<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 16, 1999
1933 Act File No. 33-69460
1940 Act File No. 811-8046
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 20 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 22 /X/
(Check appropriate box or boxes)
BERGER INVESTMENT PORTFOLIO TRUST
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
210 University Boulevard, Suite 900, Denver, Colorado 80206
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (303) 329-0200
---------------------------
Gerard M. Lavin, 210 University Boulevard, Suite 900, Denver, Co 80206
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after this
post-effective amendment becomes effective.
It is proposed that this filing will become effective: (check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/X/ 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest of the
-------------------------------------------
Berger Information Technology Fund - Investor Shares and Institutional Shares
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This amendment to the Registration Statement of the Berger Investment
Portfolio Trust contains the following:
Two Prospectuses:
One for the Berger Information Technology Fund - Investor Shares class
One for the Berger Information Technology Fund - Institutional Shares class
Two Statements of Additional Information:
One for the Berger Information Technology Fund - Investor Shares class
One for the Berger Information Technology Fund - Institutional Shares class
One Part C
This amendment does not contain a Prospectus or Statement of Additional
Information for, nor affect any Prospectus or Statement of Additional
Information covering, these other series of the Berger Investment Portfolio
Trust: Berger Small Company Growth Fund, Berger New Generation Fund, Berger
Balanced Fund, Berger Select Fund, Berger Mid Cap Growth Fund or Berger Mid Cap
Value Fund.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED _______, 1999
BERGER FUNDS PROSPECTUS
[Nature photo]
BERGER INFORMATION TECHNOLOGY FUND
INVESTOR SHARES
___________________, 1999
The Securities and Exchange Commission has not approved or disapproved any
shares offered in this prospectus or determined whether this prospectus is
accurate or complete. Anyone who tells you otherwise is committing a crime.
Page 1
<PAGE>
Contents
THE BERGER FUNDS-Registered Trademark- are a no-load family of mutual funds.
A mutual fund pools money from shareholders and invests in a portfolio of
securities. The following section introduces the Berger Information Technology
Fund, its goal, principal investment strategies and principal risks. It also
contains expense and performance information.
BERGER INFORMATION TECHNOLOGY FUND-TM- - INVESTOR SHARES PAGE
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS PAGE
Risk and Investment Table PAGE
Risk and Investment Glossary PAGE
BUYING SHARES PAGE
SELLING (REDEEMING) SHARES PAGE
Exchanging Shares PAGE
Signature Guarantees/Special Documentation PAGE
Your Share Price PAGE
Other Information About Your Account PAGE
Distributions and Taxes PAGE
Tax-Sheltered Retirement Plans PAGE
ORGANIZATION OF THE FUND
Investment Managers PAGE
12b-1 Arrangements PAGE
Special Fund Structure PAGE
FINANCIAL HIGHLIGHTS FOR THE FUND PAGE
THE BERGER FUNDS and THE BERGER MOUNTAIN LOGO are registered trademarks of
Berger Associates, Inc.; BERGER INFORMATION TECHNOLOGY FUND is a trademark of
Berger Associates, Inc.; and other marks referred to herein are the trademarks
or registered trademarks of the respective owners thereof.
Page 2
<PAGE>
BERGER INFORMATION TECHNOLOGY FUND [nature photo]
INVESTOR SHARES
Ticker Symbol: [________]
[icon-profile of head with stock ticker tape in background]
THE FUND'S GOAL AND PRINCIPAL INVESTMENT STRATEGIES
The Fund aims for capital appreciation. In pursuing its goal, the Fund invests
at least 80% of its assets in common stocks of companies in the information
technology group of industries, such as software, hardware, computer consulting
services, communications and Internet services and products. The Fund's
investment manager analyzes trends in information technology spending and
demand, then identifies companies it believes are best positioned to benefit
from those trends. The Fund generally invests the remainder of its assets in
information technology-related companies whose stock price the investment
manager believes is undervalued relative to their assets, earnings, cash flow or
business franchise.
The Fund's investment manager generally looks for companies:
- - That dominate their industries or a particular market segment
- - That have or are developing products or services that represent significant
technological advancements or improvements
- - That have strong fundamentals, strong management and strong product
positioning.
The Fund primarily invests in common stocks. The Fund is free to invest in
companies of any size market capitalization. The Fund's investment manager will
generally sell a security when it no longer meets the manager's investment
criteria or when it has met the manager's expectations for appreciation.
[icon-left facing profile of head with lightening bolt; right facing profile of
head with sunshine]
PRINCIPAL RISKS
You may be interested in the Fund if you are comfortable with above-average risk
and intend to make a long-term investment commitment. Like all managed funds,
there is a risk that the investment manager's strategy for managing the Fund may
not achieve the desired results. In addition, the price of common stock moves
up and down in response to corporate earnings and developments, economic and
market conditions and anticipated events. As a result, the price of the Fund's
investments may go down and you could lose money on your investment.
Given the Fund's concentration in industries that are rapidly changing, its
share price may fluctuate more than that of funds invested in more stable
industries. Companies in the information technology industries may have narrow
product lines and their products and services are often subject to intense
competition and rapid obsolescence.
Because the Fund's investments are focused in the information technology sector,
the Fund is more susceptible to adverse events and market pressures impacting
the industries included in that sector.
See "Investment Techniques, Securities and Associated Risks" later in this
prospectus for more information on principal risks and other risks.
Page 3
<PAGE>
[icon-profile of head with scrolled paper in background]
THE FUND'S PAST PERFORMANCE
The information below shows the Fund's total return for the only full calendar
year since it began operations on April 8, 1997. These returns include
reinvestment of all dividends and capital gains distributions and reflect Fund
expenses. As with all mutual funds, past performance does not guarantee future
results.
TOTAL RETURN FROM DECEMBER 31, 1997 THROUGH DECEMBER 31, 1998(1)
60% 62.72%
50%
40%
30%
20%
10%
0%
Best quarter: 12/31/98 39.31%
Worst quarter: 9/30/98 -9.95%
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1998
Average annual total return is a measure of the Fund's performance over time.
The Fund's average annual return is compared with the Wilshire 5000 Index
(Wilshire 5000). While the Fund does not seek to match the returns of the
Wilshire 5000, this index is an indicator of general stock market performance.
You may not invest in the Wilshire 5000 and unlike the Fund, it does not incur
fees or charges.
1 Year Life of the Fund
(April 8, 1997)
The Fund 62.72%(1) 56.39%(1)
Wilshire 5000 21.72% 25.97%
1. Fund returns are from periods prior to the adoption of share classes on
[________________], 1999, and therefore do not include the 0.25% 12b-1 fee which
has been paid by the Investor Shares since the inception of the class on that
date.
Page 4
<PAGE>
[icon-two coins]
FUND EXPENSES
As a shareholder in the Fund, you do not pay any sales charges, but you do bear
indirectly Annual Fund Operating Expenses, which vary from year to year.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fee (as a percentage of amount redeemed or 1%
exchanged if shares held less than 6 months)
Exchange Fee* None
ANNUAL FUND OPERATING EXPENSES
(deducted directly from the Fund)
Management fee .90%
Distribution (12b-1) fee .25%
Other expenses(1) .74%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.89%(2)
* The 1% redemption fee referenced in the table will be imposed on shares
exchanged if held less than 6 months, since an exchange is treated as a
redemption followed by a purchase.
1. "Other expenses" are based on estimated expenses and asset growth for the
first full year of operations of the Investor Shares class and include
transfer agency fees, shareholder report expenses, registration fees and
custodian fees.
2. Total Fund Operating Expenses may exceed the estimated 1.89% before the end
of the first full year of operations, including at the end of the Fund's
partial fiscal year on September 30, 1999, although they will not exceed
2.00%, since the Fund's investment advisor has agreed to waive its fee or
reimburse the Fund for expenses to the extent that, at any time during the
life of the Fund, the annual operating expenses for the Investor Shares
class exceed 2.00%.
UNDERSTANDING EXPENSES
Annual Fund operating expenses are paid by the Fund. As a result, they reduce
the Fund's return. Fund expenses include management fees, 12b-1 fees and
administrative costs such as shareholder recordkeeping and reports, custodian
and pricing services and registration fees.
EXAMPLE COSTS
The following example helps you compare the cost of investing in the Fund to the
cost of investing in other mutual funds by showing what your costs may be over
time. It uses the same assumptions that other funds use in their prospectuses:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain the same for each period
- - Redemption after the end of each period
Your actual costs may be higher or lower, so this example should be used for
comparison only. Based on these assumptions your costs at the end of each
period would be:
<TABLE>
<CAPTION>
Years $
- --------------------
<S> <C>
One $192
Three $594
</TABLE>
Like all mutual funds, an investment in the Fund is not a bank deposit and is
not insured or guaranteed by the FDIC or any other government agency. The Fund
is not a complete investment program, but may serve to diversify other types of
investments in your portfolio.
Page 5
<PAGE>
There is no guarantee that the Fund will meet its investment goals, and although
you have the potential to make money, you could also lose money in the Fund.
Page 6
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS
- --------------------------------------------------------------------------------
RISK AND INVESTMENT TABLE
- --------------------------------------------------------------------------------
BERGER INFORMATION
TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<S> <C>
DIVERSIFICATION *
- --------------------------------------------------------------------------------
SECTOR FOCUS [Y]
MARKET AND LIQUIDITY RISK
- --------------------------------------------------------------------------------
SMALL AND MID-SIZED COMPANY SECURITIES Y
MARKET, LIQUIDITY AND INFORMATION RISK
- --------------------------------------------------------------------------------
FOREIGN SECURITIES Y
MARKET, CURRENCY, TRANSACTION, LIQUIDITY, INFORMATION
AND POLITICAL RISK
- --------------------------------------------------------------------------------
CONVERTIBLE SECURITIES(1) Y
MARKET, INTEREST RATE AND CREDIT RISK
- --------------------------------------------------------------------------------
INVESTMENT GRADE BONDS (NONCONVERTIBLE) Y
INTEREST RATE, MARKET AND CREDIT RISK
- --------------------------------------------------------------------------------
COMPANIES WITH LIMITED OPERATING HISTORIES Y
MARKET, LIQUIDITY AND INFORMATION RISK
- --------------------------------------------------------------------------------
ILLIQUID AND RESTRICTED SECURITIES 15
MARKET, LIQUIDITY AND TRANSACTION RISK
- --------------------------------------------------------------------------------
SPECIAL SITUATIONS Y
MARKET AND INFORMATION RISK
- --------------------------------------------------------------------------------
TEMPORARY DEFENSIVE MEASURES N
OPPORTUNITY RISK
- --------------------------------------------------------------------------------
BORROWING 25A*
LEVERAGE RISK
- --------------------------------------------------------------------------------
HEDGING STRATEGIES
- --------------------------------------------------------------------------------
FINANCIAL FUTURES(2) 5
HEDGING, CORRELATION, OPPORTUNITY AND LEVERAGE RISK
- --------------------------------------------------------------------------------
FORWARD FOREIGN CURRENCY CONTRACTS(2) Y
HEDGING, CREDIT, CORRELATION, OPPORTUNITY AND LEVERAGE RISK
- --------------------------------------------------------------------------------
OPTIONS(2) 5
(EXCHANGE-TRADED AND OVER-THE-COUNTER)
HEDGING, CREDIT, CORRELATION AND LEVERAGE RISK
- --------------------------------------------------------------------------------
WRITING (SELLING) COVERED CALL OPTIONS(2) 25A
(EXCHANGE-TRADED AND OVER-THE-COUNTER)
OPPORTUNITY, CREDIT AND LEVERAGE RISK
- --------------------------------------------------------------------------------
</TABLE>
Page 7
<PAGE>
BEFORE YOU INVEST . . .
in the Fund, make sure you understand the risks involved. All investments
involve risk. Generally, the greater the risk, the greater the potential for
return. The reverse is also generally true, the lower the risk, the lower the
potential for return.
LIKE ALL MUTUAL FUNDS, AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS
NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER GOVERNMENT AGENCY. THE FUND
IS NOT A COMPLETE INVESTMENT PROGRAM, BUT MAY SERVE TO DIVERSIFY OTHER TYPES OF
INVESTMENTS IN YOUR PORTFOLIO. THERE IS NO GUARANTEE THAT THE FUND WILL MEET
ITS INVESTMENT GOAL, AND ALTHOUGH YOU HAVE THE POTENTIAL TO MAKE MONEY, YOU
COULD ALSO LOSE MONEY BY INVESTING IN THE FUND.
The table on the opposite page will help you further understand the risks the
Fund takes by investing in certain securities and the investment techniques used
by the Fund. A glossary follows this page. You may get more detailed
information about the risks of investing in the Fund in the Statement of
Additional Information (SAI), including a discussion of debt security ratings in
Appendix A to the SAI.
KEY TO TABLE
Follow down the columns under the name of the Fund. The boxes will tell you:
[Y] Yes, the security or technique is permitted by the Fund and is emphasized
by the Fund.
Y Yes, the security or technique is permitted by the Fund.
N No, the security or technique is not permitted by the Fund.
* The restriction is fundamental to the Fund. (Fundamental restrictions
cannot be changed without a shareholder vote.)
25A Use of a security or technique is permitted, but subject to a restriction
of up to 25% of total assets.
5 Use of a security or technique is permitted, but subject to a restriction
of up to 5% of net assets.
15 Use of a security or technique is permitted, but subject to a restriction
of up to 15% of net assets.
NOTES TO TABLE
1. The Fund has no minimum quality standards for convertible securities,
although it will not invest in defaulted securities. It also will not
invest 20% or more of its assets in convertible securities rated below
investment grade or in unrated convertible securities that the sub-advisor
considers to be below investment grade.
2. The Fund may use futures, forwards and options only for hedging. Not more
than 5% of the Fund's net assets may be used for initial margins for
futures and premiums for options, although the Fund may have more at risk
under these contracts than the initial margin or premium. However, the
Fund's aggregate obligations under these contracts may not exceed the total
market value of the assets being hedged, such as some or all of the value
of the Fund's equity securities.
Page 8
<PAGE>
RISK AND INVESTMENT GLOSSARY
BORROWING refers to a loan of money from a bank or other financial institution
undertaken by the Fund for temporary or emergency reasons only.
COMMON STOCK is a share of ownership (equity) interest in a company.
COMPANIES WITH LIMITED OPERATING HISTORIES are securities issued by companies
that have been in continuous operation for less than three years. Sometimes
called "unseasoned" issuers.
CONVERTIBLE SECURITIES are debt or equity securities which may be converted on
specified terms into stock of the issuer.
CORRELATION RISK occurs when the Fund "hedges" - uses one investment to offset
the Fund's position in another. If the two investments do not behave in
relation to one another the way Fund managers expect them to, then unexpected
results may occur.
CREDIT RISK means that the issuer of a security or the counterparty to an
investment contact may default or become unable to pay its obligations when due.
CURRENCY RISK happens when the Fund buys or sells a security denominated in
foreign currency. Foreign currencies "float" in value against the U.S. dollar.
Adverse changes in foreign currency value can cause investment losses when the
Fund's investments are converted to U.S. dollars.
DIVERSIFICATION means a diversified fund may not, with respect to at least 75%
of its assets, invest more than 5% in the securities of one company. A
nondiversified fund may be more volatile than a diversified fund because it
invests more of its assets in a smaller number of companies and the gains or
losses on a single stock will therefore have a greater impact on the fund's
share price. The Fund is a diversified fund.
FINANCIAL FUTURES are exchange-traded contracts on securities, securities
indexes or foreign currencies that obligate the holder to take or make future
delivery of a specified quantity of those underlying securities or currencies on
a predetermined future date.
FOREIGN SECURITIES are issued by companies located outside of the United States.
The Fund considers a company to be located outside the United States if the
principal securities trading market for its equity securities is located outside
the U.S. or it is organized under the laws of, and has a principal office in, a
country other than the U.S.
FORWARD FOREIGN CURRENCY CONTRACTS are privately negotiated contracts committing
the holder to purchase or sell a specified quantity of a foreign currency on a
predetermined future date.
HEDGING RISK comes into play when the Fund uses a security whose value is based
on an underlying security or index to "offset" the Fund's position in another
security or currency. The objective of hedging is to offset potential losses in
one security with gains in the hedge. But a hedge can eliminate or reduce gains
as well as offset losses. (Also see "Correlation risk.")
ILLIQUID AND RESTRICTED SECURITIES are securities which, by rules of their issue
or by their nature, cannot be sold readily. These include illiquid Rule 144A
securities.
INFORMATION RISK means that information about a security or issuer might not be
available, complete, accurate or comparable.
INTEREST RATE RISK is the risk that changes in interest rates will adversely
affect the value of an investor's securities. When interest rates rise, the
value of fixed-income securities will generally fall. Conversely, a drop in
interest rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities are subject to greater interest rate risk.
INVESTMENT GRADE BONDS are rated BBB (STANDARD & POOR'S) or Baa (MOODY'S) or
above. Bonds rated below investment grade are subject to greater credit risk
than investment grade bonds.
LEVERAGE RISK occurs in some securities or techniques that tend to magnify the
effect of small changes in an index or a market. This can result in a loss that
exceeds the amount that was invested in the contract.
LIQUIDITY RISK occurs when investments cannot be sold readily. The Fund may
have to accept a less-than-desirable price to complete the sale of an illiquid
security or may not be able to sell it at all.
MARKET CAPITALIZATION is the total current market value of a company's
outstanding common stock.
MARKET RISK exists in all mutual funds and means the risk that the prices of
securities in a market, a sector, or an industry will fluctuate, and that such
movements might reduce an investment's value.
Page 9
<PAGE>
OPPORTUNITY RISK means missing out on an investment opportunity because the
assets necessary to take advantage of it are committed to less advantageous
investments or strategies.
OPTIONS are contracts giving the holder the right but not the obligation to
purchase or sell a security on or before a predetermined future date for a fixed
price. Options on securities indexes are similar, but settle in cash.
POLITICAL RISK comes into play with investments, particularly foreign
investments, which may be adversely affected by nationalization, taxation, war,
government instability or other economic or political actions or factors.
SECTOR FOCUS occurs when a significant portion of the Fund's assets are invested
in a relatively small number of related industries. The Fund will not
concentrate more than 25% of its total assets in any one industry. Sector focus
may increase both market and liquidity risk.
SMALL AND MID-SIZED COMPANY SECURITIES are securities issued by small or
mid-sized companies, as measured by their market capitalization. The market
capitalization range targeted by funds investing in small or mid-sized companies
varies by fund. In general, the smaller the company, the greater its risks.
SPECIAL SITUATIONS are companies about to undergo a structural, financial or
management change which may significantly affect the value of their securities.
TEMPORARY DEFENSIVE MEASURES increase a fund's investment in government
securities and other short-term securities when warranted due to market
conditions, without regard to the fund's investment restrictions, policies or
normal investment emphasis. The Fund's investment manager does not intend to
use this technique in the management of the Fund, but rather intends for the
Fund to remain as fully invested as possible at all times.
TRANSACTION RISK means that the Fund may be delayed or unable to settle a
transaction or that commissions and settlement expenses may be higher than
usual.
WRITING (SELLING) COVERED CALL OPTIONS is the selling of a contract to another
party which gives them the right but not the obligation to buy a particular
security from you. The Fund will write call options only if it already owns the
security (if it is "covered").
Page 10
<PAGE>
BUYING SHARES
[SIDEBAR BOX]
SEND NEW ACCOUNT APPLICATIONS TO
Berger Funds
P.O. Box 419958
Kansas City, MO 64141
OR FOR OVERNIGHT, CERTIFIED OR REGISTERED MAIL ONLY
Berger Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
[SIDEBAR TABLE]
MINIMUM INITIAL INVESTMENTS:
- Regular investment $2,000
- Low Minimum Investment Plan $ 100
MINIMUM SUBSEQUENT INVESTMENTS:
- Regular investment $ 50
- Automatic investment $ 50
- Low Minimum Investment Plan
(required monthly automatic
investments) $ 100
BY MAIL
Read this prospectus.
Fill out the application if you are opening a new account.
Make out a check to BERGER FUNDS for the amount you want to invest.
Send the application and a check to the Berger Funds in the envelope
provided.
To add to an existing account, be sure to include your account number on
your check and mail it to the appropriate address above.
BY TELEPHONE
If you already have a Berger Funds account, you may purchase additional
shares by telephone order.
You must pay for them within three business days by wire, electronic funds
transfer or overnight delivery of a check.
Call (800) 551-5849 for current wire or electronic funds transfer
instructions.
Page 11
<PAGE>
BY ONLINE ACCESS
If you have established a Berger Funds account with electronic funds
transfer privileges, you may purchase additional shares via online access.
You will find us online at www.bergerfunds.com.
BY SYSTEMATIC INVESTMENT PLAN
To automatically purchase more shares on a regular basis for a regular
minimum or Low Minimum Investment Plan account, fill out the Systematic
Investment Plan section of the application. Investments are transferred
automatically from your bank account.
The Low Minimum Investment Plan is designed for investors who would like to
begin a regular investment program but are reluctant to commit to higher
lump sum initial investments. In order to qualify for the Low Minimum
Investment Plan, an investor MUST commit to automatic monthly investments
totaling no less than $100 per month per account. Automatic monthly
investments must be made until the value of each account opened under the
Plan is at least $2,000 or the account will be assessed a $25 charge each
December.
ALL SHAREHOLDERS ARE AUTOMATICALLY GRANTED TELEPHONE AND ONLINE TRANSACTION
PRIVILEGES UNLESS THEY DECLINE THEM EXPLICITLY IN WRITING, EITHER ON THE
ACCOUNT APPLICATION OR BY WRITING TO THE BERGER FUNDS AT THE ADDRESS ABOVE.
YOU MAY GIVE UP SOME LEVEL OF SECURITY BY CHOOSING TO BUY AND SELL SHARES
BY TELEPHONE OR ONLINE RATHER THAN BY MAIL.
IMPORTANT NOTES ABOUT PAYING FOR YOUR SHARES
Your check must be made payable to BERGER FUNDS.
You may NOT purchase shares by cash, credit card, third-party checks or
checks drawn on foreign banks.
Telephone and online purchase orders may not exceed four times the value of
an account on the date the order is placed. Shares previously bought by
telephone or online access are included in calculating account size only if
payment has been received for those shares.
Orders not paid for on time will be canceled and shares will be redeemed
from your account to compensate for any decline in price of the shares
canceled.
The Fund reserves the right to reject any order and to waive minimums or
increase minimums following notice.
Page 12
<PAGE>
SELLING (REDEEMING) SHARES
BY MAIL
Send a written request indicating your account number and the dollar amount
or number of shares you are redeeming to the appropriate address shown
under "Buying Shares."
Your request must be signed by each registered shareholder, with the
signature(s) appearing exactly as they do on your account registration.
BY TELEPHONE
Call (800) 551-5849.
BY ONLINE ACCESS
You will find us online at www.bergerfunds.com.
FOR LIMITATIONS ON TELEPHONE AND ONLINE REDEMPTIONS SEE "SIGNATURE
GUARANTEES/SPECIAL DOCUMENTATION" BELOW.
TELEPHONE AND ONLINE REDEMPTIONS ARE NOT AVAILABLE FOR SHARES HELD IN
RETIREMENT ACCOUNTS SPONSORED BY THE FUND.
BY SYSTEMATIC WITHDRAWAL PLAN
Shares may be redeemed automatically ($50 minimum) monthly, quarterly,
semi-annually or annually.
A systematic withdrawal plan may be established if you own shares in the
Fund worth at least $5,000.
Call (800) 551-5849 for more information and forms.
IMPORTANT NOTES ABOUT PAYMENT FOR YOUR REDEEMED SHARES
IN TIMES OF EXTREME ECONOMIC OR MARKET CONDITIONS, TRANSACTIONS BY
TELEPHONE OR ONLINE MAY BE DIFFICULT.
The Fund is intended as a long-term investment, and not as a short-term
trading vehicle. Therefore, the Fund will deduct a 1% redemption fee from
your redemption proceeds if you redeem Fund shares held less than 6 months.
This fee is intended to discourage investors from short-term trading of
Fund shares and to offset the cost to the Fund of excess brokerage and
other costs incurred as a result of such trading. This fee will not be
charged to retirement plan accounts or in the case of redemptions resulting
from the death of the shareholder.
Generally, payment for your redeemed shares will be sent to you within
three business days after receipt of your redemption request in good order.
Page 13
<PAGE>
You may receive payment for redeemed shares via wire or electronic funds
transfer. You may elect these services on the account application or send
to the Berger Funds a written request providing your bank information with
your signature guaranteed. (See "Signature Guarantees/Special
Documentation" below.)
Wire and electronic funds transfers are subject to a $1,000 minimum and
$100,000 maximum.
You will be charged $10 if you request a wire transfer. There is no charge
for an electronic funds transfer.
A wire transfer will be sent the next business day after receipt of your
order, and an electronic funds transfer will be sent the second business
day after receipt of your order.
Proceeds from the redemption of shares purchased by check may be delayed
until full payment for the shares has been received and cleared, which may
take up to 15 days from the purchase date.
INFORMATION ABOUT YOUR ACCOUNT
EXCHANGING SHARES
Shares of the Fund described in this prospectus may be exchanged for shares of
any other Berger Fund or for shares in the Berger Cash Account Trust Portfolios
(the Berger CAT Portfolios). The Berger CAT Portfolios are three separately
managed, unaffiliated money market funds: the Money Market Portfolio, the
Government Securities Portfolio and the Tax-Exempt Portfolio.
The exchange privilege with the Berger CAT Portfolios does not constitute an
offering or recommendation of the shares of these portfolios by the Berger Funds
or Berger Associates. Berger Associates is compensated for administrative
services it performs with respect to the Berger CAT Portfolios.
When exchanging shares:
- - Each account must be registered identically -- have the same signatures and
addresses.
- - Each Fund or Berger CAT Portfolio must be legally eligible for sale in your
state of residence.
- - You may exchange out of the Berger Funds up to four times per calendar
year. At this time, there is no limit on the number of exchanges permitted
out of the Berger CAT Portfolios.
- - You may exchange by telephone, online access or mail.
- - You are responsible for obtaining and reading the prospectus for the Fund
or Berger CAT Portfolio into which you are exchanging.
- - Exchanges result in the sale of one Fund's shares and the purchase of
another, normally resulting in a taxable event for you.
Page 14
<PAGE>
- - It may take one business day or more for your money from a redemption of
Fund shares to be invested in a Berger CAT Portfolio.
- - Exchanges into any new Fund or Berger CAT Portfolio are subject to that
Fund's or Portfolio's initial and subsequent investment minimums.
- - The Fund will deduct a 1% redemption fee from the amount you exchange if
you exchange Fund shares held less than 6 months. This fee is intended to
discourage investors from short-term trading of Fund shares and to offset
the cost to the Fund of excess brokerage and other costs incurred as a
result of such trading. This fee will not be charged to retirement plan
accounts.
The Fund may terminate or modify the exchange privilege in the future.
SIGNATURE GUARANTEES/SPECIAL DOCUMENTATION
The Fund uses Signature Guarantees to protect you and the Fund from possible
fraudulent requests for redeemed shares. Your redemption request must be in
writing and accompanied by a Signature Guarantee if:
- - Your request exceeds $100,000.
- - You request that payment be made to a name other than the one on your
account registration.
- - You request that payment be mailed to an address which has been changed
within 30 days of your redemption request or to an address other than the
one of record.
- - You change or add information relating to your designated bank.
The Berger Funds reserve the right to require Signature Guarantees under other
certain circumstances.
You can get a Signature Guarantee from most broker-dealers, national or state
banks, credit unions, federal savings and loan associations or other eligible
institutions. YOU CANNOT OBTAIN A SIGNATURE GUARANTEE FROM A NOTARY PUBLIC.
Make sure the Signature Guarantee appears:
- - Together with the signature(s) of all registered owner(s) of the redeemed
shares on the written redemption request.
- - On any share certificates you hold for the redeemed shares or on a separate
statement of assignment (stock power) which may be obtained from a bank or
broker.
Additional documents are required for redemptions by corporations, executors,
administrators, trustees and guardians. For instructions, call (800) 551-5849
or write to the Berger Funds, P.O. Box 419958, Kansas City, MO 64141.
Page 15
<PAGE>
YOUR SHARE PRICE
The price at which you buy, sell or exchange Fund shares is the share price or
net asset value (NAV). The share price for the Investor Shares of the Fund is
determined by adding the Investor Shares' pro rata portion of the total value of
the Fund's investments, cash and other assets, deducting the Investor Shares'
pro rata portion of the Fund's liabilities and the liabilities attributable
directly to the Investor Shares, and then dividing that value by the total
number of the Investor Shares outstanding. Share price is calculated separately
for each class of Fund shares.
The Fund's share price is calculated at the close of the regular trading session
of the New York Stock Exchange (normally 4:00 p.m. New York time) each day that
the Exchange is open. Share price is not calculated on the days that the
Exchange is closed.
FOR A PURCHASE, REDEMPTION OR EXCHANGE OF FUND SHARES, YOUR PRICE IS THE SHARE
PRICE NEXT CALCULATED AFTER YOUR REQUEST IS RECEIVED IN GOOD ORDER AND ACCEPTED
BY THE FUND, ITS AUTHORIZED AGENT OR DESIGNEE. TO RECEIVE A SPECIFIC DAY'S
PRICE, YOUR REQUEST MUST BE RECEIVED BEFORE THE CLOSE OF THE NEW YORK STOCK
EXCHANGE ON THAT DAY.
When the Fund calculates its share price, it values the securities it holds at
market value. Sometimes market quotes for some securities are not available or
are not representative of market value. Examples would be when events occur
that materially affect the value of a security at a time when the security is
not trading or when the securities are illiquid. In that case, securities may
be valued in good faith at fair value, using consistently applied procedures
decided on by the trustees. Money market instruments maturing within 60 days
are valued at amortized cost, which approximates market value. Assets and
liabilities expressed in foreign currencies are converted into U.S. dollars at
the prevailing market rates quoted by one or more banks or dealers shortly
before the close of the Exchange.
The Fund's foreign securities may trade on days that the Exchange is closed and
the Fund's daily share price is not calculated. As a result, the Fund's daily
share price may be affected and you will not be able to purchase or redeem
shares.
OTHER INFORMATION ABOUT YOUR ACCOUNT
SECURITY CONSIDERATIONS
You may give up some level of security by choosing to buy or sell shares by
telephone or online, rather than by mail. The Fund uses procedures designed to
give reasonable assurance that telephone and online instructions are genuine,
including recording the transactions, testing the identity of the shareholder
placing the order and sending prompt written confirmation of transactions to the
shareholder of record. The Fund, and its service providers, are not liable for
acting upon instructions communicated by telephone or online that they believe
to be genuine if these procedures are followed.
CONFIRMATION OF YOUR PURCHASES AND REDEMPTIONS
After any transaction, you will receive written confirmation including the share
price and the dollar amount and number of shares bought or redeemed. Exception:
Shares purchased under Automatic
Page 16
<PAGE>
Investment Plans or redeemed under Systematic Withdrawal Plans will be confirmed
quarterly. Partial shares will be calculated to three decimal places.
SHARE CERTIFICATES
To assist in minimizing administrative costs, share certificates will not be
issued. Records of share ownership are maintained by the Fund's transfer agent
in book entry form.
PURCHASES THROUGH BROKER-DEALERS
You may buy Fund shares through certain broker-dealers or other financial
organizations, but these organizations may charge you a fee or may have
different minimums for first-time or additional investments which are not
applicable if you buy shares directly from the Fund.
THIRD PARTY ADMINISTRATORS
Certain brokerage firms and other companies may provide administrative services
(such as sub-transfer agency, recordkeeping or shareholder communications
services) to investors purchasing shares of the Fund through those companies.
The Fund's advisor or the Fund (if approved by its trustees) may pay fees to
these companies for their services. These companies may also be appointed as
agents for or authorized by the Fund to accept on its behalf purchase and
redemption requests that are received in good order. Subject to Fund approval,
certain of these companies may be authorized to designate other entities to
accept purchase and redemption orders on behalf of the Fund.
YEAR 2000 AND EURO READINESS
Mutual funds and businesses around the world could be adversely affected if
computers do not properly process date-related information with respect to the
Year 2000. Similar adverse affects could result if computers do not properly
process information based on the conversion to the Euro, the new currency of the
European Union which took effect on January 1, 1999. The Fund's investment
managers are addressing these issues for their computers and are getting
reasonable assurances from the Fund's other major service providers that they
too are addressing these issues to preserve smooth functioning of the Fund's
trading, pricing, shareholder account, custodial and other operations. There
can be no assurances, however, that all problems will be avoided.
These computer problems could also adversely affect the Fund's investments.
Improperly functioning computers may disrupt securities markets generally or
result in overall economic uncertainty. Individual companies may also be
adversely affected by the cost of fixing their computers, which could be
substantial. The Fund's investment managers consider these issues when
evaluating investments for the Fund.
REDEMPTIONS IN-KIND
The Fund intends to redeem its shares only for cash, although in order to
protect the interest of remaining shareholders, it retains the right to redeem
its shares in-kind under unusual circumstances. In-kind payment means payment
will be made to you in portfolio securities rather than cash. If this
Page 17
<PAGE>
occurs, you will incur transaction costs if you sell the securities for cash.
You may have difficulty selling the securities and recovering the amount of your
redemption if the securities are illiquid.
ACCOUNT MINIMUMS
The Fund will charge all shareholder accounts with a balance of less than $2,000
that are not making automatic monthly investments an annual fee of $25 in
December of each year. This charge is designed to help offset the
proportionately higher costs of maintaining small accounts.
This charge will apply to accounts that have been over $2,000 at some point in
time only if the balance has dropped below this amount because shares were
redeemed, not because the share value declined.
Shares in accounts that do not meet the minimum balance requirement applicable
to them as described below may also be subject to involuntary redemption by the
Fund.
REDEMPTIONS BY THE FUND OF CERTAIN ACCOUNTS
To reduce its expenses, the Fund may involuntarily redeem the shares in your
account if your balance drops below $2,000 -- but only if it drops below this
amount because you have redeemed shares, not because the share value has
declined. You will be given 60 days' notice before the Fund undertakes any
involuntary redemption. During that time, you may buy more shares to bring your
account above the minimum.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS OF INCOME AND GAINS
Unless you tell us that you want to receive your distributions in cash, they
will be reinvested automatically in Fund shares. The Fund generally makes two
different kinds of distributions:
- - Capital gains from the sale of portfolio securities held by the Fund. The
Fund will distribute any net realized capital gains annually, normally in
December.
- - Net investment income from interest or dividends received on securities
held by the Fund. The Fund will distribute its investment income annually,
normally in December.
YOUR TAXES
You generally will owe tax on amounts distributed to you by the Fund in any
non-retirement account whether you reinvest them in additional shares or receive
them in cash.
Distributions of gains from the sale of assets held by the Fund for more than
one year generally are taxable to you at the applicable long-term capital gains
rate, regardless of how long you have owned your Fund shares. Distributions
from other sources generally are taxed as ordinary income.
Distributions made by the Fund to you will normally be capital gains. A portion
of those gains may be net short-term capital gains, which are taxed as ordinary
income. The Fund generally will not
Page 18
<PAGE>
distribute net investment income, although any net investment income that is
generated as a by-product of managing its portfolio will be distributed to you.
If you redeem Fund shares that have appreciated in value, you will have a
taxable gain upon redemption. Exchanges are treated as a redemption and
purchase for tax purposes. Therefore, you will also have a taxable gain if you
exchange shares redeemed that have appreciated in value.
ADDITIONAL TAX INFORMATION
You should consult your own tax advisor about your particular situation. For
more information about other tax matters, including backup withholding for
certain taxpayers and other tax aspects of redemptions, see the SAI.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for individuals,
businesses and nonprofit organizations. For information about establishing an
IRA, Roth IRA, profit-sharing or money purchase pension plan, 403(b) Custodial
Account, SEP-IRA, SIMPLE IRA account or other retirement plans, please call
(800) 551-5849 or write to the Berger Funds, P.O. Box 419958, Kansas City, MO
64141. Trustees for existing 401(k) or other plans interested in using Fund
shares as an investment or investment alternative in their plans are invited to
call the Fund at (800) 259-2820.
Page 19
<PAGE>
ORGANIZATION OF THE FUND
INVESTMENT MANAGERS
The following companies provide investment management services to the Fund. The
Fund is obligated to pay its investment advisor an advisory fee of 0.90% of the
Fund's average daily net assets per year.
BERGER ASSOCIATES, INC. (210 University Blvd., Suite 900, Denver, CO 80206) is
the Fund's investment advisor. Berger Associates serves as investment advisor,
sub-advisor, administrator or sub-administrator to mutual funds and
institutional investors. Berger Associates has been in the investment advisory
business for 25 years. When acting as investment advisor, Berger Associates is
responsible for managing the investment operations of the Fund. Berger
Associates also provides administrative services to the Fund.
BAY ISLE FINANCIAL CORPORATION (160 Sansome Street, 17th Floor, San Francisco,
CA 94104) is the Fund's sub-advisor. Bay Isle has been in the investment
advisory business since 1987. Bay Isle served as investment advisor to the Fund
(then known as the InformationTech 100-Registered Trademark- Fund) from its
inception in April 1997 until [_________], 1999, when Bay Isle became
sub-advisor to the Fund. As sub-advisor, Bay Isle provides day-to-day
management of the Fund's investment operations. William F. K. Schaff has been
the investment manager for the Fund since its inception. Mr. Schaff is a
co-founder and co-owner of Bay Isle and serves as its Chief Investment Officer.
Mr. Schaff has been managing accounts of Bay Isle clients since 1987.
PORTFOLIO TURNOVER
Portfolio changes are made whenever the Fund's investment manager believes that
the Fund's goal could be better achieved by investment in another security,
regardless of portfolio turnover. At times, portfolio turnover for the Fund may
exceed 100% per year. A turnover rate of 100% means the securities owned by the
Fund were replaced once during the year. Higher turnover rates may result in
higher brokerage costs to the Fund and in higher net taxable gains for you as an
investor. The Fund's portfolio turnover rate can be found under the heading
"Financial Highlights for the Fund."
12b-1 ARRANGEMENTS
The Fund is a "no-load" fund, meaning that you pay no sales charge or
commissions when you buy or sell Fund shares. However, the Fund has adopted a
12b-1 plan for its Investor Shares class, permitting it to pay a fee in
connection with distribution of those shares. Berger Associates is entitled to
be paid a fee under the plan of 0.25% of the Fund's average daily net assets
attributable to the Investor Shares. Because this fee is paid on an ongoing
basis, this may result in the cost of your investment increasing and over time
may cost you more than other types of sales charges. The fee may be used for
such things as marketing and promotion, compensation to dealers and others who
provide distribution and administrative services, and shareholder support
services (such as routine requests for information).
Page 20
<PAGE>
SPECIAL FUND STRUCTURE
On [___________], 1999, the Fund began offering two classes of shares. The
Investor Shares offered in this prospectus are available to the general public.
The other class of shares, Institutional Shares, are offered through a separate
prospectus and are designed for investors who maintain a minimum account balance
of $250,000. Each class of shares has its own expenses so that share price,
performance and distributions will differ between classes. The 12b-1 plan
adopted by the Fund applies only to the Investor Shares. For more information
on Institutional Shares, please call (800) 259-2820.
For more information on the multi-class fund structure, see the SAI.
Page 21
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE FUND
The following financial highlights are for the Fund for periods ending February
28, 1998 and 1999, prior to the Fund's reorganization on [___________], 1999.
Prior to the reorganization, the Fund was known as the InformationTech
100-Registered Trademark- Fund. At the time of the reorganization, the Fund
adopted share classes and first began offering the Investor Shares. Therefore,
the 0.25% 12b-1 fee paid by the Investor Shares is not reflected in the data on
the table.
These financial highlights are intended to help you understand the Fund's
financial performance for the periods shown. Certain information reflects
financial results for a single Fund share. Total return shows you how much an
investment in the Fund increased or decreased during each period. McGladrey &
Pullen, LLP, independent accountants, audited this information. Their report
appears in the 1999 Annual Report to Shareholders of the InformationTech
100-Registered Trademark- Fund and is incorporated by reference into (made a
part of) the Statement of Additional Information. That Annual Report is
available from the Fund without charge upon request.
BERGER INFORMATION TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Periods Presented
<TABLE>
<CAPTION>
Year Ended
February 28,
------------
1999 1998*
---- ----
<S> <C> <C>
Net asset value, beginning of period . . . . . . . . . $30.15 $20.00
----- -----
Income (loss) from investment operations:
Net investment income (loss). . . . . . . . . . . . (0.31) (0.10)
Net realized and unrealized gains (losses)
on securities. . . . . . . . . . . . . . . . . . . 14.52 10.25
----- -----
Total from investment operations . . . . . . . . . . . 14.21 10.15
----- -----
Net asset value, end of period . . . . . . . . . . . . $44.36 $30.15
----- -----
----- -----
Total Return . . . . . . . . . . . . . . . . . . . . . 47.13% 50.75%(2)
----- -----
----- -----
Ratios/Supplemental Data:
Net assets, end of period (in thousands) . . . . . . . $ 12,446 $ 2,674
Ratio of expenses to average net assets:
Before expense reimbursement. . . . . . . . . . . . 2.67% 12.17%(1)
After expense reimbursement . . . . . . . . . . . . 1.50% 1.50%(1)
Ratio of net income (loss) to average net assets . . . (1.19)% (1.01)%(1)
Portfolio turnover rate. . . . . . . . . . . . . . . . 35.26% 32.78%
</TABLE>
* For the period April 8, 1997 (commencement of operations) to February 28,
1998.
1. Annualized.
2. Not annualized.
Page 22
<PAGE>
[BACK COVER]
[LOGO]
BERGER-Registered Trademark-
FOR MORE INFORMATION
You may wish to read the Statement of Additional Information (SAI) for more
information on the Fund and the securities it invests in. The SAI is
incorporated into this prospectus by reference, which means that it is
considered to be part of the prospectus.
You can get a free copy of the SAI, request other information or get answers to
your questions about the Fund by writing or calling the Fund at:
Berger Funds
P.O. Box 419958
Kansas City, MO 64141
(800) 551-5849
www.bergerfunds.com
Text-only versions of Fund documents can be viewed online or downloaded from the
SEC's web site at www.sec.gov.
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington DC. For information on the operation of the Public Reference Room,
call (800) SEC-0330. Copies of documents may also be obtained by sending your
request and the appropriate fee to the SEC's Public Reference Section,
Washington, DC 20549-6009.
INVESTMENT COMPANY ACT FILE NUMBER:
Berger Investment Portfolio Trust 811-8046
Berger Information Technology Fund - Investor Shares
Page 23
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED ________, 1999
BERGER FUNDS PROSPECTUS
[Nature photo]
Berger Information Technology Fund
INSTITUTIONAL SHARES
___________________, 1999
The Securities and Exchange Commission has not approved or disapproved any
shares offered in this prospectus or determined whether this prospectus is
accurate or complete. Anyone who tells you otherwise is committing a crime.
Page 1
<PAGE>
Contents
THE BERGER FUNDS -Registered Trademark- are a no-load family of mutual funds.
A mutual fund pools money from shareholders and invests in a portfolio of
securities. This prospectus offers the class of shares designated as
Institutional Shares of the Berger Information Technology Fund. These shares
are designed for pension and profit-sharing plans, employee benefit trusts,
endowments, foundations and corporations, as well as high net worth individuals
and financial intermediaries, who are willing to maintain a minimum account
balance of $250,000. Institutional Shares are also made available for purchase
and dividend reinvestment in the account of all holders of Institutional Shares
who received their shares in the Fund's reorganization on [ ___________], 1999.
BERGER INFORMATION TECHNOLOGY FUND-TM- - INSTITUTIONAL SHARES PAGE
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS PAGE
Risk and Investment Glossary PAGE
BUYING SHARES PAGE
SELLING (REDEEMING) SHARES PAGE
Exchanging Shares PAGE
Signature Guarantees/Special Documentation PAGE
Your Share Price PAGE
Other Information About Your Account PAGE
Distributions and Taxes PAGE
Tax-Sheltered Retirement Plans PAGE
ORGANIZATION OF THE FUND
Investment Managers PAGE
Special Fund Structure PAGE
FINANCIAL HIGHLIGHTS FOR THE FUND PAGE
THE BERGER FUNDS and THE BERGER MOUNTAIN LOGO are registered trademarks of
Berger Associates, Inc.; BERGER INFORMATION TECHNOLOGY FUND is a trademark of
Berger Associates, Inc.; and other marks referred to herein are the trademarks
or registered trademarks of the respective owners thereof.
Page 2
<PAGE>
BERGER INFORMATION TECHNOLOGY FUND
INSTITUTIONAL SHARES
Ticker Symbol: BINFX
[icon-profile of head with stock ticker tape in background]
THE FUND'S GOAL AND PRINCIPAL INVESTMENT STRATEGIES
The Fund aims for capital appreciation. In pursuing its goal, the Fund invests
at least 80% of its assets in common stocks of companies in the information
technology group of industries, such as software, hardware, computer consulting
services, communications and Internet services and products. The Fund's
investment manager analyzes trends in information technology spending and
demand, then identifies companies it believes are best positioned to benefit
from those trends. The Fund generally invests the remainder of its assets in
information technology-related companies whose stock price the investment
manager believes is undervalued relative to their assets, earnings, cash flow or
business franchise.
The Fund's investment manager generally looks for companies:
- - That dominate their industries or a particular market segment
- - That have or are developing products or services that represent significant
technological advancements or improvements
- - That have strong fundamentals, strong management and strong product
positioning.
The Fund primarily invests in common stocks. The Fund is free to invest in
companies of any size market capitalization. The Fund's investment manager will
generally sell a security when it no longer meets the manager's investment
criteria or when it has met the manager's expectations for appreciation.
[icon-left facing profile of head with lightening bolt; right facing profile of
head with sunshine]
PRINCIPAL RISKS
You may be interested in the Fund if you are comfortable with above-average risk
and intend to make a long-term investment commitment. Like all managed funds,
there is a risk that the investment manager's strategy for managing the Fund may
not achieve the desired results. In addition, the price of common stock moves
up and down in response to corporate earnings and developments, economic and
market conditions and anticipated events. As a result, the price of the Fund's
investments may go down and you could lose money on your investment.
Given the Fund's concentration in industries that are rapidly changing, its
share price may fluctuate more than that of funds invested in more stable
industries. Companies in the information technology industries may have narrow
product lines and their products and services are often subject to intense
competition and rapid obsolescence.
Because the Fund's investments are focused in the information technology sector,
the Fund is more susceptible to adverse events and market pressures impacting
the industries included in that sector.
See "Investment Techniques, Securities and Associated Risks" later in this
prospectus for more information on principal risks and other risks.
Page 3
<PAGE>
[icon-profile of head with scrolled paper in background]
THE FUND'S PAST PERFORMANCE
The information below shows the Fund's total return for the only full calendar
year since it began operations on April 8, 1997. These returns include
reinvestment of all dividends and capital gains distributions and reflect Fund
expenses. As with all mutual funds, past performance does not guarantee future
results.
TOTAL RETURN FROM DECEMBER 31, 1997 THROUGH DECEMBER 31, 1998
60% 62.72%
50%
40%
30%
20%
10%
0%
(10)%
Best quarter: 12/31/98 39.31%
Worst quarter: 9/30/98 -9.95%
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1998
Average annual total return is a measure of the Fund's performance over time.
The Fund's average annual return is compared with the Wilshire 5000 Index
(Wilshire 5000). While the Fund does not seek to match the returns of the
Wilshire 5000, this index is an indicator of general stock market performance.
You may not invest in the Wilshire 5000 and unlike the Fund, it does not incur
fees or charges.
