 5.72 1.09 5.62
1994 10.24 0.50 (0.90) (0.52) 0.00 9.32 (3.97) 442 0.98 5.38 1.08 5.28
<S> <C>
Investor Share Class
1998 157%
1997 233
1996 194
1995 59
1994 126
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
Intermediate Government Fixed Income Fund
Investor Share Class
1998 $10.04 $0.47 $ 0.27 $(0.47) $ 0.00 $10.31 7.56% $ 63 1.26% 4.59% 1.40% 4.45%
1997 9.85 0.57 0.16 (0.54) 0.00 10.04 7.66 104 0.96 5.44 1.10 5.30
1996 10.05 0.49 (0.18) (0.51) 0.00 9.85 3.30 251 0.99 4.87 1.09 4.77
1995 9.32 0.49 0.76 (0.52) 0.00 10.05 13.59 2,946 0.98 5.18 1.08 5.08
1994 10.07 0.43 (0.73) (0.45) 0.00 9.32 (3.03) 1,133 1.02 5.05 1.12 4.95
Investor Share Class
1998 106%
1997 283
1996 179
1995 115
1994 124
- -------------------------------------------------
- -------------------------------------------------
- --------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund
Investor Share Class
1998 $10.39 $0.42 $ 0.12 $(0.42) $ 0.00 $10.51 5.31% $ 562 1.29% 3.98% 1.43% 3.84%
1997 9.97 0.47 0.41 (0.46) 0.00 10.39 9.11 537 0.98 4.59 1.14 4.43
1996 10.18 0.43 (0.17) (0.47) 0.00 9.97 2.70 680 0.98 4.70 1.10 4.58
1995 9.24 0.43 0.97 (0.46) 0.00 10.18 15.43 1,131 1.00 4.59 1.12 4.47
1994 10.22 0.40 (0.93) (0.42) (0.03) 9.24 (5.27) 1,059 0.97 4.35 1.10 4.22
Investor Share Class
1998 41%
1997 54
1996 98
1995 129
1994 146
- --------------------------------------------------
- --------------------------------------------------
- ----------------------------------------------------------------------------------------------------
International Fixed Income Fund
Investor Share Class
1998 $ 9.60 $0.38 $ 1.05 $(0.13) $(0.10) $10.80 14.84% $ 53 1.83% 3.17% 1.87% 3.12%
1997 10.23 0.49 (1.12) 0.00 0.00 9.60 (6.16) 68 1.47 3.83 1.51 3.78
1996 10.56 0.54 (0.27) (0.60) 0.00 10.23 2.62 112 1.36 4.43 1.36 4.43
1995 9.53 0.52 1.45 (0.94) 0.00 10.56 20.68 125 1.35 5.57 1.41 5.51
1994 10.42 0.46 (0.64) (0.53) (0.18) 9.53 (1.71) 87 1.41 5.03 7.54 (1.10)
Investor Share Class
1998 79%
1997 52
1996 85
1995 105
1994 138
- ----------------------
- ----------------------
- --------------------------------------------
Balanced Fund
Investor Share Class
1998 $12.73 $0.21 $ 0.85 $(0.21) $(1.72) $11.86 9.72% $3,657 1.49% 1.60% 1.49% 1.60%
1997 10.98 0.30 2.06 (0.30) (0.31) 12.73 21.80 4,157 1.18 2.43 1.24 2.37
1996 10.75 0.30 1.04 (0.32) (0.79) 10.98 12.86 3,710 1.19 2.89 1.19 2.89
1995 9.53 0.34 1.67 (0.36) (0.43) 10.75 21.52 3,949 1.22 3.36 1.22 3.36
1994 10.03 0.27 (0.49) (0.27) (0.01) 9.53 (2.29) 2,894 1.24 2.86 1.34 2.76
Investor Share Class
1998 84%
1997 111
1996 104
1995 85
1994 85
- -----------------
- -----------------
- ----------------------------------
Value Fund
Investor Share Class
1998 $16.54 $0.12 $ 0.82 $(0.12) $(5.04) $12.32 4.66% $1,624 1.50% 0.78% 1.50% 0.78%
1997 13.26 0.20 3.76 (0.20) (0.48) 16.54 30.20 1,965 1.26 1.32 1.32 1.26
1996 12.28 0.25 2.18 (0.25) (1.20) 13.26 20.09 1,672 1.28 1.94 1.28 1.94
1995 9.80 0.32 2.74 (0.32) (0.26) 12.28 31.72 1,497 1.33 2.79 1.33 2.79
1994 10.30 0.31 (0.33) (0.31) (0.17) 9.80 (0.21) 731 1.37 3.13 1.37 3.13
Investor Share Class
1998 55%
1997 79
1996 58
1995 37
1994 38
</TABLE>
65
<PAGE>
.
Financial Highlights
For a Share Outstanding for the Years Ended December 31,
<TABLE>
<CAPTION>
Ratio of
Net
Net Ratio of Investment Ratio of
Net Realized Distri- Asset Net Expenses Income Expenses
Asset Net and Dividends butions Value Assets to to to Average
Value Invest- Unrealized from Net from Contributions End End of Average Average Net Assets
Beginning ment Gains on Investment Capital (Return of of Total Period Net Net (Excluding
of Period Income Securities Income Gains Capital) Period Return (000) Assets Assets Waivers)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratio of
Net
Investment
Income
to
Average
Net Assets Portfolio
(Excluding Turnover
Waivers) Rate
- ----------------------------------------------------------------------------------------------------------------------------
- --------------------
- --------------------
- ----------------------------------------
Growth Fund
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Investor Share Class
1998 $14.60 $(0.07) $ 4.18 $ 0.00 $(1.65) $0.00 $17.06 29.52% $3,533 1.52% (0.45)% 1.52%
1997 13.09 0.08 2.97 (0.08) (1.46) 0.00 14.60 23.65 3,485 1.27 0.54 1.33
1996 11.62 0.14 2.33 (0.14) (0.86) 0.00 13.09 21.41 3,031 1.27 1.11 1.27
1995 9.74 0.12 2.89 (0.13) (1.00) 0.00 11.62 31.29 2,681 1.31 1.10 1.31
1994 10.23 0.13 (0.37) (0.13) (0.12) 0.00 9.74 (2.42) 1,530 1.33 1.30 1.33
- -----------------------------------------
<S> <C> <C>
Investor Share Class
1998 (0.45)% 65%
1997 0.48 62
1996 1.11 58
1995 1.10 71
1994 1.30 68
- -----------------------------------------
International Equity Fund
- -----------------------------------------
- -----------------------------------------
Investor Share Class
1998 $15.34 $(0.08) $ 3.86 $(0.03) $(0.18) $0.00 $18.91 24.87% $1,015 1.83% (0.43)% 1.83%
1997 15.79 0.01 0.66 (0.03) (1.09) 0.00 15.34 4.28 1,245 1.60 (0.05) 1.65
1996 14.52 0.04 1.35 0.00 (0.15) 0.03 15.79 9.85(A) 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
Investor Share Class
1998 (0.43)% 31%
1997 (0.10) 17
1996 0.20 9
1995 0.42 11
1994 (0.46) 6
- --------------------------------------
- --------------------------------------
- ----------------------------------------------------------------------------
Small Cap Growth Fund
Investor Share Class
1998 $13.29 $(0.10) $(0.92) $ 0.00 $(0.23) $0.00* $12.04 (7.25)% $ 874 1.63% (1.30)% 1.63%
1997 13.00 (0.13) 2.05 0.00 (1.63) 0.00 13.29 15.45 552 1.29 (0.97) 1.35
1996 12.46 (0.07) 2.39 0.00 (1.78) 0.00 13.00 19.18 579 1.30 (0.52) 1.30
1995 9.58 (0.01) 3.05 0.00 (0.16) 0.00 12.46 31.73 553 1.39 (0.08) 1.39
1994 10.25 0.00 (0.67) 0.00 0.00 0.00 9.58 (6.54) 294 1.38 0.02 1.38
Investor Share Class
1998 (1.30)% 151%
1997 (1.03) 170
1996 (0.52) 158
1995 (0.08) 142
1994 0.02 43
</TABLE>
*Per share was less than $0.005.
(A) 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 Class would
have been 9.64%.
66
<PAGE>
.
Financial Highlights
For a Share Outstanding for the Years Ended December 31,
<TABLE>
<CAPTION>
Ratio of
Net
Net Ratio of Investment Ratio of
Net Net Realized Distri- Asset Net Expenses Income Expenses
Asset Invest- and Dividends butions Value Assets to (Loss) to to Average
Value ment Unrealized from Net from Contribution End End of Average Average Net Assets
Beginning Income Gains on Investment Capital (Return) 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>
Real Estate Fund
Investor Share Class
1998(1) $10.00 $ 0.08 $ 0.66 $(0.11) $ 0.00 $0.00+ $10.63 7.35% $ 21 1.91% 4.18% 2.28%
<CAPTION>
Ratio of
Net
Investment
Income
to
Average
Net Assets Portfolio
(Excluding Turnover
Waivers) Rate
<S> <C> <C>
Investor Share Class
1998(1) 3.81% 13%*
- -----------------------------
- -----------------------------
- ----------------------------------------------------------
Asian Tigers Fund
Investor Share Class
1998 $ 7.57 $ 0.04 $(0.94) $ 0.00 $ 0.00 $0.00 $ 6.67 (11.89)% $178 2.11% 0.47% 2.11%
1997 11.89 0.05 (4.36) 0.00 (0.01) 0.00 7.57 (36.25) 334 1.85 0.30 1.89
1996 10.44 (0.02) 1.48 (0.01) (0.02) 0.02 11.89 14.21(B) 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**
Investor Share Class
1998 0.47% 57%
1997 0.26 42
1996 (0.15) 24
1995 0.98 28
1994(2) (0.70)** 13*
- -----------------------------------
- -----------------------------------
- ----------------------------------------------------------------------
Small Cap Value Fund
Investor Share Class
1998(3) $10.00 $(0.01) $(1.44) $(0.01) $ 0.00 $0.00+ $ 8.54 (14.53)% $324 2.03% (0.30)% 2.11%
Investor Share Class
1998(3) (0.38)% 54%*
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
+Per share was less than $0.005.
1. Commenced operations on October 8, 1998. All ratios except the total return
for the period have been annualized.
2. Commenced operations on January 12, 1994. All ratios and the total return
for the period have been annualized.
3. Commenced operations on June 30, 1998. All ratios except the total return
for the period have been annualized.
*Not Annualized
**Ratios are high relative to subsequent years as a result of the low initial
asset levels during the Investor Share Class' initial year of operations.
(B)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 Class would have
been 14.02%.
67
<PAGE>
More Information about the Funds is available without charge through the
following:
Statement of More detailed information about the Funds is in the
Additional Statement of Additional Information. The Statement of
Information Additional Information has been filed with the SEC and is
incorporated by reference into this Prospectus. This
means that the Statement of Additional Information, for
legal purposes, is a part of this Prospectus.
Annual and These reports list the Funds' holdings and contain
Semi-Annual information from the Funds' portfolio managers about Fund
Reports strategies and recent market conditions and trends.
Call 1-800-443-4725
By Telephone:
By Mail: Write to the Funds c/o
ABN AMRO Funds
P.O. Box 60549
King of Prussia, PA 19406-0549
On the World Wide
Web: www.abnamrofunds-usa.com
From the SEC: You can also obtain the Statement of Additional
Information, annual and semi-annual reports and other
information about the Funds from the SEC's website
(http://www.sec.gov). You may review and copy documents
at the SEC Public Reference Room in Washington, D.C. (for
information, call 1-800-SEC-0330). You may request
documents by mail from the SEC, upon payment of a
duplicating fee by writing to: Securities and Exchange
Commission, Public Reference Room, Washington, D.C.
20549-6009. The ABN AMRO Fund's Investment Company Act
registration number is 811-07244.
Investment Advisor: Distributor: [/R]
ABN AMRO Asset Management (USA) Inc. First Data Distributors, Inc.
[/R]
4400 Computer Drive
208 South LaSalle Street Westborough, MA 01581 [/R]
4th Floor
Chicago, IL 60604-1003
No one has been authorized to give any information or to make any
representations not contained in the Prospectus or Statement of Additional
Information in connection with the offering of Fund shares. Do not rely on any
such information or representations as having been authorized by the Funds or
First Data Distributors, Inc. This Prospectus does not constitute an offering
by the Funds in any jurisdiction where such an offering is not lawful.
For more information, please call 1-800-443-4725.
<PAGE>
ABN AMRO Funds
(formerly, the "Rembrandt Funds")
Investment Advisor:
ABN AMRO Asset Management (USA) Inc.
This Statement of Additional Information ("SAI") is not a prospectus. It is
intended to provide additional information regarding the activities and
operations of ABN AMRO Funds (the "Trust") and should be read in conjunction
with the prospectuses dated May 3, 1999. The Trust has two prospectuses.
One prospectus relates to Common Shares of the funds and the other relates to
Investor Shares of the funds. Prospectuses may be obtained by writing to First
Data Distributors, Inc. (the "Distributor"), 4400 Computer Drive, Westborough,
Massachusetts 01581, or by calling 1-800-443-4725.
The Trust's most recent annual report is a separate document typically supplied
with the SAI and includes the Trust's audited financial statements, which are
incorporated by reference into this SAI. The annual and other shareholder
reports are available upon request and without charge. Please call 1-800-443-
4725 to obtain these reports.
TABLE OF CONTENTS
<TABLE>
<S> <C>
THE TRUST.................................................................... 3
DESCRIPTION OF PERMITTED INVESTMENTS......................................... 3
INVESTMENT LIMITATIONS.......................................................28
NON-FUNDAMENTAL POLICIES.....................................................30
MANAGEMENT OF THE FUND.......................................................31
TRUSTEES AND OFFICERS OF THE TRUST...........................................31
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES..........................34
INVESTMENT ADVISORY AND OTHER SERVICES.......................................38
THE ADVISOR..................................................................38
DISTRIBUTION AND SHAREHOLDER SERVICING.......................................40
THE ADMINISTRATOR AND SUB-ADMINISTRATOR......................................43
THE TRANSFER AGENT...........................................................44
THE CUSTODIAN................................................................45
COUNSEL AND AUDITORS.........................................................45
BROKERAGE ALLOCATION AND OTHER PRACTICES.....................................45
PORTFOLIO TRANSACTIONS.......................................................45
TRADING PRACTICES AND BROKERAGE..............................................45
DESCRIPTION OF THE TRUST.....................................................50
PURCHASE AND REDEMPTION OF SHARES............................................51
SHAREHOLDER LIABILITY........................................................53
DETERMINATION OF NET ASSET VALUE.............................................53
TAXATION.....................................................................54
GENERAL INFORMATION ABOUT FUND PERFORMANCE...................................59
COMPUTATION OF YIELD.........................................................60
CALCULATION OF TOTAL RETURN..................................................63
LIMITATION OF TRUSTEES' LIABILITY............................................66
</TABLE>
<PAGE>
<TABLE>
<S> <C>
FINANCIAL STATEMENTS.........................................................66
APPENDIX....................................................................A-1
</TABLE>
May 3, 1999
<PAGE>
THE TRUST
ABN AMRO Funds (prior to April 29, 1998, Rembrandt Funds) is an open-end
management investment company established as a Massachusetts business trust
pursuant to a Declaration of Trust dated September 17, 1992. The Declaration of
Trust permits the Trust to offer separate series ("funds") of units of
beneficial interest ("shares") and different classes of shares of each fund.
Generally, investors may purchase shares through two separate classes, Common
Shares and the Investor Shares, which provide for variations in distribution
costs and other expenses. Except for these differences between Common Shares and
Investor Shares, each share of each fund represents an equal proportionate
interest in that fund. See "Description of Shares." This SAI relates to the
following funds: Value Fund\(US)\, Growth Fund\(US)\, International Equity
Fund\(US)\, Small Cap Growth Fund\(US)\ (formerly, the Small Cap Fund), Small
Cap Value Fund\(US)\, Asian Tigers Fund\(US)\, TransEurope Fund\(US)\, Latin
America Equity Fund\(US)\, Real Estate Fund\(US)\ (collectively, the "Equity
Funds"), Balanced Fund\(US)\ (the "Balanced Fund"), Fixed Income Fund\(US)\,
Intermediate Government Fixed Income Fund\(US)\, Tax-Exempt Fixed Income
Fund\(US)\, International Fixed Income Fund\(US)\, Limited Volatility Fixed
Income Fund\(US)\ (collectively, the "Fixed Income Funds"), Money Market
Fund\(US)\, Government Money Market Fund\(US)\, Treasury Money Market Fund\(US)\
and Tax-Exempt Money Market Fund\(US)\ (collectively, the "Money Market Funds"
and together with the Equity, Balanced, and Fixed Income Funds, the "Funds"). As
of December 31, 1998, the Limited Volatility Fixed Income Fund and TransEurope
Fund had not commenced operations.
DESCRIPTION OF PERMITTED INVESTMENTS
ADRs, Continental Depositary Receipts ("CDRs"), European Depositary Receipts
("EDRs") and Global Depositary Receipts ("GDRs")
A Fund may invest in depositary receipts and other similar instruments, such as
ADRs, CDRs, EDRs & GDRs. ADRs are securities, typically issued by a U.S.
financial institution (a "depositary"), that evidence ownership interest in a
security or a pool of securities issued by a foreign issuer and deposited with
the depositary, EDRs, which are sometimes referred to as CDRs, are securities,
typically issued by a non-U.S. financial institution, that evidence ownership
interest in security or a pool of securities issued by either a U.S. or foreign
issuer. GDRs are issued globally and evidence a similar ownership arrangement.
Generally, ADRs are designed for trading in the U.S. securities market. EDRs are
designed for trading in European Securities Markets and GDRs are designed for
trading in non-U.S. securities markets. Generally, depositary receipts may be
available through "sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security underlying the receipt and
a depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the underlying security. Holders of
unsponsored depositary receipts generally bear all the costs of the unsponsored
facility. The depositary of an unsponsored facility frequently is under no
obligation to distribute shareholder communications received from the issuer of
the deposited security or to pass through, to the holders of the receipts,
voting rights with respect to the deposited securities.
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Asset-Backed Securities
Asset-backed securities consist of securities secured by company receivables,
truck and auto loans, leases and credit card receivables. Such securities are
generally issued as passthrough 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.
Asset-backed securities may be traded over-the-counter and typically have short
to intermediate maturities 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 letters of credit issued
by financial institutions (such as banks or insurance companies) 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.
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.
Bank Investment Contracts ("BICS")
BICs are contracts issued by U.S. banks and savings and loan 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 issuing bank or savings and loan institution. For this reason, BICs
are considered to be illiquid investments.
Borrowing
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Borrowing may exaggerate changes in the net asset value of a Fund's shares and
in the return on the Fund's portfolio. Although the principal of any borrowing
will be fixed, a Fund's assets may change in value during the time the borrowing
is outstanding. A Fund may be required to liquidate portfolio securities at a
time when it would be disadvantageous to do so in order to make payments with
respect to an outstanding borrowing resulting in additional transaction costs.
In addition, liquidating portfolio securities may generate capital gains, which
will be distributed to shareholders as taxable income or capital gains. The
Funds may be required to segregate liquid assets in an amount sufficient to meet
their obligations in connection with such borrowings.