<TABLE>
<CAPTION>
1 Year Life of the Fund
(April 8, 1997)
<S> <C> <C>
The Fund 62.72% 56.39%
Wilshire 5000 21.72% 25.97%
</TABLE>
Page 4
<PAGE>
[icon-two coins]
FUND EXPENSES
As a shareholder in the Fund, you do not pay any sales charges, but you do bear
indirectly Annual Fund Operating Expenses, which vary from year to year.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases None
Maximum Deferred Sales Load None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fee (as a percentage of amount redeemed or exchanged 1%
if shares held less than 6 months)
Exchange Fee* None
ANNUAL FUND OPERATING EXPENSES
(deducted directly from the Fund)
Management fee .90%
Other expenses(1) .87%
------
TOTAL ANNUAL FUND OPERATING EXPENSES 1.77%
FEE WAIVER(2) (.27)%
------
NET EXPENSES 1.50%
* The 1% redemption fee referenced in the table will be imposed on shares
exchanged if held less than 6 months, since an exchange is treated as a
redemption followed by a purchase.
1. "Other expenses" are estimated expenses for the Institutional Shares class
for the first full year of operations of that class, restated as if those
expenses had been in effect during the previous fiscal year.
2. Under a written contract, the Fund's investment advisor waives its fee or
reimburses the Fund for expenses to the extent that, at any time during the
life of the Fund, the annual operating expenses for the Institutional
Shares class of the Fund in any fiscal year, including the investment
advisory fee, but excluding brokerage commissions, interest, taxes and
extraordinary expenses, exceed 1.50% of the Fund's average daily net assets
attributable to the Institutional Shares for that fiscal year. The
contract may not be terminated or amended except by a vote of the Fund's
Board of Trustees.
UNDERSTANDING EXPENSES
Annual Fund operating expenses are paid by the Fund. As a result, they reduce
the Fund's return. Fund expenses include management fees and administrative
costs such as shareholder recordkeeping and reports, custodian and pricing
services and registration fees.
EXAMPLE COSTS
The following example helps you compare the cost of investing in the Fund to the
cost of investing in other mutual funds by showing what your costs may be over
time. It uses the same assumptions that other funds use in their prospectuses:
- - $10,000 initial investment
- - 5% total return for each year
- - Fund operating expenses remain the same for each period
- - Redemption after the end of each period
Your actual costs may be higher or lower, so this example should be used for
comparison only. Based on these assumptions your costs at the end of each
period would be:
<TABLE>
<CAPTION>
YEARS $
- ----------------------
<S> <C>
One $ 153
Three $ 474
Five $ 818
Ten $1,791
</TABLE>
Page 5
<PAGE>
Like all mutual funds, an investment in the Fund is not a bank deposit and is
not insured or guaranteed by the FDIC or any other government agency. The Fund
is not a complete investment program, but may serve to diversify other types of
investments in your portfolio. There is no guarantee that the Fund will meet its
investment goals, and although you have the potential to make money, you could
also lose money in the Fund.
Page 6
<PAGE>
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS
BEFORE YOU INVEST . . .
in the Fund, make sure you understand the risks involved. All investments
involve risk. Generally, the greater the risk, the greater the potential for
return. The reverse is also generally true, the lower the risk, the lower the
potential for return.
The following glossary will help you further understand the risks the Fund takes
by investing in certain securities and the investment techniques used by the
Fund. You may get more detailed information about the risks of investing in the
Fund in the Statement of Additional Information (SAI), including a discussion of
debt security ratings in Appendix A to the SAI.
BORROWING refers to a loan of money from a bank or other financial
institution undertaken by the Fund for temporary or emergency reasons only. The
Fund will not borrow more than 25% of its total assets. LEVERAGE RISK
COMMON STOCK is a share of ownership (equity) interest in a company.
COMPANIES WITH LIMITED OPERATING HISTORIES are securities issued by
companies that have been in continuous operation for less than three years.
Sometimes called "unseasoned" issuers. MARKET, LIQUIDITY AND INFORMATION RISKS
CONVERTIBLE SECURITIES(1) are debt or equity securities which may be
converted on specified terms into stock of the issuer. MARKET, INTEREST RATE
AND CREDIT RISKS
CORRELATION RISK occurs when the Fund "hedges" - uses one investment to
offset the Fund's position in another. If the two investments do not behave in
relation to one another the way Fund managers expect them to, then unexpected
results may occur.
CREDIT RISK means that the issuer of a security or the counterparty to an
investment contact may default or become unable to pay its obligations when due.
CURRENCY RISK happens when the Fund buys or sells a security denominated in
foreign currency. Foreign currencies "float" in value against the U.S. dollar.
Adverse changes in foreign currency value can cause investment losses when the
Fund's investments are converted to U.S. dollars.
DIVERSIFICATION means a diversified fund may not, with respect to at least
75% of its assets, invest more than 5% in the securities of one company. A
nondiversified fund may be more volatile than a diversified fund because it
invests more of its assets in a smaller number of companies and the gains or
losses on a single stock will therefore have a greater impact on the fund's
share price. The Fund is a diversified fund.
FINANCIAL FUTURES(2) are exchange-traded contracts on securities,
securities indexes or foreign currencies that obligate the holder to take or
make future delivery of a specified quantity of those underlying securities
or currencies on a predetermined future date. Not more than 5% of the Fund's
net assets may be used for initial margins for futures and premiums for
options. HEDGING, CORRELATION, OPPORTUNITY AND LEVERAGE RISKS
Page 7
<PAGE>
FOREIGN SECURITIES are issued by companies located outside of the United
States. The Fund considers a company to be located outside the United States if
the principal securities trading market for its equity securities is located
outside the U.S. or it is organized under the laws of, and has a principal
office in, a country other than the U.S. MARKET, CURRENCY, TRANSACTION,
LIQUIDITY, INFORMATION AND POLITICAL RISKS
FORWARD FOREIGN CURRENCY CONTRACTS(2) are privately negotiated contracts
committing the holder to purchase or sell a specified quantity of a foreign
currency on a predetermined future date. HEDGING, CREDIT, CORRELATION,
OPPORTUNITY AND LEVERAGE RISKS
HEDGING RISK comes into play when the Fund uses a security whose value is
based on an underlying security or index to "offset" the Fund's position in
another security or currency. The objective of hedging is to offset potential
losses in one security with gains in the hedge. But a hedge can eliminate or
reduce gains as well as offset losses. (Also see "Correlation risk.")
ILLIQUID AND RESTRICTED SECURITIES are securities which, by rules of their
issue or by their nature, cannot be sold readily. These include illiquid
Rule 144A securities. The Fund will not invest more than 15% of its net assets
in illiquid and restricted securities. MARKET, LIQUIDITY AND TRANSACTION RISKS
INFORMATION RISK means that information about a security or issuer might
not be available, complete, accurate or comparable.
INTEREST RATE RISK is the risk that changes in interest rates will
adversely affect the value of an investor's securities. When interest rates
rise, the value of fixed-income securities will generally fall. Conversely, a
drop in interest rates will generally cause an increase in the value of
fixed-income securities. Longer-term securities are subject to greater interest
rate risk.
INVESTMENT GRADE BONDS are rated BBB (STANDARD & POOR'S) or Baa (MOODY'S)
or above. Bonds rated below investment grade are subject to greater credit risk
than investment grade bonds. INTEREST RATE, MARKET AND CREDIT RISKS
LEVERAGE RISK occurs in some securities or techniques that tend to magnify
the effect of small changes in an index or a market. This can result in a loss
that exceeds the amount that was invested in the contract.
LIQUIDITY RISK occurs when investments cannot be sold readily. The Fund
may have to accept a less-than-desirable price to complete the sale of an
illiquid security or may not be able to sell it at all.
MARKET CAPITALIZATION is the total current market value of a company's
outstanding common stock.
MARKET RISK exists in all mutual funds and means the risk that the prices
of securities in a market, a sector, or an industry will fluctuate, and that
such movements might reduce an investment's value.
OPPORTUNITY RISK means missing out on an investment opportunity because the
assets necessary to take advantage of it are committed to less advantageous
investments or strategies.
Page 8
<PAGE>
OPTIONS(2) are contracts giving the holder the right but not the obligation
to purchase or sell a security on or before a predetermined future date for a
fixed price. Options on securities indexes are similar, but settle in cash.
Not more than 5% of the Fund's net assets may be used for initial margins for
futures and premiums for options. HEDGING, CREDIT, CORRELATION AND LEVERAGE
RISKS
POLITICAL RISK comes into play with investments, particularly foreign
investments, which may be adversely affected by nationalization, taxation, war,
government instability or other economic or political actions or factors.
SECTOR FOCUS occurs when a significant portion of the Fund's assets are
invested in a relatively small number of related industries. The Fund will not
concentrate more than 25% of its total assets in any one industry. Sector focus
may increase both market and liquidity risk. * MARKET AND LIQUIDITY RISKS
SMALL AND MID-SIZED COMPANY SECURITIES are securities issued by small or
mid-sized companies, as measured by their market capitalization. The market
capitalization range targeted by funds investing in small or mid-sized companies
varies by fund. In general, the smaller the company, the greater its risks.
MARKET, LIQUIDITY AND INFORMATION RISKS
SPECIAL SITUATIONS are companies about to undergo a structural, financial
or management change which may significantly affect the value of their
securities. MARKET AND INFORMATION RISKS
TEMPORARY DEFENSIVE MEASURES increase a fund's investment in government
securities and other short-term securities when warranted due to market
conditions, without regard to the fund's investment restrictions, policies or
normal investment emphasis. The Fund's investment manager does not intend to
use this technique in the management of the Fund, but rather intends for the
Fund to remain as fully invested as possible at all times. OPPORTUNITY RISK
TRANSACTION RISK means that the Fund may be delayed or unable to settle a
transaction or that commissions and settlement expenses may be higher than
usual.
WRITING (SELLING) COVERED CALL OPTIONS(2) is the selling of a contract to
another party which gives them the right but not the obligation to buy a
particular security from you. The Fund will write call options only if it
already owns the security (if it is "covered"). The Fund may only write call
options up to 25% of its total assets. OPPORTUNITY, CREDIT AND LEVERAGE RISKS
1. The Fund has no minimum quality standards for convertible securities,
although it will not invest in defaulted securities. It also will not
invest 20% or more of its assets in convertible securities rated below
investment grade or in unrated convertible securities that the sub-advisor
considers to be below investment grade.
2. The Fund may use futures, forwards and options only for hedging. Not more
than 5% of the Fund's net assets may be used for initial margins for
futures and premiums for options, although the Fund may have more at risk
under these contracts than the initial margin or premium. However, the
Fund's aggregate obligations under these contracts may not exceed the total
market value of the assets being hedged, such as some or all of the value
of the Fund's equity securities.
* The security or technique is emphasized by the Fund.
Page 9
<PAGE>
BUYING SHARES
SEND NEW ACCOUNT APPLICATIONS TO
Berger Funds
P.O. Box 419958
Kansas City, MO 64141
OR FOR OVERNIGHT, CERTIFIED OR REGISTERED MAIL ONLY
Berger Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
Minimums:
Initial investment $250,000
Subsequent investments No minimum
BY MAIL
Read this prospectus.
Fill out the application if you are opening a new account.
Make out a check to BERGER FUNDS for the amount you want to invest.
Send the application and a check to the Berger Funds in the envelope
provided.
To add to an existing account, be sure to include your account number on
your check and mail it to the appropriate address above.
BY WIRE OR ELECTRONIC FUNDS TRANSFER
Payment may be made from your bank to the Berger Funds.
Call (800) 960-8427 for current wire or electronic funds transfer
instructions.
BY TELEPHONE
If you already have a Berger Funds account, you may purchase additional
shares by telephone order.
You must pay for them within three business days by wire, electronic funds
transfer or overnight delivery of a check.
Call (800) 960-8427 for current wire or electronic funds transfer
instructions.
Page 10
<PAGE>
BY ONLINE ACCESS
If you have established a Berger Funds account with electronic funds
transfer privileges, you may purchase additional shares via online access.
You will find us online at www.bergerfunds.com.
BY AUTOMATIC INVESTMENT PLAN
To automatically purchase more shares on a regular basis, fill out the
Automatic Investment Plan section of the application.
Investments are transferred automatically from your bank account.
See details on the application.
ALL SHAREHOLDERS ARE AUTOMATICALLY GRANTED TELEPHONE AND ONLINE TRANSACTION
PRIVILEGES UNLESS THEY DECLINE THEM EXPLICITLY IN WRITING, EITHER ON THE
ACCOUNT APPLICATION OR BY WRITING TO THE BERGER FUNDS AT THE ADDRESS ABOVE.
YOU MAY GIVE UP SOME LEVEL OF SECURITY BY CHOOSING TO BUY AND SELL SHARES
BY TELEPHONE OR ONLINE RATHER THAN BY MAIL. IN TIMES OF EXTREME ECONOMIC
OR MARKET CONDITIONS, TRANSACTIONS BY TELEPHONE OR ONLINE MAY BE DIFFICULT.
IMPORTANT NOTES ABOUT PAYING FOR YOUR SHARES
Your check must be made payable to BERGER FUNDS.
You may NOT purchase shares by cash, credit card, third-party checks or
checks drawn on foreign banks.
Subject to approval by the Fund, you may purchase Fund shares with liquid
securities that the Fund is eligible to purchase. These securities must
have a value that can be readily determined in accordance with the Fund's
valuation policies. You may pay for Fund shares with securities only if it
is the investment manager's intention to retain them in the Fund's
portfolio. The Fund may amend or terminate this practice at any time.
Orders not paid for on time will be canceled and shares will be redeemed
from your account to compensate for any decline in price of the shares
canceled.
The Fund reserves the right to reject any order and to waive minimums or
increase minimums following notice.
Page 11
<PAGE>
SELLING (REDEEMING) SHARES
BY MAIL
Send a written request indicating your account number and the dollar amount
or number of shares you are redeeming to the appropriate address shown
under "Buying Shares."
Your request must be signed by each registered shareholder, with the
signature(s) appearing exactly as they do on your account registration.
Include any necessary Signature Guarantees. See "Signature
Guarantees/Special Documentation" below.
BY TELEPHONE
Call (800) 960-8427.
BY ONLINE ACCESS
You will find us online at www.bergerfunds.com.
FOR LIMITATIONS ON TELEPHONE AND ONLINE REDEMPTIONS SEE "SIGNATURE
GUARANTEES / SPECIAL DOCUMENTATION" BELOW.
TELEPHONE AND ONLINE REDEMPTIONS ARE NOT AVAILABLE FOR SHARES HELD IN
RETIREMENT ACCOUNTS SPONSORED BY THE FUND.
BY SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan may be established if you own shares in the
Fund worth at least $5,000.
Shares may be redeemed automatically ($50 minimum) monthly, quarterly,
semi-annually or annually.
Call (800) 960-8427 for more information and forms.
IMPORTANT NOTES ABOUT PAYMENT FOR YOUR REDEEMED SHARES
The Fund is intended as a long-term investment, and not as a short-term
trading vehicle. Therefore, the Fund will deduct a 1% redemption fee from
your redemption proceeds if you redeem Fund shares held less than 6 months.
This fee is intended to discourage investors from short-term trading of
Fund shares and to offset the cost to the Fund of excess brokerage and
other costs incurred as a result of such trading. This fee will not be
charged to retirement plan accounts or in the case of redemptions resulting
from the death of the shareholder.
Generally, payment for your redeemed shares will be sent to you within
three business days after receipt of your redemption request in good order.
Page 12
<PAGE>
You may receive payment for redeemed shares via wire or electronic funds
transfer. You may elect these services on the account application or send
to the Berger Funds a written request providing your bank information with
your signature guaranteed. (See "Signature Guarantees/Special
Documentation" below.)
A wire transfer will be sent the next business day after receipt of your
order, and an electronic funds transfer will be sent the second business
day after receipt of your order.
Proceeds from the redemption of shares purchased by check may be delayed
until full payment for the shares has been received and cleared, which may
take up to 15 days from the purchase date.
INFORMATION ABOUT YOUR ACCOUNT
EXCHANGING SHARES
Shares of the Fund may be exchanged for shares of any other publicly available
Berger Funds by calling (800) 960-8427. When exchanging shares:
- - Each account must be registered identically -- have the same signatures and
addresses.
- - Each Fund must be legally eligible for sale in your state of residence.
- - You may exchange out of the Berger Funds up to four times per calendar
year.
- - You may exchange by telephone, online access or mail.
- - You are responsible for obtaining and reading the prospectus for the fund
into which you are exchanging.
- - Exchanges result in the sale of one fund's shares and the purchase of
another, normally resulting in a taxable event for you.
- - Exchanges into any new fund are subject to that fund's initial and
subsequent investment minimums.
- - The Fund will deduct a 1% redemption fee from the amount you exchange if
you exchange Fund shares held less than 6 months. This fee is intended to
discourage investors from short-term trading of Fund shares and to offset
the cost to the Fund of excess brokerage and other costs incurred as a
result of such trading. This fee will not be charged to retirement plan
accounts.
The Fund may terminate or modify the exchange privilege in the future.
SIGNATURE GUARANTEES/SPECIAL DOCUMENTATION
The Fund uses Signature Guarantees to protect you and the Fund from possible
fraudulent requests for redeemed shares. Your redemption request must be in
writing and accompanied by a Signature Guarantee if:
Page 13
<PAGE>
- - You request that payment be made to a name other than the one on your
account registration.
- - You request that payment be mailed to an address which has been changed
within 30 days of your redemption request or to an address other than the
one of record.
- - You change or add information relating to your designated bank.
The Berger Funds reserve the right to require Signature Guarantees under other
certain circumstances.
You can get a Signature Guarantee from most broker-dealers, national or state
banks, credit unions, federal savings and loan associations or other eligible
institutions. YOU CANNOT OBTAIN A SIGNATURE GUARANTEE FROM A NOTARY PUBLIC.
Make sure the Signature Guarantee appears:
- - Together with the signature(s) of all registered owner(s) of the redeemed
shares on the written redemption request.
- - On any share certificates you hold for the redeemed shares or on a separate
statement of assignment (stock power) which may be obtained from a bank or
broker.
Additional documents are required for redemptions by corporations, executors,
administrators, trustees and guardians. For instructions, call (800) 960-8427
or write to the Berger Funds, P.O. Box 419958, Kansas City, MO 64141.
YOUR SHARE PRICE
The price at which you buy, sell or exchange Fund shares is the share price or
net asset value (NAV). The share price for the Institutional Shares of the Fund
is determined by adding the Institutional Shares' pro rata portion of the total
value of the Fund's investments, cash and other assets, deducting the
Institutional Shares' pro rata portion of the Fund's liabilities and the
liabilities attributable directly to the Institutional Shares, and then dividing
that value by the total number of the Institutional Shares outstanding. Share
price is calculated separately for each class of Fund shares.
The Fund's share price is calculated at the close of the regular trading session
of the New York Stock Exchange (normally 4:00 p.m. New York time) each day that
the Exchange is open. Share price is not calculated on the days that the
Exchange is closed.
FOR A PURCHASE, REDEMPTION OR EXCHANGE OF FUND SHARES, YOUR PRICE IS THE SHARE
PRICE NEXT CALCULATED AFTER YOUR REQUEST IS RECEIVED IN GOOD ORDER AND ACCEPTED
BY THE FUND, ITS AUTHORIZED AGENT OR DESIGNEE. TO RECEIVE A SPECIFIC DAY'S
PRICE, YOUR REQUEST MUST BE RECEIVED BEFORE THE CLOSE OF THE NEW YORK STOCK
EXCHANGE ON THAT DAY.
When the Fund calculates its share price, it values the securities it holds at
market value. Sometimes market quotes for some securities are not available or
are not representative of market value. Examples would be when events occur
that materially affect the value of a security at a time when the security is
not trading or when the securities are illiquid. In that case, securities may
be valued in good
Page 14
<PAGE>
faith at fair value, using consistently applied procedures decided on by the
trustees. Money market instruments maturing within 60 days are valued at
amortized cost, which approximates market value. Assets and liabilities
expressed in foreign currencies are converted into U.S. dollars at the
prevailing market rates quoted by one or more banks or dealers shortly before
the close of the Exchange.
The Fund's foreign securities may trade on days that the Exchange is closed and
the Fund's daily share price is not calculated. As a result, the Fund's daily
share price may be affected and you will not be able to purchase or redeem
shares.
OTHER INFORMATION ABOUT YOUR ACCOUNT
SECURITY CONSIDERATIONS
You may give up some level of security by choosing to buy or sell shares by
telephone or online, rather than by mail. The Fund uses procedures designed to
give reasonable assurance that telephone and online instructions are genuine,
including recording the transactions, testing the identity of the shareholder
placing the order and sending prompt written confirmation of transactions to the
shareholder of record. The Fund, and its service providers, are not liable for
acting upon instructions communicated by telephone or online that they believe
to be genuine if these procedures are followed.
CONFIRMATION OF YOUR PURCHASES AND REDEMPTIONS
After any transaction, you will receive written confirmation including the share
price and the dollar amount and number of shares bought or redeemed. Exception:
Shares purchased under Automatic Investment Plans or redeemed under Systematic
Withdrawal Plans will be confirmed quarterly. Partial shares will be calculated
to three decimal places.
SHARE CERTIFICATES
To assist in minimizing administrative costs, share certificates will not be
issued. Records of share ownership are maintained by the Fund's transfer agent
in book entry form.
PURCHASES THROUGH BROKER-DEALERS
You may buy Fund shares through certain broker-dealers or other financial
organizations, but these organizations may charge you a fee or may have
different minimums for first-time or additional investments which are not
applicable if you buy shares directly from the Fund.
THIRD PARTY ADMINISTRATORS
Certain brokerage firms and other companies may provide administrative services
(such as sub-transfer agency, recordkeeping or shareholder communications
services) to investors purchasing shares of the Fund through those companies.
The Fund's advisor or the Fund (if approved by its trustees) may pay fees to
these companies for their services. These companies may also be appointed as
agents for or authorized by the Fund to accept on its behalf purchase and
redemption requests that are received in good order. Subject to Fund approval,
certain of these companies may be authorized to designate other entities to
accept purchase and redemption orders on behalf of the Fund.
Page 15
<PAGE>
YEAR 2000 AND EURO READINESS
Mutual funds and businesses around the world could be adversely affected if
computers do not properly process date-related information with respect to the
Year 2000. Similar adverse affects could result if computers do not properly
process information based on the conversion to the Euro, the new currency of the
European Union which took effect on January 1, 1999. The Fund's investment
managers are addressing these issues for their computers and are getting
reasonable assurances from the Fund's other major service providers that they
too are addressing these issues to preserve smooth functioning of the Fund's
trading, pricing, shareholder account, custodial and other operations. There
can be no assurances, however, that all problems will be avoided.
These computer problems could also adversely affect the Fund's investments.
Improperly functioning computers may disrupt securities markets generally or
result in overall economic uncertainty. Individual companies may also be
adversely affected by the cost of fixing their computers, which could be
substantial. The Fund's investment managers consider these issues when
evaluating investments for the Fund.
REDEMPTIONS IN-KIND
The Fund intends to redeem its shares only for cash, although in order to
protect the interest of remaining shareholders, it retains the right to redeem
its shares in-kind under unusual circumstances. In-kind payment means payment
will be made to you in portfolio securities rather than cash. If this occurs,
you will incur transaction costs if you sell the securities for cash. You may
have difficulty selling the securities and recovering the amount of your
redemption if the securities are illiquid.
REDEMPTIONS BY THE FUND OF CERTAIN ACCOUNTS
To reduce its expenses, the Fund may involuntarily redeem the shares in your
account if your balance drops below $250,000 -- but only if it drops below this
amount because you have redeemed shares, not because the share value has
declined. You will be given 60 days' notice before the Fund undertakes any
involuntary redemption. During that time, you may buy more shares to bring your
account above the minimum.
Holders of Institutional Shares who received their shares in the Fund's
reorganization on [___________], 1999, will not be subject to this minimum
account balance requirement in their existing accounts, but instead will be
subject to the regular Berger Funds retail minimum account balance requirement
of $2,000.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS OF INCOME AND GAINS
Unless you tell us that you want to receive your distributions in cash, they
will be reinvested automatically in Fund shares. The Fund generally makes two
different kinds of distributions, capital gains from the sale of portfolio
securities held by the Fund and net investment income from interest or dividends
received on securities held by the Fund. The Fund will distribute any net
realized capital gains or investment income annually, normally in December.
Page 16
<PAGE>
YOUR TAXES
You generally will owe tax on amounts distributed to you by the Fund in any
non-retirement account whether you reinvest them in additional shares or receive
them in cash. Distributions of gains from the sale of assets held by the Fund
for more than one year generally are taxable to you at the applicable long-term
capital gains rate, regardless of how long you have owned your Fund shares.
Distributions from other sources generally are taxed as ordinary income.
Distributions made by the Fund to you will normally be capital gains. A portion
of those gains may be net short-term capital gains, which are taxed as ordinary
income. The Fund generally will not distribute net investment income, although
any net investment income that is generated as a by-product of managing its
portfolio will be distributed to you.
If you redeem Fund shares that have appreciated in value, you will have a
taxable gain upon redemption. Exchanges are treated as a redemption and
purchase for tax purposes. Therefore, you will also have a taxable gain if you
exchange shares redeemed that have appreciated in value.
ADDITIONAL TAX INFORMATION
You should consult your own tax advisor about your particular situation. For
more information about other tax matters, including backup withholding for
certain taxpayers and other tax aspects of redemptions, see the SAI.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for individuals,
businesses and nonprofit organizations. For information about establishing a
IRA, Roth IRA, profit-sharing or money purchase pension plan, 403(b) Custodial
Account, SEP-IRA, SIMPLE IRA account or other retirement plans, please call
(800) 259-2820 or write to the Berger Funds, P.O. Box 419958, Kansas City, MO
64141. Trustees for existing 401(k) or other plans interested in using Fund
shares as an investment or investment alternative in their plans are invited to
call the Fund at (800) 960-8427.
Page 17
<PAGE>
ORGANIZATION OF THE FUND
INVESTMENT MANAGERS
The following companies provide investment management services to the Fund. The
Fund is obligated to pay its investment advisor an advisory fee of 0.90% of the
Fund's average daily net assets per year.
BERGER ASSOCIATES, INC. (210 University Blvd., Suite 900, Denver, CO 80206) is
the Fund's investment advisor. Berger Associates serves as investment advisor,
sub-advisor, administrator or sub-administrator to mutual funds and
institutional investors. Berger Associates has been in the investment advisory
business for 25 years. When acting as investment advisor, Berger Associates is
responsible for managing the investment operations of the Fund. Berger
Associates also provides administrative services to the Fund.
BAY ISLE FINANCIAL CORPORATION (160 Sansome Street, 17th Floor, San Francisco,
CA 94104) is the Fund's sub-advisor. Bay Isle has been in the investment
advisory business since 1987. Bay Isle served as investment advisor to the Fund
(then known as the InformationTech 100-Registered Trademark- Fund) from its
inception in April 1997 until [_________], 1999, when Bay Isle became
sub-advisor to the Fund. As sub-advisor, Bay Isle provides day-to-day
management of the Fund's investment operations. William F. K. Schaff has been
the investment manager for the Fund since its inception. Mr. Schaff is a
co-founder and co-owner of Bay Isle and serves as its Chief Investment Officer.
Mr. Schaff has been managing accounts of Bay Isle clients since 1987.
PORTFOLIO TURNOVER
Portfolio changes are made whenever the Fund's investment manager believes that
the Fund's goal could be better achieved by investment in another security,
regardless of portfolio turnover. At times, portfolio turnover for the Fund may
exceed 100% per year. A turnover rate of 100% means the securities owned by the
Fund were replaced once during the year. Higher turnover rates may result in
higher brokerage costs to the Fund and in higher net taxable gains for you as an
investor. The Fund's portfolio turnover rate can be found under the heading
"Financial Highlights for the Fund."
SPECIAL FUND STRUCTURE
On [___________], 1999, the Fund began offering two classes of shares. The
Institutional Shares offered in this prospectus are designed for investors who
maintain a minimum account balance of $250,000. Institutional Shares are also
made available for purchase and dividend reinvestment to all holders of
Institutional Shares who received their shares in the Fund's reorganization on
[___________], 1999. The other class of shares, Investor Shares, are offered
through a separate prospectus and are available to the general public with a
minimum account balance of $2,000. Each class of shares has its own expenses so
that share price, performance and distributions will differ between classes.
The 12b-1 plan adopted by the Fund applies only to the Investor Shares. For
more information on Investor Shares, please call (800) 259-2820.
For more information on the multi-class fund structure, see the SAI.
Page 18
<PAGE>
FINANCIAL HIGHLIGHTS FOR THE FUND
The following financial highlights are for the Fund for periods ending February
28, 1998 and 1999, prior to the Fund's reorganization on [___________], 1999.
Prior to the reorganization, the Fund was known as the InformationTech
100-Registered Trademark- Fund.
These financial highlights are intended to help you understand the Fund's
financial performance for the periods shown. Certain information reflects
financial results for a single Fund share. Total return shows you how much an
investment in the Fund increased or decreased during each period. McGladrey &
Pullen, LLP, independent accountants, audited this information. Their report
appears in the 1999 Annual Report to Shareholders of the InformationTech
100-Registered Trademark- Fund and is incorporated by reference into (made a
part of) the Statement of Additional Information. That Annual Report is
available from the Fund without charge upon request.
BERGER INFORMATION TECHNOLOGY FUND
FINANCIAL HIGHLIGHTS
For a Share Outstanding Throughout the Periods Presented
<TABLE>
<CAPTION>
Year Ended
February 28,
------------
1999 1998*
---- ----
<S> <C> <C>
Net asset value, beginning of period....................$30.15 $20.00
----- -----
Income (loss) from investment operations:
Net investment income (loss)........................(0.31) (0.10)
Net realized and unrealized gains (losses) on
securities..........................................14.52 10.25
----- -----
Total from investment operations.........................14.21 10.15
----- -----
Net asset value, end of period..........................$44.36 $30.15
----- -----
----- -----
Total Return.............................................47.13% 50.75%(2)
----- -----
----- -----
Ratios/Supplemental Data:
Net assets, end of period (in thousands)................$12,446 $2,674
Ratio of expenses to average net assets:
Before expense reimbursement.........................2.67% 12.17%(1)
After expense reimbursement..........................1.50% 1.50%(1)
Ratio of net income (loss) to average net assets.......(1 .19)% (1.01)%(1)
Portfolio turnover rate..................................35.26% 32.78%
</TABLE>
* For the period April 8, 1997 (commencement of operations) to February 28,
1998.
1. Annualized.
2. Not annualized.
Page 19
<PAGE>
[BACK COVER]
[LOGO]
BERGER -Registered Trademark-
FOR MORE INFORMATION
You may wish to read the Statement of Additional Information (SAI) for more
information on the Fund and the securities it invests in. The SAI is
incorporated into this prospectus by reference, which means that it is
considered to be part of the prospectus.
You can get a free copy of the SAI, request other information or get answers to
your questions about the Fund by writing or calling the Fund at:
Berger Funds
P.O. Box 419958
Kansas City, MO 64141
(800) 259-2820
www.bergerfunds.com
Text-only versions of Fund documents can be viewed online or downloaded from the
SEC's web site at www.sec.gov.
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington DC. For information on the operation of the Public Reference Room,
call (800) SEC-0330. Copies of documents may also be obtained by sending your
request and the appropriate fee to the SEC's Public Reference Section,
Washington, DC 20549-6009.
INVESTMENT COMPANY ACT FILE NUMBER:
Berger Investment Portfolio Trust 811-8046
Berger Information Technology Fund - Institutional Shares
Page 20
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED _________, 1999
BERGER INFORMATION TECHNOLOGY FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
INVESTOR SHARES
STATEMENT OF ADDITIONAL INFORMATION
SHAREHOLDER SERVICES: 1-800-551-5849
This Statement of Additional Information ("SAI") is not a prospectus.
It relates to the Prospectus for the Berger Information Technology Fund (the
"Fund") -- Investor Shares, dated ___________, 1999, as it may be amended or
supplemented from time to time, which may be obtained by writing the Fund at
P.O. Box 5005, Denver, Colorado 80217, or calling 1-800-333-1001.
The Fund is a "no-load" mutual fund, meaning that a buyer pays no
commissions or sales charge when buying or redeeming shares of the Fund,
although the Fund pays certain costs of distributing its Investor Shares. See
"Section 5. Expenses of the Fund -- 12b-1 Plan" below. This SAI provides
further description of the Fund.
The Fund is the successor to the InformationTech 100-Registered
Trademark- Fund, which was reorganized into the Fund effective ________________,
1999. The financial statements of the predecessor fund for the fiscal year
ended February 28, 1999, and the related Report of Independent Accountants on
those statements, are incorporated into this SAI by reference from the
predecessor fund's 1999 Annual Report to Shareholders dated February 28, 1999.
Additional copies may be obtained upon request without charge by calling the
Fund at 1-800-333-1001.
DATED [_________], 1999
<PAGE>
TABLE OF CONTENTS
&
CROSS-REFERENCES TO PROSPECTUS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS CROSS-REFERENCES TO
RELATED DISCLOSURES
IN PROSPECTUS
- -------------------------------------------------------------------------------
Introduction Contents
- -------------------------------------------------------------------------------
<S> <C>
1. Investment Strategies and Risks of Berger Information Technology Fund;
the Fund Investment Techniques, Securities and
Associated Risks
- -------------------------------------------------------------------------------
2. Investment Restrictions Berger Information Technology Fund;
Investment Techniques, Securities and
Associated Risks
- -------------------------------------------------------------------------------
3. Management of the Fund Berger Information Technology Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
4. Investment Advisor and Sub-Advisor Berger Information Technology Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
5. Expenses of the Fund Berger Information Technology Fund;
Financial Highlights for the Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
6. Brokerage Policy Berger Information Technology Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
7. How to Purchase and Redeem Shares Buying Shares; Exchanging Shares
in the Fund
- -------------------------------------------------------------------------------
8. How the Net Asset Value is Your Share Price
Determined
- -------------------------------------------------------------------------------
9. Income Dividends, Capital Gains Distributions and Taxes
Distributions and Tax Treatment
- -------------------------------------------------------------------------------
10. Suspension of Redemption Rights Other Information About Your Account
- -------------------------------------------------------------------------------
11. Tax-Sheltered Retirement Plans Tax-Sheltered Retirement Plans
- -------------------------------------------------------------------------------
12. Exchange Privilege and Systematic Exchanging Shares
Withdrawal Plan
- -------------------------------------------------------------------------------
13. Performance Information Berger Information Technology Fund;
Financial Highlights for the Fund
- -------------------------------------------------------------------------------
14. Additional Information Organization of the Fund; Special Fund
Structure
- -------------------------------------------------------------------------------
Financial Information Financial Highlights for the Fund
- -------------------------------------------------------------------------------
</TABLE>
-i-
<PAGE>
INTRODUCTION
------------
The Fund described in this SAI is a mutual fund, or open-end,
management investment company. The Fund is a diversified fund.
1. INVESTMENT STRATEGIES AND RISKS OF THE FUND
The Prospectus describes the investment objective of the Fund and the
principal investment policies and strategies used to achieve that objective. It
also describes the principal risks of investing in the Fund.
This section contains supplemental information concerning the types of
securities and other instruments in which the Fund may invest, the investment
policies and portfolio strategies that the Fund may utilize and certain risks
attendant to those investments, policies and strategies.
COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in
a company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on income for dividend payments and
on assets should the company be liquidated. After other claims are satisfied,
common stockholders participate in company profits on a pro-rata basis. Profits
may be paid out in dividends or reinvested in the company to help it grow.
Increases and decreases in earnings are usually reflected in a company's stock
price, so common stocks generally have the greatest appreciation and
depreciation potential of all corporate securities. While most preferred stocks
pay dividends, the Fund may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividends. Such
investments would be made primarily for their capital appreciation potential.
All investments in stocks are subject to market risk, meaning that their prices
may move up and down with the general stock market, and that such movements
might reduce their value.
DEBT SECURITIES. Debt securities (such as bonds or debentures) are
fixed-income securities which bear interest and are issued by corporations or
governments. The issuer has a contractual obligation to pay interest at a
stated rate on specific dates and to repay principal on a specific maturity
date. In addition to market risk, debt securities are generally subject to two
other kinds of risk: credit risk and interest rate risk. Credit risk refers to
the ability of the issuer to meet interest or principal payments as they come
due. The lower the rating given a security by a rating service (such as Moody's
Investor Service ("Moody's") and Standard & Poor's ("S&P")), the greater the
credit risk the rating service perceives with respect to that security. The
Fund will not purchase any nonconvertible securities rated below investment
grade (Ba or lower by Moody's, BB or lower by S&P). In cases where the ratings
assigned by more than one rating agency differ, the Fund will consider the
security as rated in the higher category. If nonconvertible securities
purchased by the Fund are downgraded to below investment grade following
purchase, the trustees of the Fund, in consultation with the Fund's sub-advisor,
will determine what action, if any, is appropriate in light of all relevant
circumstances. For a further discussion of debt security ratings, see Appendix
A to this SAI.
Interest rate risk refers to the fact that the value of fixed-income
securities (like debt securities) generally fluctuates in response to changes in
interest rates. A decrease in interest rates will generally result in an
increase in the price of fixed-income securities held by the Fund. Conversely,
during periods of rising interest rates, the value of fixed-income securities
held by the Fund will generally decline. Longer-term securities are generally
more sensitive to interest rate changes and are more volatile than shorter-term
securities, but they generally offer higher yields to compensate investors for
the associated risks.
-1-
<PAGE>
Certain debt securities can also present prepayment risk. For
example, a security may contain redemption and call provisions. If an issuer
exercises these provisions when interest rates are declining, the Fund could
sustain investment losses as well as have to reinvest the proceeds from the
security at lower interest rates, resulting in a decreased return for the Fund.
CONVERTIBLE SECURITIES. The Fund may also purchase debt or equity
securities which are convertible into common stock when the Fund's sub-advisor
believes they offer the potential for a higher total return than nonconvertible
securities. While fixed-income securities generally have a priority claim on a
corporation's assets over that of common stock, some of the convertible
securities which the Fund may hold are high-yield/high-risk securities that are
subject to special risks, including the risk of default in interest or principal
payments which could result in a loss of income to the Fund or a decline in the
market value of the securities. Convertible securities often display a degree
of market price volatility that is comparable to common stocks. The credit risk
associated with convertible securities generally is reflected by their ratings
by organizations such as Moody's or S&P or a similar determination of
creditworthiness by the Fund's sub-advisor. The Fund has no pre-established
minimum quality standards for convertible securities and may invest in
convertible securities of any quality, including lower rated or unrated
securities. However, the Fund will not invest in any security in default at the
time of purchase, and the Fund will invest less than 20% of the market value of
its assets at the time of purchase in convertible securities rated below
investment grade. If convertible securities purchased by the Fund are
downgraded following purchase, or if other circumstances cause 20% or more of
the Fund's assets to be invested in convertible securities rated below
investment grade, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances. For a further discussion of debt security ratings, see
Appendix A to this SAI.
SPECIAL SITUATIONS. The Fund may also invest in "special
situations." Special situations are companies that have recently experienced
or are anticipated to experience a significant change in structure,
management, products or services which may significantly affect the value of
their securities. Examples of special situations are companies being
reorganized or merged, companies emerging from bankruptcy, companies
introducing unusual new products or which enjoy particular tax advantages.
Other examples are companies experiencing changes in senior management,
extraordinary corporate events, significant changes in cost or capital
structure or which are believed to be probable takeover candidates. The
opportunity to invest in special situations, however, is limited and depends
in part on the market's assessment of these companies and their
circumstances. By its nature, a "special situation" company involves to some
degree a break with the company's past experience. This creates greater
uncertainty and potential risk of loss than if the company were operating
according to long-established patterns. In addition, stocks of companies in
special situations may decline or not appreciate as expected if an
anticipated change or development does not occur or is not assessed by the
market as favorably as expected.
ZEROS/STRIPS. The Fund may invest also in zero coupon bonds or in
"strips." Zero coupon bonds do not make regular interest payments; rather, they
are sold at a discount from face value. Principal and accreted discount
(representing interest accrued but not paid) are paid at maturity. "Strips" are
debt securities that are stripped of their interest coupon after the securities
are issued, but otherwise are comparable to zero coupon bonds. The market
values of "strips" and zero coupon bonds generally fluctuate in response to
changes in interest rates to a greater degree than do interest-paying securities
of comparable term and quality. The Fund will not invest in mortgage-backed or
other asset-backed securities.
SECURITIES OF SMALLER COMPANIES. The Fund may invest in securities of
companies with small or mid-sized market capitalizations. Market capitalization
is defined as total current market value of a company's outstanding common
stock. Investments in companies with smaller market capitalizations may involve
greater risks and price volatility (that is, more abrupt or erratic price
movements) than investments in larger, more mature companies since smaller
companies may
-2-
<PAGE>
be at an earlier stage of development and may have limited product lines,
reduced market liquidity for their shares, limited financial resources or less
depth in management than larger or more established companies. Smaller
companies also may be less significant factors within their industries and may
have difficulty withstanding competition from larger companies. While smaller
companies may be subject to these additional risks, they may also realize more
substantial growth than larger or more established companies.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund
may invest in securities of companies with limited operating histories. The
Fund considers these to be securities of companies with a record of less than
three years' continuous operation, even including the operations of any
predecessors and parents. (These are sometimes referred to as "unseasoned
issuers.") These companies by their nature have only a limited operating
history which can be used for evaluating the company's growth prospects. As a
result, investment decisions for these securities may place a greater emphasis
on current or planned product lines and the reputation and experience of the
company's management and less emphasis on fundamental valuation factors than
would be the case for more mature companies. In addition, many of these
companies may also be small companies and involve the risks and price volatility
associated with smaller companies.
INITIAL PUBLIC OFFERINGS. The Fund may invest in a company's
securities at the time the company first offers securities to the public, that
is, at the time of the company's initial public offering or IPO. Although
companies can be any age or size at the time of their IPOs, they are often
smaller and have a limited operating history, which involve a greater potential
for the value of their securities to be impaired following the IPO. See
"Securities of Smaller Companies" and "Securities of Companies with Limited
Operating Histories" above. In addition, market psychology prevailing at the
time of an IPO can have a substantial and unpredictable effect on the price of
an IPO security, causing the price of a company's securities to be particularly
volatile at the time of its IPO and for a period thereafter. As a result, the
Fund's sub-advisor might decide to sell an IPO security more quickly than it
would otherwise, which may result in a significant gain or loss to the Fund.
The advisor's or sub-advisor's trade allocation procedures govern which of its
advised accounts participate in any IPO. See the heading "Trade Allocations"
under Section 4 below.
FOREIGN SECURITIES. The Fund may invest in foreign securities, which
may be traded in foreign markets and denominated in foreign currency. The
Fund's investments may also include American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs) which are similar to ADRs, in bearer form,
designed for use in the European securities markets, and in Global Depositary
Receipts (GDRs).
Investments in foreign securities involve some risks that are
different from the risks of investing in securities of U.S. issuers, such as the
risk of adverse political, social, diplomatic and economic developments and,
with respect to certain countries, the possibility of expropriation, taxes
imposed by foreign countries or limitations on the removal of monies or other
assets of the Fund. Moreover, the economies of individual foreign countries
will vary in comparison to the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. Securities of some foreign
companies, particularly those in developing countries, are less liquid and more
volatile than securities of comparable domestic companies. A developing country
generally is considered to be in the initial stages of its industrialization
cycle. Investing in the securities of developing countries may involve exposure
to economic structures that are less diverse and mature, and to political
systems that can be expected to have less stability than developed countries.
There also may be less publicly available information about foreign
issuers and securities than domestic issuers and securities, and foreign issuers
generally are not subject to accounting, auditing and financial reporting
standards, requirements and practices comparable to those applicable to domestic
issuers. Also, there is generally less government supervision and
-3-
<PAGE>
regulation of exchanges, brokers, financial institutions and issuers in foreign
countries than there is in the U.S. Foreign financial markets typically have
substantially less volume than U.S. markets. Foreign markets also have
different clearance and settlement procedures and, in certain markets, delays or
other factors could make it difficult to effect transactions, potentially
causing the Fund to experience losses or miss investment opportunities.
Costs associated with transactions in foreign securities are generally
higher than with transactions in U.S. securities. The Fund will incur greater
costs in maintaining assets in foreign jurisdictions and in buying and selling
foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, the Fund might have greater
difficulty taking appropriate legal action with respect to foreign investments
in non-U.S. courts than with respect to domestic issuers in U.S. courts, which
may heighten the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
If the Fund is invested in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S. investors
are concerned. If the foreign currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the foreign currency
against the U.S. dollar would adversely affect the dollar value of the foreign
securities. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets, which are in turn affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICs). The Fund may purchase
the securities of certain companies considered Passive Foreign Investment
Companies (PFICs) under U.S. tax laws. For certain types of PFICs, in addition
to bearing their proportionate share of the Fund's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses of
such PFIC. PFIC investments also may be subject to less favorable U.S. tax
treatment, as discussed in Section 9 below.
ILLIQUID AND RESTRICTED SECURITIES. The Fund is authorized to invest
in securities which are illiquid or not readily marketable because they are
subject to restrictions on their resale ("restricted securities") or because,
based upon their nature or the market for such securities, no ready market is
available. However, the Fund will not purchase any such security, the purchase
of which would cause the Fund to invest more than 15% of its net assets,
measured at the time of purchase, in illiquid securities. Investments in
illiquid securities involve certain risks to the extent that the Fund may be
unable to dispose of such a security at the time desired or at a reasonable
price or, in some cases, may be unable to dispose of it at all. In addition, in
order to resell a restricted security, the Fund might have to incur the
potentially substantial expense and delay associated with effecting
registration. If securities become illiquid following purchase or other
circumstances cause more than 15% of the Fund's net assets to be invested in
illiquid securities, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances.
Repurchase agreements maturing in more than seven days will be
considered as illiquid for purposes of this restriction. Pursuant to guidelines
established by the trustees, the Fund's sub-advisor will determine whether
securities eligible for resale to qualified institutional buyers pursuant to SEC
Rule 144A under the Securities Act of 1933 should be treated as illiquid
investments considering, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and
(4) the nature of the security and the marketplace trades (e.g., the time needed
to dispose of
-4-
<PAGE>
the security, the method of soliciting offers, and the mechanics of the
transfer). The liquidity of the Fund's investments in Rule 144A securities
could be impaired if qualified institutional buyers become uninterested in
purchasing these securities.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements
with various financial organizations, including commercial banks, registered
broker-dealers and registered government securities dealers. A repurchase
agreement is an agreement under which the Fund acquires a debt security
(generally a debt security issued or guaranteed by the U.S. government or an
agency thereof, a banker's acceptance or a certificate of deposit) from a
commercial bank, broker or dealer, subject to resale to the seller at an agreed
upon price and date (normally, the next business day). A repurchase agreement
may be considered a loan collateralized by securities. The resale price
reflects an agreed upon interest rate effective for the period the instrument is
held by the Fund and is unrelated to the interest rate on the underlying
instrument. In these transactions, the securities acquired by the Fund
(including accrued interest earned thereon) must have a total value equal to or
in excess of the value of the repurchase agreement and are held by the Fund's
custodian bank until repurchased. In addition, the trustees will establish
guidelines and standards for review by the investment sub-advisor of the
creditworthiness of any bank, broker or dealer party to a repurchase agreement
with the Fund. The Fund will not enter into a repurchase agreement maturing in
more than seven days if as a result more than 15% of the Fund's net assets would
be invested in such repurchase agreements and other illiquid securities.
These transactions must be fully collateralized at all times by debt
securities (generally a security issued or guaranteed by the U.S. Government or
an agency thereof, a banker's acceptance or a certificate of deposit), but
involve certain risks, such as credit risk to the Fund if the other party
defaults on its obligation and the Fund is delayed or prevented from liquidating
the collateral. For example, if the other party to the agreement defaults on
its obligation to repurchase the underlying security at a time when the value of
the security has declined, the Fund may incur a loss upon disposition of the
security. If the other party to the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a court
may determine that the underlying security is collateral for a loan by the Fund
not within the control of the Fund and therefore the realization by the Fund on
such collateral may automatically be stayed and delayed. Further, it is
possible that the Fund may not be able to substantiate its interest in the
underlying security and may be deemed an unsecured creditor of the other party
to the agreement. The Fund expects that these risks can be controlled through
careful monitoring procedures.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
and sell securities on a when-issued or delayed delivery basis. However, the
Fund currently does not intend to purchase or sell securities on a when-issued
or delayed delivery basis, if as a result more than 5% of its total assets taken
at market value at the time of purchase would be invested in such securities.
When-issued or delayed delivery transactions arise when securities (normally,
obligations of issuers eligible for investment by the Fund) are purchased or
sold by the Fund with payment and delivery taking place in the future in order
to secure what is considered to be an advantageous price or yield. However, the
yield available on a comparable security when delivery takes place may vary from
the yield on the security at the time that the when-issued or delayed delivery
transaction was entered into. Any failure to consummate a when-issued or
delayed delivery transaction may result in the Fund missing the opportunity of
obtaining a price or yield considered to be advantageous. When-issued and
delayed delivery transactions may generally be expected to settle within one
month from the date the transactions are entered into, but in no event later
than 90 days. However, no payment or delivery is made by the Fund until it
receives delivery or payment from the other party to the transaction.
When the Fund purchases securities on a when-issued basis, it will
maintain in a segregated account with its custodian cash, U.S. government
securities or other liquid assets having an aggregate value equal to the amount
of such purchase commitments, until payment is
-5-
<PAGE>
made. If necessary, additional assets will be placed in the account daily so
that the value of the account will equal or exceed the amount of the Fund's
purchase commitments.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its securities to
qualified institutional investors (such as brokers, dealers or other financial
organizations) who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. Loans of securities by the Fund
will be collateralized by cash, letters of credit, or securities issued or
guaranteed by the U.S. Government or its agencies. The collateral will equal at
least 100% of the current market value of the loaned securities,
marked-to-market on a daily basis. By lending its securities, the Fund will be
attempting to generate income through the receipt of interest on the loan which,
in turn, can be invested in additional securities to pursue the Fund's
investment objective. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Fund.
The Fund may lend its portfolio securities to qualified brokers,
dealers, banks or other financial institutions, so long as the terms, the
structure and the aggregate amount of such loans are not inconsistent with the
Investment Company Act of 1940, or the Rules and Regulations or interpretations
of the Securities and Exchange Commission (the "Commission") thereunder, which
currently require that (a) the borrower pledge and maintain with the Fund
collateral consisting of cash, an irrevocable letter of credit or securities
issued or guaranteed by the United States government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis), (c) the loan be made subject
to termination by the Fund at any time and (d) the Fund receives reasonable
interest on the loan, which interest may include the Fund's investing cash
collateral in interest bearing short-term investments, and (e) the Fund receives
all dividends and distributions on the loaned securities and any increase in the
market value of the loaned securities.
The Fund bears risk of loss in the event that the other party to a
securities lending transaction defaults on its obligations and the Fund is
delayed in or prevented from exercising its rights to dispose of the collateral,
including the risk of a possible decline in the value of the collateral
securities during the period in which the Fund seeks to assert these rights, the
risk of incurring expenses associated with asserting these rights and the risk
of losing all or a part of the income from the transaction. The Fund will not
lend its portfolio securities if, as a result, the aggregate value of such loans
would exceed 33-1/3% of the value of the Fund's total assets. Loan arrangements
made by the Fund will comply with all other applicable regulatory requirements,
including the rules of the New York Stock Exchange, which rules presently
require the borrower, after notice, to redeliver the securities within the
normal settlement time of three business days. All relevant facts and
circumstances, including creditworthiness of the broker, dealer or institution,
will be considered in making decisions with respect to the lending of
securities, subject to review by the Fund's trustees.
SHORT SALES. The Fund currently is only permitted to engage in short
sales if, at the time of the short sale, the Fund owns or has the right to
acquire an equivalent kind and amount of the security being sold short at no
additional cost (i.e., short sales "against the box").
In a short sale, the seller does not immediately deliver the
securities sold and is said to have a short position in those securities until
delivery occurs. To make delivery to the purchaser, the executing broker
borrows the securities being sold short on behalf of the seller. While the
short position is maintained, the seller collateralizes its obligation to
deliver the securities sold short in an amount equal to the proceeds of the
short sale plus an additional margin amount established by the Board of
Governors of the Federal Reserve. If the Fund engages in a short sale, the
collateral account will be maintained by the Fund's custodian. While the short
sale is open, the
-6-
<PAGE>
Fund will maintain in a segregated custodial account an amount of securities
convertible into or exchangeable for such equivalent securities at no additional
cost. These securities would constitute the Fund's long position.
Under prior law, the Fund could have made a short sale, as described
above, when it wanted to sell a security it owned at a current attractive price,
but also wished to defer recognition of gain or loss for Federal income tax
purposes and for purposes of satisfying certain tests applicable to regulated
investment companies under the Internal Revenue Code. However, federal tax
legislation has eliminated the ability to defer recognition of gain or loss in
short sales against the box and accordingly, it is not anticipated that the Fund
will be engaging in these transactions unless there are further legislative
changes.
HEDGING TRANSACTIONS. Although it has historically not done so, the
Fund is authorized to make limited use of certain types of futures, forwards
and/or options, but only for the purpose of hedging, that is, protecting against
market risk due to market movements that may adversely affect the value of the
Fund's securities or the price of securities that the Fund is considering
purchasing. The utilization of futures, forwards and options is also subject to
policies and procedures which may be established by the trustees from time to
time. In addition, the Fund is not required to hedge. Decisions regarding
hedging are subject to the sub-advisor's judgment of the cost of the hedge, its
potential effectiveness and other factors the sub-advisor considers pertinent.
A hedging transaction may partially protect the Fund from a decline in
the value of a particular security or its portfolio generally, although hedging
may also limit the Fund's opportunity to profit from favorable price movements,
and the cost of the transaction will reduce the potential return on the security
or the portfolio. Use of these instruments by the Fund involves the potential
for a loss that may exceed the amount of initial margin the Fund would be
permitted to commit to the contracts under its investment limitation, or in the
case of a call option written by the Fund, may exceed the premium received for
the option. However, the Fund is permitted to use such instruments for hedging
purposes only, and only if the aggregate amount of its obligations under these
contracts does not exceed the total market value of the assets the Fund is
attempting to hedge, such as a portion or all of its exposure to equity
securities or its holding in a specific foreign currency. To help ensure that
the Fund will be able to meet its obligations under its futures and forward
contracts and its obligations under options written by the Fund, the Fund will
be required to maintain liquid assets in a segregated account with its custodian
bank or to set aside portfolio securities to "cover" its position in these
contracts.
The principal risks of the Fund utilizing futures transactions,
forward contracts and options are: (a) losses resulting from market movements
not anticipated by the Fund; (b) possible imperfect correlation between
movements in the prices of futures, forwards and options and movements in the
prices of the securities or currencies hedged or used to cover such positions;
(c) lack of assurance that a liquid secondary market will exist for any
particular futures or options at any particular time, and possible
exchange-imposed price fluctuation limits, either of which may make it difficult
or impossible to close a position when so desired; (d) lack of assurance that
the counterparty to a forward contract would be willing to negotiate an offset
or termination of the contract when so desired; and (e) the need for additional
information and skills beyond those required for the management of a portfolio
of traditional securities. In addition, when the Fund enters into an
over-the-counter contract with a counterparty, the Fund will assume counterparty
credit risk, that is, the risk that the counterparty will fail to perform its
obligations, in which case the Fund could be worse off than if the contract had
not been entered into.
Following is additional information concerning the futures, forwards
and options which the Fund may utilize, provided that no more than 5% of the
Fund's net assets at the time the contract is entered into may be used for
initial margins for financial futures transactions and
-7-
<PAGE>
premiums paid for the purchase of options. In addition, the Fund may only write
call options that are covered and only up to 25% of the Fund's total assets.
FUTURES CONTRACTS. Financial futures contracts are exchange-traded
contracts on financial instruments (such as securities and foreign currencies)
and securities indices that obligate the holder to take or make delivery of a
specified quantity of the underlying financial instrument, or the cash value of
an index, at a future date. Although futures contracts by their terms call for
the delivery or acquisition of the underlying instruments or a cash payment
based on the mark-to-market value of the underlying instruments, in most cases
the contractual obligation will be offset before the delivery date by buying (in
the case of an obligation to sell) or selling (in the case of an obligation to
buy) an identical futures contract. Such a transaction cancels the original
obligation to make or take delivery of the instruments.
The Fund may enter into contracts for the purchase or sale for future
delivery of financial instruments, such as securities and foreign currencies, or
contracts based on financial indices including indices of U.S. Government
securities, foreign government securities or equity securities. U.S. futures
contracts are traded on exchanges which have been designated "contract markets"
by the Commodity Futures Trading Commission ("CFTC") and must be executed
through a futures commission merchant (an "FCM"), or brokerage firm, which is a
member of the relevant contract market. Through their clearing corporations,
the exchanges guarantee performance of the contracts as between the clearing
members of the exchange.
Both the buyer and seller are required to deposit "initial margin" for
the benefit of the FCM when a futures contract is entered into. Initial margin
deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or other
liquid assets. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments to the other
party to settle the change in value on a daily basis. Initial and variation
margin payments are similar to good faith deposits or performance bonds or
party-to-party payments resulting from daily changes in the value of the
contract, unlike margin extended by a securities broker, and would be released
or credited to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Unlike margin extended by a
securities broker, initial and variation margin payments do not constitute
purchasing securities on margin for purposes of the Fund's investment
limitations. The Fund will incur brokerage fees when it buys or sells futures
contracts.
In the event of the bankruptcy of the FCM that holds margin on behalf
of the Fund, the Fund may be entitled to return of margin owed to the Fund only
in proportion to the amount received by the FCM's other customers. The Fund
will attempt to minimize the risk by careful monitoring of the creditworthiness
of the FCMs with which the Fund does business and by depositing margin payments
in a segregated account with the Fund's custodian for the benefit of the FCM
when practical or otherwise required by law.
The Fund intends to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the futures
markets. Accordingly, the Fund will not enter into any futures contract or
option on a futures contract if, as a result, the aggregate initial margin and
premiums required to establish such positions would exceed 5% of the Fund's net
assets.
Although the Fund would hold cash and liquid assets in a segregated
account with a mark-to-market value sufficient to cover the Fund's open futures
obligations, the segregated assets would be available to the Fund immediately
upon closing out the futures position.
The acquisition or sale of a futures contract may occur, for example,
when the Fund is considering purchasing or holds equity securities and seeks to
protect itself from fluctuations in
-8-
<PAGE>
prices without buying or selling those securities. For example, if prices were
expected to decrease, the Fund might sell equity index futures contracts,
thereby hoping to offset a potential decline in the value of equity securities
in the portfolio by a corresponding increase in the value of the futures
contract position held by the Fund and thereby preventing the Fund's net asset
value from declining as much as it otherwise would have. The Fund also could
protect against potential price declines by selling portfolio securities and
investing in money market instruments. However, the use of futures contracts as
a hedging technique allows the Fund to maintain a defensive position without
having to sell portfolio securities.
Similarly, when prices of equity securities are expected to increase,
futures contracts may be bought to attempt to hedge against the possibility of
having to buy equity securities at higher prices. This technique is sometimes
known as an anticipatory hedge. Since the fluctuations in the value of futures
contracts should be similar to those of equity securities, the Fund could take
advantage of the potential rise in the value of equity securities without buying
them until the market has stabilized. At that time, the futures contracts could
be liquidated and the Fund could buy equity securities on the cash market.
The ordinary spreads between prices in the cash and futures markets,
due to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced and prices in the futures market
distorted. Third, from the point of view of speculators, the margin deposit
requirements in the futures market are less than margin requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
the foregoing distortions, a correct forecast of general price trends by the
Fund still may not result in a successful use of futures.
Futures contracts entail additional risks. Although the Fund will
only utilize futures contracts when it believes that use of such contracts
will benefit the Fund, if the Fund's investment judgment is incorrect, the
Fund's overall performance could be worse than if the Fund had not entered
into futures contracts. For example, if the Fund has hedged against the
effects of a possible decrease in prices of securities held in the Fund's
portfolio and prices increase instead, the Fund will lose part or all of the
benefit of the increased value of these securities because of offsetting
losses in the Fund's futures positions. In addition, if the Fund has
insufficient cash, it may have to sell securities from its portfolio to meet
daily variation margin requirements. Those sales may be, but will not
necessarily be, at increased prices which reflect the rising market and may
occur at a time when the sales are disadvantageous to the Fund. Although the
buyer of an option cannot lose more than the amount of the premium plus
related transaction costs, a buyer or seller of futures contracts could lose
amounts substantially in excess of any initial margin deposits made, due to
the potential for adverse price movements resulting in additional variation
margin being required by such positions. However, the Fund intends to monitor
its investments closely and will attempt to close its positions when the risk
of loss to the Fund becomes unacceptably high.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
the Fund will not match exactly the Fund's current or potential investments.
The Fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests --
for example, by hedging investments in portfolio securities with a futures
contract based on a broad
-9-
<PAGE>
index of securities -- which involves a risk that the futures position will not
correlate precisely with the performance of the Fund's investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with the
Fund's investments. Futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between the Fund's investments and its futures positions may also
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts.
The Fund may buy or sell futures contracts with a value less than or equal to
the securities it wishes to hedge or is considering purchasing. If price
changes in the Fund's futures positions are poorly correlated with its other
investments, its futures positions may fail to produce desired gains or result
in losses that are not offset by the gains in the Fund's other investments.
Because futures contracts are generally settled within a day from the
date they are closed out, compared with a longer settlement period for most
types of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance a liquid secondary
market will exist for any particular futures contract at any particular time.
In addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for the Fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, the Fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, the Fund's access to other assets held to cover its futures positions
also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Fund may buy and write options
on futures contracts for hedging purposes. An option on a futures contract
gives the Fund the right (but not the obligation) to buy or sell a futures
contract at a specified price on or before a specified date. The purchase of a
call option on a futures contract is similar in some respects to the purchase of
a call option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying instrument, ownership of the option may or may not
be less risky than ownership of the futures contract or the underlying
instrument. As with the purchase of futures contracts, the Fund may buy a call
option on a futures contract to hedge against a market advance, and the Fund
might buy a put option on a futures contract to hedge against a market decline.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the call option is below the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Fund's portfolio
holdings. If a call option the Fund has written is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between change in the value of its
portfolio securities and changes in the value of the futures positions, the
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
-10-
<PAGE>
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk the Fund assumes when it buys an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward contract is a
privately negotiated agreement between two parties in which one party is
obligated to deliver a stated amount of a stated asset at a specified time in
the future and the other party is obligated to pay a specified invoice amount
for the assets at the time of delivery. The Fund currently intends that it will
only use forward contracts or commitments for hedging purposes and will only use
forward foreign currency exchange contracts, although the Fund may enter into
additional forms of forward contracts or commitments in the future if they
become available and advisable in light of the Fund's objectives and investment
policies. Forward contracts generally are negotiated in an interbank market
conducted directly between traders (usually large commercial banks) and their
customers. Unlike futures contracts, which are standardized exchange-traded
contracts, forward contracts can be specifically drawn to meet the needs of the
parties that enter into them. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the contract
to maturity and complete the contemplated exchange.
The following discussion summarizes the Fund's principal uses of
forward foreign currency exchange contracts ("forward currency contracts"). The
Fund may enter into forward currency contracts with stated contract values of up
to the value of the Fund's assets. A forward currency contract is an obligation
to buy or sell an amount of a specified currency for an agreed price (which may
be in U.S. dollars or a foreign currency) on a specified date. The Fund will
exchange foreign currencies for U.S. dollars and for other foreign currencies in
the normal course of business and may buy and sell currencies through forward
currency contracts in order to fix a price (in terms of a specified currency)
for securities it has agreed to buy or sell ("transaction hedge"). The Fund
also may hedge some or all of its investments denominated in foreign currency
against a decline in the value of that currency (or a proxy currency whose price
movements are expected to have a high degree of correlation with the currency
being hedged) relative to the U.S. dollar by entering into forward currency
contracts to sell an amount of that currency approximating the value of some or
all of its portfolio securities denominated in that currency ("position hedge")
or by participating in futures contracts (or options on such futures) with
respect to the currency. The Fund also may enter into a forward currency
contract with respect to a currency where the Fund is considering the purchase
or sale of investments denominated in that currency but has not yet selected the
specific investments ("anticipatory hedge").
These types of hedging minimize the effect of currency appreciation as
well as depreciation, but do not eliminate fluctuations in the underlying U.S.
dollar equivalent value of the proceeds of or rates of return on the Fund's
foreign currency denominated portfolio securities. The matching of the increase
in value of a forward contract and the decline in the U.S. dollar equivalent
value of the foreign currency denominated asset that is the subject of the hedge
generally will not be precise. Shifting the Fund's currency exposure from one
foreign currency to another limits the Fund's opportunity to profit from
increases in the value of the original currency and involves a risk of increased
losses to the Fund if its investment manager's projection of future exchange
rates is inaccurate. Unforeseen changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such contracts.
The Fund will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency
-11-
<PAGE>
being hedged. To the extent that the Fund is not able to cover its forward
currency positions with underlying portfolio securities, the Fund's custodian
will segregate cash or liquid assets having a value equal to the aggregate
amount of the Fund's commitments under forward contracts entered into. If the
value of the securities used to cover a position or the value of segregated
assets declines, the Fund must find alternative cover or segregate additional
cash or liquid assets on a daily basis so that the value of the covered and
segregated assets will be equal to the amount of the Fund's commitments with
respect to such contracts.
While forward contracts are not currently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward contracts. In such
event, the Fund's ability to utilize forward contracts may be restricted. The
Fund may not always be able to enter into forward contracts at attractive prices
and may be limited in its ability to use these contracts to hedge Fund assets.
In addition, when the Fund enters into a privately negotiated forward contract
with a counterparty, the Fund assumes counterparty credit risk, that is, the
risk that the counterparty will fail to perform its obligations, in which case
the Fund could be worse off than if the contract had not been entered into.
Unlike many exchange-traded futures contracts and options on futures, there are
no daily price fluctuation limits with respect to forward contracts and other
negotiated or over-the-counter instruments, and with respect to those contracts,
adverse market movements could therefore continue to an unlimited extent over a
period of time. However, the Fund intends to monitor its investments closely
and will attempt to renegotiate or close its positions when the risk of loss to
the Fund becomes unacceptably high.
OPTIONS ON SECURITIES AND SECURITIES INDICES. The Fund may buy or
sell put or call options and write covered call options on securities that are
traded on United States or foreign securities exchanges or over-the-counter.
Buying an option involves the risk that, during the option period, the price of
the underlying security will not increase (in the case of a call) to above the
exercise price, or will not decrease (in the case of a put) to below the
exercise price, in which case the option will expire without being exercised and
the holder would lose the amount of the premium. Writing a call option involves
the risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by the Fund to the option holder at a lower price than its current market
value and the Fund's potential for capital appreciation on the security would be
limited to the exercise price. Moreover, when the Fund writes a call option on
a securities index, the Fund bears the risk of loss resulting from imperfect
correlation between movements in the price of the index and the price of the
securities set aside to cover such position. Although they entitle the holder
to buy equity securities, call options to purchase equity securities do not
entitle the holder to dividends or voting rights with respect to the underlying
securities, nor do they represent any rights in the assets of the issuer of
those securities.
A call option written by the Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also deemed to be covered if the Fund holds a call on the same
security and in the same principal amount as the call written and the exercise
price of the call held (i) is equal to or less than the exercise price of the
call written or (ii) is greater than the exercise price of the call written if
the difference is maintained by the Fund in liquid assets in a segregated
account with its custodian.
The writer of a call option may have no control when the underlying
securities must be sold. Whether or not an option expires unexercised, the
writer retains the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the market value of the
underlying security during the option period.
-12-
<PAGE>
The writer of an exchange-traded call option that wishes to terminate
its obligation may effect a "closing purchase transaction." This is
accomplished by buying an option of the same series as the option previously
written. The effect of the purchase is that the writer's position will be
canceled by the clearing corporation. If the Fund desires to sell a particular
security from the Fund's portfolio on which the Fund has written a call option,
the Fund will effect a closing transaction prior to or concurrent with the sale
of the security. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option. An investor who
is the holder of an exchange-traded option may liquidate its position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously bought. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected.
The Fund will realize a profit from a closing transaction if the price
of the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to buy the option; the Fund will realize a loss from a closing transaction
if the price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there exists a
secondary market for an option of the same series. If a secondary market does
not exist, it might not be possible to effect closing transactions in particular
options with the result that the Fund would have to exercise the options in
order to realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or the Fund delivers the underlying security
upon exercise. Reasons for the absence of a liquid secondary market may include
the following: (i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national securities exchange on
which the option is traded ("Exchange") on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
Exchange, (v) the facilities of an Exchange or of the Options Clearing
Corporation ("OCC") may not at all times be adequate to handle current trading
volume, or (vi) one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.
In addition, when the Fund enters into an over-the-counter option
contract with a counterparty, the Fund assumes counterparty credit risk, that
is, the risk that the counterparty will fail to perform its obligations, in
which case the Fund could be worse off than if the contract had not been entered
into.
An option on a securities index is similar to an option on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, on exercise of the option, an amount of cash if the closing level of
the securities index on which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The Fund may buy call options on securities or securities indices to
hedge against an increase in the price of a security or securities that the Fund
may buy in the future. The premium paid for the call option plus any
transaction costs will reduce the benefit, if any, realized
-13-
<PAGE>
by the Fund upon exercise of the option, and, unless the price of the underlying
security or index rises sufficiently, the option may expire and become worthless
to the Fund. The Fund may buy put options to hedge against a decline in the
value of a security or its portfolio. The premium paid for the put option plus
any transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying security or
index declines sufficiently, the option may expire and become worthless to the
Fund.
An example of a hedging transaction using an index option would be
if the Fund were to purchase a put on a stock index, in order to protect the
Fund against a decline in the value of all securities held by it to the
extent that the stock index moves in a similar pattern to the prices of the
securities held. While the correlation between stock indices and price
movements of the stocks in which the Fund will generally invest may be
imperfect, the Fund expects, nonetheless, that the use of put options that
relate to such indices will, in certain circumstances, protect against
declines in values of specific portfolio securities or the Fund's portfolio
generally. Although the purchase of a put option may partially protect the
Fund from a decline in the value of a particular security or its portfolio
generally, the cost of a put will reduce the potential return on the security
or the portfolio.
PORTFOLIO TURNOVER. Investment changes in the Fund will be made
whenever management deems them appropriate even if this results in a higher
portfolio turnover rate. A 100% annual turnover rate results, for example, if
the equivalent of all of the securities in the Fund's portfolio are replaced in
a period of one year. In addition, portfolio turnover for the Fund may increase
as a result of large amounts of purchases and redemptions of shares of the Fund
due to economic, market or other factors that are not within the control of
management.
Higher portfolio turnover will necessarily result in correspondingly
higher brokerage costs for the Fund. The existence of a high portfolio turnover
rate has no direct relationship to the tax liability of the Fund, although sales
of certain stocks will lead to realization of gains, and, possibly, increased
taxable distributions to shareholders. The Fund's brokerage policy is discussed
further below under Section 6--Brokerage Policy, and additional information
concerning income taxes is located under Section 9--Income Dividends, Capital
Gains Distributions and Tax Treatment.
2. INVESTMENT RESTRICTIONS
The investment objective of the Fund is capital appreciation. The
investment objective of the Fund is considered fundamental, meaning that it
cannot be changed without a shareholders' vote. There can be no assurance that
the Fund's investment objective will be realized.
The Fund has also adopted certain investment policies, strategies,
guidelines and procedures in pursuing its objective. These may be changed
without a shareholder vote. The principal policies and strategies used by the
Fund are described in the Prospectus.
In addition, the Fund has adopted certain fundamental and
non-fundamental restrictions on its investments and other activities, which are
listed below. Fundamental restrictions may not be changed without the approval
of (i) 67% or more of the voting securities of the Fund present at a meeting of
shareholders thereof if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Fund. Non-fundamental restrictions may be
changed in the future by action of the trustees without shareholder vote.
-14-
<PAGE>
BERGER INFORMATION TECHNOLOGY FUND
The following fundamental restrictions apply to the Berger Information
Technology Fund. The Fund may not:
1. With respect to 75% of the Fund's total assets, purchase the
securities of any one issuer (except U.S. government securities) if immediately
after and as a result of such purchase (a) the value of the holdings of the Fund
in the securities of such issuer exceeds 5% of the value of the Fund's total
assets or (b) the Fund owns more than 10% of the outstanding voting securities
of such issuer.
2. Invest in any one industry (other than U.S. government
securities) 25% or more of the value of its total assets at the time of such
investment.
3. Borrow money, except from banks for temporary or emergency
purposes in amounts not to exceed 25% of the Fund's total assets (including the
amount borrowed) taken at market value, nor pledge, mortgage or hypothecate its
assets, except to secure permitted indebtedness and then only if such pledging,
mortgaging or hypothecating does not exceed 25% of the Fund's total assets taken
at market value. When borrowings exceed 5% of the Fund's total assets, the Fund
will not purchase portfolio securities.
4. Act as a securities underwriter (except to the extent the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing of a
security), issue senior securities (except to the extent permitted under the
Investment Company Act of 1940), invest in real estate (although it may purchase
shares of a real estate investment trust), or invest in commodities or commodity
contracts except financial futures transactions, futures contracts on securities
and securities indices and options on such futures, forward foreign currency
exchange contracts, forward commitments or securities index put or call options.
5. Make loans, except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies. The Fund does not, for this purpose, consider the purchase
of all or a portion of an issue of publicly distributed bonds, bank loan
participation agreements, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities, to be the making of a loan.
In applying the industry concentration investment restriction (no. 2
above), the Fund uses the industry groups used in the Data Monitor Portfolio
Monitoring System of William O'Neil & Co. Incorporated.
The trustees have adopted additional non-fundamental investment
restrictions for the Fund. These limitations may be changed by the trustees
without a shareholder vote. The non-fundamental investment restrictions include
the following:
1. The Fund may not purchase securities on margin from a broker or
dealer, except that the Fund may obtain such short-term credits as may be
necessary for the clearance of transactions, and may not make short sales of
securities, except that the Fund may make short sales if, at the time of the
short sale, the Fund owns or has the right to acquire an equivalent kind and
amount of the security being sold short at no additional cost (i.e., short sales
"against the box"). This limitation shall not prohibit or restrict the Fund
from entering into futures, forwards and options contracts or from making margin
payments and other deposits in connection therewith.
-15-
<PAGE>
2. The Fund may not purchase the securities of any other investment
company, except by purchase in the open market involving no commission or profit
to a sponsor or dealer (other than the customary broker's commission).
3. The Fund may not invest in companies for the purposes of
exercising control of management.
4. The Fund may not purchase any security, including any repurchase
agreement maturing in more than seven days, which is not readily marketable, if
more than 15% of the net assets of the Fund, taken at market value at the time
of purchase would be invested in such securities.
5. Only for the purpose of hedging, the Fund may purchase and sell
financial futures, forward foreign currency exchange contracts and put and call
options, but no more than 5% of the Fund's net assets at the time of purchase
may be invested in initial margins for financial futures transactions and
premiums for options. The Fund may only write call options that are covered and
only up to 25% of the Fund's total assets.
6. The Fund may not purchase or sell securities on a when-issued or
delayed delivery basis, if as a result more than 5% of its total assets taken at
market value at the time of purchase would be invested in such securities.
3. MANAGEMENT OF THE FUND
The Fund is supervised by trustees who are responsible for major
decisions about the Fund's policies and overall Fund oversight. The Fund's
trustees hire the companies that run day-to-day Fund operations, such as the
investment advisor, administrator, transfer agent and custodian.
The trustees and executive officers of the Fund are listed below,
together with information which includes their principal occupations during the
past five years and other principal business affiliations.
MICHAEL OWEN, 412 Reid Hall, Montana State University, Bozeman, MT 59717,
DOB: 1937. Since 1994, Dean, and from 1989 to 1994, a member of the
Finance faculty, of the College of Business, Montana State University.
Self-employed as a financial and management consultant, and in real
estate development. Formerly (1976-1989), Chairman and Chief
Executive Officer of Royal Gold, Inc. (mining). Chairman of the Board
of Berger 100 Fund and Berger Growth and Income Fund. Chairman of the
Trustees of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* GERARD M. LAVIN, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1942. President and a director of Berger 100 Fund and Berger
Growth and Income Fund, and President and a trustee of Berger
Investment Portfolio Trust and Berger Omni Investment Trust, since
February 1997. President and a trustee of Berger/BIAM Worldwide
Portfolios Trust and Berger/BIAM Worldwide Funds Trust since their
inception in May 1996. President and a trustee of Berger
Institutional Products Trust since its inception in October 1995.
President and a director since April 1995 of Berger Associates, Inc.
Member and Chairman of the Board of Managers and Co-Chief Executive
Officer on the Management Committee of BBOI Worldwide LLC since
November 1996. President and a director of West Side Investments,
Inc. (investments), a wholly-owned subsidiary of DST Systems, Inc.,
since February 1998. Formerly, a Vice President of DST Systems, Inc.
(data
-16-
<PAGE>
processing) from July 1995 to February 1998; President and Chief
Executive Officer of Investors Fiduciary Trust Company (banking) from
February 1992 to March 1995; and Chief Operating Officer of SunAmerica
Asset Management Co. (money management) from January 1990 to February
1992.
DENNIS E. BALDWIN, 3481 South Race Street, Englewood, CO 80110, DOB: 1928.
President, Baldwin Financial Counseling. Formerly (1978-1990), Vice
President and Denver Office Manager of Merrill Lynch Capital Markets.
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* WILLIAM M. B. BERGER, 210 University Boulevard, Suite 900, Denver, CO
80206, DOB: 1925. Director and, formerly, President (1974-1994) of
Berger 100 Fund and Berger Growth and Income Fund. Trustee of Berger
Investment Portfolio Trust since its inception in August 1993
(Chairman of the Trustees through November 1994). Trustee of Berger
Institutional Products Trust since its inception in October 1995.
Trustee of Berger/BIAM Worldwide Funds Trust and Berger/BIAM Worldwide
Portfolios Trust since their inception in May 1996. Trustee of Berger
Omni Investment Trust since February 1997. Chairman (since 1994) and
a Director (since 1973) and, formerly, President (1973-1994) of Berger
Associates.
LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, DOB: 1925. President,
Climate Engineering, Inc. (building environmental systems). Director
of Berger 100 Fund and Berger Growth and Income Fund. Trustee of
Berger Investment Portfolio Trust, Berger Institutional Products
Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide
Portfolios Trust and Berger Omni Investment Trust.
KATHERINE A. CATTANACH, 672 South Gaylord, Denver, CO 80209, DOB: 1945.
Managing Principal, Sovereign Financial Services, Inc. (investment
consulting firm). Formerly (1981-1988), Executive Vice President,
Captiva Corporation, Denver, Colorado (private investment management
firm). Ph.D. in Finance (Arizona State University); Chartered
Financial Analyst (CFA). Director of Berger 100 Fund and Berger
Growth and Income Fund. Trustee of Berger Investment Portfolio Trust,
Berger Institutional Products Trust, Berger/BIAM Worldwide Funds
Trust, Berger/BIAM Worldwide Portfolios Trust and Berger Omni
Investment Trust.
PAUL R. KNAPP, 33 North LaSalle Street, Suite 1900, Chicago, IL 60602, DOB:
1945. Since 1991, Chairman, President, Chief Executive Officer and a
director of Catalyst Institute (international public policy research
organization focused primarily on financial markets and institutions).
Since September 1997, President, Chief Executive Officer and a
director of DST Catalyst, Inc. (international financial markets
consulting, software and computer services company). Director
(since February 1998) and a Vice President (February 1998 - November
1998) of West Side Investments, Inc. (investments), a wholly-owned
subsidiary of DST Systems, Inc. Previously (1991 - September 1997),
Chairman, President, Chief Executive Officer and a director of
Catalyst Consulting (international financial institutions business
consulting firm). Prior thereto (1988-1991), President, Chief
Executive Officer and a director of Kessler Asher Group (brokerage,
clearing and trading firm). Director of Berger 100 Fund and Berger
Growth and Income Fund. Trustee of Berger Investment Portfolio Trust,
Berger Institutional Products Trust, Berger/BIAM Worldwide Funds
Trust, Berger/BIAM Worldwide Portfolios Trust and Berger Omni
Investment Trust.
-17-
<PAGE>
HARRY T. LEWIS, JR., 370 17th Street, Suite 3560, Denver, CO 80202, DOB:
1933. Self-employed as a private investor. Formerly (1981-1988),
Senior Vice President, Rocky Mountain Region, of Dain Bosworth
Incorporated and member of that firm's Management Committee. Director
of J.D. Edwards & Co. (computer software company) since 1995.
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
WILLIAM SINCLAIRE, 3049 S. Perry Park Road, Sedalia, CO 80135, DOB: 1928.
President, Santa Clara LLC (privately owned agriculture company).
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* JACK R. THOMPSON, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1949. Executive Vice President of the Berger Funds since
February 1999. Executive Vice President of Berger Associates, Inc.,
since February 1999. Audit Committee Member of the Public Employees'
Retirement Association of Colorado (pension plan) since November 1997.
Self-employed as a consultant from July 1995 through February 1999.
Director of Wasatch Advisors (investment management) from February
1997 to February 1999. Director of Janus Capital Corporation
(investment management) from June 1984 through June 1995, and
Executive Vice President of the Corporation from April 1989 through
June 1995. Treasurer of Janus Capital Corporation from November 1983
through October 1989. Trustee of the Janus Investment Funds from
December 1990 through June 1995, and Senior Vice President of the
Trust from May 1993 through June 1995. President and a director of
Janus Service Corporation (transfer agent) from January 1987 through
June 1995. President and a director of Fillmore Agency, Inc.
(advertising agency), from January 1990 through June 1995. Executive
Vice President and a director of Janus Capital International, Ltd.
(investment advisor) from September 1994 through June 1995. President
and a director of Janus Distributors, Inc. (broker/dealer), from May
1991 through June 1995. Director of IDEX Management, Inc. (investment
management), from January 1985 through June 1995. Trustee and Senior
Vice President of the of the Janus Aspen Funds from May 1993 through
June 1995.
* JANICE M. TEAGUE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1954. Vice President and Secretary (since November 1998) and
Assistant Secretary (September 1996 to November 1998) of the Berger
Funds. Vice President (since October 1997), Secretary (since November
1998) and Assistant Secretary (September 1996 through November 1998)
with Berger Associates. Vice President and Secretary with Berger
Distributors, Inc., since August 1998. Formerly, self-employed as a
business consultant from June 1995 through September 1996, Secretary
of the Janus Funds from January 1990 to May 1995 and Assistant
Secretary of Janus Capital Corporation from October 1989 to May 1995.
* DAVID J. SCHULTZ, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1950. Vice President and Treasurer (since November 1998) and
Assistant Treasurer (September 1996 to November 1998) of the Berger
Funds. Vice President (since February 1997) and Controller (since
August 1994) with Berger Associates. Chief Financial Officer and
Treasurer (since May 1996), Assistant Secretary (since August 1998)
and Secretary (May 1996 to August 1998) with Berger Distributors, Inc.
Formerly, Partner with Smith, Brock & Gwinn (accounting firm) from
January 1984 to August 1994.
* BRIAN S. FERRIE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1958. Vice President of the Berger Funds since November 1998.
Vice President (since February
-18-
<PAGE>
1997) and Chief Compliance Officer (since August 1994) with Berger
Associates. Chief Compliance Officer with Berger Distributors, Inc.,
since May 1996. Formerly, Compliance Officer with United Services
Advisor, Inc., from January 1988 to July 1994, and Director of
Internal Audit of United Services Funds from January 1987 to July
1994.
* JOHN PAGANELLI, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1967. Assistant Treasurer of the Berger Funds since November
1998. Vice President (since November 1998) and Manager of Accounting
(January 1997 through November 1998) with Berger Associates.
Formerly, manager of Accounting (December 1994 through October 1996)
and Senior Accountant (November 1991 through December 1994) with
Palmeri Fund Administrators, Inc.
________________
* Interested person (as defined in the Investment Company Act of 1940) of the
Fund and/or of the Fund's advisor or sub-advisor.
The trustees of the Fund have adopted a trustee retirement age of 75 years.
TRUSTEE COMPENSATION
The officers of the Fund received no compensation from the Fund during the
fiscal year ended September 30, 1998. However, trustees of the Fund who are not
"interested persons" of the Fund or its advisor or sub-advisor are compensated
for their services according to a fee schedule, allocated among the Berger
Funds. Neither the officers of the Fund nor the trustees receive any form of
pension or retirement benefit compensation from the Fund.
The following table sets forth information regarding compensation paid or
accrued during the fiscal year ended September 30, 1998, for each trustee of the
Fund:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME AND POSITION AGGREGATE COMPENSATION FROM
WITH BERGER FUNDS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BERGER INFORMATION ALL BERGER FUNDS(2)
TECHNOLOGY FUND(1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Dennis E. Baldwin(3) $ 269 $47,000
- -------------------------------------------------------------------------------
William M.B. $ 0 $ 0
Berger(3),(4)
- -------------------------------------------------------------------------------
Louis R. Bindner(3) $ 269 $46,400
- -------------------------------------------------------------------------------
Katherine A. Cattanach(3) $ 269 $47,000
- -------------------------------------------------------------------------------
Lucy Black $ 0 $ 8,200
Creighton(3),(6)
- -------------------------------------------------------------------------------
Paul R. Knapp(3) $ 269 $47,000
- -------------------------------------------------------------------------------
Gerard M. $ 0 $ 0
Lavin(3),(4),(5)
- -------------------------------------------------------------------------------
Harry T. Lewis(3) $ 269 $47,000
- -------------------------------------------------------------------------------
Michael Owen(3) $ 326 $57,000
- -------------------------------------------------------------------------------
William Sinclaire(3) $ 269 $46,400
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
NOTES TO TABLE
(1) The Fund was not added as a series of the Trust until ______________, 1999.
Figures are estimates for the first year of operations of the Fund as a series
of the Trust.
(2) Includes the Berger 100 Fund, the Berger Growth and Income Fund, the Berger
Investment Portfolio Trust (including the Berger Small Company Growth Fund, the
Berger New Generation Fund, the Berger Balanced Fund, the Berger Select Fund and
the Berger Mid Cap Growth Fund), the Berger Institutional Products Trust (four
series), the Berger/BIAM Worldwide Funds Trust (three series, including the
Berger/BIAM International Fund), the Berger/BIAM Worldwide Portfolios Trust (one
series) and the Berger Omni Investment Trust (including the Berger Small Cap
Value Fund). Aggregate compensation figures do not include first-year estimates
for the Fund. Of the aggregate amounts shown for each trustee, the following
amounts were deferred under applicable deferred compensation plans: Dennis E.
Baldwin $36,100; Louis R. Bindner $3,638; Katherine A. Cattanach $45,202; Lucy
Black Creighton $6,280; Michael Owen $10,276; William Sinclaire $14,898.
(3) Director of Berger 100 Fund and Berger Growth and Income Fund and trustee
of Berger Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Portfolios Trust, Berger/BIAM Worldwide Funds Trust and
Berger Omni Investment Trust.
(4) Interested person of Berger Associates.
(5) President of Berger 100 Fund, Berger Growth and Income Fund, Berger
Investment Portfolio Trust, Berger/BIAM Worldwide Portfolios Trust, Berger/BIAM
Worldwide Funds Trust and Berger Omni Investment Trust.
(6) Resigned as a director and trustee effective November 1997.
Trustees may elect to defer receipt of all or a portion of their
fees pursuant to a fee deferral plan adopted by the Fund. Under the plan,
deferred fees are credited to an account and adjusted thereafter to reflect
the investment experience of whichever of the Berger Funds (or approved money
market funds) is designated by the trustee for this purpose. Pursuant to an
SEC exemptive order, the Fund is permitted to purchase shares of the
designated funds in order to offset its obligation to the trustees
participating in the plan. Purchases made pursuant to the plan are excepted
from any otherwise applicable investment restriction limiting the purchase of
securities of any other investment company. The Fund's obligation to make
payments of deferred fees under the plan is a general obligation of the Fund.
As of [__________], 1999, the officers and trustees of the Fund as a
group owned of record or beneficially no shares of the Fund.
4. INVESTMENT ADVISOR AND SUB-ADVISOR
BERGER ASSOCIATES - INVESTMENT ADVISOR
Berger Associates, Inc. ("Berger Associates"), 210 University
Boulevard, Suite 900, Denver, CO 80206, is the investment advisor to the Fund.
Berger Associates is responsible for managing the investment operations of the
Fund and the composition of its investment portfolio. Berger Associates also
acts as the Fund's administrator and is responsible for such functions as
monitoring compliance with all applicable federal and state laws.
Berger Associates has been in the investment advisory business for 25
years. It serves as investment advisor or sub-advisor to mutual funds and
institutional investors and had assets under management of approximately $3.4
billion as of December 31, 1998. Berger Associates is a wholly-owned subsidiary
of Kansas City Southern Industries, Inc. ("KCSI"). KCSI is a publicly traded
holding company with principal operations in rail transportation, through its
subsidiary The Kansas City Southern Railway Company, and financial asset
management businesses. KCSI also owns approximately 31% of the outstanding
shares of DST Systems, Inc. ("DST"), a publicly traded information and
transaction processing company which acts as the Fund's sub-transfer agent.
-20-
<PAGE>
BAY ISLE FINANCIAL CORPORATION - SUB-ADVISOR
Bay Isle Financial Corporation ("Bay Isle"), 160 Sansome Street, 17th
Floor, San Francisco, CA 94104, is the investment sub-advisor for the Fund. Bay
Isle has been in the investment advisory business since 1986. Bay Isle serves
as investment advisor or sub-advisor to mutual funds, institutional investors
and individual separate accounts.
Bay Isle served as investment advisor to the Fund (originally known as
the InformationTech 100-Registered Trademark- Fund) from its inception in April
1997 until _______________, 1999, when the InformationTech 100-Registered
Trademark- Fund was reorganized into the Fund with shareholder approval. At
that time, Bay Isle became the investment sub-advisor to the Fund under a
Sub-Advisory Agreement between Berger Associates as advisor and Bay Isle as
sub-advisor. As sub-advisor, Bay Isle provides day-to-day management of the
Fund's investment operations.
William F. K. Schaff is primarily responsible for the day-to-day
investment decisions for the Fund. Mr. Schaff is a co-founder and controlling
person of Bay Isle and serves as its Chief Investment Officer and a director.
Mr. Schaff has been managing accounts of Bay Isle clients since 1987. Gary G.
Pollock is also a co-founder and controlling person of Bay Isle and serves as
its President and a director.
In addition to its other activities, Bay Isle maintains the
INFORMATIONWEEK-Registered Trademark- 100 Index, an unmanaged index of the
stocks of 100 companies in the information technology industries.
INFORMATIONWEEK-Registered Trademark- is a registered trademark of CMP Media,
which is not affiliated with Bay Isle or the Fund. Mr. Schaff also writes
articles on investments for INFORMATIONWEEK magazine, a publication of CMP Media
covering information technology-related topics. CMP Media compensates Bay Isle
for managing the Index and for Mr. Schaff's articles.
INVESTMENT ADVISORY AGREEMENTS
Under the Investment Advisory Agreement between the Fund and its
advisor, the advisor is generally responsible for furnishing continuous advice
and making investment decisions as to the acquisition, holding or disposition of
securities or other assets which the Fund may own or contemplate acquiring from
time to time. The Investment Advisory Agreement provides that the investment
advisor shall not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission taken with
respect to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties thereunder and except to the extent otherwise
provided by law.
Under the Agreement, the advisor is compensated for its services by
the payment of a fee at the following annual rate, calculated as a percentage of
the average daily net assets of the Fund:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND ADVISOR INVESTMENT ADVISORY FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Berger Information Technology Berger 0.90%(2)
Fund Associates(1)
- -------------------------------------------------------------------------------
</TABLE>
(1) Fund is sub-advised by Bay Isle. See text preceding and following this
table.
(2) Under a written contract, the Fund's investment advisor waives its fee
or reimburses the Fund for expenses to the extent that, at any time during the
life of the Fund, the annual operating expenses for the Investor Shares class of
the Fund in any fiscal year, including the investment advisory fee and the 12b-1
fee, but excluding brokerage commissions, interest, taxes and extraordinary
expenses, exceed 2.00% of the Fund's average daily net assets attributable to
the Investor Shares
-21-
<PAGE>
for that fiscal year. The contract also provides that the advisor will waive an
additional amount of its fees or reimburse an additional amount of expenses to
the extent necessary to keep its fee waiver and reimbursement for the Investor
Shares class proportionate to its fee waiver and reimbursement for the Fund's
other outstanding share class. The contract may not be terminated or amended
except by a vote of the Fund's Board of Trustees. The investment advisory fee
is allocated among the Investor Shares and the other class of the Fund on the
basis of net assets attributable to each such class.
The Fund's Investment Advisory Agreement will continue in effect until
the last day of April 2001, and thereafter from year to year if such
continuation is specifically approved at least annually by the trustees or by
vote of a majority of the outstanding shares of the Fund and in either case by
vote of a majority of the trustees who are not "interested persons" (as that
term is defined in the 1940 Act) of the Fund or the advisor. The Agreement is
subject to termination by the Fund or the advisor on 60 days' written notice,
and terminates automatically in the event of its assignment.
Under the Sub-Advisory Agreement between the advisor and the
sub-advisor for the Fund, the sub-advisor is responsible for day-to-day
investment management. The sub-advisor manages the investments and determines
what securities and other investments will be acquired, held or disposed of,
consistent with the investment objective and policies established by the
trustees. The Sub-Advisory Agreement provides that the sub-advisor shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission taken with respect to the Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of reckless disregard of its obligations and duties
thereunder and except to the extent otherwise provided by law.
No fees are paid directly to the sub-advisor by the Fund. Bay Isle,
as the sub-advisor of the Fund, receives from the advisor a fee at the annual
rate of 0.45% of the average daily net asset of the Fund. The Sub-Advisory
Agreement will continue in effect until April 2001, and thereafter from year to
year if such continuation is specifically approved at least annually by the
trustees or by vote of a majority of the outstanding shares of the Fund and in
either case by vote of a majority of the trustees of the Fund who are not
"interested persons" (as that term is defined in the Investment Company Act of
1940) of the Fund or the advisor or the sub-advisor. The Sub-Advisory Agreement
is subject to termination by the Fund or the sub-advisor on 60 days' written
notice, and terminates automatically in the event of its assignment and in the
event of termination of the Investment Advisory Agreement.
OTHER ARRANGEMENTS BETWEEN BERGER ASSOCIATES AND BAY ISLE
Berger Associates and Bay Isle have formed a joint venture to provide
asset management services to certain private accounts. In connection with the
formation of that joint venture, Berger Associates purchased from Bay Isle
owners William F. K. Schaff and Gary G. Pollock the right that, if either Mr.
Schaff or Mr. Pollock ever desires to sell any of his Bay Isle shares in the
future, they will together first offer to sell shares to Berger Associates
aggregating at least 80% of the total outstanding shares of Bay Isle at an
agreed price. If Berger elects to purchase the Bay Isle shares offered, the
parties have agreed to use their best efforts to have 5-year employment
agreements entered into between Bay Isle and Messrs. Schaff and Pollock.
Consummation of any such purchase of Bay Isle shares by Berger Associates would
be subject to a number of conditions, including any required approval by Fund
shareholders under the Investment Company Act of 1940. Bay Isle and Messrs.
Schaff and Pollock are also compensated by Berger Associates for providing
administrative or consulting services relating to their joint venture private
account business.
TRADE ALLOCATIONS
While investment decisions for the Fund are made independently by the
sub-advisor, the same investment decision may be made for the Fund and one or
more accounts
-22-
<PAGE>
advised by the advisor. In this circumstance, should purchase and sell orders
of the same class of security be in effect on the same day, the orders for such
transactions may be combined by the advisor in order to seek the best
combination of net price and execution for each. Client orders partially filled
will, as a general matter, be allocated pro rata in proportion to each client's
original order, although exceptions may be made to avoid, among other things,
odd lots and de minimus allocations. Execution prices for a combined order will
be averaged so that each participating client receives the average price paid or
received. While in some cases, this policy might adversely affect the price
paid or received by the Fund or other participating accounts, or the size of the
position obtained or liquidated, the advisor will aggregate orders if it
believes that coordination of orders and the ability to participate in volume
transactions will result in the best overall combination of net price and
execution.