Brady Bonds
Brady Bonds are a particular type of debt obligation created through the
exchange of existing commercial bank loans to foreign entities for new
obligations in connection with debt restructuring. Around 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, and 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). 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. U.S.
dollar-denominated collaterized bonds, which may be fixed par bonds or floating
rate discount bonds, are collaterized in full as to principal by U.S. Treasury
zero coupon bonds having the same maturity. At least one year of rolling
interest payments are collaterized by cash or other investments.
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
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and normally can be traded in the secondary market prior to maturity.
Certificates of deposit with penalties for early withdrawal are considered to be
illiquid.
Commercial Paper
Commercial paper is a term used to describe unsecured short-term promissory
notes issued by banks, municipalities, corporations and other entities.
Maturities on these issues vary from a few to 270 days.
Convertible Securities
Convertible securities are corporate securities that are 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.
Debt Securities -- Ratings
The quality standards of debt securities and other obligations as described for
the Funds must be satisfied at the time an investment is made. In the event
that an investment held by a Fund is assigned a lower rating or ceases to be
rated, the Advisor promptly reassesses whether such security presents suitable
credit risks and whether the Fund should continue to hold the security or
obligation in its portfolio. If a portfolio security or obligation no longer
presents suitable credit risks or is in default, the Fund disposes of the
security or obligation as soon as reasonably practicable unless the Trustees of
the Trust determine that to do so is not in the best interest of the Fund.
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.
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Equity Securities
Equity securities include common stocks, common stock equivalents, preferred
stocks, securities convertible into common stocks and securities having common
stock characteristics, such as rights and warrants to purchase common stocks,
sponsored and unsponsored depositary receipts (e.g., ADRs), REITs, and equity
securities of closed-end investment companies.
Euro-Denominated Securities
On January 1, 1999, the European Monetary Union (EMU) implemented a new currency
unit, the Euro. The countries that initially converted to the Euro include
Austria, Belgium, France, Germany, Luxembourg, the Netherlands, Ireland,
Finland, Italy, Portugal and Spain.
As of January 1, 1999, financial transactions and market information including
share quotations and company accounts, in participating countries are in Euros.
Over time, approximately 46% of the stock exchange capitalization of the total
European market may be reflected in Euros, and participating governments will
issue their bonds in Euros. Monetary policy for participating countries is
uniformly managed by a new central bank, the European Central Bank (ECB).
Although it is not possible to predict the impact of the Euro on the Funds, the
transition may change the economic environment and behavior of investors,
particularly in European markets. In addition, investors may begin to view those
countries participating in the EMU as a single entity. The Advisor may need to
adapt investment strategies accordingly. The process of implementing the Euro
also may adversely affect financial markets world-wide and may result in changes
in the relative strength and value of the U.S. dollar or other major currencies,
as well as possible adverse tax consequences as a result of currency conversions
to the Euro. Until the Euro develops its reputation and the ECB gains
experience in managing monetary policy, it will be difficult to predict the
strengths and weaknesses of the Euro.
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Floating Rate Notes
Floating rate notes normally involve industrial development or revenue bonds
which provide that the rate of interest is set as a specific percentage of a
designated base rate (such as the prime rate) at a major commercial bank, and
that a Fund can demand payment of the obligation at all times or at stipulated
dates on short notice (not to exceed 30 days) at par plus accrued interest. A
Fund may use the longer of the period required before the Fund is entitled to
prepayment under such obligations or the period remaining until the next
interest rate adjustment date for purposes of determining the maturity. Such
obligations are frequently secured by letters of credit or other credit
enhancements provided by banks. The Advisor monitors the earning power, cash
flow and liquidity ratios of the issuers of such instruments and the ability of
an issuer of a demand instrument to pay principal and interest on demand.
Foreign Securities
Foreign securities may subject a Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include costs in connection with conversions between
various currencies, limited publicly available information regarding foreign
issuers, lack of uniformity in accounting, auditing and financial standards and
requirements, greater securities market volatility, less liquidity of
securities, less government supervision and regulations of securities markets,
future adverse political and economic developments, the possible imposition of
withholding taxes on interest or other income, possible seizure,
nationalization, or expropriation of foreign deposits, the possible
establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. banks. Government regulation in many of
the countries of interest to a Fund may limit the extent of the Fund's
investment in companies in those countries.
Further, it may be more difficult for a Fund's agents to keep currently informed
about corporate actions which may affect the prices of portfolio securities.
Communications between the U.S. and foreign countries may be less reliable than
within the U.S., increasing the risk of delayed settlements of portfolio
securities. Certain markets may require payment for securities before delivery.
A Fund's ability and decisions to purchase and sell portfolio securities may be
affected by laws or regulations relating to the convertibility of currencies and
repatriation of assets. Some countries restrict the extent to which foreigners
may invest in their securities markets.
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Investments in securities of foreign issuers are frequently denominated in
foreign currencies (including the Euro and other multinational currency units)
and the value of a Fund's assets measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, and a Fund may incur costs in connection with conversions between
various currencies. Although the Funds typically do not engage in hedging
activities, a Fund may enter into forward foreign currency contracts as a hedge
against possible variations in foreign exchange rates or to hedge a specific
security transaction or portfolio position. Currently, only a limited market, if
any, exists for hedging transactions relating to currencies in emerging markets,
including Latin American and Asian markets. This may limit a Fund's ability to
effectively hedge its investments in such markets if it chose to do so.
A Fund may invest in securities denominated in currencies of foreign countries.
Accordingly, changes in the value of these currencies against the U.S. dollar
will result in corresponding changes in the U.S. dollar value of a Fund's assets
denominated in those currencies. Foreign countries also may have managed
currencies, which are not free floating against the U.S. dollar. In addition,
there is risk that certain foreign countries may restrict the free conversion of
their currencies into other currencies, including the U.S. dollar. Further, it
may be difficult to reduce a Fund's currency risk through hedging if it chose to
engage in hedging activities. Any devaluations in the currencies in which a
Fund's portfolio securities are denominated may have a detrimental impact on the
Fund's net asset value.
Securities of issuers located in countries with developing securities markets
pose greater liquidity risks and other risks than securities of issuers located
in developed countries and traded in more established markets. Low liquidity in
markets may adversely affect a Fund's ability to buy and sell securities and
cause increased volatility. Developing countries may at various times have less
stable political environments than more developed nations. Changes of control
may adversely affect the pricing of securities from time to time. Some
developing countries may afford only limited opportunities for investing. In
certain developing countries, a Fund may be able to invest solely or primarily
through ADRs or similar securities and government approved investment vehicles,
including closed-end investment companies.
Certain risks associated with international investments and investing in
smaller, developing markets are heightened for investments in Latin American
countries. For example, some of the currencies of Latin American countries have
experienced steady devaluations relative to the U.S. dollar, and major
adjustments have been made in certain of these currencies periodically.
Furthermore, Latin American currencies may not be internationally traded. Also,
many Latin American countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain Latin American
countries. In addition, although there is a trend toward less government
involvement in commerce, governments of many Latin American countries have
exercised and continue to exercise substantial influence over many aspects of
the private sector. In certain cases, the government still owns or controls many
companies, including some of the largest companies in the country. Accordingly,
government actions in the future could have a significant effect on economic
conditions in Latin American countries, which could affect private sector
companies and the Fund, as well as the value of securities in the Fund's
portfolio.
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In making investment decisions for the Fund, the Advisor evaluates the risks
associated with investing Fund assets in a particular country, including risks
stemming from a country's financial infrastructure and settlement practices; the
likelihood of expropriation, nationalization or confiscation of invested assets;
prevailing or developing custodial practices in the country; the country's laws
and regulations regarding the safekeeping, maintenance and recovery of invested
assets; the likelihood of government-imposed exchange control restrictions which
could impair the liquidity of Fund assets maintained with custodians in that
country, as well as risks from political acts of foreign governments ("country
risks"). Of course, the Advisor's decisions regarding these risks may not be
correct or prove to be wise and, generally, any losses resulting from investing
in foreign countries will be borne by Fund shareholders.
Holding Fund assets in foreign countries presents additional risks including,
but not limited to, the risks that a particular foreign custodian or depositary
will not exercise proper care with respect to Fund assets or will not have the
financial strength or adequate practices and procedures to properly safeguard
Fund assets. A Fund may be precluded from investing in certain foreign
countries until such time as adequate custodial arrangements can be established.
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
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.
Although the Funds typically do not engage in hedging activities, 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
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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.
No price is paid upon entering into futures contracts. Instead, a Fund is
required to deposit an amount of cash or liquid assets known as "initial
margin." Subsequent payments, called "variation margin," to and from the broker,
are made on a daily basis as the value of the futures position varies (a process
known as "marking to market"). The margin is in the nature of a performance bond
or good-faith deposit on a futures contract.
In order to avoid leveraging and related risks, when a Fund purchases futures
contracts, it will collateralize its position by depositing an amount of cash or
liquid assets, equal to the market value of the futures positions held, less
margin deposits, in a segregated account with the Trust's custodian. Collateral
equal to the current market value of the futures position will be marked to
market on a daily basis. Whenever a Fund is required to establish a segregated
account for any investment or strategy, notations in the books of the Trust's
custodian are sufficient to constitute a segregated account.
The Funds typically do not engage in hedging activities. Further, there are
risks associated with these activities, including the following: (1) the success
of a hedging strategy depends 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.
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.
The Funds will only enter into futures contracts traded on a national futures
exchange or board of trade.
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 shorter average maturities and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to accurately predict the average maturity of a particular
GNMA pool. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be
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"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.
Guaranteed Investment Contracts ("GICs")
GICs are contracts issued by U.S. insurance companies. Pursuant to such
contracts, the Fund makes cash contributions to a deposit fund of the insurance
company's general account. The insurance company then credits to the Fund on a
monthly basis guaranteed interest at either a fixed, variable or floating rate.
Generally, GICs are not assignable or transferable without the permission of the
issuing insurance companies. For this reason, GICs are considered to be
illiquid.
Illiquid Securities
Illiquid securities are securities that cannot be disposed of within 7 days at
approximately the price at which they are being carried on a Fund's books. An
illiquid security includes a demand instrument with a demand notice period
exceeding 7 days, if there is no secondary market for such security, and
repurchase agreements with durations (or maturities) over 7 days in length.
Investment Company Shares
Under applicable regulations, the Funds are generally prohibited from acquiring
the securities of other investment companies if, as a result of such
acquisition, the Funds own more than 3% of the total voting stock of the
company; securities issued by any one investment company represent more than 5%
of the Fund's total assets; or securities (other than treasury stock) issued by
all investment companies represent more than 10% of the total assets of the
Funds. By investing in securities of an investment company, Fund shareholders
will indirectly bear the fees of that investment company in addition to the
Fund's own fees and expenses.
The Trust has received an exemptive order from the Securities and Exchange
Commission ("SEC") to permit the Funds to invest in shares of ABN AMRO Money
Market Funds. Pursuant to this order, each Fund is permitted to invest in shares
of the Money Market Funds for cash management purposes, provided that the
Advisor and any of its affiliates waive management fees and other expenses with
respect to Fund assets invested therein.
It is the position of the staff of the SEC that certain nongovernmental issuers
of CMOs and REMICs constitute investment companies under the Investment Company
Act of 1940 ("1940 Act"), and either (a) investments in such instruments are
subject to the limitations set forth above
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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 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"). 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 Partnerships
Master limited partnerships are public limited partnerships composed of (i)
assets spun off from corporations or (ii) private limited partnerships. Master
limited partnerships are formed by reorganizing corporate assets or private
partnerships as public limited partnerships combining various investment
objectives. Interests in master limited partnerships are represented by
depositary receipts traded in the secondary market. Because limited partners
have no active role in management, the safety of a limited partner's investment
in a master limited partnership depends upon the management ability of the
general partner.
Money Market Instruments
Money market instruments include certificates of deposit, commercial paper,
bankers' acceptances, Treasury bills, time deposits, repurchase agreements and
shares of money market funds.
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.
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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 May
also guarantee timely distributions of scheduled principal. Fannie Mae and
FHLMC obligations are not backed by the full faith and credit of the U.S.
Government as GNMA certificates are, but Fannie Mae and FHLMC securities are
supported by the instrumentalities' right to borrow from the U.S. Treasury.
Private Pass-Through Securities: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust or corporation. These securities
include collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"). While they are generally structured with one or
more types of credit enhancement, private pass-through securities typically lack
a guarantee by an entity having the credit status of a governmental agency or
instrumentality.
In a CMO, series of bonds or certificates are usually issued in multiple
classes. Principal and interest paid on the underlying mortgage assets may be
allocated among the several classes of a series of a CMO in a variety of ways.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
A REMIC is a CMO that qualifies for special tax treatment under the Internal
Revenue Code and invests in certain mortgages principally secured by interests
in real property. Investors may purchase beneficial interests in REMICs, which
are known as "regular" interests, or "residual" interests. Guaranteed REMIC
pass-through certificates ("REMIC Certificates") issued by Fannie Mae or FHLMC
represent beneficial ownership interests in a REMIC trust consisting principally
of mortgage loans or Fannie Mae. FHLMC or GNMA-guaranteed mortgage
pass,,through certificates. For FHLMC REMIC Certificates, FHLMC guarantees the
timely payment of interest, and also guarantees the payment of principal as
payments are required to be made on the underlying mortgage participation
certificates.
Stripped Mortgage-Backed Securities ("SMBs"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and is thus termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the impact thereon of
prepayment of principal on the underlying mortgage securities.
Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until
that portion of such CMO obligation is repaid, investors in the longer
maturities
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receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-throughs to be prepaid prior to their
stated maturity. Although some of the mortgages underlying CMOs may be supported
by various types of insurance, and some CMOs may be backed by GNMA certificates
or other mortgage pass-throughs issued or guaranteed by U.S. Government agencies
or instrumentalities, the CMOs themselves are not generally guaranteed. FHLMC
has in the past guaranteed only the ultimate collection of principal of the
underlying mortgage loan; however, FHLMC now issues mortgage-backed securities
(FHLMC Gold PCS) which also guarantee timely payment of monthly principal
reductions. Government and private guarantees do not extend to the securities'
value, which is likely to vary inversely with fluctuations in interest rates.
A Fund also may invest in parallel pay CMOs and Planned Amortization Class CMOs
("PAC Bonds"). Parallel pay CMOs are structured to provide payments of
principal on each payment date to more than one class. These simultaneous
payments are taken into account in calculating the stated maturity date or final
distribution date of each class, which, as with other CMO structures, must be
retired by its stated maturity date or final distribution date, but may be
retired earlier. PAC Bonds are always parallel pay CMOs with the required
principal payment on such securities having the highest priority after interest
has been paid to all classes.
Municipal Securities
Municipal 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 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.
A Fund's investments in any of the notes described above is limited to those
obligations (i) rated in the highest two rating categories by an NRSRO or (ii)
if not rated, of equivalent quality in the Advisor's judgment.
Municipal bonds must be rated in the highest four rating categories by an NRSRO
at the time of investment or, if unrated, must be deemed by the Advisor to have
essentially the same character-
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istics and quality as bonds rated in the above rating categories. The Advisor
may purchase industrial development and pollution control bonds if the interest
paid is exempt from federal income tax. These bonds are issued by or on behalf
of public authorities to raise money to finance various privately-operated
facilities for business and manufacturing, housing, sports, and pollution
control. These bonds are also used to finance public facilities such as
airports, mass 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.
Obligations of Supranational Entities
Supranational entities are entities established through the joint participation
of several governments, and include the Asian Development Bank, Inter-American
Development Bank, International Bank for Reconstruction and Development (World
Bank), African Development Bank, European Economic Community, European
Investment Bank and Nordic Investment Bank. The governmental members, or
"stockholders," usually make initial capital contributions to the supranational
entity and in many cases are committed to make additional capital contributions
if the supranational entity is unable to repay its borrowings.
Options
A put option gives the purchaser the right to sell, and the writer the
obligation to buy, the underlying security at any time during the option period.
A call option gives the purchaser the right to buy, and the writer the
obligation to sell, the underlying security at any time during the option
period. The premium paid to the writer is the consideration for undertaking the
obligations under the option contract.
A Fund may purchase put and call options to protect against a decline in the
market value of the securities in its portfolio or to protect against an
increase in the cost of securities that the Fund may seek to purchase in the
future. A Fund purchasing put and call options pays a premium therefor. If
price movements in the underlying securities are such that exercise of the
options would not be profitable for a Fund, loss of the premium paid may be
offset by an increase in the value of the Fund's securities or by a decrease in
the cost of acquisition of securities by the Fund.
A Fund may write covered put and call options as a means of increasing the yield
on its portfolio and as a means of providing limited protection against
decreases in its market value. When a Fund sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Fund will realize as profit the
premium received for such option. When a call option of which a Fund is the
writer is exercised, the Fund will be required to sell the underlying securities
to the option holder at the strike price, and will not participate in any
increase in the price of such securities above the strike price. When a put
option of which a Fund is the writer is 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.
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A Fund may purchase and write options on an exchange or over-the-counter. Over-
the-counter options ("OTC options") differ from exchange-traded options in
several respects. They are transacted directly with dealers and not with a
clearing corporation, and therefore entail the risk of non-performance by the
dealer. OTC options are available for a greater variety of securities and for a
wider range of expiration dates and exercise prices than are available for
exchange-traded options. Because OTC options are not traded on an exchange,
pricing is done normally by reference to information from a market maker. It is
the position of the SEC that OTC options are illiquid.
A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash or liquid assets in an amount equal to the
amount the Fund would be required to pay upon exercise of the put.
A Fund may purchase and write put and call options on indices and enter into
related closing transactions. Put and call options on indices are similar to
options on securities except that options on an index give the holder the right
to receive, upon exercise of the option, an amount of cash if the closing level
of the underlying index is greater than (or less than, in the case of puts) the
exercise price of the option. This amount of cash is equal to the difference
between the closing price of the index and the exercise price of the option,
expressed in dollars multiplied by a specified number. Thus, unlike options on
individual securities, all settlements are in cash, and gain or loss depends on
price movements in the particular market represented by the index generally,
rather than the price movements in individual securities. All options written
on indices must be covered. When a Fund writes an option on an index, it will
establish a segregated account containing cash or liquid assets with its
custodian in an amount at least equal to the market value of the option and will
maintain the account while the option is open or will otherwise cover the
transaction.
Whenever a Fund is required to establish a segregated account, notations on the
books of the Trust's custodian are sufficient to constitute a segregated
account.
The Funds typically do not engage in hedging activities. Further, risks
associated with such activities include: (1) the success of a hedging strategy
depends on an ability to predict movements in the prices of individual
securities, fluctuations in markets and movements in interest rates; (2) there
may be an imperfect correlation between the movement in prices of options and
the securities underlying them; (3) there may not be a liquid secondary market
for options; and (4) while a Fund receives a premium when it writes covered call
options, it may not participate fully in a rise in the market value of the
underlying security. A Fund may choose to terminate an option position by
entering into a closing transaction. The ability of a Fund to enter into closing
transactions depends upon the existence of a liquid secondary market for such
transactions.
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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. Options will not be used for speculative purposes. Among the
strategies the Advisor may use are: protective puts on stocks owned by a Fund,
buying calls on stocks a Fund is attempting to buy and writing covered calls on
stocks a Fund owns.