RESTRICTIONS ON PERSONAL TRADING
Berger Associates permits its directors, officers and employees to
purchase and sell securities for their own accounts in accordance with a policy
regarding personal investing in Berger Associates' Code of Ethics. The policy
requires all covered persons to conduct their personal securities transactions
in a manner which does not operate adversely to the interests of the Fund or
Berger Associates' other advisory clients. Directors and officers of Berger
Associates, investment personnel and other designated persons deemed to have
access to current trading information ("access persons") are required to
pre-clear all transactions in securities not otherwise exempt under the policy.
Requests for authority to trade will be denied pre-clearance when, among other
reasons, the proposed personal transaction would be contrary to the provisions
of the policy or would be deemed to adversely affect any transaction then known
to be under consideration for or currently being effected on behalf of any
client account, including the Fund.
In addition to the pre-clearance requirements described above, the
policy subjects directors and officers of Berger Associates, investment
personnel and other access persons to various trading restrictions and reporting
obligations. All reportable transactions are reviewed for compliance with the
policy. The policy is administered by Berger Associates and the provisions of
the policy are subject to interpretation by and exceptions authorized by its
board of directors.
Bay Isle permits its officers, directors, employees and consultants to
purchase and sell securities for their own accounts and accounts of related
persons in accordance with provisions governing personal securities trading in
Bay Isle's code of ethics and related internal policies. Employees must wait 3
days between the time a new recommendation or opinion change is made and the
time the employee may trade in those securities in their own or related
accounts, or alternatively may ask that their transaction be added to a "block"
trade that will be made for a group of clients. Any employee trade not included
in a "block" trade made must be pre-cleared if the trade exceeds certain
specified volume limits or specified volume limits relative to the average daily
trading volume of the security being traded. Volume limits are set with the
intent of requiring prior approval of any trade that could potentially cause
changes in the market price of the security in question. In addition, no
employee may sell (or buy) any security which he or she has bought (or sold)
within the past 5 trading days unless a loss is realized on closing the
position. Each employee must acknowledge quarterly that they are in compliance
with the Bay Isle code of ethics and related policies.
EXPENSES OF THE FUND
In addition to paying an investment advisory fee to its advisor, the
Fund pays all of its expenses not assumed by its advisor, including, but not
limited to, custodian and transfer agent fees, legal and accounting expenses,
administrative and record keeping expenses, interest charges, federal and state
taxes, costs of share certificates, expenses of shareholders' meetings,
compensation of trustees who are not interested persons of Berger Associates,
expenses of
-23-
<PAGE>
printing and distributing reports to shareholders and federal and state
administrative agencies, and all expenses incurred in connection with the
execution of its portfolio transactions, including brokerage commissions on
purchases and sales of portfolio securities, which are considered a cost of
securities of the Fund. The Fund also pays all expenses incurred in complying
with all federal and state laws and the laws of any foreign country applicable
to the issue, offer or sale of shares of the Fund, including, but not limited
to, all costs involved in preparing and printing prospectuses for shareholders
of the Fund.
Under a separate Administrative Services Agreement with respect to the
Fund, Berger Associates performs certain administrative and recordkeeping
services not otherwise performed by the Fund's custodian and recordkeeper,
including the preparation of financial statements and reports to be filed with
the Securities and Exchange Commission and state regulatory authorities. The
Fund pays Berger Associates a fee at an annual rate of 0.01% of its average
daily net assets for such services. These fees are in addition to the
investment advisory fees paid under the Investment Advisory Agreement. The
administrative services fees may be changed by the trustees without shareholder
approval.
The following table shows the cost to the Fund of the previously
applicable advisory fee for the last three fiscal years. For the fiscal years
shown, all amounts were paid to Bay Isle, the Fund's then investment advisor,
now the Fund's sub-advisor.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fiscal Year Ended February 28(1) Advisory Fee(2)
- -------------------------------------------------------------------------------
<S> <C>
1999 $ 68,000
- -------------------------------------------------------------------------------
1998(3) $ 27,000
- -------------------------------------------------------------------------------
</TABLE>
(1) The Fund's fiscal year changed from February 28 to September 30 as part of
a reorganization effective _________________, 1999.
(2) Under the advisory agreement in effect prior to the reorganization
referenced in note (1), the Fund's predecessor paid an advisory fee at an annual
rate of 0.95% of its average daily net assets to Bay Isle. As part of the
reorganization, the current investment advisory fee of 0.90% payable to Berger
Associates came into effect. The current investment advisory fee is allocated
among the Investor Shares and the other class of the Fund on the basis of net
assets attributable to each such class.
(3) The Fund was the accounting survivor in the reorganization referenced in
note (1). Accordingly, this covers the period April 8, 1997 (commencement of
operations of the predecessor) to February 28, 1998.
The Fund has appointed Investors Fiduciary Trust Company ("IFTC"), 801
Pennsylvania, Kansas City, MO 64105, as its recordkeeping and pricing agent. In
addition, IFTC also serves as the Fund's custodian, transfer agent and dividend
disbursing agent. IFTC has engaged DST Systems, Inc. ("DST"), P.O. Box 419958,
Kansas City, MO 64141, as sub-agent to provide transfer agency and dividend
disbursing services for the Fund. Approximately 31% of the outstanding shares
of DST are owned by KCSI.
As recordkeeping and pricing agent, IFTC calculates the daily net
asset value of the Fund and performs certain accounting and recordkeeping
functions required by the Fund. The Fund pays IFTC a monthly base fee plus an
asset-based fee. IFTC is also reimbursed for certain out-of-pocket expenses.
IFTC, as custodian, and its subcustodians have custody and provide for
the safekeeping of the Fund's securities and cash, and receive and remit the
income thereon as directed by the management of the Fund. The custodian and
subcustodians do not perform any managerial or policy-making functions for the
Fund. For its services as custodian, IFTC receives an asset-based fee plus
certain transaction fees and out-of-pocket expenses.
-24-
<PAGE>
As transfer agent and dividend disbursing agent, IFTC (through DST, as
sub-agent) maintains all shareholder accounts of record; assists in mailing all
reports, proxies and other information to the Fund's shareholders; calculates
the amount of, and delivers to the Fund's shareholders, proceeds representing
all dividends and distributions; and performs other related services. For these
services, IFTC receives a fee from the Fund at an annual rate of $14.00 per open
Fund shareholder account, subject to preset volume discounts, plus certain
transaction fees and fees for closed accounts, and is reimbursed for
out-of-pocket expenses, which fees in turn are passed through to DST as
sub-agent.
All of IFTC's fees are subject to reduction pursuant to an agreed
formula for certain earnings credits on the cash balances of the Fund.
12b-1 PLAN
The Fund has adopted a 12b-1 plan (the "Plan") pursuant to Rule 12b-1 under
the Investment Company Act of 1940, which provides for the payment to Berger
Associates of a 12b-1 fee of 0.25% per annum of the Fund's average daily net
assets attributable to the Investor Shares to finance activities primarily
intended to result in the sale of those shares. The Plan is intended to benefit
the Investor Shares class of the Fund by attracting new assets into the class
and thereby affording potential cost reductions due to economies of scale.
The expenses paid by Berger Associates may include, but are not limited to:
- -- payments made to, and costs incurred by, the Fund's principal underwriter
in connection with the distribution of Investor Shares, including payments
made to and expenses of officers and registered representatives of the
Distributor;
- -- payments made to and expenses of other persons (including employees of
Berger Associates) who are engaged in, or provide support services in
connection with, the distribution of Investor Shares, such as answering
routine telephone inquiries and processing shareholder requests for
information;
- -- compensation (including incentive compensation and/or continuing
compensation based on the amount of customer assets maintained in the Fund)
paid to securities dealers, financial institutions and other organizations
which render distribution and administrative services in connection with
the distribution of Investor Shares, including services to holders of
Investor Shares and prospective investors;
- -- costs related to the formulation and implementation of marketing and
promotional activities, including direct mail promotions and television,
radio, newspaper, magazine and other mass media advertising;
- -- costs of printing and distributing prospectuses and reports to prospective
shareholders of Investor Shares;
- -- costs involved in preparing, printing and distributing sales literature for
Investor Shares;
- -- costs involved in obtaining whatever information, analyses and reports with
respect to market and promotional activities on behalf of the Fund relating
to Investor Shares that Berger Associates deems advisable;
- -- and such other costs relating to Investor Shares as the Fund may from time
to time reasonably deem necessary or appropriate in order to finance
activities primarily intended to result in the sale of Investor Shares.
-25-
<PAGE>
Such 12b-1 fee payments are to be made by the Fund to Berger
Associates with respect to each fiscal year of the Fund without regard to the
actual distribution expenses incurred by Berger Associates in such year; that
is, if the distribution expenditures incurred by Berger Associates are less than
the total of such payments in such year, the difference is not to be reimbursed
to the Fund by Berger Associates, and if the distribution expenditures incurred
by Berger Associates are more than the total of such payments, the excess is not
to be reimbursed to Berger Associates by the Fund.
From time to time the Fund may engage in activities which jointly
promote the sale of Investor Shares and other funds that are or may in the
future be advised or administered by Berger Associates, which costs are not
readily identifiable as related to any one fund. In such cases, the Fund's
12b-1 fees may be used to finance the joint promotion of the shares of the
Investor Shares, along with the shares of the other fund. Berger Associates
allocates the cost of such joint promotional activity among the funds involved
on the basis of their respective net assets, unless otherwise directed by the
trustees.
The current 12b-1 Plan will continue in effect until the end of April
2000, and from year to year thereafter if approved at least annually by the
Fund's trustees and those trustees who are not interested persons of the Fund
and have no direct or indirect financial interest in the operation of the Plan
or any related agreements by votes cast in person at a meeting called for such
purpose. The Plan may not be amended to increase materially the amount to be
spent on distribution of Investor Shares without shareholder approval.
OTHER EXPENSE INFORMATION
The trustees of the Fund have authorized portfolio transactions to be
placed on an agency basis through DST Securities, Inc. ("DSTS"), a wholly-owned
broker-dealer subsidiary of DST. When transactions are effected through DSTS,
the commission received by DSTS is credited against, and thereby reduces,
certain operating expenses that the Fund would otherwise be obligated to pay.
No portion of the commission is retained by DSTS. See Section 6--Brokerage
Policy for further information concerning the expenses reduced as a result of
these arrangements. DSTS may be considered an affiliate of Berger Associates
due to the ownership interest of KCSI in both DST and Berger Associates.
The Fund and/or its advisor have entered into arrangements with
certain brokerage firms and other companies (such as recordkeepers and
administrators) to provide administrative services (such as sub-transfer agency,
recordkeeping, shareholder communications, sub-accounting and/or other
services) to investors purchasing shares of the Fund through those firms or
companies. The Fund's advisor or the Fund (if approved by its trustees) may pay
fees to these companies for their services. These companies may also be
appointed as agents for or authorized by the Fund to accept on its behalf
purchase and redemption requests that are received in good order. Subject to
Fund approval, certain of these companies may be authorized to designate other
entities to accept purchase and redemption orders on behalf of the Fund.
The Fund's advisor may also enter into arrangements with organizations
that solicit clients for the advisor, which may include clients who purchase
shares of the Fund. While the specific terms of each arrangement may differ,
generally, the fee paid by the advisor under such arrangements is based on the
value of the referred client's assets managed by the advisor. None of the fees
paid to such organizations will be borne by the Fund.
-26-
<PAGE>
DISTRIBUTOR
The distributor (principal underwriter) of the Fund's shares is Berger
Distributors, Inc. (the "Distributor"), 210 University Boulevard, Suite 900,
Denver, CO 80206. The Distributor may be reimbursed by Berger Associates for
its costs in distributing the Fund's shares.
BROKERAGE POLICY
Although the Fund retains full control over its own investment
policies, under the terms of its Investment Advisory Agreement, Berger
Associates as the Fund's advisor is directed to place the portfolio transactions
of the Fund. A report on the placement of brokerage business is given to the
trustees of the Fund every quarter, indicating the brokers with whom Fund
portfolio business was placed and the basis for such placement.
The brokerage commissions paid by the Fund were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fiscal Year Ended February 28(1) Brokerage Commissions
- -------------------------------------------------------------------------------
<S> <C>
1999 $10,000
- -------------------------------------------------------------------------------
1998(2) $ 6,000
- -------------------------------------------------------------------------------
</TABLE>
(1) The Fund's fiscal year changed from February 28 to September 30 as part of
a reorganization effective _________________, 1999.
(2) The Fund was the accounting survivor in the reorganization referenced in
note (1). Accordingly, this covers the period April 8, 1997 (commencement of
operations of the predecessor) to February 28, 1998.
The Investment Advisory Agreement authorizes and directs the advisor
to place portfolio transactions for the Fund only with brokers and dealers who
render satisfactory service in the execution of orders at the most favorable
prices and at reasonable commission rates. However, the Agreement specifically
authorizes the advisor to place such transactions with a broker with whom it has
negotiated a commission that is in excess of the commission another broker or
dealer would have charged for effecting that transaction if the advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of either that particular transaction or the overall
responsibilities of the advisor. Accordingly, the advisor does not have an
obligation to seek the lowest available commission.
In accordance with this provision of the Agreement, portfolio
brokerage business of the Fund may be placed with brokers who provide useful
brokerage and research services to the advisor. During the Fund's fiscal year
ended February 28, 1999, brokerage was placed by the Fund's then advisor, now
sub-advisor, Bay Isle Financial Corporation, and none of the brokerage
commissions paid by the Fund were paid to brokers who provided to the Fund such
brokerage or research services. Currently, however, the Fund's brokerage is
placed by Berger Associates, the Fund's advisor, which may consider the value of
research provided as a factor in the choice of brokers. "Research" includes
computerized on-line stock quotation systems and related data feeds from stock
exchanges, computerized trade order entry, execution and confirmation systems,
fundamental and technical analysis data and software, computerized stock market
and business news services, economic research, account performance data and
computer hardware used for the receipt of electronic research services and
broker and other third-party equity research, such as publications or writings
which furnish advice as to the value of securities and advisability of
investing, and analyses and reports concerning issuers, industries, securities,
market trends, and portfolio strategies. Research may be provided orally, in
print, or electronically. These include a
-27-
<PAGE>
service used by the independent trustees of the Fund in reviewing the Investment
Advisory Agreement.
In some cases, a product or services termed "research" may serve other
functions unrelated to the making of investment decisions. When a product has
such a mixed use, the advisor will make a good faith allocation of the cost of
the product according to the use made of it. The portion of the product that
assists the advisor in the investment decision-making process may be paid for
with the Fund's commission dollars. The advisor pays for the portion of the
product that is not "research" with its own funds. Accordingly, the decision
whether and how to allocate the costs of such a product presents a conflict of
interest for Berger Associates.
Berger Associates does not enter into formal agreements with any
brokers regarding the placement of securities transactions because of any such
brokerage or research services that they provide. Berger Associates may,
however, make arrangements with and maintain internal procedures for allocating
transactions to brokers who provide such services to encourage them to provide
services expected to be useful to Berger Associates' clients, including the
Fund. Brokers may suggest a level of business they would like to receive in
return for the brokerage and research they provide. Berger Associates then
determines whether to continue receiving the research and brokerage provided and
the approximate amount of commissions it is willing to pay to continue the
brokerage and research arrangement with each broker. The actual amount of
commissions a broker may receive may be more or less than a broker's suggested
allocations, depending on Berger Associates' level of business, market
conditions and other relevant factors. Even under these arrangements, however,
the placement of all Fund transactions, must be consistent with the Fund's
brokerage placement and execution policies, and must be directed to a broker who
renders satisfactory service in the execution of orders at the most favorable
prices and at reasonable commission rates.
These brokerage and research services received from brokers are often
helpful to Berger Associates in performing its investment advisory
responsibilities to the Fund, and the availability of such services from brokers
does not reduce the responsibility of Berger Associates' advisory personnel to
analyze and evaluate the securities in which the Fund invests. The brokerage
and research services obtained as a result of the Fund's brokerage business also
will be useful to Berger Associates in making investment decisions for its other
advisory accounts, and, conversely, information obtained by reason of placement
of brokerage business of such other accounts may be used by Berger Associates in
rendering investment advice to the Fund. Although such brokerage and research
services may be deemed to be of value to Berger Associates, they are not
expected to decrease the expenses that Berger Associates would otherwise incur
in performing its investment advisory services for the Fund nor will the
advisory fees that are received by Berger Associates from the Fund be reduced as
a result of the availability of such brokerage and research services from
brokers.
The trustees of the Fund have authorized portfolio transactions to be
placed on an agency basis through DSTS, a wholly-owned broker-dealer subsidiary
of DST. When transactions are effected through DSTS, the commission received by
DSTS is credited against, and thereby reduces, certain operating expenses that
the Fund would otherwise be obligated to pay. No portion of the commission is
retained by DSTS. DSTS may be considered an affiliate of Berger Associates due
to the ownership interest of KCSI in both DST and Berger Associates.
The Fund's advisor places securities orders with a limited number of
major institutional brokerage firms chosen for the reliability and quality of
execution; commission rates; quality of research coverage of major U.S.
companies, the U.S. economy and the securities markets; promptness; back office
capabilities; capital strength and financial stability; prior performance in
serving the advisor and its clients; and knowledge of other buyers and sellers.
The advisor selects the broker for each order based on the factors above, as
well as the size, difficulty
-28-
<PAGE>
and other characteristics of the order. The trustees of the Fund have also
authorized sales of shares of the Fund by a broker-dealer and the
recommendations of a broker-dealer to its customers that they purchase Fund
shares to be considered as factors in the selection of broker-dealers to execute
portfolio transactions for the Fund. In addition, the advisor may also consider
payments made by brokers to the Fund or to other persons on behalf of the Fund
for services provided to the Fund for which it would otherwise be obligated to
pay, such as transfer agency fees. In placing portfolio business with any such
broker or dealer, the advisor of the Fund will seek the best execution of each
transaction.
7. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND
<TABLE>
<S> <C>
MINIMUM INITIAL INVESTMENTS:
Regular investment $2,000
Low Minimum Investment Plan $ 100
MINIMUM SUBSEQUENT INVESTMENTS:
Regular investment $ 50
Automatic investment $ 50
Low Minimum Investment Plan
(required monthly automatic investments) $ 100
</TABLE>
To purchase shares in the Fund, simply complete the application form
enclosed with the Prospectus. Then mail it with a check payable to "Berger
Funds" to the Fund in care of DST Systems, Inc., the Fund's sub-transfer agent,
as follows:
Berger Funds
P.O. Box 419958
Kansas City, MO 64141
If a shareholder is adding to an existing account, shares may also be
purchased by placing an order by telephone call to the Fund at 1-800-551-5849 or
via on-line access, and remitting payment to DST Systems, Inc. Payment for
shares ordered on-line must be made by electronic funds transfer. In order to
make sure that payment for telephone purchases is received on time, shareholders
are encouraged to remit payment by electronic funds transfer. Shareholders may
also remit payment for telephone purchases by wire or by overnight delivery.
In addition, Fund shares may be purchased through certain
broker-dealers that have established mutual fund programs and certain other
organizations connected with pension and retirement plans. These broker-dealers
and other organizations may charge investors a transaction or other fee for
their services, may require different minimum initial and subsequent investments
than the Fund and may impose other charges or restrictions different from those
applicable to shareholders who invest in the Fund directly. Fees charged by
these organizations will have the effect of reducing a shareholder's total
return on an investment in Fund shares. No such charge will apply to an
investor who purchases Fund shares directly from the Fund as described above.
Procedures for purchasing, selling (redeeming) and exchanging Fund
shares by telephone and online are described in the Prospectus. The Fund may
terminate or modify those procedures and related requirements at any time,
although shareholders of the Fund will be given notice of any termination or
material modification. Berger Associates may, at its own risk, waive certain
of those procedures and related requirements.
As described in the Prospectus, the Fund is intended as a long-term
investment, and not as a short-term trading vehicle. Therefore, the Fund will
deduct a 1% redemption fee from a shareholder's redemption proceeds if the
shareholder redeems Fund shares held less than 6 months. Because an exchange
involves a redemption of shares followed by a purchase, this
-29-
<PAGE>
redemption fee will also apply to exchanges of Fund shares held less than 6
months. This fee is intended to discourage investors from short-term trading of
Fund shares and to offset the cost to the Fund of excess brokerage and other
costs incurred as a result of such trading. This fee will not be charged to
retirement plan accounts or in the case of redemptions resulting from the death
of the shareholder. This fee will also not be charged on the redemption of
shares obtained through the reinvestment of dividends paid on Fund shares. If
some but not all of the shares in an account are redeemed, shares are treated as
redeemed in an order determined by and applied uniformly to all accounts by the
Fund's sub-transfer agent.
8. HOW THE NET ASSET VALUE IS DETERMINED
The net asset value of the Fund is determined once daily, at the close
of the regular trading session of the New York Stock Exchange (the "Exchange")
(normally 4:00 p.m., New York time, Monday through Friday) each day that the
Exchange is open. The Exchange is closed and the net asset value of the Fund is
not determined on weekends and on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day each year.
The share price for the Investor Shares of the Fund is determined by
adding the Investor Shares' pro rata portion of the total value of the Fund's
investments, cash and other assets, deducting the Investor Shares' pro rata
portion of the Fund's liabilities and the liabilities attributable directly to
the Investor Shares, and then dividing that value by the total number of the
Investor Shares outstanding. Since net asset value for the Fund is calculated
by class, and since the Investor Shares and each other class of the Fund has its
own expenses, the per share net asset value of the Fund will vary by class.
In determining net asset value, securities listed or traded primarily
on national exchanges, The Nasdaq Stock Market and foreign exchanges are valued
at the last sale price on such markets, or, if such a price is lacking for the
trading period immediately preceding the time of determination, such securities
are valued at the mean of their current bid and asked prices. Securities that
are traded in the over-the-counter market are valued at the mean between their
current bid and asked prices. The market value of individual securities held by
the Fund will be determined by using prices provided by pricing services which
provide market prices to other mutual funds or, as needed, by obtaining market
quotations from independent broker/dealers. Short-term money market securities
maturing within 60 days are valued on the amortized cost basis, which
approximates market value. All assets and liabilities initially expressed in
terms of non-U.S. dollar currencies are translated into U.S. dollars at the
prevailing market rates as quoted by one or more banks or dealers shortly before
the close of the Exchange. Securities and assets for which quotations are not
readily available or are not representative of market value may be valued at
their fair value determined in good faith pursuant to consistently applied
procedures established by the trustees. Examples would be when events occur
that materially affect the value of a security at a time when the security is
not trading or when the securities are illiquid.
Generally, trading in foreign securities markets is substantially
completed each day at various times prior to the close of the Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the Exchange. Occasionally, events affecting the value of such
securities may occur between the times at which they are determined and the
close of the Exchange, or when the foreign market on which such securities trade
is closed but the Exchange is open, which will not be reflected in the
computation of net asset value. If during such periods, events occur which
materially affect the value of such securities, the securities may be valued at
their fair value as determined in good faith pursuant to consistently applied
procedures established by the trustees.
-30-
<PAGE>
The Fund's securities may be listed primarily on foreign exchanges or
over-the-counter dealer markets which may trade on days when the Exchange is
closed (such as a customary U.S. holiday) and on which the Fund's net asset
value is not calculated. As a result, the net asset value of the Fund may be
significantly affected by such trading on days when shareholders cannot purchase
or redeem shares of the Fund.
9. INCOME DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAX TREATMENT
This discussion summarizes certain U.S. federal income tax issues
relating to the Fund. As a summary, it is not an exhaustive discussion of all
possible tax ramifications. Accordingly, shareholders are urged to consult with
their tax advisors with respect to their particular tax consequences.
TAX STATUS OF THE FUND. If the Fund meets certain investment and
distribution requirements, it will be treated as a "regulated investment
company" (a "RIC") under the Internal Revenue Code and will not be subject to
federal income tax on earnings that it distributes in a timely manner to
shareholders. It also may be subject to an excise tax on undistributed income
if it does not meet certain timing requirements for distributions. The Fund
intends to qualify as a RIC annually and to make timely distributions in order
to avoid income and excise tax liabilities.
TAX ON FUND DISTRIBUTIONS. With certain exceptions provided by law,
the Fund will report annually to the Internal Revenue Service and to each
shareholder information about the tax treatment of the shareholder's
distributions. Dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, will be treated as ordinary income to the
shareholders. Distributions of net capital gain, whether received in cash or
reinvested in Fund shares, will be taxable to the shareholders, but the rate of
tax will vary depending upon the Fund's holding periods in the assets whose sale
resulted in the capital gain. Dividends and distributions that are declared in
October, November or December but not distributed until the following January
will be considered to be received by the shareholders on December 31.
In general, net capital gains from assets held by the Fund for more
than 12 months will be subject to a maximum tax rate of 20% and net capital
gains from assets held for 12 months or less will be taxed as ordinary income.
Distributions will be subject to these capital gains rates, regardless of how
long a shareholder has held Fund shares. Assets contributed to the Fund in an
in-kind purchase of Fund shares may generate more gain upon their sale than if
the assets had been purchased by the Fund with cash contributed to the Fund in a
cash purchase of Fund shares.
If the Fund's distributions for a taxable year exceeds its tax
earnings and profits available for distribution, all or a portion of its
distributions may be treated as a return of capital or as capital gains. To the
extent a distribution is treated as a return of capital, a shareholder's basis
in his or her Fund shares will be reduced by that amount.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the U.S. Postal Service is unable to deliver checks to
the shareholder's address of record, or if a shareholder's checks remain
uncashed for six months, the Fund reserves the right to reinvest the amount
distributed in additional Fund shares at the then-current NAV and to convert the
shareholder's distribution option from receiving cash to having all dividend and
other distributions reinvested in additional shares. In addition, no interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
TAX ON REDEMPTIONS OF FUND SHARES. Shareholders may be subject to tax
on the redemption of their Fund shares. In general, such redemptions may give
rise to a capital gain or
-31-
<PAGE>
loss, the treatment of which will depend on the shareholder's holding period in
the Fund shares. Tax laws may prevent the deduction of a loss on the sale of
Fund shares if the shareholder reinvests in the Fund shortly before or after the
sale giving rise to the loss. Any loss on the redemption or other sale or
exchange of Fund shares held for six months or less will be treated as a
long-term capital loss to the extent of any long-term capital gain distribution
received on the shares.
INCOME FROM FOREIGN SOURCES. Dividends and interest received by the
Fund on foreign securities may give rise to withholding and other taxes imposed
by foreign countries, although these taxes may be reduced by applicable tax
treaties. Foreign taxes will generally be treated as expenses of the Fund,
unless the Fund has more than 50% of its assets invested in foreign corporate
securities at the end of the Fund's taxable year. In that case, shareholders of
the Fund may be able to deduct (as an itemized deduction) or, if the Fund makes
an election, claim a foreign tax credit for their share of foreign taxes,
subject to limitations prescribed in the tax law.
If the Fund invests in a foreign corporation that is a passive
foreign investment company (a "PFIC"), special rules apply that may affect
the tax treatment of gains from the sale of the stock and may cause the Fund
to incur IRS tax and interest charges. However, the Fund may be eligible to
elect one of two alternative tax treatments with respect to PFIC shares which
would avoid these taxes and charges, but also may affect, among other things,
the amount and character of gain or loss and the timing of the recognition of
income with respect to PFIC shares. Accordingly, the amounts, character and
timing of income distributed to shareholders of the Fund holding PFIC shares
may differ substantially as compared to a fund that did not invest in PFIC
shares.
INCOME FROM CERTAIN TRANSACTIONS. Some or all of the Fund's
investments may include transactions that are subject to special tax rules.
Transactions involving foreign currencies may give rise to gain or loss that
could affect the Fund's ability to make ordinary dividend distributions.
Investment in certain financial instruments, such as options, futures
contracts and forward contracts, may require annual recognition of unrealized
gains and losses. Transactions that are treated as "straddles" may affect
the character and/or timing of other gains and losses of the Fund. If the
Fund enters into a transaction (such as a "short sale against the box") that
reduces the risk of loss on an appreciated financial position that it already
holds, the entry into the transaction may constitute a constructive sale and
require immediate recognition of gain.
BACKUP WITHHOLDING. In general, if a shareholder is subject to backup
withholding, the Fund will be required to withhold federal income tax at a rate
of 31% from distributions to that shareholder. These payments are creditable
against the shareholder's federal income tax liability.
FOREIGN SHAREHOLDERS. Foreign shareholders of the Fund generally will
be subject to a 30% U.S. withholding tax on dividends paid by the Fund from
ordinary income and short-term capital gain, although the rate may be reduced by
a tax treaty. If a foreign shareholder dies while owning Fund shares, those
shares may be subject to U.S. estate taxes.
10. SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended for any period during which
the New York Stock Exchange is closed or the Securities and Exchange Commission
determines that trading on the Exchange is restricted, or when there is an
emergency as determined by the Securities and Exchange Commission as a result of
which it is not reasonably practicable for the Fund to dispose of securities
owned by it or to determine the value of its net assets, or for such other
period as the Securities and Exchange Commission may by order permit for the
protection of shareholders of the Fund.
-32-
<PAGE>
The Fund intends to redeem its shares only for cash, although it
retains the right to redeem its shares in-kind under unusual circumstances, in
order to protect the interests of the remaining shareholders, by the delivery of
securities selected from its assets at its discretion. The Fund is, however,
governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to
which the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. For purposes of this threshold, each underlying account holder
whose shares are held of record in certain omnibus accounts is treated as one
shareholder. Should redemptions by any shareholder during any 90-day period
exceed such limitation, the Fund will have the option of redeeming the excess in
cash or in-kind. If shares are redeemed in-kind, the redeeming shareholder
generally will incur brokerage costs in converting the assets to cash. The
redeeming shareholder may have difficulty selling the securities and recovering
the amount of the redemption if the securities are illiquid. The method of
valuing securities used to make redemption in-kind will be the same as the
method of valuing portfolio securities described under Section 8.
11. TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for
individuals, businesses and non-profit organizations, including a Profit-Sharing
Plan, a Money Purchase Pension Plan, an Individual Retirement Account (IRA), a
Roth IRA and a 403(b) Custodial Account for adoption by employers and
individuals who wish to participate in such Plans. For information on other
types of retirement plans offered by the Fund, please call 1-800-333-1001 or
write to the Fund c/o Berger Associates, P.O. Box 5005, Denver, CO 80217.
PROFIT-SHARING AND MONEY PURCHASE PENSION PLANS
Employers, self-employed individuals and partnerships may make
tax-deductible contributions to the tax-qualified retirement plans offered by
the Fund. All income and capital gains accumulated in the Plans are tax free
until withdrawn. The amounts that are deductible depend upon the type of Plan
or Plans adopted.
If you, as an employer, self-employed person or partnership, adopt the
Profit-Sharing Plan, you may vary the amount of your contributions from year to
year and may elect to make no contribution at all for some years. If you adopt
the Money Purchase Pension Plan, you must commit yourself to make a contribution
each year according to a formula in the Plan that is based upon your employees'
compensation or your earned income. By adopting both the Profit-Sharing and the
Money Purchase Pension Plan, you can increase the amount of contributions that
you may deduct in any one year.
If you wish to purchase shares of the Fund in conjunction with one or
both of these tax-qualified plans, you may use an Internal Revenue Service
approved prototype Trust Agreement and Retirement Plan available from the Fund.
IFTC serves as trustee of the Plan, for which it charges an annual trustee's fee
for the Fund or Cash Account Trust Money Portfolio (discussed below) in which
the participant's account is invested. Contributions under the Plans are
invested exclusively in shares of the Fund or the Cash Account Trust Money
Market Portfolios, which are then held by the trustee under the terms of the
Plans to create a retirement fund in accordance with the tax code.
Distributions from the Profit-Sharing and Money Purchase Pension
Plans generally may not be made without penalty until the participant reaches
age 59 1/2 and must begin no later than April 1 of the calendar year
following the year in which the participant attains age 70 1/2. A participant
who is not a 5% owner of the employer may postpone such distributions to
April 1 of the calendar year following the year of retirement. This exception
does not apply to distributions from an individual retirement account (IRA).
Except for required distributions after age 70 1/2,
-33-
<PAGE>
periodic distributions over more than 10 years and the distribution of any
after-tax contributions, distributions are subject to 20% Federal income tax
withholding unless those distributions are rolled directly to another qualified
plan or an IRA. Participants may not be able to receive distributions
immediately upon request because of certain requirements under federal tax law.
Since distributions which do not satisfy these requirements can result in
adverse tax consequences, consultation with an attorney or tax advisor regarding
the Plans is recommended. You should also consult with your tax advisor
regarding state tax law implications of participation in the Plans.
In order to receive the necessary materials to create a Profit-Sharing
or Money Purchase Pension Plan, please write to the Fund, c/o Berger Associates,
Inc., P.O. Box 5005, Denver, Colorado 80217, or call 1-800-333-1001. Trustees
for 401(k) or other existing plans interested in utilizing Fund shares as an
investment or investment alternative in their plans should contact the Fund at
1-800-333-1001.
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
If you are an individual with compensation or earned income, whether
or not you are actively participating in an existing qualified retirement plan,
you can provide for your own retirement by adopting an IRA. Under an IRA, you
can contribute each year up to the lesser of 100% of your compensation or
$2,000. If you are married and you file a joint return, you and your spouse
together may make contributions totaling up to $4,000 to two IRAs (with no more
than $2,000 being contributed to either account) if your joint income is $4,000
or more, even if one spouse has no earned income. If neither you nor your
spouse are active participants in an existing qualified retirement plan, or if
your income does not exceed certain amounts, the amounts contributed to your IRA
can be deducted for Federal income tax purposes whether or not your deductions
are itemized. If you or your spouse are covered by an existing qualified
retirement plan, the deductibility of your IRA contributions will be phased out
for federal income tax purposes if your income exceeds specified amounts,
although the income level at which your IRA contributions will no longer be
deductible is higher if only your spouse (but not you) is an active participant.
However, whether your contributions are deductible or not, the income and
capital gains accumulated in your IRA are not taxed until the account is
distributed.
If you wish to create an IRA to invest in shares of the Fund, you may
use the Fund's IRA custodial agreement form which is an adaptation of the form
provided by the Internal Revenue Service. Under the IRA custodial agreement,
IFTC will serve as custodian, for which it will charge an annual custodian fee
for the Fund and each other Berger Fund and Cash Account Trust Money Market
Portfolio in which the IRA is invested.
Distributions from an IRA generally may not be made without penalty
until you reach age 59 1/2 and must begin no later than April 1 of the calendar
year following the year in which you attain age 70 1/2. Since distributions
which do not satisfy these requirements can result in adverse tax consequences,
consultation with an attorney or tax advisor is recommended. You should also
consult with your tax advisor about state taxation of your account.
In order to receive the necessary materials to create an IRA account,
please write to the Fund, c/o Berger Associates, Inc., P.O. Box 5005, Denver,
Colorado 80217, or call 1-800-333-1001.
ROTH IRA
If you are an individual with compensation or earned income, you may
contribute up to the lesser of $2,000 or 100% of your compensation to a Roth
IRA, as long as your income does not exceed a specified income level ($95,000
for single individuals, $150,000 for married individuals filing jointly). A
Roth IRA is similar in many respects to a traditional IRA, as described
-34-
<PAGE>
above. However, the maximum amount you may contribute to a Roth IRA is phased
out between that income level and a maximum income amount ($110,000 and
$160,000, respectively), and you may not make any contribution at all to a Roth
IRA if your income exceeds the maximum income amount. Also, you can make
contributions to a Roth IRA even after you reach age 70-1/2, and you are not
required to take distributions from a Roth IRA prior to your death.
Contributions to a Roth IRA are not deductible for federal income tax
purposes. However, the income and capital gains accumulated in a Roth IRA are
not taxed while held in the IRA, and distributions can be taken tax-free if the
Roth IRA has been established for a minimum of five years and the distribution
is after age 59-1/2, for a first time home purchase, or upon death or
disability.
An individual with an income of less than $100,000 who is not married
filing separately can roll his or her existing IRA into a Roth IRA. However,
the individual must pay taxes on the taxable amount of the traditional IRA
account balance. Individuals who complete the rollover in 1998 will be
permitted to spread the tax liability over a four-year period. After 1998, all
taxes on such a rollover will be due in the year in which the rollover is made.
403(b) CUSTODIAL ACCOUNTS
If you are employed by a public school system or certain federally
tax-exempt private schools, colleges, universities, hospitals, religious and
charitable or other nonprofit organizations, you may establish a 403(b)
Custodial Account. Your employer must participate in the establishment of the
account.
If your employer participates, it will automatically deduct the
amount you designate from your gross salary and contribute it to your 403(b)
Custodial Account. The amount which you may contribute annually under a
salary reduction agreement is generally the lesser of $9,500 or your
exclusion allowance, which is based upon a specified formula, and other
Internal Revenue Code limits apply. There is a $50 minimum investment in the
403(b) Custodial Account. Contributions made to the account reduce the amount
of your current income subject to Federal income tax. Federal income tax is
not paid on your contribution until you begin making withdrawals. In
addition, all income and capital gains accumulated in the account are
tax-free until withdrawn.
Withdrawals from your 403(b) Custodial Agreement may begin as soon
as you reach age 59-1/2 and must begin no later than April 1 of the year
following the later of the calendar year in which you attain age 70 1/2 or
the calendar year in which you retire. Except for required distributions
after age 70 1/2 and periodic distributions over more than 10 years,
distributions are subject to 20% Federal income tax withholding unless those
distributions are rolled directly to another 403(b) account or annuity or an
individual retirement account (IRA). You may not be able to receive
distributions immediately upon request because of certain notice requirements
under federal tax law. Since distributions which do not satisfy these
requirements can result in adverse tax consequences, consultation with an
attorney or tax advisor regarding the 403(b) Custodial Account is
recommended. You should also consult with your tax advisor about state
taxation of your account.
Individuals who wish to purchase shares of the Fund in conjunction
with a 403(b) Custodial Account may use a Custodian Account Agreement and
related forms available from the Fund. IFTC serves as custodian of the 403(b)
Custodial Account, for which it charges an annual custodian fee for the Fund and
each other Berger Fund and Cash Account Trust Money Market Portfolio in which
the participant's account is invested.
-35-
<PAGE>
In order to receive the necessary materials to create a 403(b)
Custodial Account, please write to the Fund, c/o Berger Associates, Inc., P.O.
Box 5005, Denver, Colorado 80217, or call 1-800-333-1001.
12. EXCHANGE PRIVILEGE AND SYSTEMATIC WITHDRAWAL PLAN
A shareholder who owns shares of the Fund worth at least $5,000 at the
current net asset value may establish a Systematic Withdrawal account from which
a fixed sum will be paid to the shareholder at regular intervals by the Fund in
which the shareholder is invested.
To establish a Systematic Withdrawal account, the shareholder deposits
Fund shares with the Fund and appoints the Fund as agent to redeem shares in the
shareholder's account in order to make monthly, quarterly, semi-annual or annual
withdrawal payments to the shareholder of a fixed amount. The minimum
withdrawal payment is $50.00. These payments generally will be made on the 25th
day of the month.
Withdrawal payments are not yield or income on the shareholder's
investment, since portions of each payment will normally consist of a return of
the shareholder's investment. Depending on the size of the disbursements
requested and the fluctuation in value of the Fund's portfolio, redemptions for
the purpose of making such disbursements may reduce or even exhaust the
shareholder's account.
The shareholder may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying the Fund. The shareholder may, of course, make
additional deposits of Fund shares in the shareholder's account at any time.
Since redemption of shares to make withdrawal payments is a taxable
event, each investor should consult a tax advisor concerning proper tax
treatment of the redemption.
Any shareholder may exchange any or all of the shareholder's shares in
the Fund for shares of any of the other available Berger Funds or for shares of
the Money Market Portfolio, the Government Securities Portfolio or the
Tax-Exempt Portfolio of the Berger Cash Account Trust ("Berger CAT Portfolios"),
separately managed, unaffiliated money market funds, without charge, after
receiving a current prospectus of the other Fund or Berger CAT Portfolio. The
exchange privilege with the Berger CAT Portfolios does not constitute an
offering or recommendation of the shares of any such Berger CAT Portfolio by the
Fund or Berger Associates. Berger Associates is compensated for administrative
services it performs with respect to the Berger CAT Portfolios.
Exchanges into or out of the Fund are made at the net asset value
per share next determined after the exchange request is received. Each
exchange represents the sale of shares from one Fund and the purchase of
shares in another, which may produce a gain or loss for income tax purposes,
and will be subject to a redemption fee of 1% if shares are exchanged within
6 months of purchase. An exchange of shares may be made by written request
directed to DST Systems, Inc., via on-line access, or simply by telephoning
the Berger Funds at 1-800-551-5849. This privilege may be terminated or
amended by the Fund, and is not available in any state in which the shares of
the Fund or Berger CAT Portfolio being acquired in the exchange are not
eligible for sale. Shareholders automatically have telephone and on-line
privileges to authorize exchanges unless they specifically decline this
service in the account application or in writing.
13. PERFORMANCE INFORMATION
From time to time in advertisements, the Fund may discuss its
performance ratings as published by recognized mutual fund statistical services,
such as Lipper Analytical
-36-
<PAGE>
Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc., or Value
Line Investment Survey or by publications of general interest such as THE WALL
STREET JOURNAL, INVESTOR'S BUSINESS DAILY, MONEY, BARRON'S, FINANCIAL WORLD or
KIPLINGER'S PERSONAL FINANCE MAGAZINE. In addition, the Fund may compare its
performance to that of recognized broad-based securities market indices,
including the Wilshire 5000 Index, the Standard & Poor's 500 Stock Index, the
Dow Jones Industrial Average, the Russell 2000 Stock Index, the Standard &
Poor's 400 Mid-Cap Index, the Standard & Poor's 600 Small Cap Index, Morgan
Stanley Capital International EAFE (Europe, Australasia, Far East) Index, the
Dow Jones World Index, the Standard & Poor's/BARRA Value Index, the Nasdaq
Composite Index, the Lehman Brothers Intermediate Term Government/Corporate Bond
Index or the InformationWeek 100 Index, or more narrowly-based or blended
indices which reflect the market sectors in which the Fund invests.
The total return of the Fund is calculated for any specified period of
time by assuming the purchase of shares of the Fund at the net asset value at
the beginning of the period. Each dividend or other distribution paid by the
Fund is assumed to have been reinvested at the net asset value on the
reinvestment date. The total number of shares then owned as a result of this
process is valued at the net asset value at the end of the period. The
percentage increase is determined by subtracting the initial value of the
investment from the ending value and dividing the remainder by the initial
value.
The Fund's total return reflects the Fund's performance over a stated
period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same total return if the
Fund's performance had been constant over the entire period. Total return
figures are based on the overall change in value of a hypothetical investment in
the Fund. Because average annual total returns for more than one year tend to
smooth out variations in the Fund's return, investors should recognize that such
figures are not the same as actual year-by-year results.
All performance figures for the Fund are based upon historical results
and do not assure future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Quotations of average annual total return for the Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund over periods of 1, 5 and 10 years, or for
the life of the Fund, if shorter. These are the rates of return that would
equate the initial amount invested to the ending redeemable value. These
rates of return are calculated pursuant to the following formula: P(1 + T)TO
THE POWER OF n = ERV (where P = a hypothetical initial payment of $1,000, T =
the average annual total return, n = the number of years and ERV = the ending
redeemable value of a hypothetical $1,000 payment made at the beginning of
the period). All total return figures reflect the deduction of a
proportional share of Fund expenses on an annual basis, and assume that all
dividends and distributions are reinvested when paid.
PREDECESSOR PERFORMANCE QUOTATIONS
The Fund is the accounting survivor and successor of a fund previously
known as the InformationTech 100-Registered Trademark- Fund, which was
reorganized into the Fund effective ______________, 1999. As part of the
reorganization, all of the then-existing shares of the predecessor fund were
exchanged for Institutional Shares of the Fund, and the Fund commenced offering
the Investor Shares covered in this Statement of Additional Information.
The Fund quotes its historical performance track record for both of
its classes of shares based on its predecessor's only shares outstanding prior
to the reorganization. Accordingly,
-37-
<PAGE>
performance data for the Investor Shares for periods prior _____________, 1999,
do not reflect the 0.25% per year 12b-1 fee currently borne by the Investor
Shares.
Total return of the Investor Shares and other classes of shares of the
Fund will be calculated separately. Because each class of shares is subject to
different expenses, the performance of each class for the same period will
differ.
The average annual total returns for the Fund for the periods shown
are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FOR THE FISCAL YEAR ENDED 1-YEAR LIFE OF FUND
FEBRUARY 28, 1999 (1) (APRIL 8, 1997)
- -------------------------------------------------------------------------------
<S> <C> <C>
Berger Information 47.13%(2) 52.32%(2)
Technology Fund -
Investor Shares
- -------------------------------------------------------------------------------
</TABLE>
(1) The Fund's fiscal year changed from February 28 to September 30 as part of
a reorganization effective _________________, 1999.
(2) Covers periods prior to the Fund's adoption of share classes
on_______________, 1999, and therefore does not reflect the 0.25% per year 12b-1
fee which has been paid by the Investor Shares since the inception of the class
on that date.
14. ADDITIONAL INFORMATION
Fund Organization
The Fund is a separate series of the Berger Investment Portfolio Trust
(the "Trust"), a Delaware business trust established under the Delaware Business
Trust Act. The Fund was established on [__________], 1999. The Fund is the
successor to the fund formerly known as the InformationTech 100-Registered
Trademark- Fund. The InformationTech 100-Registered Trademark- Fund commenced
operations on April 8, 1997, as a separate series of the Advisors Series Trust,
a Delaware business trust. The InformationTech 100-Registered Trademark- Fund
was then reorganized into the Fund in a transaction that became effective on
[__________________], 1999. As part of the reorganization, all of the
then-existing shares of the predecessor fund were exchanged for Institutional
Shares of the Fund, and the Fund commenced offering the Investor Shares covered
in this Statement of Additional Information.
The Trust is authorized to issue an unlimited number of shares of
beneficial interest in series or portfolios. Currently, the Fund is one of
seven series established under the Trust, although others may be added in the
future. The Trust is also authorized to establish multiple classes of shares
representing differing interests in an existing or new series. The Fund
currently has two classes of shares, although others may be added in the future.
Shares of the Fund are fully paid and nonassessable when issued. Each
share has a par value of $.01. All shares issued by the Fund participate
equally in dividends and other distributions by the Fund, and in the residual
assets of the Fund in the event of its liquidation.
DELAWARE BUSINESS TRUST INFORMATION. Under Delaware law, shareholders
of the Fund will enjoy the same limitations on personal liability as extended to
stockholders of a Delaware corporation. Further, the Trust Instrument of the
Trust provides that no shareholder shall be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for or otherwise
existing with respect to, the Trust or any particular series (fund) of the
Trust. However, the principles of law governing the limitations of liability of
beneficiaries of a business trust have not been authoritatively established as
to business trusts organized under the laws of one
-38-
<PAGE>
jurisdiction but operating or owning property in other jurisdictions. In states
that have adopted legislation containing provisions comparable to the Delaware
Business Trust Act, it is believed that the limitation of liability of
beneficial owners provided by Delaware law should be respected. In those
jurisdictions that have not adopted similar legislative provisions, it is
possible that a court might hold that the shareholders of the Trust are not
entitled to the limitations of liability set forth in Delaware law or the Trust
Instrument and, accordingly, that they may be personally liable for the
obligations of the Trust.
In order to protect shareholders from such potential liability, the
Trust Instrument requires that every written obligation of the Trust or any
series thereof contain a statement to the effect that such obligation may only
be enforced against the assets of the Trust or such series. The Trust
Instrument also provides for indemnification from the assets of the relevant
series for all losses and expenses incurred by any shareholder by reason of
being or having been a shareholder, and that the Trust shall, upon request,
assume the defense of any such claim made against such shareholder for any act
or obligation of the relevant series and satisfy any judgment thereon from the
assets of that series.
As a result, the risk of a shareholder of the Fund incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations. The Trust believes
that the risk of personal liability to shareholders of the Fund is therefore
remote. The trustees intend to conduct the operations of the Trust and the Fund
so as to avoid, to the extent possible, liability of shareholders for
liabilities of the Trust or the Fund.
CORPORATE GOVERNANCE INFORMATION PERTAINING TO THE FUND. The Fund is
not required to hold annual shareholder meetings unless required by the
Investment Company Act of 1940 or other applicable law or unless called by the
trustees. If shareholders owning at least 10% of the outstanding shares of the
Trust so request, a special shareholders' meeting of the Trust will be held for
the purpose of considering the removal of a trustee. Special meetings will be
held for other purposes if the holders of at least 25% of the outstanding shares
of the Trust so request. Subject to certain limitations, the Trust will
facilitate appropriate communications by shareholders desiring to call a special
meeting for the purpose of considering the removal of a trustee.
Shareholders of the Fund and, where applicable, the other
series/classes of the Trust, generally vote separately on matters relating to
those respective series/classes, although they vote together and with the
holders of any other series/classes of the Trust in the election of trustees of
the Trust and on all matters relating to the Trust as a whole. Each full share
of the Fund has one vote.
Shares of the Fund have non-cumulative voting rights, which means that
the holders of more than 50% of the shares voting for the election of trustees
can elect 100% of the trustees if they choose to do so and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
trustees will not be able to elect any person or persons as trustees.
Shares of the Fund have no preemptive rights. There are no sinking
funds or arrearage provisions which may affect the rights of the Fund shares.
Fund shares have no subscription rights or conversion rights, except that
shareholders of any class of the Fund may convert their shares into shares of
any other class of the Fund in the event and only in the event the shareholder
ceases to be eligible to purchase or hold shares of the original class, or
becomes eligible to purchase shares of a different class, by reason of a change
in the shareholder's status under the conditions of eligibility in effect for
such class at that time. Shares of the Fund may be transferred by endorsement,
or other customary methods, but the Fund is not bound to recognize any transfer
until it is recorded on its books.
-39-
<PAGE>
MORE INFORMATION ON SPECIAL MULTI-CLASS FUND STRUCTURE
The Fund currently has divided its shares into two classes of shares,
the Investor Shares covered by this SAI and the Institutional Shares offered
through a separate Prospectus and SAI. The Fund implemented its multi-class
structure by adopting a Rule 18f-3 Plan under the 1940 Act permitting it to
issue its shares in classes. The Fund's Rule 18f-3 Plan governs such matters as
class features, dividends, voting, allocation of income and expenses between
classes, exchange and trustee monitoring of the Plan. Each class is subject to
such investment minimums and other conditions of eligibility as are set forth in
the relevant prospectus for the class, as it may be amended from time to time.
Institutional Shares are designed for institutional, individual and other
investors willing to maintain a higher minimum account balance, currently set at
$250,000. Information concerning Institutional Shares is available from the
Fund at 1-800-706-0539.
Subject to the Trust's Trust Instrument and any other applicable
provisions, the trustees of the Trust have the authority to create additional
classes, or change existing classes, from time to time, in accordance with Rule
18f-3 under the Act.
PRINCIPAL SHAREHOLDERS
Insofar as the management of the Fund is aware, as of _________, 1999,
no person owned, beneficially or of record, more than 5% of the outstanding
shares of the Fund, except for the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
OWNER PERCENTAGE HELD(1)
- -------------------------------------------------------------------------------
<S> <C>
Charles Schwab & Co., Inc. [______]%
101 Montgomery Street (owned of record)
San Francisco, CA 94104
- -------------------------------------------------------------------------------
Du Bain 1991 Trust [______]%
Myron Du Bain TTEE (owned of record)
160 Sansome Street, 17th Floor
San Francisco, CA 94104
- -------------------------------------------------------------------------------
</TABLE>
(1) All shares appearing on this table are of the Fund's Institutional Shares
class.
In addition, Bay Isle has advised the Trust that it may have voting
discretion over [____]% of the Fund's outstanding shares in accounts
beneficially owned by various Bay Isle advisory clients. Bay Isle may be deemed
to beneficially own those shares as a result of its voting discretion. If Bay
Isle is deemed to beneficially own more than 25% of the Fund's outstanding
shares, Bay Isle may also be deemed to control the Fund.
DISTRIBUTION
Berger Distributors, Inc., as the Fund's Distributor, is the
principal underwriter of the Fund's shares. The Distributor is a
wholly-owned subsidiary of Berger Associates. The Distributor is a
registered broker-dealer under the Securities Exchange Act of 1934 and is a
member of the National Association of Securities Dealers, Inc. The
Distributor acts as the agent of the Fund in connection with the sale of the
Fund's shares in all states in which the shares are eligible for sale and in
which the Distributor is qualified as a broker-dealer. David J. Schultz,
Chief Financial Officer, Assistant Secretary and Treasurer of the
Distributor, is also Vice President and Treasurer of the Fund. Janice M.
Teague, Vice President and Secretary of the Distributor, is also Vice
President
-40-
<PAGE>
and Secretary of the Fund. Brian Ferrie, Vice President and Chief Compliance
Officer of the Distributor, is also Vice President of the Fund.
The Fund and the Distributor are parties to a Distribution Agreement
that continues through April 2001, and thereafter from year to year if such
continuation is specifically approved at least annually by the trustees or by
vote of a majority of the outstanding shares of the Fund and in either case by
vote of a majority of the trustees who are not "interested persons" (as that
term is defined in the Investment Company Act of 1940) of the Fund or the
Distributor. The Distribution Agreement is subject to termination by the Fund
or the Distributor on 60 days' prior written notice, and terminates
automatically in the event of its assignment. Under the Distribution Agreement,
the Distributor continuously offers shares of the Fund and solicits orders to
purchase Fund shares at net asset value. The Distributor is not compensated for
its services under the Distribution Agreement, but may be reimbursed by Berger
Associates for its costs in distributing Fund shares.
OTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities of the Fund of which this Statement of
Additional Information is a part. If further information is desired with respect
to the Fund or such securities, reference is made to the Registration Statement
and the exhibits filed as a part thereof.
Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Denver, Colorado,
acts as counsel to the Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 950 Seventeenth Street, Denver, Colorado,
has been appointed to act as independent accountants for the Trust and the Fund
for the fiscal year ended September 30, 1999. In that capacity,
PricewaterhouseCoopers LLP will audit the financial statements of the Fund and
assist the Fund in connection with the preparation of its 1998 income tax
return.
FINANCIAL INFORMATION
The following financial statements for the Fund are incorporated
herein by reference from the Annual Report to Shareholders of the
InformationTech 100-Registered Trademark- Fund, the predecessor to the Fund,
dated February 28, 1999, along with the Report of Independent Accountants
thereon of McGladrey & Pullen, LLP, dated March 26, 1999:
Schedule of Investments as of February 28, 1999
Statement of Assets and Liabilities as of February 28, 1999
Statement of Operations for the Fiscal Year Ended February 28, 1999
Statement of Changes in Net Assets for each of the periods indicated
Notes to Financial Statements, February 28, 1999
Financial Highlights for each of the periods indicated
-41-
<PAGE>
That Annual Report is enclosed with this Statement of Additional
Information. Additional copies may be obtained upon request without charge by
calling the Fund at 1-800-333-1001.
-42-
<PAGE>
APPENDIX A
HIGH-YIELD/HIGH-RISK SECURITIES
The Fund may invest in convertible securities of any quality, including
unrated securities or securities rated below investment grade (Ba or lower by
Moody's, BB or lower by S&P) (sometimes referred to as "junk bonds"). However,
the Fund will not purchase any security in default at the time of purchase. The
Fund will not invest more than 20% of the market value of its assets at the time
of purchase in convertible securities rated below investment grade.
Securities rated below investment grade are subject to greater risk that
adverse changes in the financial condition of their issuers or in general
economic conditions, or an unanticipated rise in interest rates, may impair the
ability of their issuers to make payments of interest and principal or
dividends. The market prices of lower grade securities are generally less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to economic changes or individual corporate developments. Periods of
economic uncertainty and change can be expected to result in volatility of
prices of these securities. Lower rated securities also may have less liquid
markets than higher rated securities, and their liquidity as well as their value
may be adversely affected by poor economic conditions. Adverse publicity and
investor perceptions as well as new or proposed laws may also have a negative
impact on the market for high-yield/high-risk bonds. In the event of an
unanticipated default, the Fund will experience a reduction in its income and
could expect a decline in the market value of the securities affected. The
prices of these securities may be more volatile and the markets for them may be
less liquid than those for higher-rated securities.
Unrated securities, while not necessarily of lower quality than rated
securities, may not have as broad a market. Unrated securities will be included
in the Fund's percentage limits for investments rated below investment grade,
unless the Fund's sub-advisor deems such securities to be the equivalent of
investment grade. If securities purchased by the Fund are downgraded following
purchase, or if other circumstances cause the Fund to exceed its percentage
limits on assets invested in securities rated below investment grade, the
trustees of the Fund, in consultation with the Fund's sub-advisor, will
determine what action, if any, is appropriate in light of all relevant
circumstances.
Relying in part on ratings assigned by credit agencies in making
investments will not protect the Fund from the risk that the securities will
decline in value, since credit ratings represent evaluations of the safety of
principal, dividend and/or interest payments, and not the market values of such
securities. Moreover, such ratings may not be changed on a timely basis to
reflect subsequent events.
Although the market for high-yield debt securities has been in existence
for many years and from time to time has experienced economic downturns, this
market has involved a significant increase in the use of high-yield debt
securities to fund highly leverage corporate acquisitions and restructurings.
Past experience may not, therefore, provide an accurate indication of future
performance of the high-yield debt securities market, particularly during
periods of economic recession.
Expenses incurred in recovering an investment in a defaulted security may
adversely affect the Fund's net asset value. Moreover, the reduced liquidity of
the secondary market for such securities may adversely affect the market price
of, and the ability of the Fund to value, particular securities at certain
times, thereby making it difficult to make specific valuation determinations.
-43-
<PAGE>
CORPORATE BOND RATINGS
The ratings of fixed-income securities by Moody's and Standard & Poor's are
a generally accepted measurement of credit risk. However, they are subject to
certain limitations. Ratings are generally based upon historical events and do
not necessarily reflect the future. In addition, there is a period of time
between the issuance of a rating and the update of the rating, during which time
a published rating may be inaccurate.
KEY TO MOODY'S CORPORATE RATINGS
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by 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.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds which are rated Baa 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.
Ba-Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during good and bad times over the future. Uncertainty of position
characterizes bonds of this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca-Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security
-44-
<PAGE>
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic category.
KEY TO STANDARD & POOR'S CORPORATE RATINGS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
Aa-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-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.
BBB-Debt rated BBB 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.
BB, B, CCC, CC AND C-Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are out-weighed by the large uncertainties or major risk
exposures to adverse conditions.
C1-The rating C1 is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
PLUS (+) OR MINUS (-)-The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
-45-
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Statement of Additional Information does not constitute a
prospectus.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED __________, 1999
BERGER INFORMATION TECHNOLOGY FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
SHAREHOLDER SERVICES: 1-800-960-8427
This Statement of Additional Information ("SAI") is not a prospectus.
It relates to the Prospectus for the Berger Information Technology Fund (the
"Fund") -- Institutional Shares, dated ___________, 1999, as it may be amended
or supplemented from time to time, which may be obtained by writing the Fund at
P.O. Box 5005, Denver, Colorado 80217, or calling 1-800-706-0539.
This SAI is about the class of shares of the Fund designated as
Institutional Shares. Institutional Shares are designed for pension and
profit-sharing plans, employee benefit trusts, endowments, foundations and
corporations, as well as high net worth individuals, who are willing to maintain
a minimum account balance of $250,000. Shares of the Fund may be offered
through certain financial intermediaries that may charge their customers
transaction or other fees with respect to the customers' investment in the Fund.
Institutional Shares are also made available for purchase and dividend
reinvestment in the account of all holders of Institutional Shares who received
their shares in the Fund's reorganization on ___________, 1999.
The Fund is the successor to the InformationTech 100-Registered Trademark-
Fund, which was reorganized into the Fund effective ________________, 1999. The
financial statements of the predecessor fund for the fiscal year ended February
28, 1999, and the related Report of Independent Accountants on those statements,
are incorporated into this SAI by reference from the predecessor fund's 1999
Annual Report to Shareholders dated February 28, 1999. Additional copies may be
obtained upon request without charge by calling the Fund at 1-800-333-1001.
DATED [_________], 1999
<PAGE>
TABLE OF CONTENTS
&
CROSS-REFERENCES TO PROSPECTUS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
TABLE OF CONTENTS CROSS-REFERENCES TO
RELATED DISCLOSURES
IN PROSPECTUS
- -------------------------------------------------------------------------------
Introduction Contents
- -------------------------------------------------------------------------------
<S> <C>
1. Investment Strategies and Risks of Berger Information Technology Fund;
the Fund Investment Techniques, Securities and
Associated Risks
- -------------------------------------------------------------------------------
2. Investment Restrictions Berger Information Technology Fund;
Investment Techniques, Securities and
Associated Risks
- -------------------------------------------------------------------------------
3. Management of the Fund Berger Information Technology Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
4. Investment Advisor and Sub-Advisor Berger Information Technology Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
5. Expenses of the Fund Berger Information Technology Fund;
Financial Highlights for the Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
6. Brokerage Policy Berger Information Technology Fund;
Organization of the Fund
- -------------------------------------------------------------------------------
7. How to Purchase and Redeem Shares Buying Shares; Exchanging Shares
in the Fund
- -------------------------------------------------------------------------------
8. How the Net Asset Value is Your Share Price
Determined
- -------------------------------------------------------------------------------
9. Income Dividends, Capital Gains Distributions and Taxes
Distributions and Tax Treatment
- -------------------------------------------------------------------------------
10. Suspension of Redemption Rights Other Information About Your Account
- -------------------------------------------------------------------------------
11. Tax-Sheltered Retirement Plans Tax-Sheltered Retirement Plans
- -------------------------------------------------------------------------------
12. Exchange Privilege Exchanging Shares
- -------------------------------------------------------------------------------
13. Performance Information Berger Information Technology Fund;
Financial Highlights for the Fund
- -------------------------------------------------------------------------------
14. Additional Information Organization of the Fund; Special Fund
Structure
- -------------------------------------------------------------------------------
Financial Information Financial Highlights for the Fund
- -------------------------------------------------------------------------------
</TABLE>
-i-
<PAGE>
INTRODUCTION
The Fund described in this SAI is a mutual fund, or open-end,
management investment company. The Fund is a diversified fund.
1. INVESTMENT STRATEGIES AND RISKS OF THE FUND
The Prospectus describes the investment objective of the Fund and the
principal investment policies and strategies used to achieve that objective. It
also describes the principal risks of investing in the Fund.
This section contains supplemental information concerning the types of
securities and other instruments in which the Fund may invest, the investment
policies and portfolio strategies that the Fund may utilize and certain risks
attendant to those investments, policies and strategies.
COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in
a company. Generally, preferred stock has a specified dividend and ranks after
bonds and before common stocks in its claim on income for dividend payments and
on assets should the company be liquidated. After other claims are satisfied,
common stockholders participate in company profits on a pro-rata basis. Profits
may be paid out in dividends or reinvested in the company to help it grow.
Increases and decreases in earnings are usually reflected in a company's stock
price, so common stocks generally have the greatest appreciation and
depreciation potential of all corporate securities. While most preferred stocks
pay dividends, the Fund may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividends. Such
investments would be made primarily for their capital appreciation potential.
All investments in stocks are subject to market risk, meaning that their prices
may move up and down with the general stock market, and that such movements
might reduce their value.
DEBT SECURITIES. Debt securities (such as bonds or debentures) are
fixed-income securities which bear interest and are issued by corporations or
governments. The issuer has a contractual obligation to pay interest at a
stated rate on specific dates and to repay principal on a specific maturity
date. In addition to market risk, debt securities are generally subject to two
other kinds of risk: credit risk and interest rate risk. Credit risk refers to
the ability of the issuer to meet interest or principal payments as they come
due. The lower the rating given a security by a rating service (such as Moody's
Investor Service ("Moody's") and Standard & Poor's ("S&P")), the greater the
credit risk the rating service perceives with respect to that security. The
Fund will not purchase any nonconvertible securities rated below investment
grade (Ba or lower by Moody's, BB or lower by S&P). In cases where the ratings
assigned by more than one rating agency differ, the Fund will consider the
security as rated in the higher category. If nonconvertible securities
purchased by the Fund are downgraded to below investment grade following
purchase, the trustees of the Fund, in consultation with the Fund's sub-advisor,
will determine what action, if any, is appropriate in light of all relevant
circumstances. For a further discussion of debt security ratings, see Appendix
A to this SAI.
Interest rate risk refers to the fact that the value of fixed-income
securities (like debt securities) generally fluctuates in response to changes in
interest rates. A decrease in interest rates will generally result in an
increase in the price of fixed-income securities held by the Fund. Conversely,
during periods of rising interest rates, the value of fixed-income securities
held by the Fund will generally decline. Longer-term securities are generally
more sensitive to interest rate changes and are more volatile than shorter-term
securities, but they generally offer higher yields to compensate investors for
the associated risks.
-1-
<PAGE>
Certain debt securities can also present prepayment risk. For
example, a security may contain redemption and call provisions. If an issuer
exercises these provisions when interest rates are declining, the Fund could
sustain investment losses as well as have to reinvest the proceeds from the
security at lower interest rates, resulting in a decreased return for the Fund.
CONVERTIBLE SECURITIES. The Fund may also purchase debt or equity
securities which are convertible into common stock when the Fund's sub-advisor
believes they offer the potential for a higher total return than nonconvertible
securities. While fixed-income securities generally have a priority claim on a
corporation's assets over that of common stock, some of the convertible
securities which the Fund may hold are high-yield/high-risk securities that are
subject to special risks, including the risk of default in interest or principal
payments which could result in a loss of income to the Fund or a decline in the
market value of the securities. Convertible securities often display a degree
of market price volatility that is comparable to common stocks. The credit risk
associated with convertible securities generally is reflected by their ratings
by organizations such as Moody's or S&P or a similar determination of
creditworthiness by the Fund's sub-advisor. The Fund has no pre-established
minimum quality standards for convertible securities and may invest in
convertible securities of any quality, including lower rated or unrated
securities. However, the Fund will not invest in any security in default at the
time of purchase, and the Fund will invest less than 20% of the market value of
its assets at the time of purchase in convertible securities rated below
investment grade. If convertible securities purchased by the Fund are
downgraded following purchase, or if other circumstances cause 20% or more of
the Fund's assets to be invested in convertible securities rated below
investment grade, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances. For a further discussion of debt security ratings, see
Appendix A to this SAI.
SPECIAL SITUATIONS. The Fund may also invest in "special situations."
Special situations are companies that have recently experienced or are
anticipated to experience a significant change in structure, management,
products or services which may significantly affect the value of their
securities. Examples of special situations are companies being reorganized or
merged, companies emerging from bankruptcy, companies introducing unusual new
products or which enjoy particular tax advantages. Other examples are companies
experiencing changes in senior management, extraordinary corporate events,
significant changes in cost or capital structure or which are believed to be
probable takeover candidates. The opportunity to invest in special situations,
however, is limited and depends in part on the market's assessment of these
companies and their circumstances. By its nature, a "special situation" company
involves to some degree a break with the company's past experience. This
creates greater uncertainty and potential risk of loss than if the company were
operating according to long-established patterns. In addition, stocks of
companies in special situations may decline or not appreciate as expected if an
anticipated change or development does not occur or is not assessed by the
market as favorably as expected.
ZEROS/STRIPS. The Fund may invest also in zero coupon bonds or in
"strips." Zero coupon bonds do not make regular interest payments; rather, they
are sold at a discount from face value. Principal and accreted discount
(representing interest accrued but not paid) are paid at maturity. "Strips" are
debt securities that are stripped of their interest coupon after the securities
are issued, but otherwise are comparable to zero coupon bonds. The market
values of "strips" and zero coupon bonds generally fluctuate in response to
changes in interest rates to a greater degree than do interest-paying securities
of comparable term and quality. The Fund will not invest in mortgage-backed or
other asset-backed securities.
SECURITIES OF SMALLER COMPANIES. The Fund may invest in securities of
companies with small or mid-sized market capitalizations. Market capitalization
is defined as total current market value of a company's outstanding common
stock. Investments in companies with smaller market capitalizations may involve
greater risks and price volatility (that is, more abrupt or erratic price
movements) than investments in larger, more mature companies since smaller
companies may
-2-
<PAGE>
be at an earlier stage of development and may have limited product lines,
reduced market liquidity for their shares, limited financial resources or less
depth in management than larger or more established companies. Smaller
companies also may be less significant factors within their industries and may
have difficulty withstanding competition from larger companies. While smaller
companies may be subject to these additional risks, they may also realize more
substantial growth than larger or more established companies.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund
may invest in securities of companies with limited operating histories. The
Fund considers these to be securities of companies with a record of less than
three years' continuous operation, even including the operations of any
predecessors and parents. (These are sometimes referred to as "unseasoned
issuers.") These companies by their nature have only a limited operating
history which can be used for evaluating the company's growth prospects. As a
result, investment decisions for these securities may place a greater emphasis
on current or planned product lines and the reputation and experience of the
company's management and less emphasis on fundamental valuation factors than
would be the case for more mature companies. In addition, many of these
companies may also be small companies and involve the risks and price volatility
associated with smaller companies.
INITIAL PUBLIC OFFERINGS. The Fund may invest in a company's
securities at the time the company first offers securities to the public, that
is, at the time of the company's initial public offering or IPO. Although
companies can be any age or size at the time of their IPOs, they are often
smaller and have a limited operating history, which involve a greater potential
for the value of their securities to be impaired following the IPO. See
"Securities of Smaller Companies" and "Securities of Companies with Limited
Operating Histories" above. In addition, market psychology prevailing at the
time of an IPO can have a substantial and unpredictable effect on the price of
an IPO security, causing the price of a company's securities to be particularly
volatile at the time of its IPO and for a period thereafter. As a result, the
Fund's sub-advisor might decide to sell an IPO security more quickly than it
would otherwise, which may result in a significant gain or loss to the Fund.
The advisor's or sub-advisor's trade allocation procedures govern which of its
advised accounts participate in any IPO. See the heading "Trade Allocations"
under Section 4 below.
FOREIGN SECURITIES. The Fund may invest in foreign securities, which
may be traded in foreign markets and denominated in foreign currency. The
Fund's investments may also include American Depositary Receipts (ADRs),
European Depositary Receipts (EDRs) which are similar to ADRs, in bearer form,
designed for use in the European securities markets, and in Global Depositary
Receipts (GDRs).
Investments in foreign securities involve some risks that are
different from the risks of investing in securities of U.S. issuers, such as the
risk of adverse political, social, diplomatic and economic developments and,
with respect to certain countries, the possibility of expropriation, taxes
imposed by foreign countries or limitations on the removal of monies or other
assets of the Fund. Moreover, the economies of individual foreign countries
will vary in comparison to the U.S. economy in such respects as growth of gross
domestic product, rate of inflation, capital reinvestment, resources,
self-sufficiency and balance of payments position. Securities of some foreign
companies, particularly those in developing countries, are less liquid and more
volatile than securities of comparable domestic companies. A developing country
generally is considered to be in the initial stages of its industrialization
cycle. Investing in the securities of developing countries may involve exposure
to economic structures that are less diverse and mature, and to political
systems that can be expected to have less stability than developed countries.
There also may be less publicly available information about foreign
issuers and securities than domestic issuers and securities, and foreign issuers
generally are not subject to accounting, auditing and financial reporting
standards, requirements and practices comparable to those applicable to domestic
issuers. Also, there is generally less government supervision and
-3-
<PAGE>
regulation of exchanges, brokers, financial institutions and issuers in foreign
countries than there is in the U.S. Foreign financial markets typically have
substantially less volume than U.S. markets. Foreign markets also have
different clearance and settlement procedures and, in certain markets, delays or
other factors could make it difficult to effect transactions, potentially
causing the Fund to experience losses or miss investment opportunities.
Costs associated with transactions in foreign securities are generally
higher than with transactions in U.S. securities. The Fund will incur greater
costs in maintaining assets in foreign jurisdictions and in buying and selling
foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, the Fund might have greater
difficulty taking appropriate legal action with respect to foreign investments
in non-U.S. courts than with respect to domestic issuers in U.S. courts, which
may heighten the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
If the Fund is invested in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S. investors
are concerned. If the foreign currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the foreign currency
against the U.S. dollar would adversely affect the dollar value of the foreign
securities. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets, which are in turn affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICs). The Fund may purchase
the securities of certain companies considered Passive Foreign Investment
Companies (PFICs) under U.S. tax laws. For certain types of PFICs, in addition
to bearing their proportionate share of the Fund's expenses (management fees and
operating expenses), shareholders will also indirectly bear similar expenses of
such PFIC. PFIC investments also may be subject to less favorable U.S. tax
treatment, as discussed in Section 9 below.
ILLIQUID AND RESTRICTED SECURITIES. The Fund is authorized to invest
in securities which are illiquid or not readily marketable because they are
subject to restrictions on their resale ("restricted securities") or because,
based upon their nature or the market for such securities, no ready market is
available. However, the Fund will not purchase any such security, the purchase
of which would cause the Fund to invest more than 15% of its net assets,
measured at the time of purchase, in illiquid securities. Investments in
illiquid securities involve certain risks to the extent that the Fund may be
unable to dispose of such a security at the time desired or at a reasonable
price or, in some cases, may be unable to dispose of it at all. In addition, in
order to resell a restricted security, the Fund might have to incur the
potentially substantial expense and delay associated with effecting
registration. If securities become illiquid following purchase or other
circumstances cause more than 15% of the Fund's net assets to be invested in
illiquid securities, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances.
Repurchase agreements maturing in more than seven days will be
considered as illiquid for purposes of this restriction. Pursuant to guidelines
established by the trustees, the Fund's sub-advisor will determine whether
securities eligible for resale to qualified institutional buyers pursuant to SEC
Rule 144A under the Securities Act of 1933 should be treated as illiquid
investments considering, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and
(4) the nature of the security and the marketplace trades (e.g., the time needed
to dispose of
-4-
<PAGE>
the security, the method of soliciting offers, and the mechanics of the
transfer). The liquidity of the Fund's investments in Rule 144A securities
could be impaired if qualified institutional buyers become uninterested in
purchasing these securities.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements
with various financial organizations, including commercial banks, registered
broker-dealers and registered government securities dealers. A repurchase
agreement is an agreement under which the Fund acquires a debt security
(generally a debt security issued or guaranteed by the U.S. government or an
agency thereof, a banker's acceptance or a certificate of deposit) from a
commercial bank, broker or dealer, subject to resale to the seller at an agreed
upon price and date (normally, the next business day). A repurchase agreement
may be considered a loan collateralized by securities. The resale price
reflects an agreed upon interest rate effective for the period the instrument is
held by the Fund and is unrelated to the interest rate on the underlying
instrument. In these transactions, the securities acquired by the Fund
(including accrued interest earned thereon) must have a total value equal to or
in excess of the value of the repurchase agreement and are held by the Fund's
custodian bank until repurchased. In addition, the trustees will establish
guidelines and standards for review by the investment sub-advisor of the
creditworthiness of any bank, broker or dealer party to a repurchase agreement
with the Fund. The Fund will not enter into a repurchase agreement maturing in
more than seven days if as a result more than 15% of the Fund's net assets would
be invested in such repurchase agreements and other illiquid securities.
These transactions must be fully collateralized at all times by debt
securities (generally a security issued or guaranteed by the U.S. Government or
an agency thereof, a banker's acceptance or a certificate of deposit), but
involve certain risks, such as credit risk to the Fund if the other party
defaults on its obligation and the Fund is delayed or prevented from liquidating
the collateral. For example, if the other party to the agreement defaults on
its obligation to repurchase the underlying security at a time when the value of
the security has declined, the Fund may incur a loss upon disposition of the
security. If the other party to the agreement becomes insolvent and subject to
liquidation or reorganization under the Bankruptcy Code or other laws, a court
may determine that the underlying security is collateral for a loan by the Fund
not within the control of the Fund and therefore the realization by the Fund on
such collateral may automatically be stayed and delayed. Further, it is
possible that the Fund may not be able to substantiate its interest in the
underlying security and may be deemed an unsecured creditor of the other party
to the agreement. The Fund expects that these risks can be controlled through
careful monitoring procedures.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase
and sell securities on a when-issued or delayed delivery basis. However, the
Fund currently does not intend to purchase or sell securities on a when-issued
or delayed delivery basis, if as a result more than 5% of its total assets taken
at market value at the time of purchase would be invested in such securities.
When-issued or delayed delivery transactions arise when securities (normally,
obligations of issuers eligible for investment by the Fund) are purchased or
sold by the Fund with payment and delivery taking place in the future in order
to secure what is considered to be an advantageous price or yield. However, the
yield available on a comparable security when delivery takes place may vary from
the yield on the security at the time that the when-issued or delayed delivery
transaction was entered into. Any failure to consummate a when-issued or
delayed delivery transaction may result in the Fund missing the opportunity of
obtaining a price or yield considered to be advantageous. When-issued and
delayed delivery transactions may generally be expected to settle within one
month from the date the transactions are entered into, but in no event later
than 90 days. However, no payment or delivery is made by the Fund until it
receives delivery or payment from the other party to the transaction.
When the Fund purchases securities on a when-issued basis, it will
maintain in a segregated account with its custodian cash, U.S. government
securities or other liquid assets having an aggregate value equal to the amount
of such purchase commitments, until payment is
-5-
<PAGE>
made. If necessary, additional assets will be placed in the account daily so
that the value of the account will equal or exceed the amount of the Fund's
purchase commitments.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend its securities to
qualified institutional investors (such as brokers, dealers or other financial
organizations) who need to borrow securities in order to complete certain
transactions, such as covering short sales, avoiding failures to deliver
securities or completing arbitrage operations. Loans of securities by the Fund
will be collateralized by cash, letters of credit, or securities issued or
guaranteed by the U.S. Government or its agencies. The collateral will equal at
least 100% of the current market value of the loaned securities,
marked-to-market on a daily basis. By lending its securities, the Fund will be
attempting to generate income through the receipt of interest on the loan which,
in turn, can be invested in additional securities to pursue the Fund's
investment objective. Any gain or loss in the market price of the securities
loaned that might occur during the term of the loan would be for the account of
the Fund.
The Fund may lend its portfolio securities to qualified brokers,
dealers, banks or other financial institutions, so long as the terms, the
structure and the aggregate amount of such loans are not inconsistent with the
Investment Company Act of 1940, or the Rules and Regulations or interpretations
of the Securities and Exchange Commission (the "Commission") thereunder, which
currently require that (a) the borrower pledge and maintain with the Fund
collateral consisting of cash, an irrevocable letter of credit or securities
issued or guaranteed by the United States government having a value at all times
not less than 100% of the value of the securities loaned, (b) the borrower add
to such collateral whenever the price of the securities loaned rises (i.e., the
borrower "marks to the market" on a daily basis), (c) the loan be made subject
to termination by the Fund at any time and (d) the Fund receives reasonable
interest on the loan, which interest may include the Fund's investing cash
collateral in interest bearing short-term investments, and (e) the Fund receives
all dividends and distributions on the loaned securities and any increase in the
market value of the loaned securities.
The Fund bears risk of loss in the event that the other party to a
securities lending transaction defaults on its obligations and the Fund is
delayed in or prevented from exercising its rights to dispose of the collateral,
including the risk of a possible decline in the value of the collateral
securities during the period in which the Fund seeks to assert these rights, the
risk of incurring expenses associated with asserting these rights and the risk
of losing all or a part of the income from the transaction. The Fund will not
lend its portfolio securities if, as a result, the aggregate value of such loans
would exceed 33-1/3% of the value of the Fund's total assets. Loan arrangements
made by the Fund will comply with all other applicable regulatory requirements,
including the rules of the New York Stock Exchange, which rules presently
require the borrower, after notice, to redeliver the securities within the
normal settlement time of three business days. All relevant facts and
circumstances, including creditworthiness of the broker, dealer or institution,
will be considered in making decisions with respect to the lending of
securities, subject to review by the Fund's trustees.
SHORT SALES. The Fund currently is only permitted to engage in short
sales if, at the time of the short sale, the Fund owns or has the right to
acquire an equivalent kind and amount of the security being sold short at no
additional cost (i.e., short sales "against the box").
In a short sale, the seller does not immediately deliver the
securities sold and is said to have a short position in those securities until
delivery occurs. To make delivery to the purchaser, the executing broker
borrows the securities being sold short on behalf of the seller. While the
short position is maintained, the seller collateralizes its obligation to
deliver the securities sold short in an amount equal to the proceeds of the
short sale plus an additional margin amount established by the Board of
Governors of the Federal Reserve. If the Fund engages in a short sale, the
collateral account will be maintained by the Fund's custodian. While the short
sale is open, the
-6-
<PAGE>
Fund will maintain in a segregated custodial account an amount of securities
convertible into or exchangeable for such equivalent securities at no additional
cost. These securities would constitute the Fund's long position.
Under prior law, the Fund could have made a short sale, as described
above, when it wanted to sell a security it owned at a current attractive price,
but also wished to defer recognition of gain or loss for Federal income tax
purposes and for purposes of satisfying certain tests applicable to regulated
investment companies under the Internal Revenue Code. However, federal tax
legislation has eliminated the ability to defer recognition of gain or loss in
short sales against the box and accordingly, it is not anticipated that the Fund
will be engaging in these transactions unless there are further legislative
changes.
HEDGING TRANSACTIONS. Although it has historically not done so, the
Fund is authorized to make limited use of certain types of futures, forwards
and/or options, but only for the purpose of hedging, that is, protecting against
market risk due to market movements that may adversely affect the value of the
Fund's securities or the price of securities that the Fund is considering
purchasing. The utilization of futures, forwards and options is also subject to
policies and procedures which may be established by the trustees from time to
time. In addition, the Fund is not required to hedge. Decisions regarding
hedging are subject to the sub-advisor's judgment of the cost of the hedge, its
potential effectiveness and other factors the sub-advisor considers pertinent.
A hedging transaction may partially protect the Fund from a decline in
the value of a particular security or its portfolio generally, although hedging
may also limit the Fund's opportunity to profit from favorable price movements,
and the cost of the transaction will reduce the potential return on the security
or the portfolio. Use of these instruments by the Fund involves the potential
for a loss that may exceed the amount of initial margin the Fund would be
permitted to commit to the contracts under its investment limitation, or in the
case of a call option written by the Fund, may exceed the premium received for
the option. However, the Fund is permitted to use such instruments for hedging
purposes only, and only if the aggregate amount of its obligations under these
contracts does not exceed the total market value of the assets the Fund is
attempting to hedge, such as a portion or all of its exposure to equity
securities or its holding in a specific foreign currency. To help ensure that
the Fund will be able to meet its obligations under its futures and forward
contracts and its obligations under options written by the Fund, the Fund will
be required to maintain liquid assets in a segregated account with its custodian
bank or to set aside portfolio securities to "cover" its position in these
contracts.
The principal risks of the Fund utilizing futures transactions,
forward contracts and options are: (a) losses resulting from market movements
not anticipated by the Fund; (b) possible imperfect correlation between
movements in the prices of futures, forwards and options and movements in the
prices of the securities or currencies hedged or used to cover such positions;
(c) lack of assurance that a liquid secondary market will exist for any
particular futures or options at any particular time, and possible
exchange-imposed price fluctuation limits, either of which may make it difficult
or impossible to close a position when so desired; (d) lack of assurance that
the counterparty to a forward contract would be willing to negotiate an offset
or termination of the contract when so desired; and (e) the need for additional
information and skills beyond those required for the management of a portfolio
of traditional securities. In addition, when the Fund enters into an
over-the-counter contract with a counterparty, the Fund will assume counterparty
credit risk, that is, the risk that the counterparty will fail to perform its
obligations, in which case the Fund could be worse off than if the contract had
not been entered into.
Following is additional information concerning the futures, forwards
and options which the Fund may utilize, provided that no more than 5% of the
Fund's net assets at the time the contract is entered into may be used for
initial margins for financial futures transactions and
-7-
<PAGE>
premiums paid for the purchase of options. In addition, the Fund may only write
call options that are covered and only up to 25% of the Fund's total assets.
FUTURES CONTRACTS. Financial futures contracts are exchange-traded
contracts on financial instruments (such as securities and foreign currencies)
and securities indices that obligate the holder to take or make delivery of a
specified quantity of the underlying financial instrument, or the cash value of
an index, at a future date. Although futures contracts by their terms call for
the delivery or acquisition of the underlying instruments or a cash payment
based on the mark-to-market value of the underlying instruments, in most cases
the contractual obligation will be offset before the delivery date by buying (in
the case of an obligation to sell) or selling (in the case of an obligation to
buy) an identical futures contract. Such a transaction cancels the original
obligation to make or take delivery of the instruments.
The Fund may enter into contracts for the purchase or sale for future
delivery of financial instruments, such as securities and foreign currencies, or
contracts based on financial indices including indices of U.S. Government
securities, foreign government securities or equity securities. U.S. futures
contracts are traded on exchanges which have been designated "contract markets"
by the Commodity Futures Trading Commission ("CFTC") and must be executed
through a futures commission merchant (an "FCM"), or brokerage firm, which is a
member of the relevant contract market. Through their clearing corporations,
the exchanges guarantee performance of the contracts as between the clearing
members of the exchange.
Both the buyer and seller are required to deposit "initial margin" for
the benefit of the FCM when a futures contract is entered into. Initial margin
deposits are equal to a percentage of the contract's value, as set by the
exchange on which the contract is traded, and may be maintained in cash or other
liquid assets. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments to the other
party to settle the change in value on a daily basis. Initial and variation
margin payments are similar to good faith deposits or performance bonds or
party-to-party payments resulting from daily changes in the value of the
contract, unlike margin extended by a securities broker, and would be released
or credited to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Unlike margin extended by a
securities broker, initial and variation margin payments do not constitute
purchasing securities on margin for purposes of the Fund's investment
limitations. The Fund will incur brokerage fees when it buys or sells futures
contracts.
In the event of the bankruptcy of the FCM that holds margin on behalf
of the Fund, the Fund may be entitled to return of margin owed to the Fund only
in proportion to the amount received by the FCM's other customers. The Fund
will attempt to minimize the risk by careful monitoring of the creditworthiness
of the FCMs with which the Fund does business and by depositing margin payments
in a segregated account with the Fund's custodian for the benefit of the FCM
when practical or otherwise required by law.
The Fund intends to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the futures
markets. Accordingly, the Fund will not enter into any futures contract or
option on a futures contract if, as a result, the aggregate initial margin and
premiums required to establish such positions would exceed 5% of the Fund's net
assets.
Although the Fund would hold cash and liquid assets in a segregated
account with a mark-to-market value sufficient to cover the Fund's open futures
obligations, the segregated assets would be available to the Fund immediately
upon closing out the futures position.
The acquisition or sale of a futures contract may occur, for example,
when the Fund is considering purchasing or holds equity securities and seeks to
protect itself from fluctuations in
-8-
<PAGE>
prices without buying or selling those securities. For example, if prices were
expected to decrease, the Fund might sell equity index futures contracts,
thereby hoping to offset a potential decline in the value of equity securities
in the portfolio by a corresponding increase in the value of the futures
contract position held by the Fund and thereby preventing the Fund's net asset
value from declining as much as it otherwise would have. The Fund also could
protect against potential price declines by selling portfolio securities and
investing in money market instruments. However, the use of futures contracts as
a hedging technique allows the Fund to maintain a defensive position without
having to sell portfolio securities.
Similarly, when prices of equity securities are expected to increase,
futures contracts may be bought to attempt to hedge against the possibility of
having to buy equity securities at higher prices. This technique is sometimes
known as an anticipatory hedge. Since the fluctuations in the value of futures
contracts should be similar to those of equity securities, the Fund could take
advantage of the potential rise in the value of equity securities without buying
them until the market has stabilized. At that time, the futures contracts could
be liquidated and the Fund could buy equity securities on the cash market.
The ordinary spreads between prices in the cash and futures markets,
due to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial margin and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal price relationship between the cash
and futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced and prices in the futures market
distorted. Third, from the point of view of speculators, the margin deposit
requirements in the futures market are less than margin requirements in the
securities market. Therefore, increased participation by speculators in the
futures market may cause temporary price distortions. Due to the possibility of
the foregoing distortions, a correct forecast of general price trends by the
Fund still may not result in a successful use of futures.
Futures contracts entail additional risks. Although the Fund will
only utilize futures contracts when it believes that use of such contracts will
benefit the Fund, if the Fund's investment judgment is incorrect, the Fund's
overall performance could be worse than if the Fund had not entered into futures
contracts. For example, if the Fund has hedged against the effects of a
possible decrease in prices of securities held in the Fund's portfolio and
prices increase instead, the Fund will lose part or all of the benefit of the
increased value of these securities because of offsetting losses in the Fund's
futures positions. In addition, if the Fund has insufficient cash, it may have
to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which reflect the rising market and may occur at a time when the sales
are disadvantageous to the Fund. Although the buyer of an option cannot lose
more than the amount of the premium plus related transaction costs, a buyer or
seller of futures contracts could lose amounts substantially in excess of any
initial margin deposits made, due to the potential for adverse price movements
resulting in additional variation margin being required by such positions.
However, the Fund intends to monitor its investments closely and will attempt to
close its positions when the risk of loss to the Fund becomes unacceptably high.
The prices of futures contracts depend primarily on the value of their
underlying instruments. Because there are a limited number of types of futures
contracts, it is possible that the standardized futures contracts available to
the Fund will not match exactly the Fund's current or potential investments.
The Fund may buy and sell futures contracts based on underlying instruments with
different characteristics from the securities in which it typically invests --
for example, by hedging investments in portfolio securities with a futures
contract based on a broad
-9-
<PAGE>
index of securities -- which involves a risk that the futures position will not
correlate precisely with the performance of the Fund's investments.
Futures prices can also diverge from the prices of their underlying
instruments, even if the underlying instruments closely correlate with the
Fund's investments. Futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
instruments and the time remaining until expiration of the contract. Those
factors may affect securities prices differently from futures prices. Imperfect
correlations between the Fund's investments and its futures positions may also
result from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts.
The Fund may buy or sell futures contracts with a value less than or equal to
the securities it wishes to hedge or is considering purchasing. If price
changes in the Fund's futures positions are poorly correlated with its other
investments, its futures positions may fail to produce desired gains or result
in losses that are not offset by the gains in the Fund's other investments.
Because futures contracts are generally settled within a day from the
date they are closed out, compared with a longer settlement period for most
types of securities, the futures markets can provide superior liquidity to the
securities markets. Nevertheless, there is no assurance a liquid secondary
market will exist for any particular futures contract at any particular time.
In addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for the Fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, the Fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, the Fund's access to other assets held to cover its futures positions
also could be impaired.
OPTIONS ON FUTURES CONTRACTS. The Fund may buy and write options on
futures contracts for hedging purposes. An option on a futures contract gives
the Fund the right (but not the obligation) to buy or sell a futures contract at
a specified price on or before a specified date. The purchase of a call option
on a futures contract is similar in some respects to the purchase of a call
option on an individual security. Depending on the pricing of the option
compared to either the price of the futures contract upon which it is based or
the price of the underlying instrument, ownership of the option may or may not
be less risky than ownership of the futures contract or the underlying
instrument. As with the purchase of futures contracts, the Fund may buy a call
option on a futures contract to hedge against a market advance, and the Fund
might buy a put option on a futures contract to hedge against a market decline.
The writing of a call option on a futures contract constitutes a
partial hedge against declining prices of the security or foreign currency which
is deliverable under, or of the index comprising, the futures contract. If the
futures price at the expiration of the call option is below the exercise price,
the Fund will retain the full amount of the option premium which provides a
partial hedge against any decline that may have occurred in the Fund's portfolio
holdings. If a call option the Fund has written is exercised, the Fund will
incur a loss which will be reduced by the amount of the premium it received.
Depending on the degree of correlation between change in the value of its
portfolio securities and changes in the value of the futures positions, the
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
-10-
<PAGE>
The purchase of a put option on a futures contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Fund may buy a put option on a futures contract to hedge the Fund's
portfolio against the risk of falling prices.
The amount of risk the Fund assumes when it buys an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the options bought.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A forward contract is a
privately negotiated agreement between two parties in which one party is
obligated to deliver a stated amount of a stated asset at a specified time in
the future and the other party is obligated to pay a specified invoice amount
for the assets at the time of delivery. The Fund currently intends that it will
only use forward contracts or commitments for hedging purposes and will only use
forward foreign currency exchange contracts, although the Fund may enter into
additional forms of forward contracts or commitments in the future if they
become available and advisable in light of the Fund's objectives and investment
policies. Forward contracts generally are negotiated in an interbank market
conducted directly between traders (usually large commercial banks) and their
customers. Unlike futures contracts, which are standardized exchange-traded
contracts, forward contracts can be specifically drawn to meet the needs of the
parties that enter into them. The parties to a forward contract may agree to
offset or terminate the contract before its maturity, or may hold the contract
to maturity and complete the contemplated exchange.
The following discussion summarizes the Fund's principal uses of
forward foreign currency exchange contracts ("forward currency contracts"). The
Fund may enter into forward currency contracts with stated contract values of up
to the value of the Fund's assets. A forward currency contract is an obligation
to buy or sell an amount of a specified currency for an agreed price (which may
be in U.S. dollars or a foreign currency) on a specified date. The Fund will
exchange foreign currencies for U.S. dollars and for other foreign currencies in
the normal course of business and may buy and sell currencies through forward
currency contracts in order to fix a price (in terms of a specified currency)
for securities it has agreed to buy or sell ("transaction hedge"). The Fund
also may hedge some or all of its investments denominated in foreign currency
against a decline in the value of that currency (or a proxy currency whose price
movements are expected to have a high degree of correlation with the currency
being hedged) relative to the U.S. dollar by entering into forward currency
contracts to sell an amount of that currency approximating the value of some or
all of its portfolio securities denominated in that currency ("position hedge")
or by participating in futures contracts (or options on such futures) with
respect to the currency. The Fund also may enter into a forward currency
contract with respect to a currency where the Fund is considering the purchase
or sale of investments denominated in that currency but has not yet selected the
specific investments ("anticipatory hedge").
These types of hedging minimize the effect of currency appreciation as
well as depreciation, but do not eliminate fluctuations in the underlying U.S.
dollar equivalent value of the proceeds of or rates of return on the Fund's
foreign currency denominated portfolio securities. The matching of the increase
in value of a forward contract and the decline in the U.S. dollar equivalent
value of the foreign currency denominated asset that is the subject of the hedge
generally will not be precise. Shifting the Fund's currency exposure from one
foreign currency to another limits the Fund's opportunity to profit from
increases in the value of the original currency and involves a risk of increased
losses to the Fund if its investment manager's projection of future exchange
rates is inaccurate. Unforeseen changes in currency prices may result in poorer
overall performance for the Fund than if it had not entered into such contracts.
The Fund will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency
-11-
<PAGE>
being hedged. To the extent that the Fund is not able to cover its forward
currency positions with underlying portfolio securities, the Fund's custodian
will segregate cash or liquid assets having a value equal to the aggregate
amount of the Fund's commitments under forward contracts entered into. If the
value of the securities used to cover a position or the value of segregated
assets declines, the Fund must find alternative cover or segregate additional
cash or liquid assets on a daily basis so that the value of the covered and
segregated assets will be equal to the amount of the Fund's commitments with
respect to such contracts.