A put option gives the purchaser of the option the right to sell, and the writer
the obligation to buy, the underlying security at any time during the option
period. A call option gives the purchaser of the option the right to buy, and
the writer of the option the obligation to sell, the underlying security at any
time during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
initial purchase (sale) of an option contract is an "opening transaction". In
order to close out an option position, a Fund may enter into a "closing
transaction" -- the sale (purchase) of an option contract on the same security
with the same exercise price and expiration date as the option contract
originally opened.
A Fund may buy protective put options from time to time on such portion of its
assets as the Advisor determines is appropriate in seeking the Fund's investment
objective. The advantage to the Fund of buying the protective put is that if
the price of the stock falls during the option period, the Fund may exercise the
put and receive the higher exercise price for the stock. However, if the
security rises in value, the Fund will have paid a premium for the put which
will expire unexercised.
A Fund may buy call options from time to time as the Advisor determines is
appropriate in seeking the Fund's investment objective. The Fund may elect to
buy calls on stocks that the Fund is trying to buy. The advantage of the Fund
buying the fiduciary call is that if the price of the stock rises during the
option period, the Fund may exercise the call and buy the stock for the lower
exercise price. If the security falls in value, the Fund will have paid a
premium for the call (which will expire worthless) but will be able to buy the
stock at a lower price.
A Fund may write covered call options from time to time on such portion of its
assets as the Advisor determines is appropriate in seeking the Fund's investment
objective. The advantage to the Fund of writing covered call options is that
the Fund receives a premium which is additional income. 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.
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A Fund may write covered put and call options as a means of increasing the yield
on its portfolio and as a means of providing limited protection against
decreases in its market value. When a Fund sells an option, if the underlying
securities do not increase or decrease to a price level that would make the
exercise of the option profitable to the holder thereof, the option generally
will expire without being exercised and the Fund will realize as profit the
premium received for such option. When a call option of which a Fund is the
writer is exercised, the Fund will be required to sell the underlying securities
to the option holder at the strike price, and will not participate in any
increase in the price of such securities above the strike price. When a put
option of which a Fund is the writer is exercised, the Fund will be required to
purchase the underlying securities at the strike price, which may be in excess
of the market value of such securities.
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.
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Real Estate Investing
Investments in companies in the real estate industry may be subject to the risks
associated with the direct ownership of real estate. These risks include: the
cyclical nature of real estate values; risks related to general and local
economic conditions; overbuilding and increased competition; increases in
property taxes and operating expenses; demographic trends and variations in
rental income; changes in zoning laws; casualty or condemnation losses;
environmental risks; regulatory limitations on rents; changes in neighborhood
values; related party risks; changes in the appeal of properties to tenants;
increases in interest rates; and other real estate capital market influences.
Generally, increases in interest rates increase the costs of obtaining
financing, which could directly and indirectly decrease the value of a Fund's
investments. A Fund's share price and investment return may fluctuate, and a
shareholder's investment when redeemed may be worth more or less than its
original cost. Certain of these securities that are issued by foreign companies
may be subject to the risks associated with investing in foreign securities in
addition to the risks associated with the direct ownership of real estate.
Real Estate Investment Trust (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 1940 Act. Rising interest rates may cause
the value of the debt securities in which a Fund may invest to fall.
Conversely, falling interest rates may cause their value to rise. Changes in
the value of portfolio securities does not necessarily affect cash income
derived from these securities but will effect a Fund's net asset value.
Receipts
Receipts are interests in separately traded interest and principal component
parts of U.S. Treasury obligations that are issued by banks and brokerage firms
and are created by depositing U.S. Treasury obligations into a special account
at a custodian bank. The custodian holds the interest and principal payments
for the benefit of the registered owners of the certificates or receipts. The
custodian arranges for the issuance of the certificates or receipts evidencing
ownership and maintains the register. Receipts are sold as zero coupon
securities which means that they are sold at a substantial discount and redeemed
at face value at their maturity date without interim cash payments of interest
or principal. This discount is amortized over the life of the security, and
such amortization will constitute the income earned on the security for both
accounting and tax purposes. Because of these features, receipts may be subject
to greater price volatility than interest paying U.S. Treasury obligations.
Receipts include "Treasury Receipts" ("TRs"),
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"Treasury Investment Growth Receipts" ("TIGRs"), and "Certificates of Accrual on
Treasury Securities" ("CATS").
Repurchase Agreements
Repurchase agreements are agreements by which a person (e.g., a Fund) obtains a
security and simultaneously commits to return the security to the seller
(primary securities dealer recognized by the Federal Reserve Bank of New York or
a national member bank as defined in Section 3(d)(1) of the Federal Deposit
Insurance Act, as amended) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves
the obligation of the seller to pay the agreed upon price, which obligation is
in effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by the Funds for purposes of
their investment limitations. The repurchase agreements entered into by the
Funds will provide that the underlying security at all times shall have a value
at least equal to 100% of the resale price stated in the agreement (the Advisor
monitors compliance with this requirement). Under all repurchase agreements
entered into by the Funds, the custodian or its agent must take possession of
the underlying collateral. However, if the seller defaults, the Funds could
realize a loss on the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less 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.
Restraints on Investments by Money Market Funds
Investments by each Money Market Fund are subject to limitations imposed under
rules adopted by the SEC. Under SEC rules, money market funds may acquire only
obligations that present minimal credit risks and that are "eligible
securities," which generally means they are rated, at the time of investment, by
at least two NRSROs (one if there is only one organization rating such
obligation) in one of the two highest short-term rating categories or, if
unrated, determined to be of comparable quality. First tier securities are
securities that are rated by at least two NRSROs (one if it is the only
organization rating such securities) or an unrated security determined to be of
comparable quality. Second tier securities are eligible securities that do not
qualify as first tier securities. The Advisor will determine that an obligation
presents minimal credit risks or that unrated instruments are of comparable
quality in accordance with guidelines established by the Trustees.
Restricted Securities
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Restricted securities are securities (including those of foreign issuers) that
may not be sold to the public without registration under the Securities Act of
1933 (the "1933 Act") absent an exemption from registration. Securities of
foreign issuers may be restricted. Up to 10% of a Fund's assets may consist of
restricted securities that are illiquid and the Advisor may invest up to an
additional 5% of the total assets of a Fund in restricted securities, provided
it determines that at the time of investment such securities are not illiquid
(generally, an illiquid security cannot be disposed of within seven days in the
ordinary course of business at its full value), based on guidelines and
procedures developed and established by the Board of Trustees of the Trust. The
Board of Trustees will periodically review such procedures and guidelines and
will monitor the Advisor's implementation of such procedures and guidelines.
Under these procedures and guidelines, the Advisor considers the frequency of
trades and quotes for the security, the number of dealers in, and potential
purchasers for, the securities, dealer undertakings to make a market in the
security and the nature of the security and of the marketplace trades.
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 Lending
Securities loaned by a Fund pursuant to an agreement which requires collateral
to secure the loan are not made if, as a result, the aggregate amount of all
outstanding securities loans for the Fund exceed one-third of the value of a
Fund's total assets (including the value of the collateral) taken at fair market
value. A Fund continues to receive interest on the loaned securities while
simultaneously earning interest on the investment of the cash collateral in U.S.
Government securities. However, a Fund normally pays lending fees to such
broker-dealers and related expenses from the interest earned on invested
collateral. Loans are made only to borrowers deemed by the Advisor to be of
good standing and when, in the judgment of the Advisor, the
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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.
Lending portfolio securities involves risks that the borrower may fail to return
the securities or provide additional collateral. Voting rights with respect to
the loaned securities may pass with the lending of the securities and efforts to
call such securities promptly may be unsuccessful, especially for foreign
securities. A Fund may loan portfolio securities to qualified broker-dealers or
other institutional investors provided: (1) the loan is secured continuously by
collateral consisting of U.S. government securities, letters of credit, cash or
cash equivalents maintained on a daily marked-to-market basis in an amount at
least equal to the current market value of the securities loaned; (2) the Fund
may at any time call the loan and obtain the return of the securities loaned;
and (3) the Fund will receive any interest or dividends paid on the loaned
securities.
Short Sales
Selling securities short involves selling securities the seller (e.g., a Fund)
does not own (but has borrowed) in anticipation of a decline in the market price
of such securities. To deliver the securities to the buyer, the seller must
arrange through a broker to borrow the securities and, in so doing, the seller
becomes obligated to replace the securities borrowed at their market price at
the time of the replacement. In a short sale, the proceeds the seller receives
from the sale are retained by a broker until the seller replaces the borrowed
securities. The seller may have to pay a premium to borrow the securities and
must pay any dividends or interest payable on the securities until they are
replaced.
A Fund may sell securities short "against the box." A short sale is "against
the box" if, at all times during which the short position is open, the Fund owns
at least an equal amount of the securities or securities convertible into, or
exchangeable without further consideration for, securities of the same issuer as
the securities that are sold short.
A Fund may also maintain short positions in forward currency exchange
transactions, in which the Funds agree to exchange currency that does not own at
that time for another currency at a future date and specified price in
anticipation of a decline in the value of the currency sold short relative to
the currency that the Fund has contracted to receive in the exchange. To ensure
that any short position of a Fund is not used to achieve leverage, the Fund
establishes with its custodian a segregated account consisting of cash or liquid
assets equal to the fluctuating market value of the currency as to which any
short position is being maintained.
Whenever a Fund is required to establish a segregated account, notations on the
books of the Trust's custodian are sufficient to constitute a segregated
account.
Sovereign Debt Securities
Sovereign debt securities are debt securities issued by various foreign
governmental issuers. Investing in fixed and floating rate foreign sovereign
debt securities will expose a Fund to the direct or indirect consequences of
political, social or economic changes in the countries that issue the
securities. The ability and willingness of sovereign obligors in developing and
emerging market countries or the governmental authorities that control repayment
of their external debt to pay principal and interest on such debt when due may
depend on general economic and political conditions within the relevant country.
Countries such as those in which a Fund may invest have historically
experienced, and may continue to experience, high rates of inflation, high
interest rates, exchange rate or trade difficulties and extreme poverty and
unemployment. Many of these countries are also characterized by political
uncertainty or instability. Additional factors which may influence the ability
or willingness to service debt include, but are not limited to a country's cash
flow situation, the availability of sufficient foreign exchange on the date a
payment is due,
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the relative size of its debt service burden to the economy as a whole and its
government's policy towards the International Monetary Fund, the World Bank and
other International agencies.
The ability of a foreign sovereign obligor to make timely payments on its
external debt obligations will also be strongly influenced by the obligor's
balance of payments, including export performance, its access to international
credits and investments, fluctuations in interest rates and the extent of its
foreign reserves. A country whose exports are concentrated in a few commodities
or whose economy depends on certain strategic imports would be vulnerable to
fluctuations in international prices of these commodities or imports. To the
extent that a country receives payment for its exports in currencies other than
dollars, its ability to make debt payments denominated in dollars could be
adversely affected. If a foreign sovereign obligor cannot generate sufficient
earnings from foreign trade to service it external debt, it may need to depend
on continuing loans and aid from foreign governments, commercial banks and
multilateral organizations, and inflows of foreign investment. The commitment
on the part of these foreign governments, multilateral organizations and others
to make such disbursements may be conditioned to the government's implementation
of economic reforms and/or economic performance and the timely service of its
obligations. Failure to implement such reforms, achieve such levels of economic
performance or repay principal or interest when due may result in the
cancellation of such third parties' commitment to lend funds which may further
impair the obligor's ability or willingness to timely service its debts.
Standby Commitments or Puts
Securities subject to standby commitments or puts permit the holder thereof to
sell the securities at a fixed price prior to maturity. Securities subject to a
standby commitment or put may be sold at any time at the current market price.
However, unless the standby commitment or put was an integral part of the
security as originally issued, it may not be marketable or assignable;
therefore, the standby commitment or put would only have value to the Fund
owning the security to which it relates. In certain cases, a premium may be
paid for a standby commitment or put, which premium has the effect of reducing
the yield otherwise payable on the underlying security.
The Advisor has the authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally called a "standby commitment" or a "put." The purpose of
engaging in transactions involving puts is to maintain flexibility and liquidity
to permit a Fund to meet redemptions and remain as fully invested as possible in
municipal securities. The Funds reserve the right to engage in put
transactions. The right to put the securities depends on the writer's ability
to pay for the securities at the time the put is exercised. The Funds will
limit their put transactions to institutions which the Advisor believes present
minimal credit risks, and the Advisor will use its best efforts to initially
determine and continue to monitor the financial strength of the sellers of the
options by evaluating their financial statements and such other 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
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the event that any writer is unable to honor a put for financial reasons, the
Fund would be general creditor (i.e., on a parity with all other unsecured
creditors) of the writer. Furthermore, particular provisions of the contract
between the Fund and the writer may excuse the writer from repurchasing the
securities; for example, a change in the published rating of the underlying
municipal securities or any similar event that has an adverse effect on the
issuer's credit or a provision in the contract that the put will not be
exercised except in certain special cases, for example, to maintain portfolio
liquidity. The Fund could, however, at any time sell the underlying portfolio
security in the open market or wait until the portfolio security matures, at
which time it should realize the full par value of the security.
Securities purchased subject to a put may be sold to third persons at any time,
even though the put is outstanding, but the put itself, unless it is an integral
part of the security as originally issued, may not be marketable or otherwise
assignable. Therefore, the put would have value only to the Fund. Sale of the
securities to third parties or lapse of time with the put unexercised may
terminate the right to put the securities. Prior to the expiration of any put
option, the Fund could seek to negotiate terms for the extension of such an
option. If such a renewal cannot be negotiated on terms satisfactory to the
Fund, the Fund could sell the portfolio security. The maturity of the
underlying security will generally be different from that of the put. There
will be no limit to the 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. While there is no limitation on the percentage of a Fund's
assets that may be comprised of STRIPS, the Advisor will monitor the level of
such holdings to avoid the risk of impairing shareholders' redemption rights and
of deviations in the value of shares of the Money Market Funds.
Swaps, Caps, Floors and Collars
Interest rate swaps, mortgage swaps, currency swaps and other types of swap
agreements such as caps, floors and 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
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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.
Swap agreements are sophisticated hedging instruments that typically involve a
small investment of cash relative to the magnitude of risk assumed. As a
result, swaps can be highly volatile and have a considerable impact on a Fund's
performance. Swap agreements are subject to risks related to the counterparty's
ability to perform, and may decline in value if the counterparty's
creditworthiness deteriorates. A Fund may also suffer losses if it is unable to
terminate outstanding swap agreements or reduce its exposure through offsetting
transactions. Any obligation a Fund may have under these types of arrangements
are covered by setting aside cash or liquid assets in a segregated account. A
Fund enters into swaps only with counterparties believed to be creditworthy.
In a typical cap or floor agreement, the buyer of an interest rate cap obtains
the right to receive payments to the extent that a specific interest rate
exceeds an agreed-upon level, while the seller of an interest rate floor is
obligated to make payments to the extent that a specified interest rate falls
below an agreed-upon level. An interest rate collar combines elements of buying
a cap and selling a floor. In swap agreements, if a Fund agrees to exchange
payments in dollars for payments in foreign currency, the swap agreement would
tend to decrease the Fund's exposure to U.S. interest rates and increase its
exposure to foreign currency and interest rates. Caps and floors have an effect
similar to buying or writing options. Depending on how they are used, swap
agreements may increase or decrease the overall volatility of a Fund's
investment and their share price and yield. 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.
Unit Investment Trusts
A unit investment trust ("UIT") is a type of investment company. Investments in
UITs are subject to regulations limiting a Fund's acquisition of investment
company securities. Standard and Poor's Depositary Receipts ("SPDRs") DIAMONDS,
MDYs and similar investments are interests in UITs that may be obtained directly
from the UIT or purchased in the secondary market. SPDRs consist of a portfolio
of securities substantially similar to the component securities of the Standard
and Poor's 500 Composite Stock Price Index. DIAMONDS and MDYs consist of a
portfolio of securities substantially similar to the component securities of the
Dow Jones Industrial Average and of the Standard and Poor's MidCap 400 Index,
respectively.
The price of a UIT interest is derived and based upon the securities held by the
UIT. Accordingly, the level of risk involved in the purchase or sale of a UIT
interest is similar to the risk involved in the purchase or sale of traditional
common stock, with the exception that the pricing mechanism for UITs is based on
a basket of stocks. Disruptions in the markets for the securities underlying
UITs purchased or sold by a Fund could result in losses on UITs. Trading
26
<PAGE>
in UITs involves risks similar to those risks, described above under "Options,"
involved in the writing of options on securities.
Interests in UITs are not individually redeemable, except upon termination of
the UIT. To redeem, a Fund must accumulate a certain amount of UIT interests.
The liquidity of small holdings of UITs, therefore, depends upon the existence
of a secondary market. Upon redemption of a UIT interest, a Fund receives
securities and cash identical to the deposit required of an investor wishing to
purchase a UIT interest that day.
U.S. Government Agency Obligations
Obligations issued or guaranteed by agencies of the U.S. Government, including,
among others, the Federal Farm Credit 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.,GNMA 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 Obligations
U.S. Treasury obligations consist of bills, notes and bonds issued by the U.S.
Treasury, as well as separately traded interest and principal component parts of
such obligations, known as "Separately Traded Registered Interest and Principal
Securities" ("STRIPS"), that are transferable through the Federal book-entry
system.
Variable 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.
27
<PAGE>
Warrants
Warrants are instruments giving holders the right, but not the obligation, to
buy shares of a company at a given price usually higher than the market price at
the time of issuance during a specified period.
When-Issued Securities
When-issued or delayed delivery basis transactions involve the purchase of an
instrument with payment and delivery taking place in the future. Delivery of
and payment for these securities may occur a month or more after the date of the
purchase commitment. 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.
The when-issued securities are subject to market fluctuations, and the purchaser
accrues no interest on the security during this period. The payment obligation
and the interest rate that will be received on the securities are each fixed at
the time the purchaser enters into the commitment.
The Funds segregate cash or liquid assets in an amount at least equal in value
to the Funds' commitments to purchase when-issued securities. If the value of
these assets declines, the Funds place additional liquid assets aside on a daily
basis so that the value of the assets set aside is equal to the amount of such
commitments. Consequently, the Funds do not use such purchases for leveraging.
Whenever a Fund is required to establish a segregated account, notations on the
books of the Trust's custodian are sufficient to constitute a segregated
account.
Zero Coupon Obligations
Zero coupon obligations are debt obligations that do not bear any interest, but
instead are issued at a deep discount from face value or par. The value of a
zero coupon obligations increases over time to reflect the interest accreted.
Such obligations will not result in the payment of interest until maturity, and
will have greater price volatility than similar securities that are issued at
face value or par and pay interest periodically.
INVESTMENT LIMITATIONS
Each Fund has adopted certain investment limitations which are fundamental and
may not be changed without approval by a majority vote of the Fund's outstanding
shares. The term
28
<PAGE>
"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 a Fund
may be considered an underwriter within the meaning of the Securities Act
of 1933 in the disposition of shares of the Fund.
2. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described below or as permitted by rule,
regulation or order of the SEC.