While forward contracts are not currently regulated by the CFTC, the
CFTC may in the future assert authority to regulate forward contracts. In such
event, the Fund's ability to utilize forward contracts may be restricted. The
Fund may not always be able to enter into forward contracts at attractive prices
and may be limited in its ability to use these contracts to hedge Fund assets.
In addition, when the Fund enters into a privately negotiated forward contract
with a counterparty, the Fund assumes counterparty credit risk, that is, the
risk that the counterparty will fail to perform its obligations, in which case
the Fund could be worse off than if the contract had not been entered into.
Unlike many exchange-traded futures contracts and options on futures, there are
no daily price fluctuation limits with respect to forward contracts and other
negotiated or over-the-counter instruments, and with respect to those contracts,
adverse market movements could therefore continue to an unlimited extent over a
period of time. However, the Fund intends to monitor its investments closely
and will attempt to renegotiate or close its positions when the risk of loss to
the Fund becomes unacceptably high.
OPTIONS ON SECURITIES AND SECURITIES INDICES. The Fund may buy or
sell put or call options and write covered call options on securities that are
traded on United States or foreign securities exchanges or over-the-counter.
Buying an option involves the risk that, during the option period, the price of
the underlying security will not increase (in the case of a call) to above the
exercise price, or will not decrease (in the case of a put) to below the
exercise price, in which case the option will expire without being exercised and
the holder would lose the amount of the premium. Writing a call option involves
the risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by the Fund to the option holder at a lower price than its current market
value and the Fund's potential for capital appreciation on the security would be
limited to the exercise price. Moreover, when the Fund writes a call option on
a securities index, the Fund bears the risk of loss resulting from imperfect
correlation between movements in the price of the index and the price of the
securities set aside to cover such position. Although they entitle the holder
to buy equity securities, call options to purchase equity securities do not
entitle the holder to dividends or voting rights with respect to the underlying
securities, nor do they represent any rights in the assets of the issuer of
those securities.
A call option written by the Fund is "covered" if the Fund owns the
underlying security covered by the call or has an absolute and immediate right
to acquire that security without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities held in its portfolio. A call
option is also deemed to be covered if the Fund holds a call on the same
security and in the same principal amount as the call written and the exercise
price of the call held (i) is equal to or less than the exercise price of the
call written or (ii) is greater than the exercise price of the call written if
the difference is maintained by the Fund in liquid assets in a segregated
account with its custodian.
The writer of a call option may have no control when the underlying
securities must be sold. Whether or not an option expires unexercised, the
writer retains the amount of the premium. This amount, of course, may, in the
case of a covered call option, be offset by a decline in the market value of the
underlying security during the option period.
-12-
<PAGE>
The writer of an exchange-traded call option that wishes to terminate
its obligation may effect a "closing purchase transaction." This is
accomplished by buying an option of the same series as the option previously
written. The effect of the purchase is that the writer's position will be
canceled by the clearing corporation. If the Fund desires to sell a particular
security from the Fund's portfolio on which the Fund has written a call option,
the Fund will effect a closing transaction prior to or concurrent with the sale
of the security. However, a writer may not effect a closing purchase
transaction after being notified of the exercise of an option. An investor who
is the holder of an exchange-traded option may liquidate its position by
effecting a "closing sale transaction." This is accomplished by selling an
option of the same series as the option previously bought. There is no
guarantee that either a closing purchase or a closing sale transaction can be
effected.
The Fund will realize a profit from a closing transaction if the price
of the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to buy the option; the Fund will realize a loss from a closing transaction
if the price of the purchase transaction is more than the premium received from
writing the option or the price received from a sale transaction is less than
the premium paid to buy the option. Because increases in the market price of a
call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by the Fund.
An option position may be closed out only where there exists a
secondary market for an option of the same series. If a secondary market does
not exist, it might not be possible to effect closing transactions in particular
options with the result that the Fund would have to exercise the options in
order to realize any profit. If the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or the Fund delivers the underlying security
upon exercise. Reasons for the absence of a liquid secondary market may include
the following: (i) there may be insufficient trading interest in certain
options, (ii) restrictions may be imposed by a national securities exchange on
which the option is traded ("Exchange") on opening or closing transactions or
both, (iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying securities,
(iv) unusual or unforeseen circumstances may interrupt normal operations on an
Exchange, (v) the facilities of an Exchange or of the Options Clearing
Corporation ("OCC") may not at all times be adequate to handle current trading
volume, or (vi) one or more Exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the trading of options
(or a particular class or series of options), in which event the secondary
market on that Exchange (or in that class or series of options) would cease to
exist, although outstanding options on that Exchange that had been issued by the
OCC as a result of trades on that Exchange would continue to be exercisable in
accordance with their terms.
In addition, when the Fund enters into an over-the-counter option
contract with a counterparty, the Fund assumes counterparty credit risk, that
is, the risk that the counterparty will fail to perform its obligations, in
which case the Fund could be worse off than if the contract had not been entered
into.
An option on a securities index is similar to an option on a security
except that, rather than the right to take or make delivery of a security at a
specified price, an option on a securities index gives the holder the right to
receive, on exercise of the option, an amount of cash if the closing level of
the securities index on which the option is based is greater than, in the case
of a call, or less than, in the case of a put, the exercise price of the option.
The Fund may buy call options on securities or securities indices to
hedge against an increase in the price of a security or securities that the Fund
may buy in the future. The premium paid for the call option plus any
transaction costs will reduce the benefit, if any, realized
-13-
<PAGE>
by the Fund upon exercise of the option, and, unless the price of the underlying
security or index rises sufficiently, the option may expire and become worthless
to the Fund. The Fund may buy put options to hedge against a decline in the
value of a security or its portfolio. The premium paid for the put option plus
any transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying security or
index declines sufficiently, the option may expire and become worthless to the
Fund.
An example of a hedging transaction using an index option would be if
the Fund were to purchase a put on a stock index, in order to protect the Fund
against a decline in the value of all securities held by it to the extent that
the stock index moves in a similar pattern to the prices of the securities held.
While the correlation between stock indices and price movements of the stocks in
which the Fund will generally invest may be imperfect, the Fund expects,
nonetheless, that the use of put options that relate to such indices will, in
certain circumstances, protect against declines in values of specific portfolio
securities or the Fund's portfolio generally. Although the purchase of a put
option may partially protect the Fund from a decline in the value of a
particular security or its portfolio generally, the cost of a put will reduce
the potential return on the security or the portfolio.
PORTFOLIO TURNOVER. Investment changes in the Fund will be made whenever
management deems them appropriate even if this results in a higher portfolio
turnover rate. A 100% annual turnover rate results, for example, if the
equivalent of all of the securities in the Fund's portfolio are replaced in a
period of one year. In addition, portfolio turnover for the Fund may increase
as a result of large amounts of purchases and redemptions of shares of the Fund
due to economic, market or other factors that are not within the control of
management.
Higher portfolio turnover will necessarily result in correspondingly higher
brokerage costs for the Fund. The existence of a high portfolio turnover rate
has no direct relationship to the tax liability of the Fund, although sales of
certain stocks will lead to realization of gains, and, possibly, increased
taxable distributions to shareholders. The Fund's brokerage policy is discussed
further below under Section 6--Brokerage Policy, and additional information
concerning income taxes is located under Section 9--Income Dividends, Capital
Gains Distributions and Tax Treatment.
2. INVESTMENT RESTRICTIONS
The investment objective of the Fund is capital appreciation. The
investment objective of the Fund is considered fundamental, meaning that it
cannot be changed without a shareholders' vote. There can be no assurance that
the Fund's investment objective will be realized.
The Fund has also adopted certain investment policies, strategies,
guidelines and procedures in pursuing its objective. These may be changed
without a shareholder vote. The principal policies and strategies used by the
Fund are described in the Prospectus.
In addition, the Fund has adopted certain fundamental and
non-fundamental restrictions on its investments and other activities, which are
listed below. Fundamental restrictions may not be changed without the approval
of (i) 67% or more of the voting securities of the Fund present at a meeting of
shareholders thereof if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Fund. Non-fundamental restrictions may be
changed in the future by action of the trustees without shareholder vote.
-14-
<PAGE>
BERGER INFORMATION TECHNOLOGY FUND
The following fundamental restrictions apply to the Berger Information
Technology Fund. The Fund may not:
1. With respect to 75% of the Fund's total assets, purchase the
securities of any one issuer (except U.S. government securities) if immediately
after and as a result of such purchase (a) the value of the holdings of the Fund
in the securities of such issuer exceeds 5% of the value of the Fund's total
assets or (b) the Fund owns more than 10% of the outstanding voting securities
of such issuer.
2. Invest in any one industry (other than U.S. government
securities) 25% or more of the value of its total assets at the time of such
investment.
3. Borrow money, except from banks for temporary or emergency
purposes in amounts not to exceed 25% of the Fund's total assets (including the
amount borrowed) taken at market value, nor pledge, mortgage or hypothecate its
assets, except to secure permitted indebtedness and then only if such pledging,
mortgaging or hypothecating does not exceed 25% of the Fund's total assets taken
at market value. When borrowings exceed 5% of the Fund's total assets, the Fund
will not purchase portfolio securities.
4. Act as a securities underwriter (except to the extent the Fund
may be deemed an underwriter under the Securities Act of 1933 in disposing of a
security), issue senior securities (except to the extent permitted under the
Investment Company Act of 1940), invest in real estate (although it may purchase
shares of a real estate investment trust), or invest in commodities or commodity
contracts except financial futures transactions, futures contracts on securities
and securities indices and options on such futures, forward foreign currency
exchange contracts, forward commitments or securities index put or call options.
5. Make loans, except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies. The Fund does not, for this purpose, consider the purchase
of all or a portion of an issue of publicly distributed bonds, bank loan
participation agreements, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities, to be the making of a loan.
In applying the industry concentration investment restriction (no. 2
above), the Fund uses the industry groups used in the Data Monitor Portfolio
Monitoring System of William O'Neil & Co. Incorporated.
The trustees have adopted additional non-fundamental investment
restrictions for the Fund. These limitations may be changed by the trustees
without a shareholder vote. The non-fundamental investment restrictions include
the following:
1. The Fund may not purchase securities on margin from a broker or
dealer, except that the Fund may obtain such short-term credits as may be
necessary for the clearance of transactions, and may not make short sales of
securities, except that the Fund may make short sales if, at the time of the
short sale, the Fund owns or has the right to acquire an equivalent kind and
amount of the security being sold short at no additional cost (i.e., short sales
"against the box"). This limitation shall not prohibit or restrict the Fund
from entering into futures, forwards and options contracts or from making margin
payments and other deposits in connection therewith.
-15-
<PAGE>
2. The Fund may not purchase the securities of any other investment
company, except by purchase in the open market involving no commission or profit
to a sponsor or dealer (other than the customary broker's commission).
3. The Fund may not invest in companies for the purposes of
exercising control of management.
4. The Fund may not purchase any security, including any repurchase
agreement maturing in more than seven days, which is not readily marketable, if
more than 15% of the net assets of the Fund, taken at market value at the time
of purchase would be invested in such securities.
5. Only for the purpose of hedging, the Fund may purchase and sell
financial futures, forward foreign currency exchange contracts and put and call
options, but no more than 5% of the Fund's net assets at the time of purchase
may be invested in initial margins for financial futures transactions and
premiums for options. The Fund may only write call options that are covered and
only up to 25% of the Fund's total assets.
6. The Fund may not purchase or sell securities on a when-issued or
delayed delivery basis, if as a result more than 5% of its total assets taken at
market value at the time of purchase would be invested in such securities.
3. MANAGEMENT OF THE FUND
The Fund is supervised by trustees who are responsible for major
decisions about the Fund's policies and overall Fund oversight. The Fund's
trustees hire the companies that run day-to-day Fund operations, such as the
investment advisor, administrator, transfer agent and custodian.
The trustees and executive officers of the Fund are listed below,
together with information which includes their principal occupations during the
past five years and other principal business affiliations.
MICHAEL OWEN, 412 Reid Hall, Montana State University, Bozeman, MT 59717,
DOB: 1937. Since 1994, Dean, and from 1989 to 1994, a member of the
Finance faculty, of the College of Business, Montana State University.
Self-employed as a financial and management consultant, and in real
estate development. Formerly (1976-1989), Chairman and Chief
Executive Officer of Royal Gold, Inc. (mining). Chairman of the Board
of Berger 100 Fund and Berger Growth and Income Fund. Chairman of the
Trustees of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* GERARD M. LAVIN, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1942. President and a director of Berger 100 Fund and Berger
Growth and Income Fund, and President and a trustee of Berger
Investment Portfolio Trust and Berger Omni Investment Trust, since
February 1997. President and a trustee of Berger/BIAM Worldwide
Portfolios Trust and Berger/BIAM Worldwide Funds Trust since their
inception in May 1996. President and a trustee of Berger
Institutional Products Trust since its inception in October 1995.
President and a director since April 1995 of Berger Associates, Inc.
Member and Chairman of the Board of Managers and Co-Chief Executive
Officer on the Management Committee of BBOI Worldwide LLC since
November 1996. President and a director of West Side Investments,
Inc. (investments), a wholly-owned subsidiary of DST Systems, Inc.,
since February 1998. Formerly, a Vice President of DST Systems, Inc.
(data
-16-
<PAGE>
processing) from July 1995 to February 1998; President and Chief
Executive Officer of Investors Fiduciary Trust Company (banking) from
February 1992 to March 1995; and Chief Operating Officer of SunAmerica
Asset Management Co. (money management) from January 1990 to February
1992.
DENNIS E. BALDWIN, 3481 South Race Street, Englewood, CO 80110, DOB: 1928.
President, Baldwin Financial Counseling. Formerly (1978-1990), Vice
President and Denver Office Manager of Merrill Lynch Capital Markets.
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* WILLIAM M. B. BERGER, 210 University Boulevard, Suite 900, Denver, CO
80206, DOB: 1925. Director and, formerly, President (1974-1994) of
Berger 100 Fund and Berger Growth and Income Fund. Trustee of Berger
Investment Portfolio Trust since its inception in August 1993
(Chairman of the Trustees through November 1994). Trustee of Berger
Institutional Products Trust since its inception in October 1995.
Trustee of Berger/BIAM Worldwide Funds Trust and Berger/BIAM Worldwide
Portfolios Trust since their inception in May 1996. Trustee of Berger
Omni Investment Trust since February 1997. Chairman (since 1994) and
a Director (since 1973) and, formerly, President (1973-1994) of Berger
Associates.
LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, DOB: 1925. President,
Climate Engineering, Inc. (building environmental systems). Director
of Berger 100 Fund and Berger Growth and Income Fund. Trustee of
Berger Investment Portfolio Trust, Berger Institutional Products
Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide
Portfolios Trust and Berger Omni Investment Trust.
KATHERINE A. CATTANACH, 672 South Gaylord, Denver, CO 80209, DOB: 1945.
Managing Principal, Sovereign Financial Services, Inc. (investment
consulting firm). Formerly (1981-1988), Executive Vice President,
Captiva Corporation, Denver, Colorado (private investment management
firm). Ph.D. in Finance (Arizona State University); Chartered
Financial Analyst (CFA). Director of Berger 100 Fund and Berger
Growth and Income Fund. Trustee of Berger Investment Portfolio Trust,
Berger Institutional Products Trust, Berger/BIAM Worldwide Funds
Trust, Berger/BIAM Worldwide Portfolios Trust and Berger Omni
Investment Trust.
PAUL R. KNAPP, 33 North LaSalle Street, Suite 1900, Chicago, IL 60602, DOB:
1945. Since 1991, Chairman, President, Chief Executive Officer and a
director of Catalyst Institute (international public policy research
organization focused primarily on financial markets and institutions).
Since September 1997, President, Chief Executive Officer and a
director of DST Catalyst, Inc. (international financial markets
consulting, software and computer services company). Director
(since February 1998) and a Vice President (February 1998 - November
1998) of West Side Investments, Inc. (investments), a wholly-owned
subsidiary of DST Systems, Inc. Previously (1991 - September 1997),
Chairman, President, Chief Executive Officer and a director of
Catalyst Consulting (international financial institutions business
consulting firm). Prior thereto (1988-1991), President, Chief
Executive Officer and a director of Kessler Asher Group (brokerage,
clearing and trading firm). Director of Berger 100 Fund and Berger
Growth and Income Fund. Trustee of Berger Investment Portfolio Trust,
Berger Institutional Products Trust, Berger/BIAM Worldwide Funds
Trust, Berger/BIAM Worldwide Portfolios Trust and Berger Omni
Investment Trust.
-17-
<PAGE>
HARRY T. LEWIS, JR., 370 17th Street, Suite 3560, Denver, CO 80202, DOB:
1933. Self-employed as a private investor. Formerly (1981-1988),
Senior Vice President, Rocky Mountain Region, of Dain Bosworth
Incorporated and member of that firm's Management Committee. Director
of J.D. Edwards & Co. (computer software company) since 1995.
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
WILLIAM SINCLAIRE, 3049 S. Perry Park Road, Sedalia, CO 80135, DOB: 1928.
President, Santa Clara LLC (privately owned agriculture company).
Director of Berger 100 Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger/BIAM Worldwide Funds Trust, Berger/BIAM
Worldwide Portfolios Trust and Berger Omni Investment Trust.
* JACK R. THOMPSON, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1949. Executive Vice President of the Berger Funds since
February 1999. Executive Vice President of Berger Associates, Inc.,
since February 1999. Audit Committee Member of the Public Employees'
Retirement Association of Colorado (pension plan) since November 1997.
Self-employed as a consultant from July 1995 through February 1999.
Director of Wasatch Advisors (investment management) from February
1997 to February 1999. Director of Janus Capital Corporation
(investment management) from June 1984 through June 1995, and
Executive Vice President of the Corporation from April 1989 through
June 1995. Treasurer of Janus Capital Corporation from November 1983
through October 1989. Trustee of the Janus Investment Funds from
December 1990 through June 1995, and Senior Vice President of the
Trust from May 1993 through June 1995. President and a director of
Janus Service Corporation (transfer agent) from January 1987 through
June 1995. President and a director of Fillmore Agency, Inc.
(advertising agency), from January 1990 through June 1995. Executive
Vice President and a director of Janus Capital International, Ltd.
(investment advisor) from September 1994 through June 1995. President
and a director of Janus Distributors, Inc. (broker/dealer), from May
1991 through June 1995. Director of IDEX Management, Inc. (investment
management), from January 1985 through June 1995. Trustee and Senior
Vice President of the of the Janus Aspen Funds from May 1993 through
June 1995.
* JANICE M. TEAGUE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1954. Vice President and Secretary (since November 1998) and
Assistant Secretary (September 1996 to November 1998) of the Berger
Funds. Vice President (since October 1997), Secretary (since November
1998) and Assistant Secretary (September 1996 through November 1998)
with Berger Associates. Vice President and Secretary with Berger
Distributors, Inc., since August 1998. Formerly, self-employed as a
business consultant from June 1995 through September 1996, Secretary
of the Janus Funds from January 1990 to May 1995 and Assistant
Secretary of Janus Capital Corporation from October 1989 to May 1995.
* DAVID J. SCHULTZ, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1950. Vice President and Treasurer (since November 1998) and
Assistant Treasurer (September 1996 to November 1998) of the Berger
Funds. Vice President (since February 1997) and Controller (since
August 1994) with Berger Associates. Chief Financial Officer and
Treasurer (since May 1996), Assistant Secretary (since August 1998)
and Secretary (May 1996 to August 1998) with Berger Distributors, Inc.
Formerly, Partner with Smith, Brock & Gwinn (accounting firm) from
January 1984 to August 1994.
* BRIAN S. FERRIE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1958. Vice President of the Berger Funds since November 1998.
Vice President (since February
-18-
<PAGE>
1997) and Chief Compliance Officer (since August 1994) with Berger
Associates. Chief Compliance Officer with Berger Distributors, Inc.,
since May 1996. Formerly, Compliance Officer with United Services
Advisor, Inc., from January 1988 to July 1994, and Director of
Internal Audit of United Services Funds from January 1987 to July
1994.
* JOHN PAGANELLI, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1967. Assistant Treasurer of the Berger Funds since November
1998. Vice President (since November 1998) and Manager of Accounting
(January 1997 through November 1998) with Berger Associates.
Formerly, manager of Accounting (December 1994 through October 1996)
and Senior Accountant (November 1991 through December 1994) with
Palmeri Fund Administrators, Inc.
________________
* Interested person (as defined in the Investment Company Act of 1940) of the
Fund and/or of the Fund's advisor or sub-advisor.
The trustees of the Fund have adopted a trustee retirement age of 75
years.
TRUSTEE COMPENSATION
The officers of the Fund received no compensation from the Fund during
the fiscal year ended September 30, 1998. However, trustees of the Fund who are
not "interested persons" of the Fund or its advisor or sub-advisor are
compensated for their services according to a fee schedule, allocated among the
Berger Funds. Neither the officers of the Fund nor the trustees receive any
form of pension or retirement benefit compensation from the Fund.
The following table sets forth information regarding compensation paid
or accrued during the fiscal year ended September 30, 1998, for each trustee of
the Fund:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NAME AND POSITION AGGREGATE COMPENSATION FROM
WITH BERGER FUNDS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
BERGER INFORMATION All Berger Funds(2)
TECHNOLOGY FUND(1)
- -------------------------------------------------------------------------------
<S> <C> <C>
Dennis E. Baldwin(3) $ 269 $47,000
- -------------------------------------------------------------------------------
William M.B. $ 0 $ 0
Berger(3),(4)
- -------------------------------------------------------------------------------
Louis R. Bindner(3) $ 269 $46,400
- -------------------------------------------------------------------------------
Katherine A. Cattanach(3) $ 269 $47,000
- -------------------------------------------------------------------------------
Lucy Black $ 0 $ 8,200
Creighton(3),(6)
- -------------------------------------------------------------------------------
Paul R. Knapp(3) $ 269 $47,000
- -------------------------------------------------------------------------------
Gerard M. $ 0 $ 0
Lavin(3),(4),(5)
- -------------------------------------------------------------------------------
Harry T. Lewis(3) $ 269 $47,000
- -------------------------------------------------------------------------------
Michael Owen(3) $ 326 $57,000
- -------------------------------------------------------------------------------
William Sinclaire(3) $ 269 $46,400
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
NOTES TO TABLE
(1) The Fund was not added as a series of the Trust until ______________, 1999.
Figures are estimates for the first year of operations of the Fund as a series
of the Trust.
(2) Includes the Berger 100 Fund, the Berger Growth and Income Fund, the Berger
Investment Portfolio Trust (including the Berger Small Company Growth Fund, the
Berger New Generation Fund, the Berger Balanced Fund, the Berger Select Fund and
the Berger Mid Cap Growth Fund), the Berger Institutional Products Trust (four
series), the Berger/BIAM Worldwide Funds Trust (three series, including the
Berger/BIAM International Fund), the Berger/BIAM Worldwide Portfolios Trust (one
series) and the Berger Omni Investment Trust (including the Berger Small Cap
Value Fund). Aggregate compensation figures do not include first-year estimates
for the Fund. Of the aggregate amounts shown for each trustee, the following
amounts were deferred under applicable deferred compensation plans: Dennis E.
Baldwin $36,100; Louis R. Bindner $3,638; Katherine A. Cattanach $45,202; Lucy
Black Creighton $6,280; Michael Owen $10,276; William Sinclaire $14,898.
(3) Director of Berger 100 Fund and Berger Growth and Income Fund and trustee
of Berger Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Portfolios Trust, Berger/BIAM Worldwide Funds Trust and
Berger Omni Investment Trust.
(4) Interested person of Berger Associates.
(5) President of Berger 100 Fund, Berger Growth and Income Fund, Berger
Investment Portfolio Trust, Berger/BIAM Worldwide Portfolios Trust, Berger/BIAM
Worldwide Funds Trust and Berger Omni Investment Trust.
(6) Resigned as a director and trustee effective November 1997.
Trustees may elect to defer receipt of all or a portion of their fees
pursuant to a fee deferral plan adopted by the Fund. Under the plan, deferred
fees are credited to an account and adjusted thereafter to reflect the
investment experience of whichever of the Berger Funds (or approved money market
funds) is designated by the trustee for this purpose. Pursuant to an SEC
exemptive order, the Fund is permitted to purchase shares of the designated
funds in order to offset its obligation to the trustees participating in the
plan. Purchases made pursuant to the plan are excepted from any otherwise
applicable investment restriction limiting the purchase of securities of any
other investment company. The Fund's obligation to make payments of deferred
fees under the plan is a general obligation of the Fund.
As of [__________], 1999, the officers and trustees of the Fund as a
group owned of record or beneficially no shares of the Fund.
4. INVESTMENT ADVISOR AND SUB-ADVISOR
BERGER ASSOCIATES - INVESTMENT ADVISOR
Berger Associates, Inc. ("Berger Associates"), 210 University
Boulevard, Suite 900, Denver, CO 80206, is the investment advisor to the Fund.
Berger Associates is responsible for managing the investment operations of the
Fund and the composition of its investment portfolio. Berger Associates also
acts as the Fund's administrator and is responsible for such functions as
monitoring compliance with all applicable federal and state laws.
Berger Associates has been in the investment advisory business for 25
years. It serves as investment advisor or sub-advisor to mutual funds and
institutional investors and had assets under management of approximately $3.4
billion as of December 31, 1998. Berger Associates is a wholly-owned subsidiary
of Kansas City Southern Industries, Inc. ("KCSI"). KCSI is a publicly traded
holding company with principal operations in rail transportation, through its
subsidiary The Kansas City Southern Railway Company, and financial asset
management businesses. KCSI also owns approximately 31% of the outstanding
shares of DST Systems, Inc. ("DST"), a publicly traded information and
transaction processing company which acts as the Fund's sub-transfer agent.
-20-
<PAGE>
BAY ISLE FINANCIAL CORPORATION - SUB-ADVISOR
Bay Isle Financial Corporation ("Bay Isle"), 160 Sansome Street, 17th
Floor, San Francisco, CA 94104, is the investment sub-advisor for the Fund. Bay
Isle has been in the investment advisory business since 1986. Bay Isle serves
as investment advisor or sub-advisor to mutual funds, institutional investors
and individual separate accounts.
Bay Isle served as investment advisor to the Fund (originally known as
the InformationTech 100-Registered Trademark- Fund) from its inception in April
1997 until _______________, 1999, when the InformationTech 100-Registered
Trademark- Fund was reorganized into the Fund with shareholder approval. At
that time, Bay Isle became the investment sub-advisor to the Fund under a
Sub-Advisory Agreement between Berger Associates as advisor and Bay Isle as
sub-advisor. As sub-advisor, Bay Isle provides day-to-day management of the
Fund's investment operations.
William F. K. Schaff is primarily responsible for the day-to-day
investment decisions for the Fund. Mr. Schaff is a co-founder and controlling
person of Bay Isle and serves as its Chief Investment Officer and a director.
Mr. Schaff has been managing accounts of Bay Isle clients since 1987. Gary G.
Pollock is also a co-founder and controlling person of Bay Isle and serves as
its President and a director.
In addition to its other activities, Bay Isle maintains the
INFORMATIONWEEK-Registered Trademark- 100 Index, an unmanaged index of the
stocks of 100 companies in the information technology industries.
INFORMATIONWEEK-Registered Trademark- is a registered trademark of CMP Media,
which is not affiliated with Bay Isle or the Fund. Mr. Schaff also writes
articles on investments for INFORMATIONWEEK magazine, a publication of CMP Media
covering information technology-related topics. CMP Media compensates Bay Isle
for managing the Index and for Mr. Schaff's articles.
INVESTMENT ADVISORY AGREEMENTS
Under the Investment Advisory Agreement between the Fund and its
advisor, the advisor is generally responsible for furnishing continuous advice
and making investment decisions as to the acquisition, holding or disposition of
securities or other assets which the Fund may own or contemplate acquiring from
time to time. The Investment Advisory Agreement provides that the investment
advisor shall not be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission taken with
respect to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties thereunder and except to the extent otherwise
provided by law.
Under the Agreement, the advisor is compensated for its services by
the payment of a fee at the following annual rate, calculated as a percentage of
the average daily net assets of the Fund:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND ADVISOR INVESTMENT ADVISORY FEE
- -------------------------------------------------------------------------------
<S> <C> <C>
Berger Information Technology Berger 0.90%(2)
Fund Associates(1)
- -------------------------------------------------------------------------------
</TABLE>
(1) Fund is sub-advised by Bay Isle. See text preceding and following this
table.
(2) Under a written contract, the Fund's investment advisor waives its fee
or reimburses the Fund for expenses to the extent that, at any time during the
life of the Fund, the annual operating expenses for the Institutional Shares
class of the Fund in any fiscal year, including the investment advisory fee, but
excluding brokerage commissions, interest, taxes and extraordinary expenses,
exceed 1.50% of the Fund's average daily net assets attributable to the
Institutional Shares for that
-21-
<PAGE>
fiscal year. The contract also provides that the advisor will waive an
additional amount of its fees or reimburse an additional amount of expenses to
the extent necessary to keep its fee waiver and reimbursement for the
Institutional Shares class proportionate to its fee waiver and reimbursement for
the Fund's other outstanding share class. The contract may not be terminated or
amended except by a vote of the Fund's Board of Trustees. The investment
advisory fee is allocated among the Institutional Shares and the other class of
the Fund on the basis of net assets attributable to each such class.
The Fund's Investment Advisory Agreement will continue in effect until
the last day of April 2001, and thereafter from year to year if such
continuation is specifically approved at least annually by the trustees or by
vote of a majority of the outstanding shares of the Fund and in either case by
vote of a majority of the trustees who are not "interested persons" (as that
term is defined in the 1940 Act) of the Fund or the advisor. The Agreement is
subject to termination by the Fund or the advisor on 60 days' written notice,
and terminates automatically in the event of its assignment.
Under the Sub-Advisory Agreement between the advisor and the
sub-advisor for the Fund, the sub-advisor is responsible for day-to-day
investment management. The sub-advisor manages the investments and determines
what securities and other investments will be acquired, held or disposed of,
consistent with the investment objective and policies established by the
trustees. The Sub-Advisory Agreement provides that the sub-advisor shall not be
liable for any error of judgment or mistake of law or for any loss arising out
of any investment or for any act or omission taken with respect to the Fund,
except for willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of reckless disregard of its obligations and duties
thereunder and except to the extent otherwise provided by law.
No fees are paid directly to the sub-advisor by the Fund. Bay Isle,
as the sub-advisor of the Fund, receives from the advisor a fee at the annual
rate of 0.45% of the average daily net asset of the Fund. The Sub-Advisory
Agreement will continue in effect until April 2001, and thereafter from year to
year if such continuation is specifically approved at least annually by the
trustees or by vote of a majority of the outstanding shares of the Fund and in
either case by vote of a majority of the trustees of the Fund who are not
"interested persons" (as that term is defined in the Investment Company Act of
1940) of the Fund or the advisor or the sub-advisor. The Sub-Advisory Agreement
is subject to termination by the Fund or the sub-advisor on 60 days' written
notice, and terminates automatically in the event of its assignment and in the
event of termination of the Investment Advisory Agreement.
OTHER ARRANGEMENTS BETWEEN BERGER ASSOCIATES AND BAY ISLE
Berger Associates and Bay Isle have formed a joint venture to provide
asset management services to certain private accounts. In connection with the
formation of that joint venture, Berger Associates purchased from Bay Isle
owners William F. K. Schaff and Gary G. Pollock the right that, if either Mr.
Schaff or Mr. Pollock ever desires to sell any of his Bay Isle shares in the
future, they will together first offer to sell shares to Berger Associates
aggregating at least 80% of the total outstanding shares of Bay Isle at an
agreed price. If Berger elects to purchase the Bay Isle shares offered, the
parties have agreed to use their best efforts to have 5-year employment
agreements entered into between Bay Isle and Messrs. Schaff and Pollock.
Consummation of any such purchase of Bay Isle shares by Berger Associates would
be subject to a number of conditions, including any required approval by Fund
shareholders under the Investment Company Act of 1940. Bay Isle and Messrs.
Schaff and Pollock are also compensated by Berger Associates for providing
administrative or consulting services relating to their joint venture private
account business.
TRADE ALLOCATIONS
While investment decisions for the Fund are made independently by the
sub-advisor, the same investment decision may be made for the Fund and one or
more accounts
-22-
<PAGE>
advised by the advisor. In this circumstance, should purchase and sell orders
of the same class of security be in effect on the same day, the orders for such
transactions may be combined by the advisor in order to seek the best
combination of net price and execution for each. Client orders partially filled
will, as a general matter, be allocated pro rata in proportion to each client's
original order, although exceptions may be made to avoid, among other things,
odd lots and de minimus allocations. Execution prices for a combined order will
be averaged so that each participating client receives the average price paid or
received. While in some cases, this policy might adversely affect the price
paid or received by the Fund or other participating accounts, or the size of the
position obtained or liquidated, the advisor will aggregate orders if it
believes that coordination of orders and the ability to participate in volume
transactions will result in the best overall combination of net price and
execution.
RESTRICTIONS ON PERSONAL TRADING
Berger Associates permits its directors, officers and employees to
purchase and sell securities for their own accounts in accordance with a policy
regarding personal investing in Berger Associates' Code of Ethics. The policy
requires all covered persons to conduct their personal securities transactions
in a manner which does not operate adversely to the interests of the Fund or
Berger Associates' other advisory clients. Directors and officers of Berger
Associates, investment personnel and other designated persons deemed to have
access to current trading information ("access persons") are required to
pre-clear all transactions in securities not otherwise exempt under the policy.
Requests for authority to trade will be denied pre-clearance when, among other
reasons, the proposed personal transaction would be contrary to the provisions
of the policy or would be deemed to adversely affect any transaction then known
to be under consideration for or currently being effected on behalf of any
client account, including the Fund.
In addition to the pre-clearance requirements described above, the
policy subjects directors and officers of Berger Associates, investment
personnel and other access persons to various trading restrictions and reporting
obligations. All reportable transactions are reviewed for compliance with the
policy. The policy is administered by Berger Associates and the provisions of
the policy are subject to interpretation by and exceptions authorized by its
board of directors.
Bay Isle permits its officers, directors, employees and consultants to
purchase and sell securities for their own accounts and accounts of related
persons in accordance with provisions governing personal securities trading in
Bay Isle's code of ethics and related internal policies. Employees must wait 3
days between the time a new recommendation or opinion change is made and the
time the employee may trade in those securities in their own or related
accounts, or alternatively may ask that their transaction be added to a "block"
trade that will be made for a group of clients. Any employee trade not included
in a "block" trade made must be pre-cleared if the trade exceeds certain
specified volume limits or specified volume limits relative to the average daily
trading volume of the security being traded. Volume limits are set with the
intent of requiring prior approval of any trade that could potentially cause
changes in the market price of the security in question. In addition, no
employee may sell (or buy) any security which he or she has bought (or sold)
within the past 5 trading days unless a loss is realized on closing the
position. Each employee must acknowledge quarterly that they are in compliance
with the Bay Isle code of ethics and related policies.
5. EXPENSES OF THE FUND
In addition to paying an investment advisory fee to its advisor, the Fund
pays all of its expenses not assumed by its advisor, including, but not limited
to, custodian and transfer agent fees, legal and accounting expenses,
administrative and record keeping expenses, interest charges, federal and state
taxes, costs of share certificates, expenses of shareholders' meetings,
compensation of trustees who are not interested persons of Berger Associates,
expenses of
-23-
<PAGE>
printing and distributing reports to shareholders and federal and state
administrative agencies, and all expenses incurred in connection with the
execution of its portfolio transactions, including brokerage commissions on
purchases and sales of portfolio securities, which are considered a cost of
securities of the Fund. The Fund also pays all expenses incurred in complying
with all federal and state laws and the laws of any foreign country applicable
to the issue, offer or sale of shares of the Fund, including, but not limited
to, all costs involved in preparing and printing prospectuses for shareholders
of the Fund.
Under a separate Administrative Services Agreement with respect to the
Fund, Berger Associates performs certain administrative and recordkeeping
services not otherwise performed by the Fund's custodian and recordkeeper,
including the preparation of financial statements and reports to be filed with
the Securities and Exchange Commission and state regulatory authorities. The
Fund pays Berger Associates a fee at an annual rate of 0.01% of its average
daily net assets for such services. These fees are in addition to the
investment advisory fees paid under the Investment Advisory Agreement. The
administrative services fees may be changed by the trustees without shareholder
approval.
The following table shows the cost to the Fund of the previously
applicable advisory fee for the last three fiscal years. For the fiscal years
shown, all amounts were paid to Bay Isle, the Fund's then investment advisor,
now the Fund's sub-advisor.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fiscal Year Ended February 28 (1) Advisory Fee(2)
- -------------------------------------------------------------------------------
<S> <C>
1999 $ 68,000
- -------------------------------------------------------------------------------
1998 (3) $ 27,000
- -------------------------------------------------------------------------------
</TABLE>
(1) The Fund's fiscal year changed from February 28 to September 30 as part of
a reorganization effective _________________, 1999.
(2) Under the advisory agreement in effect prior to the reorganization
referenced in note (1), the Fund's predecessor paid an advisory fee at an annual
rate of 0.95% of its average daily net assets to Bay Isle. As part of the
reorganization, the current investment advisory fee of 0.90% payable to Berger
Associates came into effect. The current investment advisory fee is allocated
among the Institutional Shares and the other class of the Fund on the basis of
net assets attributable to each such class.
(3) The Fund was the accounting survivor in the reorganization referenced in
note (1). Accordingly, this covers the period April 8, 1997 (commencement of
operations of the predecessor) to February 28, 1998.
The Fund has appointed Investors Fiduciary Trust Company ("IFTC"), 801
Pennsylvania, Kansas City, MO 64105, as its recordkeeping and pricing agent. In
addition, IFTC also serves as the Fund's custodian, transfer agent and dividend
disbursing agent. IFTC has engaged DST Systems, Inc. ("DST"), P.O. Box 419958,
Kansas City, MO 64141, as sub-agent to provide transfer agency and dividend
disbursing services for the Fund. Approximately 31% of the outstanding shares
of DST are owned by KCSI.
As recordkeeping and pricing agent, IFTC calculates the daily net
asset value of the Fund and performs certain accounting and recordkeeping
functions required by the Fund. The Fund pays IFTC a monthly base fee plus an
asset-based fee. IFTC is also reimbursed for certain out-of-pocket expenses.
IFTC, as custodian, and its subcustodians have custody and provide for
the safekeeping of the Fund's securities and cash, and receive and remit the
income thereon as directed by the management of the Fund. The custodian and
subcustodians do not perform any managerial or policy-making functions for the
Fund. For its services as custodian, IFTC receives an asset-based fee plus
certain transaction fees and out-of-pocket expenses.
-24-
<PAGE>
As transfer agent and dividend disbursing agent, IFTC (through DST, as
sub-agent) maintains all shareholder accounts of record; assists in mailing all
reports, proxies and other information to the Fund's shareholders; calculates
the amount of, and delivers to the Fund's shareholders, proceeds representing
all dividends and distributions; and performs other related services. For these
services, IFTC receives a fee from the Fund at an annual rate of $14.00 per open
Fund shareholder account, subject to preset volume discounts, plus certain
transaction fees and fees for closed accounts, and is reimbursed for
out-of-pocket expenses, which fees in turn are passed through to DST as
sub-agent.
All of IFTC's fees are subject to reduction pursuant to an agreed
formula for certain earnings credits on the cash balances of the Fund.
OTHER EXPENSE INFORMATION
The trustees of the Fund have authorized portfolio transactions to be
placed on an agency basis through DST Securities, Inc. ("DSTS"), a wholly-owned
broker-dealer subsidiary of DST. When transactions are effected through DSTS,
the commission received by DSTS is credited against, and thereby reduces,
certain operating expenses that the Fund would otherwise be obligated to pay.
No portion of the commission is retained by DSTS. See Section 6--Brokerage
Policy for further information concerning the expenses reduced as a result of
these arrangements. DSTS may be considered an affiliate of Berger Associates
due to the ownership interest of KCSI in both DST and Berger Associates.
The Fund and/or its advisor have entered into arrangements with
certain brokerage firms and other companies (such as recordkeepers and
administrators) to provide administrative services (such as sub-transfer agency,
recordkeeping, shareholder communications, sub-accounting and/or other
services) to investors purchasing shares of the Fund through those firms or
companies. The Fund's advisor or the Fund (if approved by its trustees) may pay
fees to these companies for their services. These companies may also be
appointed as agents for or authorized by the Fund to accept on its behalf
purchase and redemption requests that are received in good order. Subject to
Fund approval, certain of these companies may be authorized to designate other
entities to accept purchase and redemption orders on behalf of the Fund.
The Fund's advisor may also enter into arrangements with organizations
that solicit clients for the advisor, which may include clients who purchase
shares of the Fund. While the specific terms of each arrangement may differ,
generally, the fee paid by the advisor under such arrangements is based on the
value of the referred client's assets managed by the advisor. None of the fees
paid to such organizations will be borne by the Fund.
DISTRIBUTOR
The distributor (principal underwriter) of the Fund's shares is Berger
Distributors, Inc. (the "Distributor"), 210 University Boulevard, Suite 900,
Denver, CO 80206. The Distributor may be reimbursed by Berger Associates for
its costs in distributing the Fund's Institutional Shares.
BROKERAGE POLICY
Although the Fund retains full control over its own investment policies,
under the terms of its Investment Advisory Agreement, Berger Associates as the
Fund's advisor is directed to place the portfolio transactions of the Fund. A
report on the placement of brokerage business is given to the trustees of the
Fund every quarter, indicating the brokers with whom Fund portfolio business was
placed and the basis for such placement.
The brokerage commissions paid by the Fund were as follows:
-25-
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Fiscal Year Ended February 28 (1) Brokerage Commissions
- -------------------------------------------------------------------------------
<S> <C>
1999 $10,000
- -------------------------------------------------------------------------------
1998(2) $ 6,000
- -------------------------------------------------------------------------------
</TABLE>
(1) The Fund's fiscal year changed from February 28 to September 30 as part of
a reorganization effective _________________, 1999.
(2) The Fund was the accounting survivor in the reorganization referenced in
note (1). Accordingly, this covers the period April 8, 1997 (commencement of
operations of the predecessor) to February 28, 1998.
The Investment Advisory Agreement authorizes and directs the advisor
to place portfolio transactions for the Fund only with brokers and dealers who
render satisfactory service in the execution of orders at the most favorable
prices and at reasonable commission rates. However, the Agreement specifically
authorizes the advisor to place such transactions with a broker with whom it has
negotiated a commission that is in excess of the commission another broker or
dealer would have charged for effecting that transaction if the advisor
determines in good faith that such amount of commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker viewed in terms of either that particular transaction or the overall
responsibilities of the advisor. Accordingly, the advisor does not have an
obligation to seek the lowest available commission.
In accordance with this provision of the Agreement, portfolio
brokerage business of the Fund may be placed with brokers who provide useful
brokerage and research services to the advisor. During the Fund's fiscal year
ended February 28, 1999, brokerage was placed by the Fund's then advisor, now
sub-advisor, Bay Isle Financial Corporation, and none of the brokerage
commissions paid by the Fund were paid to brokers who provided to the Fund such
brokerage or research services. Currently, however, the Fund's brokerage is
placed by Berger Associates, the Fund's advisor, which may consider the value of
research provided as a factor in the choice of brokers. "Research" includes
computerized on-line stock quotation systems and related data feeds from stock
exchanges, computerized trade order entry, execution and confirmation systems,
fundamental and technical analysis data and software, computerized stock market
and business news services, economic research, account performance data and
computer hardware used for the receipt of electronic research services and
broker and other third-party equity research, such as publications or writings
which furnish advice as to the value of securities and advisability of
investing, and analyses and reports concerning issuers, industries, securities,
market trends, and portfolio strategies. Research may be provided orally, in
print, or electronically. These include a service used by the independent
trustees of the Fund in reviewing the Investment Advisory Agreement.
In some cases, a product or services termed "research" may serve other
functions unrelated to the making of investment decisions. When a product has
such a mixed use, the advisor will make a good faith allocation of the cost of
the product according to the use made of it. The portion of the product that
assists the advisor in the investment decision-making process may be paid for
with the Fund's commission dollars. The advisor pays for the portion of the
product that is not "research" with its own funds. Accordingly, the decision
whether and how to allocate the costs of such a product presents a conflict of
interest for Berger Associates.
Berger Associates does not enter into formal agreements with any
brokers regarding the placement of securities transactions because of any such
brokerage or research services that they provide. Berger Associates may,
however, make arrangements with and maintain internal procedures for allocating
transactions to brokers who provide such services to encourage them to provide
services expected to be useful to Berger Associates' clients, including
-26-
<PAGE>
the Fund. Brokers may suggest a level of business they would like to receive in
return for the brokerage and research they provide. Berger Associates then
determines whether to continue receiving the research and brokerage provided and
the approximate amount of commissions it is willing to pay to continue the
brokerage and research arrangement with each broker. The actual amount of
commissions a broker may receive may be more or less than a broker's suggested
allocations, depending on Berger Associates' level of business, market
conditions and other relevant factors. Even under these arrangements, however,
the placement of all Fund transactions, must be consistent with the Fund's
brokerage placement and execution policies, and must be directed to a broker who
renders satisfactory service in the execution of orders at the most favorable
prices and at reasonable commission rates.
These brokerage and research services received from brokers are often
helpful to Berger Associates in performing its investment advisory
responsibilities to the Fund, and the availability of such services from brokers
does not reduce the responsibility of Berger Associates' advisory personnel to
analyze and evaluate the securities in which the Fund invests. The brokerage
and research services obtained as a result of the Fund's brokerage business also
will be useful to Berger Associates in making investment decisions for its other
advisory accounts, and, conversely, information obtained by reason of placement
of brokerage business of such other accounts may be used by Berger Associates in
rendering investment advice to the Fund. Although such brokerage and research
services may be deemed to be of value to Berger Associates, they are not
expected to decrease the expenses that Berger Associates would otherwise incur
in performing its investment advisory services for the Fund nor will the
advisory fees that are received by Berger Associates from the Fund be reduced as
a result of the availability of such brokerage and research services from
brokers.
The trustees of the Fund have authorized portfolio transactions to be
placed on an agency basis through DSTS, a wholly-owned broker-dealer subsidiary
of DST. When transactions are effected through DSTS, the commission received by
DSTS is credited against, and thereby reduces, certain operating expenses that
the Fund would otherwise be obligated to pay. No portion of the commission is
retained by DSTS. DSTS may be considered an affiliate of Berger Associates due
to the ownership interest of KCSI in both DST and Berger Associates.
The Fund's advisor places securities orders with a limited number of
major institutional brokerage firms chosen for the reliability and quality of
execution; commission rates; quality of research coverage of major U.S.
companies, the U.S. economy and the securities markets; promptness; back office
capabilities; capital strength and financial stability; prior performance in
serving the advisor and its clients; and knowledge of other buyers and sellers.
The advisor selects the broker for each order based on the factors above, as
well as the size, difficulty and other characteristics of the order. The
trustees of the Fund have also authorized sales of shares of the Fund by a
broker-dealer and the recommendations of a broker-dealer to its customers that
they purchase Fund shares to be considered as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. In addition, the
advisor may also consider payments made by brokers to the Fund or to other
persons on behalf of the Fund for services provided to the Fund for which it
would otherwise be obligated to pay, such as transfer agency fees. In placing
portfolio business with any such broker or dealer, the advisor of the Fund will
seek the best execution of each transaction.
7. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND
<TABLE>
<S> <C>
Minimum Initial Investment $250,000
</TABLE>
Institutional Shares in the Fund may be purchased at the relevant net
asset value without a sales charge. The minimum initial investment for
Institutional Shares of the Fund is $250,000. (This requirement is not
applicable to shareholder accounts opened prior to the Fund's
-27-
<PAGE>
reorganization on ____________, 1999, since those accounts met the initial
investment minimum in effect for the Fund at the time those accounts were
opened.)