3. Borrow money, except that a Fund (a) may borrow money for temporary or
emergency purposes in an amount not exceeding 5% of the Fund's total assets
determined at the time of the borrowing and (b) may borrow money from banks
or by engaging in reverse repurchase agreements. Asset coverage of at
least 300% is required for all borrowings, except where a Fund has borrowed
money for temporary purposes in amounts not exceeding 5% of its total
assets.
4. Purchase or sell real estate or physical commodities, unless acquired as a
result of ownership of securities or other instruments (but this shall not
prevent a Fund from investing in securities or other instruments either
issued by companies that invest in real estate, backed by real estate or
securities of companies engaged in the real estate business).
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.
29
<PAGE>
No Money Market Fund may:
1. Purchase securities of any issuer if, as a result, the Fund would violate
the diversification provisions of Rule 2a-7 under the 1940 Act.
2. Purchase securities of any issuer if, as a result, more than 25% of the
total assets of the Fund are invested in the securities of one or more
issuers whose principal business activities are in the same industry or
securities the interest upon which is paid from revenue of similar type
industrial development projects, provided that this limitation does not
apply to: (i) investment in obligations issued or guaranteed by the U.S.
Government or its agencies and instrumentalities or in repurchase
agreements involving such securities; (ii) obligations issued by domestic
branches of U.S. banks or U.S. branches of foreign banks subject to the
same regulations as U.S. banks; or (iii) tax-exempt securities issued by
government or political subdivisions of governments.
3. Make loans, except as permitted by the 1940 Act, and the rules and
regulations thereunder.
The foregoing percentages (except for the limitation on illiquid securities
below) apply at the time of the purchase of a security and shall not be
considered violated unless an excess occurs or exists immediately after and as a
result of a purchase of such security.
NON-FUNDAMENTAL POLICIES
No Fund may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of the Fund's net assets (except for all Money Market Funds for
which the limit is 10% of net assets).
For purposes of the Latin America Equity Fund's investment policies, Latin
American issuers means 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.
For purposes of the Real Estate 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.
30
<PAGE>
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.
MANAGEMENT OF THE FUND
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 have approved contracts under which certain companies provide essential
management, administrative and other services to the Trust. 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 -- 950 N. Michigan Avenue, Chicago,
Illinois 60611. Retired. Executive Vice President, Chief Financial Officer and
Planning Officer of Stone Container Corporation (pulp and paper business),
1991-1996.
WILLIAM T. SIMPSON (7/26/27) -- Trustee -- 1318 Navajo Court, Louisville,
Kentucky 40207. Retired since July 1992.
ROBERT FIETLER (11/19/30) -- Trustee -- 179 East Lake Shore Drive, Chicago,
Illinois 60611. Retired. Chairman of Executive Committee, Board of Directors,
Weyco Group, Inc. (men's footwear), since 1996. President and Director, Weyco
Group, Inc., 1968-1996.
RICHARD A. FRODSHAM (3/23/40) -- Executive Vice President** -- Since October
1997, Executive Vice President and Chief Administrative Officer of ABN AMRO
Asset Management (USA) Inc., 208 S. LaSalle Street, Chicago, Illinois 60604.
President of LaSalle Street Capital Management, Ltd., January 1997 -September
1997. Senior Vice President of ABN AMRO Incorporated (formerly, ABN AMRO Chicago
Corporation, formerly, The Chicago Corporation), January 1994 -Present.
31
<PAGE>
MICHAEL T. CASTINO (8/10/62) -- Vice President** -- Since July 1997, Vice
President, Fund Marketing, of ABN AMRO Asset Management (USA) Inc., 208 S.
LaSalle Street, Chicago, Illinois 60604. Assistant Vice President, Rembrandt
Product Manager of LaSalle National Bank (formerly, LaSalle National Trust,
N.A.), June 1995-July 1997. Director of Fund Marketing, Kemper Financial
Services, Inc., October 1991-June 1995.
KATHRYN L. MARTIN (10/23/57) -- Vice President** -- Since March 1998, Senior
Vice President, Director of Compliance of ABN AMRO Asset Management (USA) Inc.,
208 S. LaSalle Street, Chicago, Illinois 60604. Vice President, ABN AMRO Asset
Management (USA) Inc. (formerly, LaSalle Street Capital Management, Ltd.), June
1995 - March 1998. Assistant Vice President, LaSalle Street Capital Management,
Ltd. (formerly, Chemical Investment Group), October 1989-June 1995.
LAURIE LYNCH (8/3/61) -- Vice President** -- Since April 1997, Marketing
Associate, Fund Marketing of ABN AMRO Asset Management (USA) Inc., 208 S.
LaSalle Street, Chicago, Illinois 60604. Executive Assistant, LaSalle Street
Capital Management, Ltd., April 1996-April 1997. Municipal Underwriting
Assistant, Fidelity Capital Markets, September 1994-April 1997. Office
Administrator, The Choice for Staffing, March 1992-September 1994.
COLEEN DOWNS DINNEEN (12/16/60) -- Vice President and Assistant Secretary --
Counsel, Mutual Fund Legal Division, First Data Investor Services Group, Inc.,
101 Federal Street, Boston, Massachusetts 02110 since 1997. Vice-President,
Scudder, Stevens & Clark, Inc (an investment management firm). (1989-1996).
MICHAEL C. KARDOK (7/17/59) -- Treasurer -- Vice President and Division Manager,
First Data Investor Services Group, Inc.; prior to May 1994, Vice President, The
Boston Company Advisors, Inc.
32
<PAGE>
JEFFREY MARSHALL (2/18/56) -- Vice President and Assistant Treasurer -- Since
1998, associated with the Distribution Services Division of First Data Investor
Services Group, Inc., 4400 Computer Drive, Westborough, Massachusetts 01581.
THERESE M. HOGAN (2/27/62) -- Vice President and Assistant Treasurer -- Director
of State Regulation of First Data Investor Services Group, Inc., 4400 Computer
Drive, Westborough, Massachusetts 01581 since June 1994. For more than eight
years prior thereto, a paralegal at Robinson & Cole in Hartford, Connecticut.
MARC PEIRCE (4/6/62) -- Vice President** -- Since September 1998, Compliance
Analyst of ABN AMRO Asset Management (USA) Inc., 208 S. LaSalle Street, Chicago,
IL 60604. Compliance Analyst, The Northern Trust Company from August 1996 --
September 1998; Tax Analyst, The Northern Trust Company, September 1991 --
August 1996.
KAREN DEPOUTOT (10/7/66) -- Assistant Treasurer -- Director of Mutual Fund
Treasury and Assistant Treasurer for First Data Investor Services Group, Inc.
since June 1994. Prior to June 1994, Ms. Depoutot was a Senior Treasury Analyst
at The New England and an Assistant Vice President in the Mutual Fund Accounting
Department at The Boston Company Advisors, Inc.
JOHN H. GRADY, JR. (6/1/61) -- Assistant Secretary -- 1701 Market Street,
Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law
firm) since 1995; Associate, Morgan, Lewis & Bockius LLP, 1993-1995.
RICHARD W. GRANT (10/25/45) -- Assistant Secretary -- 1701 Market Street,
Philadelphia, Pennsylvania 19103. Partner, Morgan, Lewis & Bockius LLP (law
firm) since 1989.
- ------------------
** This person is an "affiliated person" of both the Advisor and the Trust, as
the term is defined in the 1940 Act.
For the fiscal year ended December 31, 1998, 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 1998 Expenses Retirement 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Arnold F. Brookstone, $14,000 N/A N/A $14,000 for service
Trustee on one board
===================================================================================================
</TABLE>
33
<PAGE>
<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 1998 Expenses Retirement 1998
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
William T. Simpson, $14,000 N/A N/A $14,000 for service
Trustee on one board
- --------------------------------------------------------------------------------------------------------
John A. Wing, None N/A N/A None
Trustee/1/
- --------------------------------------------------------------------------------------------------------
Robert Fietler, $14,000 N/A N/A $14,000
Trustee
- --------------------------------------------------------------------------------------------------------
Timothy Leach, None N/A N/A None
Trustee/1/
========================================================================================================
</TABLE>
/1/ No longer serves on the Board.
The Trust pays the fees for unaffiliated Trustees who are not "interested
persons" of the Trust. Officers and affiliated Trustees are not compensated by
the Trust.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
5% AND 25% SHAREHOLDERS
As of March 31, 1999, the Trustees and officers of the Trust owned less than 1%
of the outstanding shares of the Trust.
As of March 31, 1999, 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 Common Class shares of the Funds were held for the record owner's
fiduciary, agency or custodial customers.
TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>
Name of Owner and Class Percentage of Ownership
- ----------------------- -----------------------
<S> <C>
LaSalle National Bank 97.219
Attn: Demand Note Desk
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
ABN AMRO Chicago Corporation 99.376
Attn: Control Department
208 S. LaSalle St.
Chicago, IL 60604-1001
INVESTOR Shares
</TABLE>
34
<PAGE>
GOVERNMENT MONEY MARKET FUND
<TABLE>
<CAPTION>
Name of Owner and Class Percentage of Ownership
- ----------------------- -----------------------
<S> <C>
LaSalle National Trust N.A. 80.782
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
LaSalle National Bank 17.320
FBO Various Defined Contribution
P.O. Box 1443
Chicago, IL 60609-1443
COMMON Shares
ABN AMRO Incorporated 99.276
Attn: Control Department
208 S. LaSalle St.
Chicago, IL 60604-1001
INVESTOR Shares
MONEY MARKET FUND
LaSalle National Trust N.A. 94.223
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
ABN AMRO Chicago Corporation 99.114
Attn: Control Department
208 S. LaSalle St.
Chicago, IL 60604-1001
INVESTOR Shares
TAX-EXEMPT MONEY MARKET FUND
LaSalle National Bank 97.124
Attn: Income Collection
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
ABN AMRO Chicago Corporation 99.525
Attn: Control Department
208 S. LaSalle St.
Chicago, IL 60604-1001
INVESTOR Shares
FIXED INCOME FUND
LaSalle National Bank 75.896
Omnibus A/C 75953R109
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
Name of Owner and Class Percentage of Ownership
----------------------- -----------------------
<S> <C>
LaSalle National Bank 17.617
FBO Various Defined Contribution P1
P.O. Box 1443
Chicago, IL 60609-1443
COMMON Shares
Delaware Charter Cust 34.790
IRA A/C Casmir F. Jezierny
7609 W Strong
Harwood Heights, IL 60656-3353
INVESTOR Shares
Delaware Charter Cust T 22.275
IRA A/C Thomas J. Odriska
6609 S Kedvale
Chicago, IL 60629-5127
INVESTOR Shares
ABN AMRO Incorporated 9.241
393-56020-15
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
Delaware Charter Cust 6.807
IRA A/C Christopher J. Nolfi
5131 W Melrose
Chicago, IL 60641-4225
INVESTOR Shares
Robert K. Moeller & 6.234
Donald R. Moeller JTWROS
4921 Newport Ave
Chicago, IL 60641-3559
INVESTOR Shares
Delaware Charter Cust 5.461
IRA A/C Donald Johnson
3304 N New England
Chicago, IL 60634-3745
INVESTOR Shares
Helen Ann Huber TR 5.025
J/A 12-04-1997 The Then Acting
Trustee of The Helen Ann Huber Self
Declaration Trust
6314 N Leona Ave
Chicago, IL 60646-4224
INVESTOR Shares
INTERMEDIATE GOVERNMENT FIXED INCOME FUND
LaSalle National Bank 95.822
Omnibus A/C 75953R307
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
Delaware Charter Cust 47.944
IRA A/C Christopher J. Nolfi
5131 W Melrose
Chicago, IL 60641-4225
INVESTOR Shares
ABN AMRO Incorporated 19.772
Attn: Mutual Fund Operations
395-01746-19
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
Delaware Charter Cust 13.222
IRA A/C Joanne Magnifico Madonia
291 Beaumont Ct
Bartlett, IL 60103-2982
INVESTOR Shares
Jennifer L. Billy 10.762
720 N. Lakeside Dr
Vernon Hills, IL 60061-2614
INVESTOR Shares
ABN AMRO Incorporated 8.289
Attn: Mutual Fund Operations
395-70333-13
PO Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
TAX-EXEMPT FIXED INCOME FUND
LaSalle National Bank 99.432
Omnibus A/C 75953R505
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
ABN AMRO Incorporated 35.037
392-03740-18
Attn: Mutual Fund Operations
P.O. Box 6106
Chicago, IL 60680-6108
INVESTOR Shares
ABN AMRO Incorporated 17.866
040-88498-18
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
Anton Sivak & 6.672
Eugenia Sivak Jtten
6526 S Karlou Ave
Chicago, IL 60629-5124
INVESTOR Shares
Donald A. Peterson 6.578
5323 W Drummond
Chicago, IL 60639-1514
INVESTOR Shares
Hugh J. O'Malley & 5.993
Helen A O'Malley JT TEN
725 Newgate Ln Apt G
Prospect Hts, IL 60070-2893
INVESTOR Shares
Gloria Kokaisl 5.569
200 Vilalge Dr #224
Downers Grove, IL 60516-3050
INVESTOR Shares
ABN AMRO Incorporated 5.019
Attn: Mutual Fund Operations
392-06083-16
PO Box 6108
Chicago, IL 60680-6106
INVESTOR Shares
INTERNATIONAL FIXED INCOME FUND
LaSalle National Bank 98.650
Omnibus A/C 75953R703
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
Delaware Charter Cust 16.899
IRA A/C R/O Jeraldine Harris
4607 Lincoln Blvd
Richton Park, IL 60471-1868
INVESTOR Shares
Mae F. Belgrave 15.978
15022 South Champlain Avenue
Dolton, IL 60419-2661
INVESTOR Shares
Louis A. McDaniel Jr 10.388
15840 Campbell St
Harvey, IL 60426-2850
INVESTOR Shares
Benito Zapata Cust 9.508
Andrea Zapata
Unif Trans to Min Act - FL
8164 Boss Street
Vienna, VA 22182-3776
INVESTOR Shares
Ilene Wolthusen 7.638
416 E Reader St
Elburn, Il 60119-8937
INVESTOR Shares
Maria D. Dominquez 5.470
1114 George St
Calumet City, IL 60409-2024
INVESTOR Shares
ABN AMRO Incorporated 5.396
393-04255-11
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
Claudette C. Miles 5.166
8000 S Dante
Chicago, IL 60619-4621
INVESTOR Shares
ABN AMRO Incorporated 5.063
393-04254-12
Attn: Mutual Fund Operations
P.O. Box 6106
Chicago, IL 60680-6108
INVESTOR Shares
VALUE FUND
LaSalle National Bank 62.247
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
LaSalle National Bank 29.549
FBO Various Defined Contributions PL
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
GROWTH FUND
LaSalle National Bank 58.236
FBO Various Defined Contributions PL
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
LaSalle National Bank 33.577
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Name of Owner and Class Percentage of Ownership
- ----------------------- -----------------------
<S> <C>
SMALL CAP GROWTH FUND
LaSalle National Bank 84.717
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
LaSalle National Bank 10.511
FBO Various Defined Contribution PL
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
Sema & Co 12.051
100 Wall St.
New York, NY 10005-3701
INVESTOR Shares
Delaware Charter Cust 11.065
IRA A/C Ronald T. Anderson
3134 N 78th Ct.
Elmwood Park, IL 60707-1012
INVESTOR Shares
Phyllis L. Fisher 9.354
P.O. Box 427 Corning Rd.
Beecher, IL 60401-0427
INVESTOR Shares
Delaware Charter Cust 6.793
IRA A/C Sonny C. Lai
1760 Potter Rd.
Park Ridge, IL 60068-1131
INVESTOR Shares
Mark R. Dieter & 5.992
Dawn R. Dieter JTTEN
6859 South Plainfield Rd
Plainfield, IL 60544-0000
INVESTOR Shares
INTERNATIONAL EQUITY FUND
LaSalle National Bank 68.719
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
LaSalle National Bank 22.088
FBO Various Defined Contribution PL
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
ABN AMRO Incorporated 5.471
393-93306-13
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
ASIAN TIGERS FUND
LaSalle National Bank 72.312
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
LaSalle National Bank 24.945
FBO Various Defined Contribution PL
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
James G. Kokenes & 9.241
Lynn M. Kokenes JTTEN
510 North Richmond Avenue
Westmont, IL 60559-1539
INVESTOR Shares
Donaldson Lufkin Jenrette 8.927
Securities Corporation, Inc.
P.O. Box 2052
Jersey City, NJ 07303-2052
INVESTOR Shares
Delaware Charter Cust 8.649
IRA A/C Thomas J. Plonka
126 N. Grant Street
Westmont, IL 60559-1608
INVESTOR Shares
Delaware Charter Cust 6.366
IRA A/C Roger J. Bianco, Sr.
1636 Gibson Dr.
Elk Grove Village, IL 60007-2704
INVESTOR Shares
BALANCED FUND
LaSalle National Bank 68.105
FBO Various Defined Contribution PL
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
LaSalle National Bank 16.101
P.O. Box 1443
Chicago, IL 60690-1443
COMMON Shares
ABN AMRO Incorporated 5.259
Attn: Mutual Fund Operations
395-00837-11
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
LATIN AMERICA EQUITY FUND
LaSalle National Bank
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Name of Owner and Class Percentage of Ownership
- ----------------------- -----------------------
<S> <C>
P.O. Box 1443 96.041
Chicago, IL 60690-1443
COMMON Shares
REAL ESTATE FUND
ABN AMRO Chicago Corporation 37.550
Attn: Bill Thiel
208 S. LaSalle Street
Chicago, IL 60604-1001
COMMON Shares
ABN AMRO Incorporated 32.628
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
COMMON Shares
ABN AMRO Incorporated 10.830
022-81283-10
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
COMMON Shares
ABN AMRO Incorporated 5.511
022-81280-13
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
COMMON Shares
ABN AMRO Incorporated 47.500
292-00034-11
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
ABN AMRO Incorporated 47.500
292-00035-10
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
ABN AMRO Incorporated 5.000
398-49208-13
Attn: Mutual Fund Operations
P.O. Box 6108
Chicago, IL 60680-6108
INVESTOR Shares
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
THE ADVISOR
The Trust and ABN AMRO Asset Management (USA) Inc., 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 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. The Administrator and Advisor are affiliated and
under the common control of ABN AMRO Holding N.V.
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.
38
<PAGE>
For the fiscal years ended December 31, 1996, 1997, and 1998, the Funds paid the
following advisory fees:
<TABLE>
<CAPTION>
Net Fees Paid Fees waived
---------------------------------- ----------------------------------
Fund 1996 1997 1998 1996 1997 1998
===========================================================================================
<S> <C> <C> <C> <C> <C> <C>
Treasury Money $ 291,794 $ 374,682 $ 458,132 $235,779 $ 301,942 $ 343,600
Market Fund
- -------------------------------------------------------------------------------------------
Government $ 448,001 $ 497,187 $ 474,566 $ 0 $ 0 $ 263,355
Money Market
Fund
- -------------------------------------------------------------------------------------------
Money Market $1,138,578 $1,386,860 $2,020,937 $853,933 $1,040,154 $1,515,702
Fund
- -------------------------------------------------------------------------------------------
Tax-Exempt $ 318,245 $ 484,301 $ 613,501 $275,379 $ 413,335 $ 460,126
Money Market
Fund
- -------------------------------------------------------------------------------------------
Fixed Income $ 625,690 $ 670,250 $ 833,301 $125,138 $ 134,049 $ 166,660
Fund
- -------------------------------------------------------------------------------------------
Intermediate $ 334,912 $ 268,185 $ 243,361 $ 66,982 $ 53,637 $ 48,672
Government
Fixed Income
Fund
- -------------------------------------------------------------------------------------------
Tax-Exempt $ 218,761 $ 194,948 $ 184,668 $ 56,636 $ 43,866 $ 36,934
Fixed Income
Fund
- -------------------------------------------------------------------------------------------
International $ 140,609 $ 136,701 $ 132,776 $ 0 $ 0 $ 7,424
Fixed Income
Fund
- -------------------------------------------------------------------------------------------
Limited * * * * * *
Volatility Fixed
Income Fund
- -------------------------------------------------------------------------------------------
Value Fund $1,170,294 $1,620,699 $1,673,833 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------
Growth Fund $ 723,113 $ 972,369 $1,279,933 $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------
Small Cap $ 235,012 $ 319,968 $ 390,042 $ 0 $ 0 $ 0
Growth Fund
- -------------------------------------------------------------------------------------------
Small Cap Value * * $ 25,004 * * $ 2,778
Fund
- -------------------------------------------------------------------------------------------
International $ 886,424 $ 972,268 $1,183,171 $ 0 $ 0 $ 0
Equity Fund
- -------------------------------------------------------------------------------------------
TransEurope * * * * * *
Fund
===========================================================================================
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Net Fees Paid Fees Waived
------------------------------ ---------------------------
Fund 1996 1997 1998 1996 1997 1998
====================================================================================
<S> <C> <C> <C> <C> <C> <C>
Asian Tigers $312,823 $393,065 $298,444 $0 $0 $0
Fund
- ------------------------------------------------------------------------------------
Latin America $ 44,270 $259,452 $287,872 $0 $0 $0
Equity Fund
- ------------------------------------------------------------------------------------
Real Estate Fund * $ 57 $ 34,196 * $25 $14,655
- ------------------------------------------------------------------------------------
Balanced Fund $391,615 $466,334 $545,646 $0 $0 $0
====================================================================================
</TABLE>
* Not in operation during the period.
The Advisor has agreed to waive its fee at least through April 2000 in order to
limit advisory fees to the amounts set forth below:
Fund Total Advisory Fees
- ---- -------------------
Real Estate Fund .70%
Fixed Income Fund .50%
Intermediate Government Fixed Income Fund .50%
Tax-Exempt Fixed Income Fund .50%
Limited Volatility Fixed Income Fund .50%
Treasury Money Market Fund .20%
Money Market Fund .20%
Tax-Exempt Money Market Fund .20%
After April 2000, the Advisor may continue, modify or cancel this waiver.
Advisory fees are paid separately by each Fund. For each Fund, advisory fees at
the Fund level rather than at the share class level.
DISTRIBUTION AND SHAREHOLDER SERVICING
First Data Distributors, Inc., (the "Distributor"), a wholly-owned subsidiary of
First Data Corporation, 4400 Computer Drive, Westborough, Massachusetts 01581,
and the Trust are parties to a distribution agreement (the "Distribution
Agreement") dated March 2, 1998. The Distribution Agreement shall be reviewed
and ratified at least annually (i) by the Trustees or by the vote of a majority
of the outstanding shares of the Trust, and (ii) by the vote of a majority of
the Trustees of the Trust who are not parties to the Distribution Agreement or
"interested persons" (as defined in the 1940 Act) of any party to the
Distribution Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement will terminate in the event
of any assignment, as defined in the 1940 Act, and is terminable with respect to
a particular Fund on not less than 60 days' notice by the Trustees, by vote of a
majority of the outstanding shares of such Fund or by the Distributor. Under
the Distribution Agreement, the Distributor has agreed to use its best efforts
in connection with the distribution of Fund shares. Fund shares are offered
continuously.
Distribution Plan
The Trust has adopted a distribution plan for the Investor Shares of each Fund
(the "Distribution Plan") in accordance with the provisions of Rule 12b-1 under
the 1940 Act. Rule 12b-1 regulates the circumstances under which an
investment company may directly or indirectly bear expenses relating to the
distribution of its shares. Continuance of the Distribution Plan must be
approved annually by a majority of the Trustees of the Trust and by a majority
of the Trustees who are not "interested persons" of the Trust or the
Distributor, as that term is defined in the 1940 Act ("Disinterested Trustees").
The Distribution Plan requires that quarterly written reports of amounts spent
under the Distribution Plan and the purposes of such expenditures be furnished
to and reviewed by the Trustees. In accordance with Rule 12b-1 under the 1940
Act, the Distribution Plan may be terminated with respect to any Fund by a vote
of a majority of the Disinterested Trustees, or by a vote of a majority of the
outstanding shares of that Fund. The
40
<PAGE>
Distribution Plan may be amended by vote of the Trust's Board of Trustees,
including a majority of the Disinterested Trustees, cast in person at a meeting
called for such purpose, except that any change that would effect a material
increase in any distribution fee with respect to a Fund requires the approval of
that Fund's shareholders. All material amendments of the Plan will require
approval by a majority of the Trustees of the Trust and of the Disinterested
Trustees.
The Distribution Plan provides for payments to the Distributor at an annual rate
of .25% of the Investor Shares average daily net assets. This ongoing
distribution fee is calculated on each Fund's aggregate average daily net assets
attributable to its Investor Shares. From this amount, the Distributor may make
payments to financial institutions and intermediaries such as banks, savings and
loan associations, insurance companies, and investment counselors, broker-
dealers, and the Distributor's affiliates and subsidiaries as compensation for
services, reimbursement of expenses incurred in connection with distribution
assistance, or provision of shareholder services. The Distribution Plan is
characterized as a compensation plan and is not directly tied to expenses
incurred by the Distributor; the payments the Distributor receives during any
year may therefore be higher or lower than its actual expenses.
Prior to March 2, 1998, Rembrandt Financial Services Company ("RFS"), Oaks,
Pennsylvania 19456, served as the Trust's distributor. RFS is a wholly-owned
subsidiary of SEI Financial Services Company.
For the fiscal year ended December 31, 1998, the Funds paid the following
amounts pursuant to the Distribution Plan:
<TABLE>
<CAPTION>
=====================================================================
Distribution Amount Paid
Fund 1998
- ---------------------------------------------------------------------
<S> <C>
Treasury Money Market Fund $ 35,204
- ---------------------------------------------------------------------
Government Money Market Fund $144,655
- ---------------------------------------------------------------------
Money Market Fund $369,611
- ---------------------------------------------------------------------
Tax-Exempt Money Market Fund $114,248
- ---------------------------------------------------------------------
Fixed Income Fund $ 1,093
- ---------------------------------------------------------------------
Intermediate Government Fixed Income Fund $ 189
- ---------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 1,337
- ---------------------------------------------------------------------
International Fixed Income Fund $ 135
- ---------------------------------------------------------------------
Limited Volatility Fixed Income Fund *
- ---------------------------------------------------------------------
Value Fund $ 4,184
- ---------------------------------------------------------------------
Growth Fund $ 7,913
- ---------------------------------------------------------------------
Small Cap Growth Fund $ 1,396
- ---------------------------------------------------------------------
Small Cap Value Fund $ 309
=====================================================================
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
================================================================================
Distribution Amount Paid
Fund 1998
================================================================================
<S> <C>
International Equity Fund $ 2,742
- --------------------------------------------------------------------------------
TransEurope Fund *
- --------------------------------------------------------------------------------
Real Estate Fund $ 9
- --------------------------------------------------------------------------------
Asian Tigers Fund $ 467
- --------------------------------------------------------------------------------
Latin America Equity Fund *
- --------------------------------------------------------------------------------
Balanced Fund $ 9,436
================================================================================
</TABLE>
* Not in operation during the period.
The distribution-related services that may be provided under the Distribution
Plan include: incremental printing costs for reports, prospectuses, notices and
similar materials; advertising; cost of preparing, printing, and distributing
literature used in connection with the offering of shares; and expenses incurred
in the promotion and sale of shares. Certain state securities laws may require
those financial institutions providing such distribution services to register as
dealers pursuant to state law.
The Administrator or Advisor may benefit from the expenditures under the plan
through increased fees from an increase in the net assets of the Trust except
for affiliates of the Administrator and Advisor, no "interested person" of the
Trust or Disinterested Trustee had a direct or indirect financial interest in
the operation of the Distribution Plan or related agreements.
Shareholder Servicing Plan
The Trust has adopted a shareholder servicing plan for the Investor Shares of
each Fund (the "Shareholder Servicing Plan"). Under the Shareholder Servicing
Plan, the Trust pays a fee of .25% of the average daily net assets of the
Investor Shares. This fee is paid to the Distributor to perform, or to
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. The Distributor may
voluntarily waive all or a portion of its shareholder servicing fee, and may
discontinue its waiver at any time. Currently, the Distributor is waiving, on a
voluntary basis, its shareholder servicing fee for the Money Market Funds. After
waivers, the Funds are paying shareholder servicing fees in the following
amounts:
Fund Net Fees
- ---- --------
Treasury Money Market Fund None
Government Money Market Fund .18%
Money Market Fund .14%
Tax-Exempt Money Market Fund None
It is possible that an intermediary may offer different classes of shares to its
customers and differing services to the classes, and thus receive compensation
with respect to different classes. Intermediaries also may charge separate fees
to their customers.
42
<PAGE>
The Funds may use the Distributor as a broker for the Funds' portfolio
transactions. The Distributor may receive compensation for its brokerage
services.
THE ADMINISTRATOR AND SUB-ADMINISTRATOR
ABN AMRO Fund Services, Inc. (the "Administrator") serves as the Administrator
for the Trust. The Administrator is an affiliate of the Advisor and both are
under common control of ABN AMRO Holding N.V., a Netherlands company. As
Administrator, it provides the Trust with administrative services, including
oversight and monitoring of the sub-administrator, transfer agent, distributor
and custodian. The Administrator is entitled to a fee, which is calculated
daily and paid monthly, at an annual rate of 0.15% of the average daily net
assets of the Fund.
Under the Administration Agreement: (i) the Administrator is entitled to
receive a fee at an annual rate of 0.15% of the average daily net assets of the
Funds; (ii) the Trust may withhold a portion of this fee in the event that the
Administrator fails to perform its duties according to the performance standards
as set forth in the Agreement; and (iii) the Trust agreed to pay the
Administrator $1,500,000 if the Trust terminates the Agreement within the first
year and $750,000 if the Trust terminates the Agreement in the second year.
The Administrator has agreed to waive its fees at least through April 2000 in
order to limit total administration fees to the amounts set forth below:
Fund Total Administrative Fees
- ---- -------------------------
Treasury Money Market Fund .07%
Government Money Market Fund .07%
Money Market Fund .07%
Tax-Exempt Money Market Fund .07%
Fixed Income Fund .10%
Intermediate Government Fixed Income Fund .10%
Tax-Exempt Fixed Income Fund .10%
International Fixed Income Fund .10%
Real Estate Fund .07%
Small Cap Value Fund .07%
After April 2000, the Administrator may continue, modify or cancel this waiver.
The Administrator, a Delaware corporation, has its principal business offices at
208 South LaSalle Street, Chicago, Illinois 60604. ABN AMRO Holding N.V. and
its subsidiaries and affiliates, including the Administrator, are global
providers of financial services, including banking and investment management.
Prior to March 2, 1998, SEI Fund Resources (SEI) served as the Trust's
administrator. SEI, a Delaware business trust, has its principal offices at
Oaks, Pennsylvania 19456. SEI Investments Management Corporation, a wholly-
owned subsidiary of SEI Investments Company, is the owner of all beneficial
interest in SEI.
First Data Investor Services Group, Inc. serves as the Sub-Administrator for the
Trust. As Sub-Administrator it provides the Trust with sub-administrative
services, including fund accounting, regulatory reporting, necessary office
space, equipment, personnel and facilities. Compensation for these services is
paid under a Sub-Administrative and Fund Accounting Agreement with the
Administrator. The Sub-Administrator has voluntarily agreed to waive a portion
of its accounting fees for the Real Estate and Small Cap Value Fund. The Sub-
Administrator may modify or discontinue this waiver at any time.
Under the Sub-Administration Agreement: (i) the Sub-Administrator is entitled
to receive a fee at an annual rate of 0.15% of the average daily net assets of
the Funds; (ii) the Administrator may withhold a portion of this fee in the
event that the Sub-Administrator fails to perform its duties according to the
performance standards as set forth in the Agreement; and (iii) the
Administrator agreed to pay the Sub-Administrator $1,500,000 if the
Administrator terminates the Agreement within the first year and $750,000 if the
Administrator terminates the Agreement in the second year.
From March 2, 1998 until June 30, 1998, Investor Services Group served as the
Trust's administrator. Investor Services Group, a Massachusetts corporation,
has its principal offices at
43
<PAGE>
4400 Computer Drive, Westborough, Massachusetts 01581. First Data Corporation
and its subsidiaries and affiliates, including Investor Services Group, are
leading providers of funds evaluation services, trust accounting systems, and
brokerage and information services to financial institutions, institutional
investors, and money managers.
For the fiscal years ended December 31, 1996, 1997, and 1998, the Funds paid the
following administrative fees:
<TABLE>
<CAPTION>
================================================================================
Net Fees Paid
-----------------------------------
Fund 1996 1997 1998
================================================================================
<S> <C> <C> <C>
Treasury Money Market Fund $226,103 $135,486 $187,851
- --------------------------------------------------------------------------------
Government Money Market Fund $336,001 $176,620 $290,086
- --------------------------------------------------------------------------------
Money Market Fund $853,933 $435,763 $738,080
- --------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $254,410 $180,324 $255,157
- --------------------------------------------------------------------------------
Fixed Income Fund $187,707 $201,074 $178,994
- --------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund $100,473 $ 80,456 $ 52,959
- --------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 68,849 $ 59,704 $ 40,804
- --------------------------------------------------------------------------------
International Fixed Income Fund $ 26,364 $ 25,631 $ 18,863
- --------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund * * *
- --------------------------------------------------------------------------------
Value Fund $219,430 $303,868 $313,844
- --------------------------------------------------------------------------------
Growth Fund $135,584 $182,319 $239,987
- --------------------------------------------------------------------------------
Small Cap Growth Fund $ 44,065 $ 59,994 $ 73,133
- --------------------------------------------------------------------------------
Small Cap Value Fund * * $ 2,431
- --------------------------------------------------------------------------------
International Equity Fund $132,965 $145,840 $177,476
- --------------------------------------------------------------------------------
TransEurope Fund * * *
- --------------------------------------------------------------------------------
Asian Tigers Fund $ 46,924 $ 58,960 $ 44,767
- --------------------------------------------------------------------------------
Latin America Equity Fund $ 6,640 $ 38,918 $ 43,181
- --------------------------------------------------------------------------------
Real Estate Fund * $ 12 $ 3,885
- --------------------------------------------------------------------------------
Balanced Fund $ 83,917 $ 99,929 $116,924
================================================================================
</TABLE>
* Not in operation during the period.
THE TRANSFER AGENT
44
<PAGE>
The Trust and First Data Investor Services Group (the "Transfer Agent"), 3200
Horizon Drive, King of Prussia, Pennsylvania 19406-0549, a wholly-owned
subsidiary of First Data Corporation, have entered into a transfer agency
agreement (the "Transfer Agency Agreement") dated May 11, 1998. Under the
Transfer Agency Agreement, the Transfer Agent is entitled to receive fees for
its services, which may be reduced in the event that the Transfer Agent fails to
meet certain performance standards set forth in the Agreement. Under the
Agreement, the Trust agreed to pay the Transfer Agent $1,500,000 if the Trust
terminates the Agreement within the first year and $750,000 if it terminates the
Agreement during the second year.
THE CUSTODIAN
The Chase Manhattan Bank, 270 Park Avenue, New York, New York 10017, acts as
custodian of the Trust. The Custodian holds cash, securities, and other assets
of the Trust as required by the Investment Company Act of 1940.
COUNSEL AND AUDITORS
Morgan, Lewis & Bockius LLP serves as counsel to the Trust. Ernst & Young LLP
serves as the independent auditors of the Trust.
BROKERAGE ALLOCATION AND OTHER PRACTICES
PORTFOLIO TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of trans actions in portfolio securities. Subject to policies
established by the Trustees, the 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, research and the firm's risk in positioning the securities involved.
While the Advisor generally seeks reasonably competitive spreads or commissions,
the Trust will not necessarily be paying the lowest spread or commission
available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded over-the-
counter, but may be traded on an exchange. The Advisor usually deals directly
with the dealers who make a market in the securities, unless 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
45
<PAGE>
The Advisor selects brokers or dealers to execute transactions for the purchase
or sale of portfolio securities on the basis of their judgment of the
professional capability of the brokers or dealers to provide the service. The
primary consideration is to have brokers or dealers execute transactions at best
price and execution. Best price and execution refer to many factors, including
the price paid or received for a security, the commission charged, the
promptness and reliability of execution, the confidentiality and placement
accorded the order and other factors affecting the overall benefit obtained by
the account on the transaction. The Trust's determination of what are reasonably
competitive rates is based upon the professional knowledge of its trading
department as to rates paid and charged for similar transactions throughout the
securities industry. In some instances, the Trust pays a minimal share
transaction cost when the transaction presents no difficulty. Some trades are
made on a net basis where the Trust either buys securities directly from the
dealer or sells them to the dealer. In these instances, there is no direct
commission charged but there is a spread (the difference between the buy and
sell price) which is the equivalent of a commission.
The Trust may allocate out of all commission business generated by all of the
Funds (and any other accounts under management by the Advisor), 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
in connection with their investment decision-making process with respect to one
or more funds and accounts managed by them, and may not be used exclusively with
respect to a fund or account generating the brokerage business.
As provided in the Securities Exchange Act of 1934 (the "1934 Act"), higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-dealers
who provide such brokerage and research services, the Trust believes that the
commissions paid to such broker-dealers are reasonable in relation to the value
of the brokerage and research services provided. In addition, portfolio
transactions which generate commissions or their equivalent may be 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 may place a combined order for two or more accounts or Funds engaged
in the purchase or sale of the same security if, in their judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or Fund. It is believed that an
46
<PAGE>
ability to participate in volume transactions will generally be beneficial to
the accounts and Funds. Although it is recognized that, in some cases, the joint
execution of orders could adversely affect the price or volume of the security
that a particular account or Fund may obtain, it is the opinion of the Advisor
and 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.
The Trust may execute brokerage or other agency transactions through an
affiliate of the Advisor, which is a registered broker-dealer, for commissions
in conformity with the 1940 Act, the 1934 Act and rules promulgated by the SEC.