To purchase shares in the Fund, simply complete the application form
enclosed with the Prospectus. Then mail it with a check payable to "Berger
Funds" to the Fund in care of DST Systems, Inc., the Fund's sub-transfer agent,
as follows:
Berger Funds
P.O. Box 419958
Kansas City, MO 64141
Payment for shares purchased may be made by wire, electronic funds
transfer or mail. All purchase orders are effected at the relevant net asset
value per share of the Fund next determined after receipt of the purchase order,
completed application and payment. A purchase order, together with payment in
proper form, received by the Fund, its authorized agent or designee prior to the
close of the New York Stock Exchange (the "Exchange") on a day the Fund is open
for business will be effected at that day's net asset value. An order received
after that time will be effected at the net asset value determined on the next
business day.
Additional investments may be made at any time by mail, telephone
(1-800-960-8427) or online (www.bergerfunds.com) at the relevant net asset value
by calling or writing the Fund and making payment by wire or electronic funds
transfer as outlined above.
In addition, Fund shares may be purchased through certain
broker-dealers that have established mutual fund programs and certain other
organizations connected with pension and retirement plans. These broker-dealers
and other organizations may charge investors a transaction or other fee for
their services, may require different minimum initial and subsequent investments
than the Fund and may impose other charges or restrictions different from those
applicable to shareholders who invest in the Fund directly. Fees charged by
these organizations will have the effect of reducing a shareholder's total
return on an investment in Fund shares. No such charge will apply to an
investor who purchases Fund shares directly from the Fund as described above.
Procedures for purchasing, selling (redeeming) and exchanging Fund
shares by telephone and online are described in the Prospectus. The Fund may
terminate or modify those procedures and related requirements at any time,
although shareholders of the Fund will be given notice of any termination or
material modification. Berger Associates may, at its own risk, waive certain
of those procedures and related requirements.
As described in the Prospectus, the Fund is intended as a long-term
investment, and not as a short-term trading vehicle. Therefore, the Fund will
deduct a 1% redemption fee from a shareholder's redemption proceeds if the
shareholder redeems Fund shares held less than 6 months. Because an exchange
involves a redemption of shares followed by a purchase, this redemption fee will
also apply to exchanges of Fund shares held less than 6 months. This fee is
intended to discourage investors from short-term trading of Fund shares and to
offset the cost to the Fund of excess brokerage and other costs incurred as a
result of such trading. This fee will not be charged to retirement plan
accounts or in the case of redemptions resulting from the death of the
shareholder. This fee will also not be charged on the redemption of shares
obtained through the reinvestment of dividends paid on Fund shares. If some but
not all of the shares in an account are redeemed, shares are treated as redeemed
in an order determined by and applied uniformly to all accounts by the Fund's
sub-transfer agent.
-28-
<PAGE>
5. HOW THE NET ASSET VALUE IS DETERMINED
The net asset value of the Fund is determined once daily, at the close
of the regular trading session of the New York Stock Exchange (the "Exchange")
(normally 4:00 p.m., New York time, Monday through Friday) each day that the
Exchange is open. The Exchange is closed and the net asset value of the Fund is
not determined on weekends and on New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day each year.
The per share net asset value of the Institutional Shares is
determined by dividing the Institutional Shares' pro rata portion of the total
value of the Fund's securities and other assets, less the Institutional Shares'
pro rata portion of the Fund's liabilities and the liabilities attributable to
the Institutional Shares, by the total number of Institutional Shares
outstanding. Since net asset value for the Fund is calculated by class, and
since the Institutional Shares and each other class of the Fund has its own
expenses, the per share net asset value of the Fund will vary by class.
In determining net asset value, securities listed or traded primarily
on national exchanges, The Nasdaq Stock Market and foreign exchanges are valued
at the last sale price on such markets, or, if such a price is lacking for the
trading period immediately preceding the time of determination, such securities
are valued at the mean of their current bid and asked prices. Securities that
are traded in the over-the-counter market are valued at the mean between their
current bid and asked prices. The market value of individual securities held by
the Fund will be determined by using prices provided by pricing services which
provide market prices to other mutual funds or, as needed, by obtaining market
quotations from independent broker/dealers. Short-term money market securities
maturing within 60 days are valued on the amortized cost basis, which
approximates market value. All assets and liabilities initially expressed in
terms of non-U.S. dollar currencies are translated into U.S. dollars at the
prevailing market rates as quoted by one or more banks or dealers shortly before
the close of the Exchange. Securities and assets for which quotations are not
readily available or are not representative of market value may be valued at
their fair value determined in good faith pursuant to consistently applied
procedures established by the trustees. Examples would be when events occur
that materially affect the value of a security at a time when the security is
not trading or when the securities are illiquid.
Generally, trading in foreign securities markets is substantially
completed each day at various times prior to the close of the Exchange. The
values of foreign securities used in computing the net asset value of the shares
of the Fund are determined as of the earlier of such market close or the closing
time of the Exchange. Occasionally, events affecting the value of such
securities may occur between the times at which they are determined and the
close of the Exchange, or when the foreign market on which such securities trade
is closed but the Exchange is open, which will not be reflected in the
computation of net asset value. If during such periods, events occur which
materially affect the value of such securities, the securities may be valued at
their fair value as determined in good faith pursuant to consistently applied
procedures established by the trustees.
The Fund's securities may be listed primarily on foreign exchanges or
over-the-counter dealer markets which may trade on days when the Exchange is
closed (such as a customary U.S. holiday) and on which the Fund's net asset
value is not calculated. As a result, the net asset value of the Fund may be
significantly affected by such trading on days when shareholders cannot purchase
or redeem shares of the Fund.
-29-
<PAGE>
6. INCOME DIVIDENDS, CAPITAL GAINS
DISTRIBUTIONS AND TAX TREATMENT
This discussion summarizes certain U.S. federal income tax issues
relating to the Fund. As a summary, it is not an exhaustive discussion of all
possible tax ramifications. Accordingly, shareholders are urged to consult with
their tax advisors with respect to their particular tax consequences.
TAX STATUS OF THE FUND. If the Fund meets certain investment and
distribution requirements, it will be treated as a "regulated investment
company" (a "RIC") under the Internal Revenue Code and will not be subject to
federal income tax on earnings that it distributes in a timely manner to
shareholders. It also may be subject to an excise tax on undistributed income
if it does not meet certain timing requirements for distributions. The Fund
intends to qualify as a RIC annually and to make timely distributions in order
to avoid income and excise tax liabilities.
TAX ON FUND DISTRIBUTIONS. With certain exceptions provided by law,
the Fund will report annually to the Internal Revenue Service and to each
shareholder information about the tax treatment of the shareholder's
distributions. Dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, will be treated as ordinary income to the
shareholders. Distributions of net capital gain, whether received in cash or
reinvested in Fund shares, will be taxable to the shareholders, but the rate of
tax will vary depending upon the Fund's holding periods in the assets whose sale
resulted in the capital gain. Dividends and distributions that are declared in
October, November or December but not distributed until the following January
will be considered to be received by the shareholders on December 31.
In general, net capital gains from assets held by the Fund for more
than 12 months will be subject to a maximum tax rate of 20% and net capital
gains from assets held for 12 months or less will be taxed as ordinary income.
Distributions will be subject to these capital gains rates, regardless of how
long a shareholder has held Fund shares. Assets contributed to the Fund in an
in-kind purchase of Fund shares may generate more gain upon their sale than if
the assets had been purchased by the Fund with cash contributed to the Fund in a
cash purchase of Fund shares.
If the Fund's distributions for a taxable year exceeds its tax
earnings and profits available for distribution, all or a portion of its
distributions may be treated as a return of capital or as capital gains. To the
extent a distribution is treated as a return of capital, a shareholder's basis
in his or her Fund shares will be reduced by that amount.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the U.S. Postal Service is unable to deliver checks to
the shareholder's address of record, or if a shareholder's checks remain
uncashed for six months, the Fund reserves the right to reinvest the amount
distributed in additional Fund shares at the then-current NAV and to convert the
shareholder's distribution option from receiving cash to having all dividend and
other distributions reinvested in additional shares. In addition, no interest
will accrue on amounts represented by uncashed distribution or redemption
checks.
TAX ON REDEMPTIONS OF FUND SHARES. Shareholders may be subject to tax
on the redemption of their Fund shares. In general, such redemptions may give
rise to a capital gain or loss, the treatment of which will depend on the
shareholder's holding period in the Fund shares. Tax laws may prevent the
deduction of a loss on the sale of Fund shares if the shareholder reinvests in
the Fund shortly before or after the sale giving rise to the loss. Any loss on
the redemption or other sale or exchange of Fund shares held for six months or
less will be treated as a long-term capital loss to the extent of any long-term
capital gain distribution received on the shares.
-30-
<PAGE>
INCOME FROM FOREIGN SOURCES. Dividends and interest received by the
Fund on foreign securities may give rise to withholding and other taxes imposed
by foreign countries, although these taxes may be reduced by applicable tax
treaties. Foreign taxes will generally be treated as expenses of the Fund,
unless the Fund has more than 50% of its assets invested in foreign corporate
securities at the end of the Fund's taxable year. In that case, shareholders of
the Fund may be able to deduct (as an itemized deduction) or, if the Fund makes
an election, claim a foreign tax credit for their share of foreign taxes,
subject to limitations prescribed in the tax law.
If the Fund invests in a foreign corporation that is a passive foreign
investment company (a "PFIC"), special rules apply that may affect the tax
treatment of gains from the sale of the stock and may cause the Fund to incur
IRS tax and interest charges. However, the Fund may be eligible to elect one of
two alternative tax treatments with respect to PFIC shares which would avoid
these taxes and charges, but also may affect, among other things, the amount and
character of gain or loss and the timing of the recognition of income with
respect to PFIC shares. Accordingly, the amounts, character and timing of
income distributed to shareholders of the Fund holding PFIC shares may differ
substantially as compared to a fund that did not invest in PFIC shares.
INCOME FROM CERTAIN TRANSACTIONS. Some or all of the Fund's
investments may include transactions that are subject to special tax rules.
Transactions involving foreign currencies may give rise to gain or loss that
could affect the Fund's ability to make ordinary dividend distributions.
Investment in certain financial instruments, such as options, futures contracts
and forward contracts, may require annual recognition of unrealized gains and
losses. Transactions that are treated as "straddles" may affect the character
and/or timing of other gains and losses of the Fund. If the Fund enters into a
transaction (such as a "short sale against the box") that reduces the risk of
loss on an appreciated financial position that it already holds, the entry into
the transaction may constitute a constructive sale and require immediate
recognition of gain.
BACKUP WITHHOLDING. In general, if a shareholder is subject to backup
withholding, the Fund will be required to withhold federal income tax at a rate
of 31% from distributions to that shareholder. These payments are creditable
against the shareholder's federal income tax liability.
FOREIGN SHAREHOLDERS. Foreign shareholders of the Fund generally will
be subject to a 30% U.S. withholding tax on dividends paid by the Fund from
ordinary income and short-term capital gain, although the rate may be reduced by
a tax treaty. If a foreign shareholder dies while owning Fund shares, those
shares may be subject to U.S. estate taxes.
10. SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended for any period during which
the New York Stock Exchange is closed or the Securities and Exchange Commission
determines that trading on the Exchange is restricted, or when there is an
emergency as determined by the Securities and Exchange Commission as a result of
which it is not reasonably practicable for the Fund to dispose of securities
owned by it or to determine the value of its net assets, or for such other
period as the Securities and Exchange Commission may by order permit for the
protection of shareholders of the Fund.
The Fund intends to redeem its shares only for cash, although it
retains the right to redeem its shares in-kind under unusual circumstances, in
order to protect the interests of the remaining shareholders, by the delivery of
securities selected from its assets at its discretion. The Fund is, however,
governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to
which the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. For purposes of this threshold, each underlying account holder
whose shares are held of record in certain omnibus
-31-
<PAGE>
accounts is treated as one shareholder. Should redemptions by any shareholder
during any 90-day period exceed such limitation, the Fund will have the option
of redeeming the excess in cash or in-kind. If shares are redeemed in-kind, the
redeeming shareholder generally will incur brokerage costs in converting the
assets to cash. The redeeming shareholder may have difficulty selling the
securities and recovering the amount of the redemption if the securities are
illiquid. The method of valuing securities used to make redemption in-kind will
be the same as the method of valuing portfolio securities described under
Section 8.
11. TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for
individuals, businesses and nonprofit organizations. For information about
establishing an IRA, Roth IRA, profit-sharing or money purchase pension plan,
403(b) Custodial Account, SEP-IRA, SIMPLE IRA account or other retirement plans,
please call 1-800-706-0539 or write to The Berger Funds c/o Berger Associates,
P.O. Box 5005, Denver, CO 80217. Trustees for existing 401(k) or other plans
interested in using Fund shares as an investment or investment alternative in
their plans are invited to call the Fund at 1-800-960-8427.
The Fund also offers an Automatic Investment Plan (minimum $100 per
monthly or quarterly investment) and a Systematic Withdrawal Plan (for
shareholders who own shares of the Fund worth at least $5,000; minimum of $50
withdrawn monthly, quarterly, semiannually or annually). Forms for these plans
may be obtained by writing to the Fund, c/o DST Systems, Inc., P.O. Box 419958,
Kansas City, MO 64141, or call 1-800-960-8427.
12. EXCHANGE PRIVILEGE
Any shareholder may exchange any or all of the shareholder's shares in the
Fund, subject to stated minimums, for shares of any of the other available
Berger Funds, without charge, after receiving a current prospectus of the other
fund. Exchanges into or out of the Fund are made at the net asset value per
share next determined after the exchange request is received. Each exchange
represents the sale of shares from one fund and the purchase of shares in
another, which may produce a gain or loss for federal income tax purposes. An
exchange of shares may be made by written request directed to DST Systems, Inc.,
by telephoning the Fund at 1-800-960-8427 or by contacting the Fund online at
www.bergerfunds.com. This privilege may be terminated or amended by the Fund,
and is not available in any state in which the shares of the Berger Fund being
acquired in the exchange are not eligible for sale. Shareholders automatically
have telephone and online transaction privileges to authorize exchanges unless
they specifically decline this service in the account application or in writing.
13. PERFORMANCE INFORMATION
From time to time in advertisements, the Fund may discuss its
performance ratings as published by recognized mutual fund statistical services,
such as Lipper Analytical Services, Inc., CDA Investment Technologies, Inc.,
Morningstar, Inc., or Value Line Investment Survey or by publications of general
interest such as THE WALL STREET JOURNAL, INVESTOR'S BUSINESS DAILY, MONEY,
BARRON'S, FINANCIAL WORLD or KIPLINGER'S PERSONAL FINANCE MAGAZINE. In
addition, the Fund may compare its performance to that of recognized broad-based
securities market indices, including the Wilshire 5000 Index, the Standard &
Poor's 500 Stock Index, the Dow Jones Industrial Average, the Russell 2000 Stock
Index, the Standard & Poor's 400 Mid-Cap Index, the Standard & Poor's 600 Small
Cap Index, Morgan Stanley Capital International EAFE (Europe, Australasia, Far
East) Index, the Dow Jones World Index, the Standard & Poor's/BARRA Value Index,
the Nasdaq Composite Index, the Lehman Brothers Intermediate Term
Government/Corporate Bond Index or the InformationWeek 100 Index, or more
narrowly-based or blended indices which reflect the market sectors in which the
Fund invests.
-32-
<PAGE>
The total return of the Fund is calculated for any specified period of
time by assuming the purchase of shares of the Fund at the net asset value at
the beginning of the period. Each dividend or other distribution paid by the
Fund is assumed to have been reinvested at the net asset value on the
reinvestment date. The total number of shares then owned as a result of this
process is valued at the net asset value at the end of the period. The
percentage increase is determined by subtracting the initial value of the
investment from the ending value and dividing the remainder by the initial
value.
The Fund's total return reflects the Fund's performance over a stated
period of time. An average annual total return reflects the hypothetical
annually compounded return that would have produced the same total return if the
Fund's performance had been constant over the entire period. Total return
figures are based on the overall change in value of a hypothetical investment in
the Fund. Because average annual total returns for more than one year tend to
smooth out variations in the Fund's return, investors should recognize that such
figures are not the same as actual year-by-year results.
All performance figures for the Fund are based upon historical results
and do not assure future performance. The investment return and principal value
of an investment will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
Quotations of average annual total return for the Fund will be
expressed in terms of the average annual compounded rate of return of a
hypothetical investment in the Fund over periods of 1, 5 and 10 years, or for
the life of the Fund, if shorter. These are the rates of return that would
equate the initial amount invested to the ending redeemable value. These rates
of return are calculated pursuant to the following formula: P(1 + T)n = ERV
(where P = a hypothetical initial payment of $1,000, T = the average annual
total return, n = the number of years and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the period). All total
return figures reflect the deduction of a proportional share of Fund expenses on
an annual basis, and assume that all dividends and distributions are reinvested
when paid.
PREDECESSOR PERFORMANCE QUOTATIONS
The Fund is the accounting survivor and successor of a fund previously
known as the InformationTech 100-Registered Trademark- Fund, which was
reorganized into the Fund effective ______________, 1999. As part of the
reorganization, all of the then-existing shares of the predecessor fund were
exchanged for Institutional Shares of the Fund. The Fund quotes its historical
performance track record for both of its classes of shares based on its
predecessor's only shares outstanding prior to the reorganization.
Total return of the Institutional Shares and other classes of shares
of the Fund will be calculated separately. Because each class of shares is
subject to different expenses, the performance of each class for the same period
will differ.
The average annual total returns for the Fund for the periods shown
are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
For the Fiscal Year Ended 1-Year Life of Fund
February 28, 1999 (1) (April 8, 1997)
- -------------------------------------------------------------------------------
<S> <C> <C>
Berger Information 47.13% 52.32%
Technology Fund -
Institutional Shares
- -------------------------------------------------------------------------------
</TABLE>
-33-
<PAGE>
(1) The Fund's fiscal year changed from February 28 to September 30 as part of
a reorganization effective _________________, 1999.
14. ADDITIONAL INFORMATION
FUND ORGANIZATION
The Fund is a separate series of the Berger Investment Portfolio Trust
(the "Trust"), a Delaware business trust established under the Delaware Business
Trust Act. The Fund was established on [__________], 1999. The Fund is the
successor to the fund formerly known as the InformationTech 100-Registered
Trademark- Fund. The InformationTech 100-Registered Trademark- Fund commenced
operations on April 8, 1997, as a separate series of the Advisors Series Trust,
a Delaware business trust. The InformationTech 100-Registered Trademark- Fund
was then reorganized into the Fund in a transaction that became effective on
[__________________], 1999. As part of the reorganization, all of the
then-existing shares of the predecessor fund were exchanged for Institutional
Shares of the Fund.
The Trust is authorized to issue an unlimited number of shares of
beneficial interest in series or portfolios. Currently, the Fund is one of
seven series established under the Trust, although others may be added in the
future. The Trust is also authorized to establish multiple classes of shares
representing differing interests in an existing or new series. The Fund
currently has two classes of shares, although others may be added in the future.
Shares of the Fund are fully paid and nonassessable when issued. Each
share has a par value of $.01. All shares issued by the Fund participate
equally in dividends and other distributions by the Fund, and in the residual
assets of the Fund in the event of its liquidation.
DELAWARE BUSINESS TRUST INFORMATION. Under Delaware law, shareholders
of the Fund will enjoy the same limitations on personal liability as extended to
stockholders of a Delaware corporation. Further, the Trust Instrument of the
Trust provides that no shareholder shall be personally liable for the debts,
liabilities, obligations and expenses incurred by, contracted for or otherwise
existing with respect to, the Trust or any particular series (fund) of the
Trust. However, the principles of law governing the limitations of liability of
beneficiaries of a business trust have not been authoritatively established as
to business trusts organized under the laws of one jurisdiction but operating or
owning property in other jurisdictions. In states that have adopted legislation
containing provisions comparable to the Delaware Business Trust Act, it is
believed that the limitation of liability of beneficial owners provided by
Delaware law should be respected. In those jurisdictions that have not adopted
similar legislative provisions, it is possible that a court might hold that the
shareholders of the Trust are not entitled to the limitations of liability set
forth in Delaware law or the Trust Instrument and, accordingly, that they may be
personally liable for the obligations of the Trust.
In order to protect shareholders from such potential liability, the Trust
Instrument requires that every written obligation of the Trust or any series
thereof contain a statement to the effect that such obligation may only be
enforced against the assets of the Trust or such series. The Trust Instrument
also provides for indemnification from the assets of the relevant series for all
losses and expenses incurred by any shareholder by reason of being or having
been a shareholder, and that the Trust shall, upon request, assume the defense
of any such claim made against such shareholder for any act or obligation of the
relevant series and satisfy any judgment thereon from the assets of that series.
As a result, the risk of a shareholder of the Fund incurring financial loss
on account of shareholder liability is limited to circumstances in which the
Fund itself would be unable to meet its obligations. The Trust believes that
the risk of personal liability to shareholders of the Fund is
-34-
<PAGE>
therefore remote. The trustees intend to conduct the operations of the Trust
and the Fund so as to avoid, to the extent possible, liability of shareholders
for liabilities of the Trust or the Fund.
CORPORATE GOVERNANCE INFORMATION PERTAINING TO THE FUND. The Fund is
not required to hold annual shareholder meetings unless required by the
Investment Company Act of 1940 or other applicable law or unless called by the
trustees. If shareholders owning at least 10% of the outstanding shares of the
Trust so request, a special shareholders' meeting of the Trust will be held for
the purpose of considering the removal of a trustee. Special meetings will be
held for other purposes if the holders of at least 25% of the outstanding shares
of the Trust so request. Subject to certain limitations, the Trust will
facilitate appropriate communications by shareholders desiring to call a special
meeting for the purpose of considering the removal of a trustee.
Shareholders of the Fund and, where applicable, the other
series/classes of the Trust, generally vote separately on matters relating to
those respective series/classes, although they vote together and with the
holders of any other series/classes of the Trust in the election of trustees of
the Trust and on all matters relating to the Trust as a whole. Each full share
of the Fund has one vote.
Shares of the Fund have non-cumulative voting rights, which means that
the holders of more than 50% of the shares voting for the election of trustees
can elect 100% of the trustees if they choose to do so and, in such event, the
holders of the remaining less than 50% of the shares voting for the election of
trustees will not be able to elect any person or persons as trustees.
Shares of the Fund have no preemptive rights. There are no sinking
funds or arrearage provisions which may affect the rights of the Fund shares.
Fund shares have no subscription rights or conversion rights, except that
shareholders of any class of the Fund may convert their shares into shares of
any other class of the Fund in the event and only in the event the shareholder
ceases to be eligible to purchase or hold shares of the original class, or
becomes eligible to purchase shares of a different class, by reason of a change
in the shareholder's status under the conditions of eligibility in effect for
such class at that time. Shares of the Fund may be transferred by endorsement,
or other customary methods, but the Fund is not bound to recognize any transfer
until it is recorded on its books.
MORE INFORMATION ON SPECIAL MULTI-CLASS FUND STRUCTURE
The Fund currently has divided its shares into two classes of shares,
the Institutional Shares covered by this SAI and the Investor Shares offered
through a separate Prospectus and SAI. The Fund implemented its multi-class
structure by adopting a Rule 18f-3 Plan under the 1940 Act permitting it to
issue its shares in classes. The Fund's Rule 18f-3 Plan governs such matters as
class features, dividends, voting, allocation of income and expenses between
classes, exchange and trustee monitoring of the Plan. Each class is subject to
such investment minimums and other conditions of eligibility as are set forth in
the relevant prospectus for the class, as it may be amended from time to time.
Investor Shares are available to the general public and bear a 0.25% 12b-1 fee.
Information concerning Investor Shares is available from the Fund at
1-800-333-1001.
Subject to the Trust's Trust Instrument and any other applicable
provisions, the trustees of the Trust have the authority to create additional
classes, or change existing classes, from time to time, in accordance with Rule
18f-3 under the Act.
-35-
<PAGE>
PRINCIPAL SHAREHOLDERS
Insofar as the management of the Fund is aware, as of _________, 1999,
no person owned, beneficially or of record, more than 5% of the outstanding
shares of the Fund, except for the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
OWNER PERCENTAGE HELD(1)
- -------------------------------------------------------------------------------
<S> <C>
Charles Schwab & Co., Inc. [______]%
101 Montgomery Street (owned of record)
San Francisco, CA 94104
- -------------------------------------------------------------------------------
Du Bain 1991 Trust [______]%
Myron Du Bain TTEE (owned of record)
160 Sansome Street, 17th Floor
San Francisco, CA 94104
- -------------------------------------------------------------------------------
</TABLE>
(1) All shares appearing on this table are of the Fund's Institutional Shares
class.
In addition, Bay Isle has advised the Trust that it may have voting
discretion over [____]% of the Fund's outstanding shares in accounts
beneficially owned by various Bay Isle advisory clients. Bay Isle may be deemed
to beneficially own those shares as a result of its voting discretion. If Bay
Isle is deemed to beneficially own more than 25% of the Fund's outstanding
shares, Bay Isle may also be deemed to control the Fund.
DISTRIBUTION
Berger Distributors, Inc., as the Fund's Distributor, is the principal
underwriter of the Fund's shares. The Distributor is a wholly-owned subsidiary
of Berger Associates. The Distributor is a registered broker-dealer under the
Securities Exchange Act of 1934 and is a member of the National Association of
Securities Dealers, Inc. The Distributor acts as the agent of the Fund in
connection with the sale of the Fund's shares in all states in which the shares
are eligible for sale and in which the Distributor is qualified as a
broker-dealer. David J. Schultz, Chief Financial Officer, Assistant Secretary
and Treasurer of the Distributor, is also Vice President and Treasurer of the
Fund. Janice M. Teague, Vice President and Secretary of the Distributor, is
also Vice President and Secretary of the Fund. Brian Ferrie, Vice President and
Chief Compliance Officer of the Distributor, is also Vice President of the Fund.
The Fund and the Distributor are parties to a Distribution Agreement
that continues through April 2001, and thereafter from year to year if such
continuation is specifically approved at least annually by the trustees or by
vote of a majority of the outstanding shares of the Fund and in either case by
vote of a majority of the trustees who are not "interested persons" (as that
term is defined in the Investment Company Act of 1940) of the Fund or the
Distributor. The Distribution Agreement is subject to termination by the Fund
or the Distributor on 60 days' prior written notice, and terminates
automatically in the event of its assignment. Under the Distribution Agreement,
the Distributor continuously offers shares of the Fund and solicits orders to
purchase Fund shares at net asset value. The Distributor is not compensated for
its services under the Distribution Agreement, but may be reimbursed by Berger
Associates for its costs in distributing Fund shares.
-36-
<PAGE>
OTHER INFORMATION
The Trust has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement under the Securities Act of 1933, as
amended, with respect to the securities of the Fund of which this Statement of
Additional Information is a part. If further information is desired with respect
to the Fund or such securities, reference is made to the Registration Statement
and the exhibits filed as a part thereof.
Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Denver, Colorado,
acts as counsel to the Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 950 Seventeenth Street, Denver, Colorado,
has been appointed to act as independent accountants for the Trust and the Fund
for the fiscal year ended September 30, 1999. In that capacity,
PricewaterhouseCoopers LLP will audit the financial statements of the Fund and
assist the Fund in connection with the preparation of its 1998 income tax
return.
FINANCIAL INFORMATION
The following financial statements for the Fund are incorporated
herein by reference from the Annual Report to Shareholders of the
InformationTech 100-Registered Trademark- Fund, the predecessor to the Fund,
dated February 28, 1999, along with the Report of Independent Accountants
thereon of McGladrey & Pullen, LLP, dated March 26, 1999:
Schedule of Investments as of February 28, 1999
Statement of Assets and Liabilities as of February 28, 1999
Statement of Operations for the Fiscal Year Ended February 28, 1999
Statement of Changes in Net Assets for each of the periods indicated
Notes to Financial Statements, February 28, 1999
Financial Highlights for each of the periods indicated
That Annual Report is enclosed with this Statement of Additional
Information. Additional copies may be obtained upon request without charge by
calling the Fund at 1-800-333-1001.
-37-
<PAGE>
APPENDIX A
HIGH-YIELD/HIGH-RISK SECURITIES
The Fund may invest in convertible securities of any quality, including
unrated securities or securities rated below investment grade (Ba or lower by
Moody's, BB or lower by S&P) (sometimes referred to as "junk bonds"). However,
the Fund will not purchase any security in default at the time of purchase. The
Fund will not invest more than 20% of the market value of its assets at the time
of purchase in convertible securities rated below investment grade.
Securities rated below investment grade are subject to greater risk that
adverse changes in the financial condition of their issuers or in general
economic conditions, or an unanticipated rise in interest rates, may impair the
ability of their issuers to make payments of interest and principal or
dividends. The market prices of lower grade securities are generally less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to economic changes or individual corporate developments. Periods of
economic uncertainty and change can be expected to result in volatility of
prices of these securities. Lower rated securities also may have less liquid
markets than higher rated securities, and their liquidity as well as their value
may be adversely affected by poor economic conditions. Adverse publicity and
investor perceptions as well as new or proposed laws may also have a negative
impact on the market for high-yield/high-risk bonds. In the event of an
unanticipated default, the Fund will experience a reduction in its income and
could expect a decline in the market value of the securities affected. The
prices of these securities may be more volatile and the markets for them may be
less liquid than those for higher-rated securities.
Unrated securities, while not necessarily of lower quality than rated
securities, may not have as broad a market. Unrated securities will be included
in the Fund's percentage limits for investments rated below investment grade,
unless the Fund's sub-advisor deems such securities to be the equivalent of
investment grade. If securities purchased by the Fund are downgraded following
purchase, or if other circumstances cause the Fund to exceed its percentage
limits on assets invested in securities rated below investment grade, the
trustees of the Fund, in consultation with the Fund's sub-advisor, will
determine what action, if any, is appropriate in light of all relevant
circumstances.
Relying in part on ratings assigned by credit agencies in making
investments will not protect the Fund from the risk that the securities will
decline in value, since credit ratings represent evaluations of the safety of
principal, dividend and/or interest payments, and not the market values of such
securities. Moreover, such ratings may not be changed on a timely basis to
reflect subsequent events.
Although the market for high-yield debt securities has been in existence
for many years and from time to time has experienced economic downturns, this
market has involved a significant increase in the use of high-yield debt
securities to fund highly leverage corporate acquisitions and restructurings.
Past experience may not, therefore, provide an accurate indication of future
performance of the high-yield debt securities market, particularly during
periods of economic recession.
Expenses incurred in recovering an investment in a defaulted security may
adversely affect the Fund's net asset value. Moreover, the reduced liquidity of
the secondary market for such securities may adversely affect the market price
of, and the ability of the Fund to value, particular securities at certain
times, thereby making it difficult to make specific valuation determinations.
-38-
<PAGE>
CORPORATE BOND RATINGS
The ratings of fixed-income securities by Moody's and Standard & Poor's are
a generally accepted measurement of credit risk. However, they are subject to
certain limitations. Ratings are generally based upon historical events and do
not necessarily reflect the future. In addition, there is a period of time
between the issuance of a rating and the update of the rating, during which time
a published rating may be inaccurate.
KEY TO MOODY'S CORPORATE RATINGS
Aaa-Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by 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.
Aa-Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A-Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa-Bonds which are rated Baa 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.
Ba-Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during good and bad times over the future. Uncertainty of position
characterizes bonds of this class.
B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca-Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other marked
shortcomings.
C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic
rating classification from Aa through B in its corporate bond rating system.
The modifier 1 indicates that the security
-39-
<PAGE>
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic category.
KEY TO STANDARD & POOR'S CORPORATE RATINGS
AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA-Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A-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.
BBB-Debt rated BBB 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.
BB, B, CCC, CC AND C-Debt rated BB, B, CCC, CC and C is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are out-weighed by the large uncertainties or major risk
exposures to adverse conditions.
C1-The rating C1 is reserved for income bonds on which no interest is being
paid.
D-Debt rated D is in default, and payment of interest and/or repayment of
principal is in arrears.
PLUS (+) OR MINUS (-)-The ratings from "AA" to "CCC" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
BERGER INVESTMENT PORTFOLIO TRUST
PART C. OTHER INFORMATION
Item 23. EXHIBITS
The Exhibit Index following the signature pages below is incorporated
herein by reference.
Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 26. INDEMNIFICATION
Article IX, Section 2 of the Trust Instrument for Berger Investment
Portfolio Trust (the "Trust"), of which the Fund is a series, provides for
indemnification of certain persons acting on behalf of the Trust to the fullest
extent permitted by the law. In general, trustees, officers, employees and
agents will be indemnified against liability and against all expenses incurred
by them in connection with any claim, action, suit or proceeding (or settlement
thereof) in which they become involved by virtue of their Trust office, unless
their conduct is determined to constitute willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties, or unless it has been
determined that they have not acted in good faith in the reasonable belief that
their actions were in or not opposed to the best interests of the Trust. The
Trust also may advance money for these expenses, provided that the trustees,
officers, employees or agents undertake to repay the Trust if their conduct is
later determined to preclude indemnification. The Trust has the power to
purchase insurance on behalf of its trustees, officers, employees and agents,
whether or not it would be permitted or required to indemnify them for any such
liability under the Trust Instrument or applicable law, and the Trust has
purchased and maintains an insurance policy covering such persons against
certain liabilities incurred in their official capacities.
Item 27. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The business of Berger Associates, Inc., the investment adviser of the
Fund, is described in the Prospectus under the heading "Organization of the
Berger Funds Family -- Investment Managers" and in the Statement of Additional
Information in Section 4, which are included in this Registration Statement.
Information relating to the business and other connections of the officers and
directors of Berger Associates (current and for the past two years) is listed in
Schedules A and D of Berger Associates' Form ADV as filed with the Securities
and Exchange Commission (File No. 801-9451, dated March 29, 1999), which
information from such schedules is incorporated herein by reference.
The business of Bay Isle Financial Corporation ("Bay Isle"),
sub-adviser to the Fund, is also described in the Prospectus and in Section 4 of
the Statement of Additional Information. Information relating to the business
and other connections of the officers and directors of Bay Isle (current and for
the past two years) is listed in Schedules A and D of Bay Isle's Form ADV as
filed with the Securities and Exchange Commission (File No. 801-27563, dated
March 31, 1999), which information from such schedules is incorporated herein by
reference.
C-1
<PAGE>
Item 27. PRINCIPAL UNDERWRITERS
(a) Investment companies for which the Fund's principal underwriter
also acts as principal underwriter, depositor or investment adviser:
The One Hundred Fund, Inc.
Berger One Hundred and One Fund, Inc.
Berger Investment Portfolio Trust
- --Berger Small Company Growth Fund
- --Berger New Generation Fund
- --Berger Balanced Fund
- --Berger Select Fund
- --Berger Mid Cap Growth Fund
- --Berger Mid Cap Value Fund
Berger Omni Investment Trust
- --Berger Small Cap Value Fund
Berger Institutional Products Trust
- --Berger IPT - 100 Fund
- --Berger IPT - Growth and Income Fund
- --Berger IPT - Small Company Growth Fund
- --Berger/BIAM IPT - International Fund
Berger/BIAM Worldwide Funds Trust
- --Berger/BIAM International Fund
- --International Equity Fund
- --Berger/BIAM International CORE Fund
(b) For Berger Distributors, Inc.:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name Positions and Positions and
Offices with Offices with
Underwriter Registrant
- --------------------------------------------------------------------------------
<S> <C> <C>
David G. Mertens President, CEO and Director None
- --------------------------------------------------------------------------------
David J. Schultz Chief Financial Officer, Vice President and
Assistant Secretary and Treasurer
Treasurer
- --------------------------------------------------------------------------------
Brian Ferrie Vice President and Chief Vice President
Compliance Officer
- --------------------------------------------------------------------------------
Mark S. Sunderhuse Director Vice President of the
Berger New Generation
Fund of the Registrant
- --------------------------------------------------------------------------------
Janice M. Teague Vice President and Vice President and
Secretary Secretary
- --------------------------------------------------------------------------------
</TABLE>
The principal business address of each of the persons in the table
above is 210 University Blvd., Suite 900, Denver, CO 80206.
(c) Not applicable.
C-2
<PAGE>
Item 28. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books and other documents required to be maintained by
Section 31(a) of the 1940 Act and the rules promulgated thereunder are
maintained as follows:
(a) Shareholder records are maintained by the Registrant's
sub-transfer agent, DST Systems, Inc., P.O. Box 419958, Kansas
City, MO 64141;
(b) Accounting records relating to cash and other money balances;
asset, liability, reserve, capital, income and expense accounts;
portfolio securities; purchases and sales; and brokerage
commissions are maintained by the Registrant's Recordkeeping and
Pricing Agent, Investors Fiduciary Trust Company ("IFTC"), 801
Pennsylvania, Kansas City, Missouri 64105. Other records of the
Registrant relating to purchases and sales; the Trust Instrument,
minute books and other trust records; brokerage orders;
performance information and other records are maintained at the
offices of the Registrant at 210 University Boulevard, Suite 900,
Denver, Colorado 80206.
(c) Certain records relating to day-to-day portfolio management of
the Fund are kept at the offices of Bay Isle Financial
Corporation, 160 Sansome Street, 17th Floor, San Francisco, CA
94104.
Item 29. MANAGEMENT SERVICES
The Registrant has no management-related service contract which is not
discussed in Parts A and B of this form.
Item 30. UNDERTAKINGS
Not applicable.
C-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City and County of Denver, and State of
Colorado, on the 16th day of April, 1999.
BERGER INVESTMENT PORTFOLIO TRUST
(Registrant)
By Gerard M. Lavin
------------------------------------------
Name: Gerard M. Lavin
--------------------------------------
Title: 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 capacities and on the dates indicated.
SIGNATURE TITLE DATE
Gerard M. Lavin President (Principal April 16, 1999
- --------------------------- Executive Officer)
Gerard M. Lavin and Director
David J. Schultz Vice President and April 16, 1999
- --------------------------- Treasurer (Principal
David J. Schultz Financial Officer)
John Paganelli Assistant Treasurer April 16, 1999
- --------------------------- (Principal Accounting
John Paganelli Officer)
/s/ Dennis E. Baldwin Trustee April 16, 1999
- ---------------------------
Dennis E. Baldwin*
/s/ William M.B. Berger Trustee April 16, 1999
- ---------------------------
William M.B. Berger*
/s/ Louis R. Bindner Trustee April 16, 1999
- ---------------------------
Louis R. Bindner*
/s/ Katherine A. Cattanach Trustee April 16, 1999
- ---------------------------
Katherine A. Cattanach*
C-4
<PAGE>
/s/ Paul R. Knapp Trustee April 16, 1999
- ---------------------------
Paul R. Knapp*
/s/ Harry T. Lewis, Jr. Trustee April 16, 1999
- ---------------------------
Harry T. Lewis, Jr.*
/s/ Michael Owen Trustee April 16, 1999
- ---------------------------
Michael Owen*
/s/ William Sinclaire Trustee April 16, 1999
- ---------------------------
William Sinclaire*
Gerard M. Lavin
- ---------------------------
*By Gerard M. Lavin
Attorney-in-Fact
C-5
<PAGE>
BERGER INVESTMENT PORTFOLIO TRUST
EXHIBIT INDEX
N-1A EDGAR
Exhibit Exhibit
No. No. Name of Exhibit
- -------------- -------- ---------------
(1) Exhibit 23(a) Trust Instrument
(2) Exhibit 23(b) Bylaws
Exhibit 23(c) Not applicable
(3) Exhibit 23(d)-1 Form of Investment Advisory
Agreement for Berger Small
Company Growth Fund
(4) Exhibit 23(d)-2 Form of Investment Advisory
Agreement for Berger New
Generation Fund
(5) Exhibit 23(d)-3 Form of Investment Advisory
Agreement for Berger Balanced
Fund
(6) Exhibit 23(d)-4 Form of Investment Advisory
Agreement for Berger Select
Fund
(7) Exhibit 23(d)-5 Form of Investment Advisory
Agreement for Berger Mid Cap
Growth Fund
(8) Exhibit 23(d)-6 Form of Investment Advisory
Agreement for Berger Mid Cap
Value Fund
(9) Exhibit 23(d)-7 Form of Sub-Advisory Agreement
for Berger Mid Cap Value Fund
* Exhibit 23(d)-8 EX-99.B23(d)-8 Form of Investment Advisory
Agreement for Berger Information
Technology Fund
* Exhibit 23(d)-9 EX-99.B23(d)-9 Form of Sub-Advisory Agreement
for Berger Information
Technology Fund
(10) Exhibit 23(e) Form of Distribution Agreement
between the Trust and Berger
Distributors, Inc.
Exhibit 23(f) Not applicable
(11) Exhibit 23(g) Form of Custody Agreement
(12) Exhibit 23(h)-1 Form of Administrative Services
Agreement for Berger Small
Company Growth Fund
(13) Exhibit 23(h)-2 Form of Administrative Services
Agreement for Berger New
Generation Fund
(14) Exhibit 23(h)-3 Form of Administrative Services
Agreement for Berger Balanced
Fund
(15) Exhibit 23(h)-4 Form of Administrative Services
Agreement for Berger Select
Fund
(16) Exhibit 23(h)-5 Form of Administrative Services
Agreement for Berger Mid Cap
Growth Fund
(17) Exhibit 23(h)-6 Form of Administrative Services
Agreement for Berger Mid Cap
Value Fund
(18) Exhibit 23(h)-7 Form of Recordkeeping and
Pricing Agent Agreement
(19) Exhibit 23(h)-8 Form of Agency Agreement
* Exhibit 23(h)-9 EX-99.B23(h)-9 Form of Administrative Services
Agreement for the Berger
Information Technology Fund
<PAGE>
* Exhibit 23(i) EX-99.B23(i) Opinion and consent of Davis,
Graham & Stubbs LLP (relating
to the Berger Information
Technology Fund)
(28) Exhibit 23(j)-1 Consent of
PricewaterhouseCoopers LLP
* Exhibit 23(j)-2 EX-99.B23(j)-2 Consent of McGladrey & Pullen,
LLP relating to the Berger
Information Technology Fund
Exhibit 23(k) Not applicable
(20) Exhibit 23(l) Investment Letter from Initial
Stockholder
(21) Exhibit 23(m)-1 Rule 12b-1 Plan for Berger
Small Company Growth Fund
(22) Exhibit 23(m)-2 Rule 12b-1 Plan for Berger New
Generation Fund
(23) Exhibit 23(m)-3 Rule 12b-1 Plan for Berger
Balanced Fund
(24) Exhibit 23(m)-4 Rule 12b-1 Plan for Berger
Select Fund
(25) Exhibit 23(m)-5 Rule 12b-1 Plan for Berger Mid
Cap Growth Fund
(26) Exhibit 23(m)-6 Rule 12b-1 Plan for Berger Mid
Cap Value Fund
* Exhibit 23(m)-7 EX-99.B23(m)-7 Rule 12b-1 Plan for the
Investor Shares of the Berger
Information Technology Fund
(28) Exhibit 23(n)-1 Financial Data Schedule for
Berger Small Company Growth
Fund
(27) Exhibit 23(n)-2 Financial Data Schedule for
Berger New Generation Fund
(28) Exhibit 23(n)-3 Financial Data Schedule for
Berger Balanced Fund
(28) Exhibit 23(n)-4 Financial Data Schedule for
Berger Select Fund
(28) Exhibit 23(n)-5 Financial Data Schedule for
Berger Mid Cap Growth Fund
(28) Exhibit 23(n)-6 Financial Data Schedule for
Berger Mid Cap Value Fund
** Exhibit 23(n)-7 Financial Data Schedule for
Berger Information Technology
Fund - Investor Shares
* Exhibit 23(n)-8 EX-27.8 Financial Data Schedule for
Berger Information Technology
Fund - Institutional Shares
* Exhibit 23(o) EX-99.B23(o) Rule 18f-3 Plan for the Berger
Information Technology Fund
- ----------------------------
* Filed herewith.
** Not required to be filed until financial statements for the new class of
the Fund are required.
Filed previously as indicated below and incorporated herein by reference:
(1) Filed as Exhibit 1 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(2) Filed as Exhibit 2 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
<PAGE>
(3) Filed as Exhibit 5.1 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(4) Filed as Exhibit 5.2 with Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A, filed February 23,
1996.
(5) Filed as Exhibit 5.3 with Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A, filed August 28, 1997.
(6) Filed as Exhibit 5.4 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31,
1997.
(7) Filed as Exhibit 5.5 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31,
1997.
(8) Filed as Exhibit 5.6 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(9) Filed as Exhibit 5.7 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(10) Filed as Exhibit 6 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(11) Filed as Exhibit 8 with Post-Effective Amendment No. 6 to the
Registrant's Registration Statement on Form N-1A, filed November 27,
1995.
(12) Filed as Exhibit 9.2.1 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(13) Filed as Exhibit 9.2.2 with Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A, filed February 23,
1996.
(14) Filed as Exhibit 9.2.3 with Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A, filed August 28, 1997.
(15) Filed as Exhibit 9.2.4 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31,
1997.
(16) Filed as Exhibit 9.2.5 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31,
1997.
(17) Filed as Exhibit 9.2.6 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(18) Filed as Exhibit 9.3 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(19) Filed as Exhibit 9.4 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(20) Filed as Exhibit 10 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(21) Filed as Exhibit 13 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(22) Filed as Exhibit 15.1 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(23) Filed as Exhibit 15.2 with Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A, filed February 23,
1996.
(24) Filed as Exhibit 15.3 with Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A, filed August 28, 1997.
(25) Filed as Exhibit 15.4 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31,
1997.
(26) Filed as Exhibit 15.5 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31,
1997.
(27) Filed as Exhibit 15.6 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(28) Filed as Exhibit number listed with Post-Effective Amendment No. 19 to
the Registrant's Registration Statement on Form N-1A, filed January 25,
1999.
<PAGE>
INVESTMENT ADVISORY AGREEMENT
BERGER INFORMATION TECHNOLOGY FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
This INVESTMENT ADVISORY AGREEMENT (the "Agreement") is made this ____ day
of _________, 1999, between BERGER ASSOCIATES, INC., a Delaware corporation
("Berger Associates"), and BERGER INVESTMENT PORTFOLIO TRUST, a Delaware
business trust (the "Trust"), with respect to the BERGER INFORMATION TECHNOLOGY
FUND, a series of the Trust (the "Fund").
RECITALS
A. The Trust is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), and has
registered its shares for public offering under the Securities Act of 1933, as
amended (the "1933 Act").
B. The Trust is authorized to create separate series of shares, each with
its own separate investment portfolio, one of such series created by the Trust
being the Fund.
C. Berger Associates is engaged in the business of rendering investment
advisory services and is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended (the "Advisers Act").
D. The Trust and Berger Associates deem it mutually advantageous that
Berger Associates should assist the Trustees and officers of the Trust in the
management of the securities portfolio of the Fund.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. APPOINTMENT. The Trust hereby appoints Berger Associates as
investment adviser and manager with respect to the Fund for the period and on
the terms set forth in this Agreement. Berger Associates hereby accepts such
appointment and agrees to render the services herein set forth, for the
compensation herein provided.