Under these provisions, an affiliate of the Advisor is permitted to receive and
retain compensation for effecting portfolio transactions for the Trust on an
exchange. These rules further require that commissions paid to the Distributor
by the Trust for exchange transactions not exceed "usual and customary"
brokerage commissions. The rules define "usual and customary" commissions to
include amounts which are "reasonable and fair compared to the commission, fee
or other remuneration received or to be received by other brokers in connection
with comparable transactions involving similar securities being purchased or
sold on a securities exchange during a comparable period of time." In addition,
the Trust may direct commission business to one or more designated broker-
dealers in connection with such broker-dealers' provision of services to the
Trust or payment of certain Trust expenses (e.g., custody, pricing and
professional fees). The Trustees, including those who are not "interested
persons" of the Trust, have adopted procedures for evaluating the reasonableness
of commissions paid to the Distributor and will review these procedures
periodically.
For the fiscal year ended December 31, 1998, 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 Amount
Amount of Brokerage Commissions Effected Affiliates in of Brokerage
Brokerage Commissions Paid to Through Connection Commissions
Fund Commissions Paid to Affiliates in Affiliated with Paid for
Paid in 1998 Affiliates in 1998 Brokers in Repurchase Research
1998 1998 Agreement in 1998
Transactions in
1998
=================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Intermediate $0 $0 0.00% 0.00% $152 $0
Government Fixed
Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed $0 $0 0.00% 0.00% $ 0 $0
Income Fund
- ---------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $0 $0 0.00% 0.00% $587 $0
=================================================================================================================================
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
====================================================================================================================================
% of Total Total
Total $ % of Total of Brokerage Commissions Total $
Total $ Amount of Brokerage Transactions Paid to Amount
Amount of Brokerage Commissions Effected Affiliates in of Brokerage
Brokerage Commissions Paid to Through Connection Commissions
Fund Commissions Paid to Affiliates in Affiliated with Paid for
Paid in 1998 Affiliates in 1998 Brokers in Repurchase Research
1998 1998 Agreement in 1998
Transactions in
1998
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
International Fixed $ 0 $ 0 0.00% 0.00% $ 0 $ 0
Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed * * *
Income Fund * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Value Fund $343,492 $ 0 0.00% 0.00% $ 189 $282,758
- ------------------------------------------------------------------------------------------------------------------------------------
Growth Fund $220,922 $ 0 0.00% 0.00% $ 501 $203,618
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Growth $ 78,745 $ 594 0.80% 0.00% $ 194 $ 67,444
Fund +
- ------------------------------------------------------------------------------------------------------------------------------------
Small Cap Value Fund $ 20,732 $ 0 0% 0.00% $ 0 $ 18,172
- ------------------------------------------------------------------------------------------------------------------------------------
International Equity $262,654 $ 0 0.00% 0.00% $ 0 $209,960
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Asian Tigers Fund $129,623 $ 0 0.00% 0.00% $ 0 $123,434
- ------------------------------------------------------------------------------------------------------------------------------------
TransEurope Fund * * * * * *
- ------------------------------------------------------------------------------------------------------------------------------------
Latin America Equity $157,615 $ 0 0.00% 0.00% $ 0 $ 76,054
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Real Estate Fund $ 8,665 $ 485 6.02% 7.69% $ 45 $ 5,640
- ------------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $ 62,210 $ 0 0.00% 0.00% $ 404 $ 50,879
- ------------------------------------------------------------------------------------------------------------------------------------
Tax-Exempt Money $ 0 $ 0 0.00% 0.00% $ 0 $ 0
Market Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Money Market Fund $ 0 $ 0 0.00% 0.00% $17,895 $ 0
- ------------------------------------------------------------------------------------------------------------------------------------
Treasury Money Market $ 0 $ 0 0.00% 0.00% $ 0 $ 0
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Government Money $ 0 $ 0 0.00% 0.00% $ 6,907 $ 0
Market Fund
====================================================================================================================================
</TABLE>
* Not in operation during the period.
+ Less than 1%.
For the fiscal years ended December 31, 1996 and 1997, Funds paid the following
brokerage fees:
48
<PAGE>
<TABLE>
<CAPTION>
======================================================================================================
Total $ Amount of Brokerage Total $ Amount of Brokerage
Commissions Paid in Commissions Paid to Affiliates in
Fund 1996 1997 1996 1997
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Intermediate Government Fixed $ 0 $ 0 $0 $ 0
Income Fund
- ------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund $ 0 $ 0 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Fixed Income Fund $ 0 $ 0 $0 $ 0
- ------------------------------------------------------------------------------------------------------
International Fixed Income Fund $ 0 $ 0 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income * * * *
Fund
- ------------------------------------------------------------------------------------------------------
Value Fund $185,275 $256,616 $0 $19,358
- ------------------------------------------------------------------------------------------------------
Growth Fund $ 99,324 $135,230 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Small Cap Growth Fund $ 89,340 $ 77,603 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Small Cap Value Fund * * * *
- ------------------------------------------------------------------------------------------------------
International Equity Fund $ 80,851 $134,578 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Asian Tigers Fund $109,083 $178,644 $0 $ 0
- ------------------------------------------------------------------------------------------------------
TransEurope Fund * * * *
- ------------------------------------------------------------------------------------------------------
Latin America Equity Fund $ 38,488 $117,515 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Real Estate Fund * $ 4,285 * $ 0
- ------------------------------------------------------------------------------------------------------
Balanced Fund $ 37,786 $ 47,708 $0 $12,801
- ------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund $ 0 $ 0 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Money Market Fund $ 0 $ 0 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Treasury Money Market Fund $ 0 $ 0 $0 $ 0
- ------------------------------------------------------------------------------------------------------
Government Money Market Fund $ 0 $ 0 $0 $ 0
======================================================================================================
</TABLE>
* Not in operation during the period.
The broker-dealers who execute transactions on behalf of the Funds and who are
affiliates of the Fund's Advisor are brokers in the ABN AMRO International
brokerage network. In addition, the Funds executed brokerage trades through SEI
Financial Services Company, an affiliate of Rembrandt Financial Services Company
and SEI Fund Resources, the Funds' former distributor and administrator,
respectfully.
As of December 31, 1998, the following Funds owned securities of their regular
brokers or dealers, as defined in Rule 10b-1 under the Investment Company Act of
1940, with the following market values:
<TABLE>
<CAPTION>
Fund Broker Dealer Market Value
---- ------------- ------------
<S> <C> <C>
Fixed Income Fund: Paine Webber $ 1,742,175
Balanced Fund: Chase Manhattan $ 639,786
Paine Webber $ 215,268
Bear Sterns $ 310,213
Merrill Lynch Pierce Fenner & Smith $ 300,375
Value Fund: Chase Manhattan $ 5,431,388
Bear Sterns $ 2,182,700
Merrill Lynch Pierce Fenner & Smith $ 2,776,800
Growth Fund: Morgan Stanley Dean Witter $ 1,157,300
Treasury Money Market Fund: Morgan Stanley $ 15,097,949
Prudential Securities $ 18,876,200
Money Market Fund: Merrill Lynch Pierce Fenner & Smith $ 44,847,131
</TABLE>
49
<PAGE>
Except for the Small Cap Growth, Intermediate Government Fixed Income and Fixed
Income Funds, it is expected that the portfolio turnover rate normally will not
exceed 100% for any Fund. A portfolio turnover rate would exceed 100% if all of
its securities exclusive of U.S. Government securities and securities whose
maturities at the time of acquisition are one year or less are replaced in the
period of one year. Turnover rates may vary from year to year and may be
affected by cash requirements and by requirements which enable a Fund to receive
favorable tax treatment. A portfolio turnover rate of 100% or more will result
in higher transaction costs and may result in additional tax consequences for
shareholders. You will find portfolio turnover rates for each Fund (except the
Money Market Funds) in the "Financial Highlights" section of the Prospectus.
DESCRIPTION OF THE TRUST
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
50
<PAGE>
series and would be subject to the liabilities related thereto. Share
certificates representing shares will not be issued.
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.
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.
PURCHASE AND REDEMPTION OF SHARES
It is currently the Trust's policy to pay for all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of securities held by the Funds in
lieu of cash. Shareholders may incur brokerage charges and taxes on the sale of
any such securities so received in payment of redemptions. However, a
shareholder will at all times be entitled to aggregate cash redemptions from all
Funds of the Trust during any 90-day period of up to the lesser of $250,000 or
1% of the Trust's net assets.
Your purchase request may be canceled if the Custodian does not receive federal
funds before net asset value is determined on the next Business Day, and you
could be liable for any fees or expenses incurred by the Trust.
51
<PAGE>
A redemption request submitted by mail must be received by the Transfer Agent in
order to constitute a valid request for redemption. The Transfer Agent may
require that the signature on the written request be guaranteed by a bank which
is a member of the Federal Deposit Insurance Corporation, a trust company,
broker dealer, credit union (if authorized under state law), securities exchange
or association, clearing agency or savings association. This signature guarantee
requirement will be waived if all of the following conditions apply: (1) the
redemption is for $5,000 worth of shares or less, (2) the redemption check is
payable to the shareholder(s) of record, and (3) the redemption check is mailed
to the shareholder(s) at the address of record or to a commercial bank account
previously designated either on the Account Application or by written
instruction to the Transfer Agent.
You may redeem your Money Market Investor Shares by writing checks on your
account. Once you have signed and returned a signature card, you will receive a
supply of checks. A check may be made payable to any person, and your account
will continue to earn dividends until the check clears.
Because of the difficulty of determining in advance the exact value of a Fund
account, you may not use a check to close your account. The checks are free, but
your account 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. If you write a check on your account for an amount below $100,
you will be charged a $5 processing fee.
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.
Neither the Trust nor the Transfer Agent will be responsible for any loss,
liability, cost or expense for acting upon wire instructions or upon telephone
instructions that it reasonably believes to be genuine. The Trust and the
Transfer Agent will each employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, including requiring a form
of personal identification prior to acting upon instructions received by
telephone and recording telephone instructions. If market conditions are
extraordinarily active, or other extraordinary circumstances exist, and a
financial intermediary experiences difficulties placing
52
<PAGE>
redemption orders by telephone, the intermediary may wish to consider placing
the order by other means.
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust, under certain
circumstances, could be held personally liable as partners for the obligations
of the Trust. Even if, however, the Trust were held to be a partnership, the
possibility of shareholders incurring financial loss for that reason appears
remote because the Trust's Declaration of Trust contains an express disclaimer
of 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.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Funds is calculated by adding the value of
securities and other assets, subtracting liabilities and dividing by the total
number of outstanding shares. Although the methodology and procedures are
identical, the net asset value per share of Common Shares and Investor Shares
within the Funds may differ because of the distribution and shareholder
servicing expenses charged to Investor Shares.
The Money Market Funds
Securities of the Treasury Money Market, Government Money Market, Money Market
and Tax-Exempt Money Market Funds will be valued by the amortized cost method,
which involves 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
53
<PAGE>
the extent of deviation, if any, of the Funds' current net asset value per share
calculated using available market quotations from the Funds amortized cost price
per share at such intervals as the Trustees deem appropriate and reasonable in
light of market conditions and periodic reviews of the amount of the deviation
and the methods used to calculate such deviation. In the event that such
deviation exceeds 1/2 of 1%, the Trustees are required to consider promptly what
action, if any, should be initiated, and, if the Trustees believe that the
extent of any deviation may result in material dilution or other unfair results
to shareholders, the Trustees are required to take such corrective action as
they deem appropriate to eliminate or reduce such dilution or unfair results to
the extent reasonably practicable. Such actions may include the sale of
portfolio instruments prior to maturity to realize capital gains or losses or to
shorten average portfolio maturity; withholding dividends; redeeming shares in
kind; or establishing a net asset value per share by using available market
quotations. In addition, if the Funds incur a significant loss or liability, the
Trustees have the authority to reduce pro rata the number of shares of the Funds
in each shareholder's account and to offset each shareholder's pro rata portion
of such loss or liability from the shareholder's accrued but unpaid dividends or
from future dividends while each other Fund must annually distribute at least
90% of its investment company taxable income.
The Equity, Balanced and Fixed Income Funds
The securities of the Equity, Balanced and Fixed Income Funds are valued by the
Administrator pursuant to valuations provided by an independent pricing service.
The pricing service relies primarily on prices of actual market transactions as
well as trader quotations. However, the service may also use a matrix system to
determine valuations of fixed income securities, which system considers such
factors as security prices, yields, maturities, call features, ratings and
developments relating to specific securities in arriving at valuations.
TAXATION
The following is only a summary of certain income tax considerations generally
affecting a Fund and its shareholders, and is not intended as a substitute for
careful tax planning. Shareholders are urged to consult their tax advisers with
specific reference to their own tax situations, including their state and local
income tax liabilities.
Federal Income Tax
All Funds
This discussion of Federal income tax consequences is based on the Internal
Revenue Code of 1986 (the "Code"), and the regulations issued thereunder, in
effect on the date of this Statement of Additional Information. New legislation,
as well as administrative changes or court decisions, may change the conclusions
expressed herein, and may have a retroactive effect with respect to the
transactions contemplated herein. 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
54
<PAGE>
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.
Tax Status of the Funds
Each Fund is treated as a separate entity for Federal income tax purposes and is
not combined with the other Funds. Each Fund intends to qualify for the special
tax treatment afforded regulated investment companies as defined under
Subchapter M of the Code. As long as each Fund qualifies for this special tax
treatment, it will be relieved of Federal income tax on that part of its net
investment income and net capital gains (the excess of net long-term capital
gain over net short-term capital loss) which is distributed to shareholders.
In order to qualify for treatment as a RIC under the Code, each Fund must
distribute annually to its shareholders at least the sum of 90% of its net
investment income excludable from gross income plus 90% of its investment
company taxable income (generally, net investment income plus net short-term
capital gain) (the "Distribution Requirement") and also must meet several
additional requirements. Among these requirements are the following: (a) at
least 90% of a Fund's gross income each taxable year must be derived from
dividends, interest, payments with respect to securities loans, and gains from
the sale or other disposition of stock or securities, or certain other income;
and (b) diversify its holdings so that: (i) at the close of each quarter of a
Fund's taxable year, at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. Government securities, securities of
other RICs and other securities, with such other securities limited, in respect
to any one issuer, to an amount that does not exceed 5% of the value of a Fund's
assets and that does not represent more than 10% of the outstanding voting
securities of such issuer; and (ii) at the close of each quarter of a Fund's
taxable year, not more than 25% of the value of its assets may be invested in
securities (other than U.S. Government securities or the securities of other
RICs) of any one issuer or of two or more issuers which are engaged in the same,
similar or related trades or businesses if the Fund owns at least 20% of the
voting power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital gain
(the excess of net long-term capital gain over net short-term capital loss), a
Fund will be subject to a nondeductible 4% excise tax to the extent it 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.
Tax Status of Distributions
Each Fund will distribute substantially all of its net investment income
(including, for this purpose, net short-term capital gain) to shareholders.
Distributions from net investment income will be taxable to you as ordinary
income whether received in cash or in additional shares. Any
55
<PAGE>
net capital gains will be distributed annually as capital gains and will be
treated as gain from the sale or exchange of capital asset held for more than
one year, regardless of how long 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.
It is possible that a Fund may make a distribution in excess of the Fund's
current and accumulated earnings and profits. Such a "return of capital"
distribution is applied against and reduces the tax basis of your shares. The
excess of a return of capital distribution over the tax basis of your shares is
treated as gain from a sale of exchange of the shares.
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. A Fund will be required to include as part of its current income the
imputed interest on such obligations even though the Fund has not received any
interest payments on such obligations during that period. Because each Fund
distributes substantially all of its net investment income to shareholders, a
Fund may have to sell portfolio securities to distribute such income, which may
occur at a time when the Advisor would not have chosen to sell such securities
and which may result in a taxable gain or loss.
Income received on U.S. obligations is exempt from tax at the state level when
received directly by a Fund and may be exempt, depending on the state, when
received by you as income dividends from the Fund, provided certain state-
specific conditions are satisfied. Each Fund will inform you annually of the
percentage of income and distributions derived from U.S. obligations. You should
consult your tax advisor to determine whether any portion of the income
dividends received from a Fund is considered tax exempt in your particular
state.
Dividends declared by a Fund in October, November or December of any year and
payable to shareholders of record on a date in that month will be deemed to have
been paid by the Fund and received by shareholders on December 31 of that year,
if paid by the Fund at any time during the following January.
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 one year,
and short-term if for a year or less. If shares on which a net capital gain
distribution has been received are subsequently sold or redeemed, and such
shares have been held for six months or less, any loss recognized by a
shareholder will be treated as long-term capital loss to the extent of the long-
term capital gain distributions.
If for any taxable year a Fund does not qualify as a RIC, all of its taxable
income will be subject to tax at regular corporate rates without any deduction
for distributions to shareholders. In such case, distributions (including
capital gains distributions) will be taxable as ordinary dividends to the extent
of the Fund's current and accumulated earnings and profits.
56
<PAGE>
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.
A Fund may sell securities short "against the box." Under certain circumstances,
these transactions may be treated as constructive sales, resulting in the
recognition of gain to the Fund.
Tax-Exempt Funds
Interest on indebtedness incurred by a shareholder in order to purchase or carry
shares in the Tax-Exempt Fixed Income Fund or Tax-Exempt Money Market Fund (the
"Tax-Exempt Funds") is generally not deductible for federal income tax purposes
to the extent that the Fund distributes exempt-interest dividends during the
taxable year. If a shareholder receives exempt-interest dividends with respect
to any share of these Funds and if such share is held by the shareholder for six
months or less, then any loss on the sale or exchange of such share will be
disallowed to the extent of the amount of exempt-interest dividends. In
addition, the Code may require a shareholder who receives exempt-interest
dividends to treat as taxable income a portion of certain social security and
railroad retirement benefit payments. Furthermore, entities or persons who are
"substantial users" (or persons related to "substantial users") of facilities
financed by "private activity bonds" or certain industrial development bonds
should consult their tax advisers before purchasing shares in the Tax-Exempt
Funds. For these purposes, the term "substantial user" is defined generally to
include a "non-exempt person" who regularly uses in trade or business a part of
a facility financed from the proceeds of such bonds. Moreover, some or all of
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 foreign corporate shareholder's
federal "branch profits" tax liability, and an S corporation shareholder's
federal excess "passive investment income."
Shareholders of the Tax-Exempt Funds should consult their tax advisers to
determine whether any portion of the income dividends received from such Funds
is considered tax exempt in their particular states.
Issuers of bonds purchased by the Tax-Exempt Funds (or the beneficiary of such
bonds) may have made certain representations or covenants in connection with the
issuance of such bonds to satisfy certain requirements of the Code that must be
satisfied subsequent to the issuance of such bonds. Shareholders should be aware
that exempt-interest dividends may become subject to federal income taxation
retroactively to the date of issuance of the bonds to which such dividends are
attributable if such representations are determined to have been inaccurate or
if the issuers (or the beneficiary) of the bonds fail to comply with certain
covenants made at that time.
57
<PAGE>
Current federal income tax laws limit the types and volume of bonds qualifying
for the federal income tax exemption of interest, which may have an effect on
the ability of the Tax-Exempt Funds to purchase sufficient amounts of tax-exempt
securities to satisfy the Code's requirements for the payment of "exempt
interest dividends."
Equity and Balanced Funds
Subject to certain restrictions, a dividends-received deduction is available to
corporations that receive dividends from domestic corporations. Income dividends
paid by an Equity or Balanced Fund will be eligible for the dividends-received
deduction for corporate shareholders (subject to the same restrictions) to the
extent they are derived from dividends from domestic corporations and to the
extent that the respective security has been held for at least three months.
Shareholders will be advised each year of the portion of ordinary income
dividends eligible for the deduction. Individual shareholders are not entitled
to the dividends received deduction regardless of which fund paid the dividend.
Dividends received from other funds, e.g., Money Market or Fixed Income Funds,
will not be eligible for the dividends-received deduction. Distributions of net
capital gains from any Fund do not qualify for the dividends received deduction.
State Taxes
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Funds
to shareholders and the ownership of shares may be subject to state and local
taxes. 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
58
<PAGE>
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. 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.
GENERAL INFORMATION ABOUT FUND PERFORMANCE
The Equity, Balanced and Fixed Income Funds
From time to time, the Funds may advertise yield and total return. These figures
will be based on historical earnings and are not intended to indicate future
performance. The 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 Market Funds
From time to time a Fund may advertise its current yield and 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 the 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
59
<PAGE>
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 measure 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 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 1998 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 shareholder services expenses
charges to Investor Shares.
COMPUTATION OF YIELD
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<PAGE>
From time to time the Treasury Money Market Fund, Government Money Market Fund,
Money Market Fund and Tax-Exempt Money Market Fund advertise their current yield
and effective compound yield. Both yield figures are based on historical
earnings and are not intended to indicate future performance. The yield of
the Funds refers to the income generated by an investment in a Fund over a
seven-day period (which period will be stated in the advertisement). This
income is then "annualized." That is, the amount of income generated by the
investment during that week is assumed to be generated each week over a 52-week
period and is shown as a percentage of the investment. The effective yield is
calculated similarly but, when annualized, the income earned by an investment in
a Fund is assumed to be reinvested. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed reinvestment.
The current yield of the Funds will be calculated daily based upon the seven
days ending on the date of calculation ("base period"). The yield is computed
by determining the net change (exclusive of 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, 1998, the end of the Trust's most
recent fiscal year, the Money Market Funds' current, effective and tax-
equivalent yields were as follows:
61
<PAGE>
<TABLE>
<CAPTION>
======================================================================================
7-Day Tax-
7-Day Tax- Equivalent
Equivalent Effective
7-Day Yield at a Yield at a
Effective tax rate tax rate of
Fund Class 7-Day Yield Yield of 39.6% 39.6%
======================================================================================
<S> <C> <C> <C> <C> <C>
Treasury Money Common 4.40% 4.49% N/A N/A
-----------------------------------------------------------------
Market Fund Investor 4.15% 4.23% N/A N/A
- --------------------------------------------------------------------------------------
Government Money Common 4.75% 4.87% N/A N/A
-----------------------------------------------------------------
Market Fund Investor 4.44% 4.54% N/A N/A
- --------------------------------------------------------------------------------------
Common 4.90% 5.02% N/A N/A
Money Market Fund -----------------------------------------------------------------
Investor 4.54% 4.64% N/A N/A
- --------------------------------------------------------------------------------------
Tax-Exempt Money Common 3.24% 3.29% 5.36% 5.45%
-----------------------------------------------------------------
Market Fund Investor 2.99% 3.04% 4.95% 5.03%
======================================================================================
N/A Not Applicable
</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 Growth Fund, Small Cap Value 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, 1998, the yield for the following
Funds were:
<TABLE>
<CAPTION>
===================================================================
Fund Class 30-Day Yield
===================================================================
<S> <C> <C>
Common 4.82%
Fixed Income Fund ----------------------
Investor 4.32%
- -------------------------------------------------------------------
Common 4.47%
Intermediate Government Fixed Income Fund ----------------------
Investor 3.97%
- -------------------------------------------------------------------
Common 3.31%
Tax-Exempt Fixed Income Fund ----------------------
Investor 2.81%
- -------------------------------------------------------------------
</TABLE>
62
<PAGE>
<TABLE>
<CAPTION>
============================================================
Fund Class 30-Day Yield
============================================================
<S> <C> <C>
Common 2.39%
International Fixed Income Fund ----------------------
Investor 1.89%
- ------------------------------------------------------------
Common 4.34%
Real Estate Fund ---------------------
Investor 3.84%
============================================================
</TABLE>
* Not in operation at the end of the period.
CALCULATION OF TOTAL RETURN
From time to time, the Value Fund, Growth Fund, Small Cap Growth Fund, Small Cap
Value Fund, International Equity Fund, TransEurope Fund, Asian Tigers Fund,
Latin America Equity Fund, Fixed Income Fund, Intermediate Government Fixed
Income Fund, Tax-Exempt Fixed Income Fund, International Fixed Income Fund,
Limited Volatility Fixed Income Fund, Balanced Fund and Real Estate Fund may
advertise total return. The total return of a Fund refers to the average
compounded rate of return to a hypothetical investment for designated time
periods (including but not limited to, the period from which the Fund commenced
operations through the specified date), assuming that the entire investment is
redeemed at the end of each period. In particular, total return will be
calculated according to the following formula: P (1+T)/n/ = ERV, where P = a
hypothetical initial payment of $1,000; T = average annual total return; n =
number of years; and ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the designated time period as of the end of
such period.
Based on the foregoing, the average annual total return for the Funds from
commencement of operations through December 31, 1998, and for the one and three
year periods ended December 31, 1998, were as follows:
63
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
Average Annual Total Return
----------------------------------
One Five Ten Since
Fund Class Year Year Year Inception
=================================================================================================================
<S> <C> <C> <C> <C> <C>
Treasury Money Market Fund Investor/1#/ 4.64% 4.44% * 4.15%
---------------------------------------------------------------------
Common/2/ 4.90% 4.71% * 4.35%
- -----------------------------------------------------------------------------------------------------------------
Government Money Market Fund Investor/3#/ 4.91% 4.75% * 4.50%
---------------------------------------------------------------------
Common/2/ 5.24% 5.03% * 4.69%
- -----------------------------------------------------------------------------------------------------------------
Money Market Fund Investor/4#/ 4.97% 4.81% * 4.54%
---------------------------------------------------------------------
Common/2/ 5.33% 5.10% * 4.75%
- -----------------------------------------------------------------------------------------------------------------
Tax-Exempt Money Market Fund Investor/5#/ 2.96% 2.88% * 2.72%
---------------------------------------------------------------------
Common/2/ 3.21% 3.14% * 2.95%
- -----------------------------------------------------------------------------------------------------------------
Fixed Income Fund Investor/6/ 6.81% 6.25% * 6.37%
---------------------------------------------------------------------
Common/2/ 7.13% 6.50% * 7.06%
- -----------------------------------------------------------------------------------------------------------------
Intermediate Government Fixed Income Fund Investor/7/ 7.56% 5.67% * 5.38%
---------------------------------------------------------------------
Common/2/ 8.16% 5.99% * 6.00%
- -----------------------------------------------------------------------------------------------------------------
Tax-Exempt Fixed Income Fund Investor/8/ 5.31% 5.23% * 5.26%
---------------------------------------------------------------------
Common/2/ 5.79% 5.55% * 6.05%
- -----------------------------------------------------------------------------------------------------------------
International Fixed Income Fund Investor/9/ 14.84% 5.58% * 5.61%
---------------------------------------------------------------------
Common/10/ 15.15% 5.85% * 7.42%
- -----------------------------------------------------------------------------------------------------------------
Limited Volatility Fixed Income Fund Investor * * * *
---------------------------------------------------------------------
Common * * * *
- -----------------------------------------------------------------------------------------------------------------
Balanced Fund Investor/8/ 9.72% 12.36% * 11.16%
---------------------------------------------------------------------
Common/2/ 9.97% 12.63% * 11.81%
- -----------------------------------------------------------------------------------------------------------------
Value Fund Investor/11/ 4.66% 16.56% * 14.55%
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE>
<TABLE>
<CAPTION>
==================================================================================================
Average Annual Total Return
-----------------------------------
One Five Ten Since
Fund Class Year Year Year Inception
==================================================================================================
<S> <C> <C> <C> <C> <C>
Common/2/ 5.47% 16.96% * 15.20%
- --------------------------------------------------------------------------------------------------
Growth Fund Investor/12/ 29.52% 20.03% * 17.03%
---------------------------------------------------------------------
Common/2/ 30.23% 20.43% * 17.74%
- --------------------------------------------------------------------------------------------------
Small Cap Growth Fund Investor/7/ (7.25)% 9.46% * 9.60%
---------------------------------------------------------------------
Common/2/ (6.52)% 9.89% * 8.69%
- --------------------------------------------------------------------------------------------------
Small Cap Value Fund Investor/18/ * * * (14.59)%
---------------------------------------------------------------------
Common/18/ * * * (12.74)%
- --------------------------------------------------------------------------------------------------
International Equity Fund Investor/7/ 24.87% 10.90% * 12.25%
---------------------------------------------------------------------
Common/2/ 25.43% 11.21% * 13.61%
- --------------------------------------------------------------------------------------------------
Asian Tigers Fund Investor/13/ (11.89)% * * (7.57)%
---------------------------------------------------------------------
Common/14/ (11.37)% * * (7.19)%
- --------------------------------------------------------------------------------------------------
Latin America Equity Fund Investor * * * *
---------------------------------------------------------------------
Common/15/ (36.33)% * * (4.82)%
- --------------------------------------------------------------------------------------------------
TransEurope Fund Investor * * * *
---------------------------------------------------------------------
Common * * * *
- --------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
<TABLE>
<CAPTION>
==============================================================================================
Average Annual Total Return
----------------------------------
One Five Ten Since
Fund Class Year Year Year Inception
==============================================================================================
<S> <C> <C> <C> <C> <C>
Real Estate Fund Investor/16/ * * * *
------------------------------------------------------------------
Common/17/ (12.35)% * * (12.35)%
==============================================================================================
</TABLE>
* Not in operation during the period.
_______________
/1/ Commenced operations 3/25/93 /9/ Commenced operations 4/26/93
/2/ Commenced operations 1/4/93 /10/ Commenced operations 2/7/93
/3/ Commenced operations 4/22/93 /11/ Commenced operations 3/26/93
/4/ Commenced operations 3/31/93 /12/ Commenced operations 3/8/93
/5/ Commenced operations 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 10/8/98
/17/ Commenced operations 12/31/97
/18/ Commenced Operations 6/30/98
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.
FINANCIAL STATEMENTS
The Trust's financial statements for the fiscal year ended December 31, 1998,
including notes thereto and the report of Ernst & Young LLP are herein
incorporated by reference from the Trust's annual report.
66
<PAGE>
APPENDIX
Ratings
NRSROs provide ratings for certain instruments in which the Funds may invest.
For example, bonds rated in the fourth highest rating category (investment grade
bonds) have an adequate capacity to pay principal and interest, but may have
speculative characteristics as well. The quality standards of debt securities
and other obligations as described for the Funds must be satisfied at the time
an investment is made. In the event that an investment held by a Fund is
assigned a lower rating or ceases to be rated, the Advisor will promptly
reassess whether such security presents suitable credit risks and whether the
Fund should continue to hold the security or obligation in its portfolio. If a
portfolio security or obligation no longer presents suitable credit risks or is
in default, the Fund will dispose of the security or obligation as soon as
reasonably practicable unless the Trustees of the Trust determine that to do so
is not in the best interest of the Fund. The Funds may invest in unrated
securities that the Advisor determines to be of comparable quality at the time
of purchase.
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
A-1
<PAGE>
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.
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 consi-
A-2
<PAGE>
dered adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Debt rated Baa is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Bonds rated AAA by Fitch are judged by Fitch to be strictly high grade, broadly
marketable, suitable for investment by trustees and fiduciary institutions
liable to but slight market fluctuation other than through changes in the money
rate. The prime feature of an AAA bond is a showing of earnings several times or
many times interest requirements, with such stability of applicable earnings
that safety 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. Capa-
A-3
<PAGE>
city 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-4
<PAGE>
ABN AMRO FUNDS
(formerly, the "Rembrandt Funds")
PART C: OTHER INFORMATION
Post Effective Amendment No. 18
<TABLE>
<CAPTION>
Item 23. Exhibits
<C> <S>
a(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.
a(2) 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.
a(3) Amendment dated April 27, 1998 to Registrant's Agreement and
Declaration of Trust is incorporated by reference to Exhibit 1(b)
Post-Effective Amendment No. 16, filed June 30, 1998.
b(1) 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.
b(2) Registrant's restated By-Laws as of March 11, 1998 are
incorporated by reference to Exhibit 2 Post-Effective Amendment
No. 16, filed June 30, 1998.
b(3) Amendment to Registrant's By-Laws is incorporated by reference to
Exhibit 2(a) Post-Effective Amendment No. 16, filed June 30,
1997.
c Not applicable.
d(1) 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.
d(2) Form of Amendment to Schedule A to Investment Advisory Agreement
dated December 31, 1992 is incorporated by reference to Exhibit
5(a) Post-Effective Amendment No. 16, filed June 30, 1998.
d(3) 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.
e(1) 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.
e(2) Distribution Agreement between the Registrant and First Data
Distributors, Inc. dated February 26, 1998 is incorporated by
reference to Exhibit 6(a) Post-Effective Amendment No. 15, filed
April 28, 1998.
e(3) Form of Amendment to Schedule A to the Distribution Agreement
dated February 26, 1998 is incorporated by reference to Exhibit
6(a) incorporated by reference to Exhibit 6(a) Post-Effective
Amendment No. 16, filed June 30, 1998.
f Not applicable.
g(1) 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.
g(2) Sub-Custodian Agreement between CoreStates Bank, N.A. and
Barclays Bank PLC as filed as Exhibit 8(a)(1) to Post-Effective
Amendment No. 6 to Registrant's Registration Statement on
Form N-1A (File No. 33-52784), filed with the Securities and
Exchange Commission on January 13, 1995.
</TABLE>
-2-
<PAGE>
<TABLE>
<C> <S>
g(3) Transfer Agency Agreement between the Registrant and Supervised
Service Company as filed as Exhibit 8(c) to Post-Effective
Amendment No. 4 to Registrant's Registration Statement on
Form N-1A (File No. 33-52784) filed with the Securities and
Exchange Commission on April 1, 1994.
g(4) Form of Amendment to Exhibit 1 the Transfer Agency and Services
Agreement dated February 26, 1998 is incorporated by reference to
Exhibit 8(c) Post-Effective Amendment No. 16, filed June 30,
1998.
g(5) Custodian Agreement between the Registrant and The Chase
Manhattan Bank to be filed by amendment.
h(1) Transfer Agency and Services Agreement dated February 26, 1998
between the Registrant and First Data Investor Services Group,
Inc. is incorporated by reference to Exhibit 8(b) Post-Effective
Amendment No. 16, filed June 30, 1998.
h(2) 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.
h(3) 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.
h(4) 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.
h(5) Administration Agreement between the Registrant and First Data
Investor Services Group, Inc., is incorporated by reference to
Exhibit 9(c) Post-Effective Amendment No. 15, filed April 28,
1998.
h(6) Form of Shareholder Servicing Agent Agreement between the
Registrant and First Data Distributors, Inc. is incorporated by
reference to Exhibit 9(a) Post-Effective Amendment No. 16, filed
June 30, 1998.
h(7) Shareholder Service Plan is incorporated by reference to Exhibit
9(b) Post-Effective Amendment No. 16, filed June 30, 1998.
h(8) Administration and Fund Accounting Agreement between the
Registrant and ABN AMRO Fund Services, Inc., is incorporated by
reference to Exhibit h(8) Post-Effective Amendment No. 17, filed
March 1, 1999.
h(9) Sub-Administration and Fund Accounting Agreement between First
Data Investor Services Group, Inc. and ABN AMRO Fund Services,
Inc., is incorporated by reference to Exhibit h(9) Post-Effective
Amendment No. 17, filed March 1, 1999.
h(10) Contractual Advisory Agreement between Registrant and ABN AMRO
Asset Management (USA) Inc. dated March 30, 1999 is filed
herewith.
h(11) Contractual Administrative Agreement between Registrant and ABN
AMRO Fund Services, Inc. dated March 30, 1999 is filed herewith.
i 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.
j Consent of Independent Auditors, Ernst & Young LLP, is filed
herewith.
k Not applicable.
l Not applicable.
m(1) 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.
m(2) Distribution Plan - Investor Class between the Registrant and
First Data Distributors, Inc. as of February 26, 1998 is
incorporated by reference to Exhibit 15(a) Post-Effective
Amendment No. 15, filed April 26, 1998.
m(3) Form of Purchase Agreement between the Registrant and First Data
Distributors, Inc. is incorporated by reference to Exhibit 13
Post-Effective Amendment No. 16, filed June 30, 1998.
n Financial Data Schedules are filed herewith.
</TABLE>
-3-
<PAGE>
<TABLE>
<C> <S>
o 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.
p Powers of Attorney are incorporated by reference to Exhibit 24
Post-Effective Amendment No. 13, filed April 16, 1998.
</TABLE>
Item 24. Persons Controlled by or under Common Control with Registrant:
See the Prospectuses and Statement of Additional Information regarding the
Trust's control relationships.
Item 25. 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 26. Business and Other Connections of Investment Advisor.
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------- -------------
<S> <C> <C>
John M. Kramer ABN AMRO Incorporated Secretary, General Counsel
Director Senior Vice President
ABN AMRO Capital Markets Holding, Inc. Secretary
ABN AMRO Acceptance Corporation Director & Secretary
ABN AMRO Commodity Finance, Inc. Director & Secretary
ABN AMRO Funding Corporation Secretary
ABN AMRO Funds Services, Inc. Director
ABN AMRO Mezzanine Management, Inc. Director & Secretary
ABN AMRO Mezzanine Management II, Inc. Director & Secretary
ABN AMRO Mortgage Corporation Secretary
ABN AMRO Sage Corporation Secretary
Bluestone Private Equity Management, Inc. Director & Secretary
Jackson LaSalle Investment Services, Inc. Director & Secretary
Wilbert Thiel ABN AMRO Incorporated President, CEO
Director Director
Securities Industry Association Director
SIA-Central States District
Executive Committee Chairman
Lutheran Social Services of Illinois Director & Officer
Chicago Area Council of the Boy Scouts
of America Director
Dexter Tong ABN AMRO Incorporated Senior Vice President
Treasurer
Jon T. Ender None
Executive Vice President
Richard A. Frodsham None
Executive Vice President
Dennis P. Sheehan None
Executive Vice President
Johannes N.A. Specker ABN AMRO Bank N.V. Senior Vice President
Group Senior Vice President
George J. Baxter None
Senior Vice President
Gregory D. Boal LaSalle National Bank Vice President
Senior Vice President
Lawrence J. Brottman None
Senior Vice President
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Connection with
with Investment Advisor Other Company Other Company
- ----------------------- ------------- ---------------
<S> <C> <C>
Edwin M. Bruere None
Senior Vice President
A. Wade Buckles LaSalle National Bank First Vice President &
Senior Vice President Assistant Secretary
Brian L. Burda None
Senior Vice President
Richard C. Butler None
Senior Vice President
Annette C. Calderwood None
Senior Vice President
Jac A. Cerney LaSalle National Bank Vice President &
Senior Vice President Assistant Secretary
A. Keith Dibble LaSalle National Bank Vice President &
Senior Vice President Assistant Secretary
Nancy J. Holland None
Senior Vice President
Mark Karstrom LaSalle National Bank Vice President &
Senior Vice President Assistant Secretary
Steven P. Klimkowski None
Senior Vice President
Susan E. Lorsch None
Senior Vice President
Kathryn L. Martin None
Senior Vice President
George S. McElroy, Jr. None
Senior Vice President
Thomas F. McGrath LaSalle National Bank Senior Vice President &
Senior Vice President Assistant Secretary
Scott Moore None
Senior Vice President
Mark T. Morgan LaSalle National Bank Assistant Vice President &
Senior Vice President Assistant Secretary
Steve Smith None
Senior Vice President
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------- -------------
<S> <C> <C>
Daniel Strumphler None
Senior Vice President
Karen L. Van Cleave LaSalle National Bank Vice President &
Senior Vice President Assistant Secretary
Michael Wasson None
Senior Vice President
Peter Williams None
Senior Vice President
Todd Youngberg None
Senior Vice President
James J. Baudendistel None
Vice President
Alisa L. Castillo None
Vice President
Michael T. Castino None
Vice President
Brett M. Detterbeck None
Vice President
Martin L. Eisenberg ABN AMRO Bank N.V. Vice President
Vice President ABN AMRO Capital Markets Holding, Inc. Vice President
ABN AMRO Incorporated Vice President
ABN AMRO Mortgage Corp. 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 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 Credit Corp. Vice President
ABN AMRO Investment Services, Inc. Vice President
ABN AMRO Leasing, 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
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------- -------------
<S> <C> <C>
LaSalle Financial Services, Inc. Vice President
LaSalle Home Mortgage Corporation Vice President
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 National Association Vice President
LaSalle National Bancorp, Inc. Vice President
Amsterdam Pacific Corporation Vice President
LaSalle Trade Services Limited Vice President
CNBC Bancorp, Inc. Vice President
ChiCorp. Commodity Finance, Inc. Vice President
ChiCorp. Commodities, Inc. Vice President
Bluestone Private Equity Management, Inc. Vice President
Columbia Financial Services, Inc. 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
ABN AMRO Fund Services Vice President
LaSalle National Bank Vice President
LaSalle Distributors, Inc. Vice President
LaSalle Community Development 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
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------- -------------
<S> <C> <C>
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
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
Huntington Bay Development Corp. Vice President
Plaza Homes Inc. (Metrofund) Vice President
LSR Realty Inc. Vice President
Beckman Hospitality Corp. Vice President
Bennett 143 Corp. Vice President
Birch Locust Valley Corp. Vice President
Broadhollow 532 Melville Corporation Vice President
Colony at Sayerville, Corp. Vice President
Corners Estate at Hauppauge Inc. Vice President
Corona 114 Apartments Inc. Vice President
Country Knolls at Manorville Inc. Vice President
Cove Townhouses at Southold Inc. Vice President
Crystal Domiciles Inc. Vice President
Eastern Shores at Northampton Corp. Vice President
Forestwood at North Hills Inc. Vice President
Garden State Convention Center at Somerest
County, Inc. Vice President
Half Acre on 347 at Nesoonsat Inc. Vice President
Horse Race Lane at Nissequogue 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 Front Land Corp Vice President
Lattingtown Mansion, Inc. Vice President
Lowell Acquisition Corp. Vice President
Ludlow Development Corp. Vice President
Maspeth 56-25 58th Street Corp. Vice President
Metro Case Corp. Vice President
Montauk Hospitality Corp. Vice President
Montauk YC Corp. Vice President
Moreland Hauppauge Corp. Vice President
North Hills Links Corp. Vice President
Parkway Plaza 1400 Corp. Vice President
Plaza Boulevard Equities Corp. Vice President
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Name of Other Connection with
with Investment Advisor Company Other Company
- ----------------------- ------- -------------
<S> <C> <C>
Plaza Boulevard Properties Corp. Vice President
Plaza Uniondale Properties, Inc. Vice President
Remington Ronkonkoma Corp. Vice President
Rendezvous Realty Corp. Vice President
SE at Commack Inc. Vice President
SE at Commack II Inc. Vice President
SE at Commack III Inc. Vice President
SE at Commack IV Inc. Vice President
Scholar Estates at Commack Inc. Vice President
Seaman Shares at Inwood Corp. Vice President
Showcase Estates at Dix Hills Inc. 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
T E at Dix Hills Inc. Vice President
T E at Dix Hills II Inc. Vice President
T E at Dix Hills III Inc. Vice President
Thornwood Estates at Dix Hills Inc. 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
Ziegfeld Villas Corp. Vice President
41 East Sunrise Highway Corporation Vice President
55 Commerce, Inc. Vice President
(Sold to EMI 1/20/92)
Seventh Street Development Corp. Vice President
Fourteenth Street Development Corp. Vice President
West 51st Street Development Corp. Vice President
West 73rd Street Development Corp. Vice President
Lemark Land in Setauket, Inc. Vice President
Ludlow Street Development Corp. Vice President
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
Nancy A. Ellefson LaSalle National Bank Assistant Vice President &
Vice President Assistant Secretary
Frank Germack None
Vice President
Frank J. Haggerty None
Vice President
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Connection with
with Investment Advisor Name of Other Company Other Company
- ----------------------- -------------------------------------- ---------------
<S> <C> <C>
Ann H. Heffron None
Vice President
Brian R. Keeley None
Vice President
Tom Lennox None
Vice President
Phillip P. Mierzwa LaSalle National Bank Trust Officer &
Vice President Assistant Secretary
Kurt Moeller None
Vice President
Michelle Montgomery None
Vice President
Mary E. Ras None
Vice President
Kenneth Tyszko None
Vice President
Bridget Vogenthaler None
Vice President
Ann Weis None
Vice President
Robert Bennett None
Assistant Vice President
Christine Dragon None
Assistant Vice President
Anthony P. Ford None
Assistant Vice President
Timothy Kelly None
Assistant Vice President
Laurie Lynch None
Assistant Vice President
Alan Mason LaSalle National Bank Trust Officer &
Assistant Vice President Assistant Secretary
Kathleen McClure None
Assistant Vice President
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
Name and Position Connection with
with Investment Advisor Name of Other Company Other Company
- ----------------------- -------------------------------------- ---------------
<S> <C> <C>
Patrick O'Hare None
Assistant Vice President
Shelly Paulger None
Assistant Vice President
Marc Peirce None
Assistant Vice President
Monica Kim Phillips None
Assistant Vice President
Marcia Roth None
Assistant Vice President
Susan M. Wiemeler None
Assistant Vice President
Edmund Zelko None
Assistant Vice President
Wiepke Postna ABN AMRO NSM International Funds
Portfolio Manager Management B.V. Director
ABN AMRO Bank N.V. Vice President
Jaap Bettink ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
Willem Ploeger ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
Theo Maas ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
A.A. Pals-de Groot ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
Edward Moolenburgh ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
Luigi Leo ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
Edward Niehoff ABN AMRO Bank N.V. Vice President
Portfolio Manager Portfolio Manager
Theodoor Maters ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
Wouter Wesland ABN AMRO NSM International Funds
Portfolio Manager Management B.V. Portfolio Manager
ABN AMRO Bank N.V. Vice President
Portfolio Manager
Chris Huys ABN AMRO Bank N.V. Vice President
Portfolio Manager Portfolio Manager
Catherina Hooyman ABN AMRO Bank N.V. Portfolio Manager
Portfolio Manager
Kim Guan Ng ABN AMRO NSM International Funds
Portfolio Manager Management B.V. Portfolio Manager
ABN AMRO Asset Management (Asia) Ltd. Managing Director
Vice President
Chi Keung Leung ABN AMRO Asset Management (Asia) Ltd. Senior Portfolio Manager
Portfolio Manager Vice President
Lester Yiu-Cheong Poon ABN AMRO Asset Management (Asia) Ltd. Portfolio Manager
Portfolio Manager Vice President
Paritosh Thakore ABN AMRO Asset Management (Asia) Ltd. Portfolio Manager
Portfolio Manager Vice President
Hak Kau Lung ABN AMRO Asset Management (Asia) Ltd. Portfolio Manager
Portfolio Manager Vice President
Shing On Kwang ABN AMRO Asset Management (Asia) Ltd. Portfolio Manager
Portfolio Manager
</TABLE>
Item 27. Principal Underwriters:
-11-
<PAGE>
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing the securities of
the Registrant also acts as a principal underwriter, distributor or
investment adviser.
First Data Distributors, Inc. (the "Distributor"), a wholly-owned
subsidiary of First Data Investor Services Group, Inc. and an indirect
wholly-owned subsidiary of First Data Corporation, acts as Distributor
for ABN AMRO Funds pursuant to a distribution agreement dated February
26, 1998. The Distributor also acts as underwriter for BT Insurance
Funds Trust, Alleghany Funds, First Choice Funds Trust, Forward Funds,
Inc., Galaxy Fund II, The Galaxy VIP Fund, IAA Trust Asset Allocation
Fund, Inc., IAA Trust Growth Fund, Inc., IAA Trust Tax Exempt Bond
Fund, Inc., IAA Trust Taxable Fixed Income Series Fund, Inc., IBJ
Funds Trust, ICM Series Trust, Light Index Fund, Inc., LKCM Funds,
Matthews International Funds, McM Funds, Metropolitan West Funds,
Panorama Trust, RWB/WPG U.S. Large Stock Fund, Smith Breeden Series
Fund, Smith Breeden Trust, Stratton Growth Fund, Inc., Stratton
Monthly Dividend REIT Shares, Inc., The Galaxy Fund, The Govett Funds,
Inc., The Potomac Funds, The Stratton Funds, Inc., Tomorrow Funds
Retirement Trust, Trainer, Wortham First Mutual Funds, Undiscovered
Managers Funds, Weiss, Peck & Greer Funds Trust, Weiss, Peck & Greer
International Fund, Wilshire Target Funds, Inc., Worldwide Index
Funds, WPG Growth Fund, WPG Growth and Income Fund and WPG Tudor Fund.
The Distributor is registered with the Securities and Exchange
Commission as a broker-dealer and is a member of the National
Association of Securities Dealers, Inc.
(b) The information required by this Item 27(b) with respect to each
First director, officer, or partner of Data Distributors, Inc. is
incorporated by reference to Schedule A of Form BD filed by First Data
Distributors, Inc. with the Securities and Exchange Commission
pursuant to the Securities Act of 1934 (file no. 8-45467).
(c) Not applicable.
Item 28. Location of Accounts and Records
All accounts, books and other documents required to be maintained by the
Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules thereunder will be maintained by the offices of:
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
ABN AMRO Asset Management (USA) Inc.
208 South LaSalle Street
Chicago, Illinois 60604
-12-
<PAGE>
First Data Investor Services Group, Inc.
101 Federal Street
Boston, Massachusetts 02110
First Data Investor Services Group, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19406
Item 29. There are no management-related service contracts not discussed in
Parts A and B.
Item 30. Undertakings: None.
-13-
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for ABN AMRO Funds (formerly
The Rembrandt Funds, The LSNT Funds and The Passport Funds) is on file with the
Secretary of State of The Commonwealth of Massachusetts and notice is hereby
given that this Registration Statement has been executed on behalf of the Trust
by an officer of the Trust as an officer and by its Trustees as trustees and not
individually and the obligations of or arising out of this Registration
Statement are not binding upon any of the Trustees, officers, or Shareholders
individually but are binding only upon the assets and property of the Trust.
-14-
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this Registration Statement
pursuant to rule 485(b) under the Securities Act of 1933 and has duly caused
this Post-Effective Amendment No. 18 to Registration Statement No. 33-52784 to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, Commonwealth of Massachusetts, on the 4th of May 1999.
ABN AMRO Funds
By: /s/Richard A. Frodsham
---------------------------------------------
Richard A. Frodsham
Executive Vice 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.
<TABLE>
<CAPTION>
<S> <C> <C>
* Trustee May 4, 1999
- -----------------------
Arnold F. Brookstone
* Trustee May 4, 1999
- -----------------------
William T. Simpson
* Trustee May 4, 1999
- -----------------------
Robert Feitler
/s/Richard A. Frodsham Executive Vice President May 4, 1999
- -----------------------
Richard A. Frodsham
/s/Michael C. Kardok Treasurer May 4, 1999
- -----------------------
Michael C. Kardok
</TABLE>
*By: /s/Coleen D. Dinneen
-------------------------------------
Coleen D. Dinneen, Attorney-in-Fact
-15-
<PAGE>
EXHIBIT INDEX
h(10) Contractual Advisory Agreement between the Registrant and ABN AMRO Asset
Management (USA) Inc., dated March 30, 1999 is filed herewith.
h(11) Contractual Administrative Agreement between the Registrant and ABN AMRO
Fund Services, Inc., dated March 30, 1999 is filed herewith.
j Consent of Independent Auditors, Ernst & Young LLP, is filed herewith.
<PAGE>
Exhibit h(10)
Contractual Advisory Fee Waiver
AGREEMENT made this 30th day of March, 1999, by and between the ABN AMRO Funds,
a Massachusetts business trust (the "Trust"), and ABN AMRO Asset Management
(USA) Inc. (the "Adviser").
The Adviser hereby agrees to limit the total advisory fees at the following
levels for a period of one year from the date of this Agreement for each of the
following funds:
Fund Total Advisory Fees
- ---- -------------------
Real Estate Fund .70%
Fixed Income Fund .50%
Intermediate Government Fixed Income Fund .50%
Tax-Exempt Fixed Income Fund .50%
Limited Volatility Fixed Income Fund .50%
Treasury Money Market Fund .20%
Money Market Fund .20%
Tax-Exempt Money Market Fund .20%
This Agreement shall be renewable at the end of each one year period for an
additional one year period upon the written agreement of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
ABN AMRO FUNDS ABN AMRO Asset management (USA) Inc.
By: /s/ Michael T. Castino By: /s/ Steven A. Smith
----------------------------- --------------------------
Attest: /s/ Steven A. Smith Attest: /s/ Michael T. Castino
------------------------- --------------------------
20
<PAGE>
Exhibit h(11)
Contractual Administrative Fee Waiver
AGREEMENT made this 30th day of March, 1999, by and between the ABN AMRO Funds,
a Massachusetts business trust (the "Trust"), and ABN AMRO Fund Services, Inc.
(the "Administrator").
The Administrator hereby agrees to limit the total administrative fees at the
following levels for a period of one year from the date of this Agreement for
each of the following funds:
Fund Total Administrative Fees
Treasury Money Market Fund .07%
Government Money Market Fund .07%
Money Market Fund .07%
Tax-Exempt Money Market Fund .07%
Fixed Income Fund .10%
Intermediate Government Fixed Income Fund .10%
Tax-Exempt Fixed Income Fund .10%
International Fixed Income Fund .10%
Real Estate Fund .07%
Small Cap Value Fund .07%
This Agreement shall be renewable at the end of each one year period for an
additional one year period upon the written agreement of the parties hereto.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
as of the day and year first written above.
ABN AMRO FUNDS ABN AMRO Fund Services, Inc.
By: /s/ Michael T. Castino By: /s/ Steven A. Smith
------------------------ -------------------------
Attest: /s/ Steven A. Smith Attest: /s/ Michael T. Castino
--------------------- -----------------------
<PAGE>
(j)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the references to our firm under the captions "Financial
Highlights" in the Prospectuses and "Counsel and Auditors" and "Financial
Statements" in the Statement of Additional Information and to the incorporation
by reference, in Post-Effective Amendment Number 18 to the Registration
Statement (Form N-1A No. 33-52784) and related Prospectuses of ABN AMRO Funds,
of our report dated February 12, 1999 on the Treasury Money Market Fund,
Government Money Market Fund, Money Market Fund, Tax-Exempt Money Market Fund,
Fixed Income Fund, Intermediate Government Fixed Income Fund, Tax-Exempt Fixed
Income Fund, International Fixed Income Fund, Balanced Fund, Value Fund, Growth
Fund, International Equity Fund, Small Cap Growth Fund, Real Estate Fund, Asian
Tigers Fund, Latin America Equity Fund, and Small Cap Value Fund, each a
portfolio of ABN AMRO Funds.
/s/ ERNST & YOUNG LLP
Boston, Massachusetts
April 26, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000892567
<NAME> ABN-AMRO
<SERIES>
<NUMBER> 010
<NAME> FIXED INCOME COMMON
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 170,622
<INVESTMENTS-AT-VALUE> 172,688
<RECEIVABLES> 2,038
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,729
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,540
<TOTAL-LIABILITIES> 2,540
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 170,012
<SHARES-COMMON-STOCK> 16,579
<SHARES-COMMON-PRIOR> 13,635
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 109
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,066
<NET-ASSETS> 172,189
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 10,241
<OTHER-INCOME> 0
<EXPENSES-NET> 1,200
<NET-INVESTMENT-INCOME> 9,041
<REALIZED-GAINS-CURRENT> 2,974
<APPREC-INCREASE-CURRENT> (798)
<NET-CHANGE-FROM-OPS> 11,217
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (9,325)
<DISTRIBUTIONS-OF-GAINS> (2,080)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 52,981
<NUMBER-OF-SHARES-REDEEMED> (24,774)
<SHARES-REINVESTED> 2,615
<NET-CHANGE-IN-ASSETS> 30,613
<ACCUMULATED-NII-PRIOR> 11
<ACCUMULATED-GAINS-PRIOR> (482)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,000
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,438
<AVERAGE-NET-ASSETS> 166,216
<PER-SHARE-NAV-BEGIN> 10.35
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.16
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> (0.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000892567
<NAME> ABN-AMRO
<SERIES>
<NUMBER> 011
<NAME> FIXED INCOME INVESTOR
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 170,622
<INVESTMENTS-AT-VALUE> 172,688
<RECEIVABLES> 2,038
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 174,729
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2,540
<TOTAL-LIABILITIES> 2,540
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 170,012
<SHARES-COMMON-STOCK> 42
<SHARES-COMMON-PRIOR> 41
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 109
<OVERDISTRIBUTION-GAINS> 0
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<NAME> ABN-AMRO
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<NAME> VALUE INVESTOR
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<PAGE>
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<NAME> GROWTH FUND COMMON SHARES
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<S> <C>
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<PAGE>
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<NAME> GROWTH FUND INVESTOR SHARES
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<S> <C>
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<PAGE>
<ARTICLE> 6
<SERIES>
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<NAME> SMALL CAP GROWTH FUND COMMON SHARES
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<S> <C>
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<PERIOD-END> DEC-31-1998
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<PAGE>
<ARTICLE> 6
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<NAME> SMALL CAP GROWTH FUND INVESTOR SHARES
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<S> <C>
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<NAME> INTERNATIONAL EQUITY COMMON
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<NAME> INTERNATIONAL EQUITY INVESTOR
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<NAME> ASIAN TIGERS FUND COMMON SHARES
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<NAME> ASIAN TIGERS FUND INVESTOR SHARES
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<PAGE>
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<NAME> REAL ESTATE FUND COMMON SHARES
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<S> <C>
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<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 182
<NAME> REAL ESTATE FUND INVESTOR SHARES
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 191
<NAME> SMALL CAP VALUE FUND COMMON SHARES
<MULTIPLIER> 1000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
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<PAGE>
<ARTICLE> 6
<SERIES>
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<NAME> SMALL CAP VALUE FUND INVESTOR SHARES
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
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