2. INVESTMENT ADVISORY FUNCTIONS. In its capacity as investment adviser
to the Fund, Berger Associates shall have the following duties and
responsibilities:
-1-
<PAGE>
(a) To manage the investment operations of the Fund and the composition of
its investment portfolio, and to determine without prior consultation
with the Trust, what securities and other assets of the Fund will be
acquired, held, disposed of or loaned, in conformity with the
investment objective, policies and restrictions and the other
statements concerning the Fund in the Trust's trust instrument, as
amended from time to time (the "Trust Instrument"), bylaws and
registration statements under the 1940 Act and the 1933 Act, the 1940
Act and the Advisers Act, the rules and regulations thereunder, and
all other applicable federal and state laws and regulations, and the
provisions of the Internal Revenue Code of 1986, as amended,
applicable to the Fund as a regulated investment company;
(b) To cause its officers to attend meetings and furnish oral or written
reports, as the Trust may reasonably require, in order to keep the
Trustees and appropriate officers of the Trust fully informed as to
the condition of the investment portfolio of the Fund, the investment
decisions of Berger Associates, and the investment considerations
which have given rise to those decisions;
(c) To supervise the purchase and sale of securities for investments of
the Fund and for other related transactions as directed by the
appropriate officers of the Trust or any sub-adviser engaged by Berger
Associates pursuant to the authority granted in this Agreement; to
give instructions to the custodian (including any subcustodian) of the
Fund as to deliveries of securities to and from such custodian and
receipt and payments of cash for the account of the Fund, and advise
the Trust on the same day such instructions are given; and to submit
such reports relating to the valuation of the Fund's assets and to
otherwise assist in the calculation of the net asset value of shares
of the Fund as may reasonably be requested;
(d) To maintain all books and records required to be maintained by Berger
Associates pursuant to the 1940 Act and the rules and regulations
promulgated thereunder, as the same may be amended from time to time,
with respect to transactions on behalf of the Fund, and shall furnish
the Trustees with such periodic and special reports as the Trustees
reasonably may request. Berger Associates agrees that all records
which it maintains for the Fund or the Trust are the property of the
Trust, agrees to permit the reasonable inspection thereof by the Trust
or its designees and agrees to preserve for the periods prescribed
under the 1940 Act any records which it maintains for the Trust and
which are required to be maintained under the 1940 Act, and further
agrees to surrender promptly to the Trust or its designees any records
which it maintains for the Trust upon request by the Trust; and
(e) At such times as shall be reasonably requested by the Trustees, to
provide the Trustees with economic, operational and investment data
and reports, including
-2-
<PAGE>
without limitation all information and materials reasonably requested
by or requested to be delivered to the Trustees of the Trust pursuant
to Section 15(c) of the 1940 Act, and make available to the Trustees
any economic, statistical and investment services normally available
to similar investment company clients of Berger Associates.
3. FURTHER OBLIGATIONS. In all matters relating to the performance of
this Agreement, Berger Associates shall act in conformity with the Trust's Trust
Instrument, bylaws and currently effective registration statements under the
1940 Act and the 1933 Act and any amendments or supplements thereto (the
"Registration Statements") and with the written policies, procedures and
guidelines of the Fund, and written instructions and directions of the Trustees
of the Trust and shall comply with the requirements of the 1940 Act, the
Advisers Act, the rules thereunder, and all other applicable federal and state
laws and regulations. The Trust agrees to provide Berger Associates with copies
of the Trust's Trust Instrument, bylaws, Registration Statements, written
policies, procedures and guidelines, and written instructions and directions of
the Trustees, and any amendments or supplements to any of them at, or, if
practicable, before the time such materials become effective. Berger Associates
shall maintain errors and omissions insurance in an amount at least equal to
that disclosed to the Trustees in connection with their approval of this
Agreement.
4. SUB-ADVISERS. Berger Associates may engage one or more sub-advisers
in furtherance of Berger Associates' duties and responsibilities under this
Agreement, subject to the approval of the Trustees of the Trust and, if required
by law, the shareholders of the Fund, pursuant in each case to a written
agreement with a party that, if applicable, meets the requirements of Section 15
of the 1940 Act and the rules thereunder applicable to contracts for service as
an investment adviser of a registered investment company, subject, however, to
such exemptions as may be granted by the Securities and Exchange Commission.
The engagement of one or more sub-advisers pursuant to this provision shall not
diminish or relieve in any way the liability of Berger Associates for any of its
duties and responsibilities under this Agreement. Berger Associates shall
appropriately oversee, monitor and evaluate the activities of any sub-adviser
engaged hereunder.
5. OBLIGATIONS OF TRUST. The Trust shall have the following obligations
under this Agreement:
(a) To keep Berger Associates continuously and fully informed as to the
composition of the investment portfolio of the Fund and the nature of
all of the Fund's assets and liabilities from time to time;
(b) To furnish Berger Associates with a certified copy of any financial
statement or report prepared for the Fund by certified or independent
public accountants and
-3-
<PAGE>
with copies of any financial statements or reports made to the Fund's
shareholders or to any governmental body or securities exchange;
(c) To furnish Berger Associates with any further materials or information
which Berger Associates may reasonably request to enable it to perform
its function under this Agreement; and
(d) To compensate Berger Associates for its services in accordance with
the provisions of Section 6 hereof.
6. COMPENSATION. The Trust shall pay to Berger Associates for its
services under this Agreement a fee, payable in United States dollars, at an
annual rate of 0.90% of the average daily net asset value of the Fund. This fee
shall be computed and accrued daily and payable monthly as of the last day of
each month during which or part of which this Agreement is in effect. For the
month during which this Agreement becomes effective and the month during which
it terminates, however, there shall be an appropriate proration of the fee
payable for such month based on the number of calendar days of such month during
which this Agreement is effective.
7. EXPENSES.
(a) EXPENSES PAID BY THE TRUST. The Trust assumes and shall pay all
expenses incidental to its operations and business not specifically assumed or
agreed to be paid by Berger Associates hereunder or otherwise, including, but
not limited to, any compensation, fees or reimbursements which the Trust pays to
its Trustees who are not interested persons of Berger Associates; compensation
of the Fund's custodian, transfer agent, registrar and dividend disbursing agent
and other service providers; legal, accounting, audit and printing expenses;
administrative, clerical, recordkeeping and bookkeeping expenses; brokerage
commissions and all other expenses in connection with execution of portfolio
transactions (including any appropriate commissions paid to Berger Associates or
its affiliates for effecting exchange listed, over-the-counter or other
securities transactions); interest; all federal, state and local taxes
(including stamp, excise, income and franchise taxes); costs of stock
certificates and expenses of delivering such certificates to the purchasers
thereof; expenses of local representation in Delaware; expenses of shareholders'
meetings and of preparing, printing and distributing proxy statements, notices,
and reports to shareholders; expenses of preparing and filing reports and tax
returns with federal and state regulatory authorities; all expenses incurred in
complying with all federal and state laws and the laws of any foreign country
applicable to the issue, offer or sale of shares of the Fund, including, but not
limited to, all costs involved in preparing, printing and mailing prospectuses
and statements of additional information to shareholders of the Fund; and all
fees, dues and other expenses incurred by the Trust in connection with the
membership of the Trust in any trade association or other investment company
organization. To the extent that Berger Associates shall perform any of the
above described administrative and clerical functions, including transfer
-4-
<PAGE>
agency, registry, dividend disbursing, recordkeeping, bookkeeping, accounting
and blue sky monitoring and registration functions, and the preparation of
reports and returns, the Trust shall pay to Berger Associates compensation for,
or reimburse Berger Associates for its expenses incurred in connection with,
such services as Berger Associates and the Trust shall agree from time to time,
any other provision of this Agreement notwithstanding.
(b) EXPENSES PAID BY BERGER ASSOCIATES. Berger Associates shall pay all
its own costs and expenses incurred in fulfilling its obligations under this
Agreement. In addition to such costs and expenses, Berger Associates shall
incur and pay the following expenses relating to the Fund's operations:
(i) Reasonable compensation, fees and related expenses of the
Trust's officers and Trustees, except for such Trustees who are not interested
persons of Berger Associates;
(ii) Rental of offices of the Trust; and
(iii) Fees of any sub-adviser engaged by Berger Associates pursuant
to the authority granted in Section 4 hereof.
8. BROKERAGE COMMISSIONS. For purposes of this Agreement, brokerage
commissions paid by the Fund upon the purchase or sale of its portfolio
securities shall be considered a cost of securities of the Fund and shall be
paid by the Fund. Absent instructions from the Trust to the contrary, Berger
Associates is authorized and directed to place Fund portfolio transactions only
with brokers and dealers who render satisfactory service in the execution of
orders at the most favorable prices and at reasonable commission rates,
provided, however, that Berger Associates may pay a broker an amount of
commission for effecting a securities transaction in excess of the amount of
commission another broker would have charged for effecting that transaction if
Berger Associates determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research services
provided by such broker viewed in terms of either that particular transaction or
the overall responsibilities of Berger Associates. Berger Associates is also
authorized to consider sales of Fund shares as a factor in selecting
broker-dealers to execute Fund portfolio transactions. In placing portfolio
business with such broker-dealers, Berger Associates shall seek the best
execution of each transaction. Subject to the terms of this Agreement and the
applicable requirements and provisions of the law, including the 1940 Act and
the Securities Exchange Act of 1934, as amended, and in the event that Berger
Associates or an affiliate is registered as a broker-dealer, Berger Associates
may select a broker with which it or any of its affiliates or the Fund is
affiliated. Berger Associates or such affiliated broker may effect or execute
Fund portfolio transactions, whether on a securities exchange or in the
over-the-counter market, and receive separate compensation from the Fund
therefor. Notwithstanding the foregoing, the Trust shall retain the right to
direct the placement of all portfolio transactions, and the Trustees of the
Trust may establish policies or guidelines to be followed by Berger Associates
-5-
<PAGE>
in placing portfolio transactions for the Trust pursuant to the foregoing
provisions. Berger Associates shall report on the placement of portfolio
transactions in the prior fiscal quarter at each quarterly meeting of such
Trustees. To the extent consistent with applicable law, purchase or sell orders
for the Fund may be aggregated with simultaneous purchase or sell orders for
other clients of Berger Associates. Whenever Berger Associates simultaneously
places orders to purchase or sell the same security on behalf of the Fund and
one or more other clients of Berger Associates, such orders will be allocated as
to price and amount among all such clients in a manner reasonably believed by
Berger Associates to be fair and equitable to each client. The Trust recognizes
that in some cases, this procedure may adversely affect the results obtained for
the Fund.
9. TERMINATION. This Agreement may be terminated at any time, without
penalty, by the Trustees of the Trust, or by the shareholders of the Fund acting
by vote of at least a majority of its outstanding voting securities, provided in
either case that sixty (60) days' advance written notice of termination be given
to Berger Associates at its principal place of business. This Agreement may be
terminated by Berger Associates at any time, without penalty, by giving sixty
(60) days' advance written notice of termination to the Trust, addressed to its
principal place of business. The Trust agrees that, consistent with the terms of
the Trust's Trust Instrument, the Trust shall cease to use the name "Berger" in
connection with the Fund as soon as reasonably practicable following any
termination of this Agreement if Berger Associates does not continue to provide
investment advice to the Fund after such termination.
10. ASSIGNMENT. This Agreement shall terminate automatically in the event
of any assignment of this Agreement.
11. TERM. This Agreement shall continue in effect until April 30, 2001,
unless sooner terminated in accordance with its terms, and shall continue in
effect from year to year thereafter only so long as such continuance is
specifically approved at least annually by the vote of a majority of the
Trustees of the Trust who are not parties hereto or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on the
approval of the terms of such renewal, and by either the Trustees of the Trust
or the affirmative vote of a majority of the outstanding voting securities of
the Fund.
12. AMENDMENTS. This Agreement may be amended by the parties only if such
amendment is specifically approved (i) by a majority of the Trustees, including
a majority of the Trustees who are not interested persons of the Fund or Berger
Associates and, (ii) if required by applicable law, by the affirmative vote of a
majority of the outstanding voting securities of the Fund.
13. ALLOCATION OF EXPENSES. The Trustees shall determine the basis for
making an appropriate allocation of the Trust's expenses (other than those
directly attributable to the Fund)
-6-
<PAGE>
between the Fund and any other series of the Trust and between the Fund and
other investment companies managed by Berger Associates or its affiliates.
14. LIMITATION ON PERSONAL LIABILITY. NOTICE IS HEREBY GIVEN that the
Trust is a business trust organized under the Delaware Business Trust Act
pursuant to a Certificate of Trust filed in the office of the Secretary of State
of the State of Delaware. All parties to this Agreement acknowledge and agree
that the Trust is a series trust and all debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series shall be enforceable against the assets held with respect to
such series only, and not against the assets of the Trust generally or against
the assets held with respect to any other series and further that no Trustee,
officer or holder of shares of beneficial interest of the Trust shall be
personally liable for any of the foregoing.
15. LIMITATION OF LIABILITY OF BERGER ASSOCIATES. Berger Associates shall
not be liable for any error of judgment or mistake of law or for any loss
arising out of any investment or for any act or omission taken with respect to
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of reckless disregard of its obligations
and duties hereunder and except to the extent otherwise provided by law. As
used in this Section 15, "Berger Associates" shall include any affiliate of
Berger Associates performing services for the Trust contemplated hereunder and
directors, officers and employees of Berger Associates and such affiliates.
16. ACTIVITIES OF BERGER ASSOCIATES. The services of Berger Associates to
the Trust hereunder are not to be deemed to be exclusive, and Berger Associates
and its affiliates are free to render services to other parties, so long as its
services under this Agreement are not materially adversely affected or otherwise
impaired thereby. Nothing in this Agreement shall limit or restrict the right
of any director, officer or employee of Berger Associates to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar nature or a dissimilar
nature. It is understood that Trustees, officers and shareholders of the Trust
are or may become interested in Berger Associates as directors, officers and
shareholders of Berger Associates, that directors, officers, employees and
shareholders of Berger Associates are or may become similarly interested in the
Trust, and that Berger Associates may become interested in the Trust as a
shareholder or otherwise.
17. CERTAIN DEFINITIONS. The terms "vote of a majority of the outstanding
voting securities," "assignment," "approved at least annually" and "interested
persons" when used herein, shall have the respective meanings specified in the
1940 Act, as now in effect or hereafter amended, and the rules and regulations
thereunder, subject to such orders, exemptions and interpretations as may be
issued by the Securities and Exchange Commission under said Act and as may be
then in effect. Where the effect of a requirement of the federal securities
laws reflected in any provision of this Agreement is made less restrictive by a
rule, regulation, order,
-7-
<PAGE>
interpretation or other authority of the Securities and Exchange Commission,
whether of special or general application, such provision shall be deemed to
incorporate the effect of such rule, regulation, order, interpretation or other
authority.
18. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Colorado (without giving effect to the conflicts of
laws principles thereof) and the 1940 Act. To the extent that the applicable
laws of the State of Colorado conflict with the applicable provisions of the
1940 Act, the latter shall control.
19. MISCELLANEOUS. The headings in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions thereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Investment Advisory Agreement as of the date and year first
above written.
BERGER ASSOCIATES, INC.
By:
----------------------------
Gerard M. Lavin
President
BERGER INVESTMENT PORTFOLIO TRUST, with
respect to the series known as the
Berger Information Technology Fund
By:
----------------------------
Gerard M. Lavin
President
-8-
<PAGE>
SUB-ADVISORY AGREEMENT
(BERGER ASSOCIATES, INC./BAY ISLE FINANCIAL CORPORATION)
BERGER INFORMATION TECHNOLOGY FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
This SUB-ADVISORY AGREEMENT (the "Agreement") is entered into effective as
of the _____ day of _______________, 1999, by and between BERGER ASSOCIATES,
INC., a Delaware corporation ("Berger Associates"), and BAY ISLE FINANCIAL
CORPORATION, a California corporation ("Bay Isle").
RECITALS
A. Berger Associates has entered into an Investment Advisory Agreement
(the "Advisory Agreement") with Berger Investment Portfolio Trust, a Delaware
business trust (the "Trust") and an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), with respect to the Berger Information Technology Fund, a series of the
Trust (the "Fund"), pursuant to which Berger Associates has agreed to provide
investment advisory services with respect to the Fund.
B. Bay Isle is engaged in the business of rendering investment advisory
services and is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act").
C. Berger Associates desires to retain Bay Isle to furnish investment
advisory services with respect to the Fund, and Bay Isle is willing to furnish
such services.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. DUTIES OF BAY ISLE. Berger Associates hereby engages the services of
Bay Isle as sub-adviser for the Fund in furtherance of the Advisory Agreement.
Bay Isle agrees to perform the following duties, subject to the oversight of
Berger Associates and to the overall control of the officers and the Trustees of
the Trust:
(a) Bay Isle shall manage the investment operations of the Fund and
the composition of its investment portfolio, and determine without prior
consultation with Berger Associates or the Trust, what securities and other
assets of the Fund will be acquired, held, disposed of or loaned, and shall
direct Berger Associates with respect to the execution of trades
1
<PAGE>
in connection with such determinations, in conformity with the investment
objective, policies and restrictions and the other statements concerning the
Fund in the Trust's trust instrument, as amended from time to time (the "Trust
Instrument"), bylaws and registration statements under the 1940 Act and the
Securities Act of 1933, as amended (the "1933 Act"), the 1940 Act and the
Advisers Act, the rules and regulations thereunder, and all other applicable
federal and state laws and regulations, and the provisions of the Internal
Revenue Code of 1986, as amended, applicable to the Fund as a regulated
investment company;
(b) Bay Isle shall cause its officers to attend meetings and furnish
oral or written reports, as the Trust or Berger Associates may reasonably
require, in order to keep Berger Associates, the Trustees and appropriate
officers of the Trust fully informed as to the condition of the investment
portfolio of the Fund, the investment decisions of Bay Isle, and the investment
considerations which have given rise to those decisions;
(c) Bay Isle shall maintain all books and records required to be
maintained by Bay Isle pursuant to the 1940 Act, the Advisers Act, and the rules
and regulations promulgated thereunder, as the same may be amended from time to
time, with respect to transactions on behalf of the Fund, and shall furnish the
Trustees and Berger Associates with such periodic and special reports as the
Trustees or Berger Associates reasonably may request. Bay Isle hereby agrees
that all records which it maintains for the Fund or the Trust are the property
of the Trust, agrees to permit the reasonable inspection thereof by the Trust or
its designees and agrees to preserve for the periods prescribed under the 1940
Act and the Advisers Act any records which it maintains for the Trust and which
are required to be maintained under the 1940 Act and the Advisers Act, and
further agrees to surrender promptly to the Trust or its designees any records
which it maintains for the Trust upon request by the Trust;
(d) Bay Isle shall submit such reports relating to the valuation of
the Fund's assets and to otherwise assist in the calculation of the net asset
value of shares of the Fund as may reasonably be requested;
(e) Bay Isle shall, on behalf of the Fund, exercise such voting
rights, subscription rights, rights to consent to corporate action and any other
rights pertaining to the Fund's assets that may be exercised, in accordance with
any policy pertaining to the same that may be adopted or agreed to by the
Trustees of the Trust, or, in the event that the Trust retains the right to
exercise such voting and other rights, to furnish the Trust with advice as may
reasonably requested as to the manner in which such rights should be exercised;
(f) At such times as shall be reasonably requested by the Trustees or
Berger Associates, Bay Isle shall provide the Trustees and Berger Associates
with economic, operational and investment data and reports, including without
limitation all information and materials reasonably requested by or requested to
be delivered to the Trustees of the Trust pursuant to
2
<PAGE>
Section 15(c) of the 1940 Act, and shall make available to the Trustees and
Berger Associates any economic, statistical and investment services normally
available to similar investment company clients of Bay Isle; and
(g) Bay Isle will provide to Berger Associates for regulatory filings
and other appropriate uses materially accurate and complete information relating
to Bay Isle as may reasonably be requested by Berger Associates from time to
time and, notwithstanding anything herein to the contrary, Bay Isle shall be
liable to Berger Associates for all damages, costs and expenses, including
without limitation reasonable attorneys' fees (hereinafter referred to
collectively as "Damages"), incurred by Berger Associates as a result of any
material inaccuracies or omissions in such information provided by Bay Isle to
Berger Associates; provided, however, that Bay Isle shall not be liable to the
extent that any Damages are based upon inaccuracies or omissions made in
reliance upon information furnished to Bay Isle by Berger Associates.
2. FURTHER OBLIGATIONS. In all matters relating to the performance of
this Agreement, Bay Isle shall act in conformity with the Trust's Trust
Instrument, bylaws and currently effective registration statements under the
1940 Act and the 1933 Act and any amendments or supplements thereto (the
"Registration Statements") and with the written policies, procedures and
guidelines of the Fund, and written instructions and directions of the Trustees
and Berger Associates and shall comply with the requirements of the 1940 Act,
the Advisers Act, the rules and regulations thereunder, and all other applicable
federal and state laws and regulations. Berger Associates agrees to provide to
Bay Isle copies of the Trust's Trust Instrument, bylaws, Registration Statement,
written policies, procedures and guidelines and written instructions and
directions of the Trustees and Berger Associates, and any amendments or
supplements to any of them at, or, if practicable, before the time such
materials become effective. Bay Isle shall maintain errors and omissions
insurance in an amount at least equal to that disclosed to the Trustees in
connection with their approval of this Agreement.
3. OBLIGATIONS OF BERGER ASSOCIATES. Berger Associates shall have the
following obligations under this Agreement:
(a) To keep Bay Isle continuously and fully informed (or cause the
custodian of the Fund's assets to keep Bay Isle so informed) as to the
composition of the investment portfolio of the Fund and the nature of all of the
Fund's assets and liabilities from time to time;
(b) To furnish Bay Isle with a certified copy of any financial
statement or report prepared for the Fund by certified or independent public
accountants and with copies of any financial statements or reports made to the
Fund's shareholders or to any governmental body or securities exchange;
3
<PAGE>
(c) To furnish Bay Isle with any further materials or information
which Bay Isle may reasonably request to enable it to perform its function under
this Agreement; and
(d) To compensate Bay Isle for its services in accordance with the
provisions of Section 4 hereof.
4. COMPENSATION. Berger Associates shall pay to Bay Isle for its
services under this Agreement a fee, payable in United States dollars, at an
annual rate of 0.45% of the average daily net asset value of the Fund. This fee
shall be computed and accrued daily and payable monthly as of the last day of
each month during which or part of which this Agreement is in effect. For the
month during which this Agreement becomes effective and the month during which
it terminates, however, there shall be an appropriate proration of the fee
payable for such month based on the number of calendar days of such month during
which this Agreement is effective.
5. EXPENSES AND EXCLUDED EXPENSES. Bay Isle shall pay all its own costs
and expenses incurred in fulfilling its obligations under this Agreement.
6. REPRESENTATIONS OF BAY ISLE. Bay Isle hereby represents, warrants and
covenants to Berger Associates as follows:
(a) Bay Isle: (i) is registered as an investment adviser under the
Advisers Act and will continue to be so registered for so long as this Agreement
remains in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act
from performing the services contemplated by this Agreement; (iii) has met, and
will continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory organization necessary to be met in order
to perform the services contemplated by this Agreement; (iv) has the legal and
corporate authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Berger Associates of the occurrence
of any event that would disqualify Bay Isle from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise, and of the institution of any administrative, regulatory or judicial
proceeding against Bay Isle that could have a material adverse effect upon Bay
Isle's ability to fulfill its obligations under this Agreement.
(b) Bay Isle has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide Berger Associates
with a copy of such code of ethics, together with evidence of its adoption.
Within 45 days after the end of the last calendar quarter of each year that this
Agreement is in effect, the president or a vice president of Bay Isle shall
certify to Berger Associates that Bay Isle has complied with the requirements of
Rule 17j-1 during the previous year and that there has been no violation of Bay
Isle's code of ethics or, if such a violation has occurred, that appropriate
action was taken in response to such
4
<PAGE>
violation. Upon the written request of Berger Associates, Bay Isle shall permit
Berger Associates, its employees or its agents to examine the reports required
to be made to Bay Isle by Rule 17j-1(c)(1) and all other records relevant to Bay
Isle's code of ethics.
(c) Bay Isle has provided Berger Associates with a copy of its Form
ADV as most recently filed with the U.S. Securities and Exchange Commission
("SEC") and will, promptly after filing any amendment to its Form ADV with the
SEC, furnish a copy of such amendment to Berger Associates.
(d) Bay Isle will notify Berger Associates of any change in the
identity or control of its shareholders owning a 10% or greater interest in Bay
Isle, or any change that would constitute a change in control of Bay Isle under
the 1940 Act, prior to any such change if Bay Isle is aware, or should be aware,
of any such change, but in any event as soon as any such change becomes known to
Bay Isle.
7. REPRESENTATIONS OF BERGER ASSOCIATES. Berger Associates hereby
represents, warrants and covenants to Bay Isle as follows:
(a) Berger Associates: (i) is registered as an investment adviser
under the Advisers Act and will continue to be so registered for so long as this
Agreement remains in effect; (ii) is not prohibited by the 1940 Act or the
Advisers Act from fulfilling its obligations under this Agreement; (iii) has
met, and will continue to meet for so long as this Agreement remains in effect,
any other applicable federal or state requirements, or the applicable
requirements of any regulatory or industry self-regulatory organization
necessary to be met in order to fulfill its obligations under this Agreement;
(iv) has the legal and corporate authority to enter into and perform this
Agreement; and (v) will immediately notify Bay Isle of the occurrence of any
event that would disqualify Berger Associates from serving as an investment
adviser of an investment company pursuant to Section 9(a) of the 1940 Act or
otherwise, and of the institution of any administrative, regulatory or judicial
proceeding against Berger Associates that could have a material adverse effect
upon Berger Associates' ability to fulfill its obligations under this Agreement.
(b) Berger Associates has adopted a written code of ethics complying
with the requirements of Rule 17j-1 under the 1940 Act and will provide Bay Isle
with a copy of such code of ethics, together with evidence of its adoption.
(c) Berger Associates has provided Bay Isle with a copy of its Form
ADV as most recently filed with the U.S. Securities and Exchange Commission
("SEC") and will, promptly after filing any amendment to its Form ADV with the
SEC, furnish a copy of such amendment to Bay Isle.
5
<PAGE>
(d) Berger Associates will notify Bay Isle of any change in the
identity or control of its shareholders owning a 10% or greater interest in
Berger Associates, or any change that would constitute a change in control of
Berger Associates under the 1940 Act, prior to any such change if Berger
Associates is aware, or should be aware, of any such change, but in any event as
soon as any such change becomes known to Berger Associates.
8. TERM. This Agreement shall become effective as of the date first set
forth above and shall continue in effect until April 30, 2001, unless sooner
terminated in accordance with its terms, and shall continue in effect from year
to year thereafter only so long as such continuance is specifically approved at
least annually by the vote of a majority of the Trustees of the Trust who are
not parties hereto or interested persons of the Trust, Berger Associates or Bay
Isle, cast in person at a meeting called for the purpose of voting on the
approval of the terms of such renewal, and by either the Trustees of the Trust
or the affirmative vote of a majority of the outstanding voting securities of
the Fund. Berger Associates shall use its best efforts consistent with the
fiduciary obligations of all parties to obtain such annual approvals of this
Agreement.
9. TERMINATION. This Agreement may be terminated at any time, without
penalty, by the Trustees or by the shareholders of the Fund acting by vote of at
least a majority of its outstanding voting securities, provided in any such case
that 60 days' advance written notice of termination be given to Bay Isle at its
principal place of business. This Agreement may also be terminated by Berger
Associates or the Trust: (i) upon a material breach by Bay Isle of any of the
representations and warranties set forth in Section 6 of this Agreement, if such
breach shall not have been cured within a 20-day period after notice of such
breach; or (ii) if Bay Isle becomes unable to discharge its duties and
obligations under this Agreement. This Agreement may be terminated by Bay Isle
at any time, without penalty: (i) by giving 60 days' advance written notice of
termination to Berger Associates and to the Trust, or (ii) upon a material
breach by Berger Associates of any of the representations and warranties set
forth in Section 7 of this Agreement, if such breach shall not have been cured
within a 20-day period after notice of such breach. In addition, this Agreement
shall terminate, without penalty, upon the termination of the Advisory
Agreement.
10. ASSIGNMENT. This Agreement shall automatically terminate in the event
of its assignment.
11. AMENDMENTS. This Agreement may be amended by the parties only in a
written instrument signed by the parties to this Agreement and only if such
amendment is specifically approved (i) by a majority of the Trustees, including
a majority of the Trustees who are not interested persons of the Trust or Berger
Associates, Bay Isle or their affiliates, and (ii) if required by applicable
law, by the affirmative vote of a majority of the outstanding voting securities
of the Fund.
6
<PAGE>
12. LIMITATION ON PERSONAL LIABILITY. NOTICE IS HEREBY GIVEN that the
Trust is a business trust organized under the Delaware Business Trust Act
pursuant to a Certificate of Trust filed in the office of the Secretary of State
of the State of Delaware. All parties to this Agreement acknowledge and agree
that the Trust is a series trust and all debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series shall be enforceable against the assets held with respect to
such series only, and not against the assets of the Trust generally or against
the assets held with respect to any other series and further that no Trustee,
officer or holder of shares of beneficial interest of the Trust shall be
personally liable for any of the foregoing.
13. LIMITATION OF LIABILITY OF BAY ISLE. Berger Associates will not seek
to hold Bay Isle, and Bay Isle shall not be, liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission taken with respect to the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder and except to the
extent otherwise provided by law. As used in this section, "Bay Isle" shall
include any affiliate of Bay Isle performing services for the Fund contemplated
hereunder and directors, officers and employees of Bay Isle and such affiliates.
14. ACTIVITIES OF BAY ISLE. The services of Bay Isle hereunder are not to
be deemed to be exclusive, and Bay Isle is free to render services to other
parties, so long as its services under this Agreement are not materially
adversely affected or otherwise impaired thereby. Nothing in this Agreement
shall limit or restrict the right of any director, officer or employee of Bay
Isle to engage in any other business or to devote his or her time and attention
in part to the management or other aspects of any other business, whether of a
similar or a dissimilar nature. It is understood that Trustees, officers and
shareholders of the Trust are or may become interested in Bay Isle as directors,
officers and shareholders of Bay Isle, that directors, officers, employees and
shareholders of Bay Isle are or may become similarly interested in the Trust,
and that Bay Isle may become interested in the Trust as a shareholder or
otherwise.
15. THIRD PARTY BENEFICIARIES. The parties expressly acknowledge and
agree that the Trust and the Fund are third party beneficiaries of this
Agreement and that the Trust and the Fund shall have the full right to sue upon
and enforce this Agreement in accordance with its terms as if they were
signatories hereto. Any oversight, monitoring or evaluation of the activities
of Bay Isle by Berger Associates, the Trust or the Fund shall not diminish or
relieve in any way the liability of Bay Isle for any of its duties and
responsibilities under this Agreement.
16. NOTICES. Any notice or other communication required to be given
pursuant to this Agreement shall be deemed duly given if delivered personally or
by overnight delivery service or mailed by certified or registered mail, return
receipt requested and postage prepaid, or sent by facsimile and followed by copy
in first class postal mail, addressed to the parties at their respective
7
<PAGE>
addresses set forth below, or at such other address as shall be designated by
any party in a written notice to the other party.
(a) To Berger Associates at:
Berger Associates, Inc.
210 University Boulevard
Denver, Colorado 80206
Attention: President
Phone: (303) 329-0200
Fax: (303) 394-4397
with a copy to:
Diane M. Bono, Esq.
Sonnenschein Nath & Rosenthal
4520 Main Street, 11th Floor
Kansas City, Missouri 64111
Phone: (816) 932-4400
Fax: (816) 531-7545
(b) To Bay Isle at:
Bay Isle Financial Corporation
160 Sansome Street
San Francisco, California 94104
Attention: President
Phone: (415) 705-7777
Fax: (415) 705-7775
(c) To the Trust at:
Berger Investment Portfolio Trust
210 University Boulevard
Suite 900
Denver, Colorado 80206
with a copy to:
Lester R. Woodward, Esq.
Davis, Graham & Stubbs LLP
370 Seventeenth Street, Suite 4700
Denver, Colorado 80202
Phone: (303) 892-9400
Fax: (303) 892-7400
8
<PAGE>
17. CERTAIN DEFINITIONS. As used in this Agreement, the terms "vote of a
majority of the outstanding voting securities," "assignment," "approved at least
annually" and "interested persons" shall have the respective meanings specified
in the 1940 Act, as now in effect or hereafter amended, and the rules and
regulations thereunder, subject to such orders, exemptions and interpretations
as may be issued by the SEC under the 1940 Act and as may be then in effect.
Where the effect of a requirement of the federal securities laws reflected in
any provision of this Agreement is made less restrictive by a rule, regulation,
order, interpretation or other authority of the SEC, whether of special or
general application, such provision shall be deemed to incorporate the effect of
such rule, regulation, order, interpretation or other authority.
18. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Colorado (without giving effect to the conflicts of
laws principles thereof) and the 1940 Act. To the extent that the applicable
laws of the State of Colorado conflict with the applicable provisions of the
1940 Act, the latter shall control.
19. MISCELLANEOUS. The headings in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions thereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an originally, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers designated below as of the day and year first
above written.
BERGER ASSOCIATES, INC.
By:________________________________
Gerard M. Lavin
President
9
<PAGE>
BAY ISLE FINANCIAL CORPORATION
By:________________________________
Gary G. Pollock
President
10
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
BERGER INFORMATION TECHNOLOGY FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
This ADMINISTRATIVE SERVICES AGREEMENT (the "Agreement") is entered into
effective as of the _____ day of ______________, 1999, by and between BERGER
ASSOCIATES, INC. ("Berger Associates"), and BERGER INVESTMENT PORTFOLIO TRUST, a
Delaware business trust (the "Trust"), with respect to the BERGER INFORMATION
TECHNOLOGY FUND, a series of the Trust (the "Fund").
RECITALS
A. The Trust is a Delaware business trust and an open-end, management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act").
B. The Fund is a series of the Trust for which Berger Associates acts as
investment advisor.
C. The parties desire that in addition to its duties as investment
advisor, Berger Associates provide certain administrative services to the Trust
with respect to the Fund, on the terms and conditions set forth herein.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. APPOINTMENT. The Trust hereby appoints Berger Associates as the
administrator of the Fund, to provide to the Fund, at Berger Associates' expense
except as specifically set forth below, all services specified herein, for the
period and on the terms set forth in this Agreement. Berger Associates hereby
accepts such appointment and agrees to render the services and assume the
responsibilities herein set forth, for the compensation herein provided. In
performing its services under this Agreement, Berger Associates shall comply
with all relevant provisions of the 1940 Act and all other applicable federal
and state laws and regulations.
2. SERVICES TO BE PROVIDED. Berger Associates shall provide the
following services to the Fund at Berger Associates' own expense:
(a) coordinating all matters relating to the operations of the Fund,
including any necessary coordination among the investment advisor, sub-advisor,
transfer agent, dividend
1
<PAGE>
disbursing agent, fund accounting agent, accountants, attorneys and other
parties performing services or operational functions for the Fund;
(b) providing personnel and assistance necessary to maintain the
qualification and/or registration to sell shares under the federal securities
laws and in each state where Berger Associates has determined such qualification
and/or registration to be advisable;
(c) monitoring the Fund's compliance with (i) the Trust's trust
instrument, as amended from time to time (the "Trust Instrument"), bylaws and
currently effective registration statement under the Securities Act of 1933, as
amended (the "1933 Act") and the 1940 Act and any amendments or supplements
thereto ("Registration Statement"); (ii) the written policies, procedures and
guidelines of the Fund, and the written instructions from the Trustees of the
Trust; (iii) the requirements of the 1933 Act, the 1940 Act, the rules
thereunder, and all other applicable federal and state laws and regulations; and
(iv) the provisions of Subchapter M of the Internal Revenue Code, applicable to
the Fund as a regulated investment company;
(d) supervising the preparation of any or all registration statements
(including prospectuses and statements of additional information), tax returns,
proxy materials, financial statements, notices and reports for filings with
regulatory authorities and distribution to shareholders of the Fund;
(e) issuing certain correspondence to shareholders;
(f) maintaining or supervising the maintenance of certain books and
records;
(g) providing the Trust with adequate personnel, office space,
communications facilities and other facilities necessary for operation of the
Fund as contemplated by this Agreement; and
(h) preparing and rendering to the Trustees of the Trust such periodic and
special reports as the Trustees may reasonably request.
3. EXPENSES AND EXCLUDED EXPENSES. Berger Associates shall pay all its
own costs and expenses incurred in rendering the services required under this
Agreement. Notwithstanding any other provision hereof, it is expressly agreed
that Berger Associates shall not be responsible to pay, except as the parties
may otherwise agree, directly or on behalf of the Fund, any of the Fund's
expenses which shall remain the Trust's own obligation and responsibility to
pay.
4. COMPENSATION. The Trust shall pay to Berger Associates for the
services provided under this Agreement a fee, payable in United States dollars,
at an annual rate of 0.01% of the average daily net asset value of the Fund.
Such fee shall be computed and accrued daily and
2
<PAGE>
payable monthly on the last day of each month during which or part of which this
Agreement is in effect.
5. BOOKS AND RECORDS. Berger Associates hereby agrees that all records
which it maintains for the Fund or the Trust hereunder are the property of the
Trust, agrees to permit the reasonable inspection thereof by the Trust or its
designees and agrees to preserve for the periods prescribed under the 1940 Act
any records which it maintains for the Fund or the Trust and which are required
to be maintained under the 1940 Act. Berger Associates further agrees to
surrender promptly to the Trust or its designees any records which it maintains
for the Fund or the Trust upon request by the Trust.
6. TERM AND TERMINATION. This Agreement shall become effective as of the
date first set forth above and shall continue until terminated by either party
on 60 days' written notice to the other party. This Agreement may also be
terminated by the Trustees of the Trust at any time if Berger Associates becomes
unable to discharge its duties and obligations under this Agreement.
7. ASSIGNMENT AND AMENDMENTS. This Agreement shall not be assigned by
either party without the prior written consent of the other party to the
Agreement. This Agreement may be amended in writing by the parties, provided
that all such amendments shall be subject to the approval of the Trustees of the
Trust.
8. LIMITATION OF LIABILITY OF BERGER ASSOCIATES. Berger Associates shall
not be liable for any error of judgment or mistake of law or for any act or
omission taken with respect to the Fund, except for willful misfeasance, bad
faith or gross negligence in the performance of its duties, or by reason of
reckless disregard of its obligations and duties hereunder and except to the
extent otherwise provided by law. As used in this section, "Berger Associates"
shall include directors, officers and employees of Berger Associates.
9. ACTIVITIES OF BERGER ASSOCIATES. The services of Berger Associates
hereunder are not to be deemed to be exclusive, and Berger Associates is free to
render services to other parties, so long as its services under this Agreement
are not materially adversely affected or otherwise impaired thereby. Nothing in
this Agreement shall limit or restrict the right of any director, officer or
employee of Berger Associates to engage in any other business or to devote his
or her time and attention in part to the management or other aspects of any
other business, whether of a similar nature or a dissimilar nature.
10. LIMITATION ON PERSONAL LIABILITY. NOTICE IS HEREBY GIVEN that the
Trust is a business trust organized under the Delaware Business Trust Act
pursuant to a Certificate of Trust filed in the office of the Secretary of State
of the State of Delaware. All parties to this Agreement acknowledge and agree
that the Trust is a series trust and all debts, liabilities, obligations and
expenses incurred, contracted for or otherwise existing with respect to a
particular series shall be
3
<PAGE>
enforceable against the assets held with respect to such series only, and not
against the assets of the Trust generally or against the assets held with
respect to any other series and further that no Trustee, officer or holder of
shares of beneficial interest of the Trust shall be personally liable for any of
the foregoing.
11. GOVERNING LAW. This Agreement shall be construed in accordance with
the laws of the State of Colorado (without giving effect to the conflicts of
laws principles thereof) and the 1940 Act. To the extent that the applicable
laws of the State of Colorado conflict with the applicable provisions of the
1940 Act, the latter shall control.
12. MISCELLANEOUS. The headings in this Agreement are included for
convenience of reference only and in no way define or limit any of the
provisions thereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the date first above written.
BERGER ASSOCIATES, INC.
By:
----------------------------------------
Gerard M. Lavin
President
BERGER INVESTMENT PORTFOLIO TRUST, with
respect to the series known as the Berger
Information Technology Fund
By:
----------------------------------------
Gerard M. Lavin
President
4
<PAGE>
DAVIS, GRAHAM & STUBBS LLP
A Limited Liability Partnership
Attorneys at Law
Writer's Address:
515 Post Oak Blvd.
Suite 870
Houston, Texas 77027
713-850-9400 (phone)
713-850-0807 (fax)
April 16, 1999
Berger Investment Portfolio Trust
210 University Blvd., Suite 900
Denver, Colorado 80206
Re: Berger Information Technology Fund
Ladies and Gentlemen:
We have acted as counsel to Berger Investment Portfolio Trust, a Delaware
business trust (the "Trust"), and are providing this opinion in connection with
the registration by the Trust of shares of beneficial interest, $.01 par value
(the "Shares"), of the Berger Information Technology Fund (the "Fund"), a series
of the Trust, described in Post-Effective Amendment No. 20 to the Registration
Statement on Form N1-A of the Trust (1933 Act File No. 33-69460; 1940 Act File
No. 811-8046), as filed with the Securities and Exchange Commission on April 16,
1999 (the "Registration Statement").
In such connection, we have examined the Trust's Trust Instrument and
Bylaws, the proceedings of its Trustees relating to the authorization, issuance
and proposed sale of the Shares, and considered such other records and documents
and such factual and legal matters as we deemed appropriate for purposes of this
opinion.
Based on the foregoing, it is our opinion that the Shares have been duly
authorized and, when sold as contemplated in the Registration Statement,
including receipt by the Fund of full payment for the Shares and compliance with
the Securities Act of 1933, the Investment Company Act of 1940 and applicable
state law regulating the offer and sale of securities, will be validly issued,
fully paid and non-assessable Shares of the Trust.
We hereby consent to all references to this firm in the Registration
Statement and to the filing of this opinion as an exhibit to the Registration
Statement. This consent does not constitute a consent under Section 7 of the
Securities Act of 1933, and in consenting to the references to our firm in the
Registration Statement, we have not certified any part of the Registration
Statement and do not otherwise come within the categories of persons whose
consent is required under Section 7 or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
DAVIS, GRAHAM & STUBBS LLP
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated March 26, 1999, on the
financial statements of the InformationTech100-Registered Trademark- Fund series
of Advisors Series Trust referred to therein, in Post-Effective Amendment No. 20
to the Registration Statement on Form N-1A, File No. 33-69460, of Berger
Investment Portfolio Trust as filed with the Securities and Exchange Commission.
We also consent to the reference to our Firm in the Prospectuses contained
therein under the caption "Financial Highlights of the Fund" and in the
Statements of Additional Information contained therein under the caption
"Financial Information."
McGLADREY & PULLEN, LLP
April 14, 1999
<PAGE>
RULE 12b-1 PLAN FOR
THE INVESTOR SHARES OF THE
BERGER INFORMATION TECHNOLOGY FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
1. THE PLAN. The Trustees of Berger Investment Portfolio Trust, a
Delaware business trust (the "Trust"), have adopted this Rule 12b-1 Plan (the
"Plan") pursuant to the terms of Rule 12b-1 under the Investment Company Act of
1940, as amended (the "Act"), with respect to the class of shares designated as
Investor Shares of the Trust's series known as the Berger Information Technology
Fund (the "Fund"). In accordance with the terms of this Plan, the Trust may act
as a "distributor" (as that term is used in said Rule 12b-1) of the Investor
Shares of the Fund.
2. AUTHORIZED PAYMENTS. During each fiscal year of the Fund, the
Trust is hereby authorized to pay out of the assets of the Fund on a monthly
basis, an amount computed at an annual rate of twenty-five one-hundredths of one
percent (.25%) of the average daily net assets of the Fund represented by
Investor Shares ("12b-1 Payments"), to Berger Associates, Inc. ("Berger
Associates"), to finance activities primarily intended to result in the sale of
the Fund's Investor Shares, which shall include, but not be limited to:
payments made to, and costs incurred by, the Fund's principal underwriter in
connection with the distribution of the Fund's Investor Shares, including
payments made to and expenses of officers and registered representatives of
Berger Distributors, Inc.; payments made to and expenses of other persons
(including employees of Berger Associates) who are engaged in, or provide
support services in connection with, the distribution of the Fund's Investor
Shares, such as answering routine telephone inquiries and processing prospective
investor requests for information; compensation paid to securities dealers,
financial institutions and other organizations which render distribution and
administrative services in connection with the distribution of the Fund's
Investor Shares, including services to shareholders of the Investor Shares of
the Fund and prospective investors; costs related to the formulation and
implementation of marketing and promotional activities, including direct mail
promotions and television, radio, newspaper, magazine and other mass media
advertising; costs of printing and distributing prospectuses and reports to
prospective shareholders of Investor Shares of the Fund; costs involved in
preparing, printing and distributing sales literature for Investor Shares of the
Fund; costs involved in obtaining whatever information, analyses and reports
with respect to marketing and promotional activities on behalf of the Fund
relating to its Investor Shares that Berger Associates deems advisable; and such
other costs relating to the Investor Shares of the Fund as may from time to time
be agreed upon by the Fund. 12b-1 Payments shall be made by the Trust to Berger
Associates with respect to each fiscal year of the Fund without regard to the
actual distribution expenses incurred by Berger Associates in such year; I.E.,
if distribution expenditures incurred by Berger Associates are less than the
total of such 12b-1 Payments in such year, the difference shall not be
reimbursed to the Trust by Berger Associates, and if distribution expenditures
incurred by Berger Associates are more than the total of such 12b-1 Payments,
the excess shall not be reimbursed to Berger Associates by the Trust. 12b-1
Payments made pursuant to this Plan shall be imposed only against the assets of
the Fund represented by Investor Shares.
1
<PAGE>
3. TRUSTEE APPROVAL. This Plan shall not take effect until it has
been approved, together with any related agreements, by votes of a majority of
both (a) the Trustees of the Trust and (b) those Trustees of the Trust who are
not "interested persons" of the Trust or the Fund (as defined in the Act) and
have no direct or indirect financial interest in the operation of this Plan or
any agreements related to it (the "Rule 12b-1 Trustees"), cast in person at a
meeting (or meetings) called for the purpose of voting on this Plan and such
related agreements.
4. ANNUAL REAPPROVAL. Unless sooner terminated pursuant to
paragraph 5, this Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in paragraph 3.
5. TERMINATION OF PLAN. This Plan may be terminated at any time by
a vote of a majority of the Rule 12b-1 Trustees, or by vote of a majority of the
Fund's outstanding Investor Shares.
6. AMENDMENTS. This Plan may not be amended to increase materially
the amount of distribution expenses provided for in paragraph 2 hereof without
approval of the holders of Investor Shares as provided in Rule 12b-1 under the
Act (or any successor provision), and no material amendment to the Plan shall be
made unless approved in the manner provided for approval of this Plan in
paragraph 3 hereof.
7. QUARTERLY REPORTS. Any person authorized to direct the
disposition of monies paid or payable by the Trust pursuant to this Plan or any
related agreements shall provide to the Trustees of the Trust, and the Trustees
shall review at least quarterly, a written report of the amounts so expended and
the purposes for which such expenditures were made. Unless directed otherwise
by the Trustees with respect to a particular expenditure or type of expenditure,
any expenditure made by Berger Associates which jointly promotes the sale of
Investor Shares of the Fund and the sale of other classes of shares or shares of
other investment companies for which Berger Associates or its affiliate serves
as investment adviser or administrator, and which expenditures are not readily
identifiable as related to the Investor Shares of the Fund or one or more of
such other classes or investment companies, shall be allocated to the Investor
Shares of the Fund and such other classes or other investment companies on a
basis such that the Investor Shares of the Fund will be allocated only their
proportional share of such expenditures based upon the relative net assets of
the Fund represented by Investor Shares as compared to the net assets of such
other classes and all such other investment companies thus promoted.
8. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in
effect, the selection and nomination of Trustees of the Trust who are not
interested persons (as defined in the Act) of the Fund shall be committed to the
discretion of the Trustees who are not interested persons of the Fund.
9. RECORDS. The Trust shall preserve copies of this Plan and any
related agreements and all reports made pursuant to paragraph 7 hereof for a
period of not less than six
2
<PAGE>
years from the date of this Plan, or the agreements or such reports, as the case
may be, and shall preserve the Plan, agreement or report the first two years in
an easily accessible place.
10. LIMITATION ON PERSONAL LIABILITY. NOTICE IS HEREBY GIVEN that
the Trust is a business trust organized under the Delaware Business Trust Act
pursuant to a Certificate of Trust filed in the office of the Secretary of State
of the State of Delaware. The Trust is a series trust and all debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular series shall be enforceable against the
assets held with respect to such series only, and not against the assets of the
Trust generally or against the assets held with respect to any other series and
further that no trustee, officer or holder of shares of beneficial interest of
the Trust shall be personally liable for any of the foregoing.
IN WITNESS WHEREOF, the adoption of this Rule 12b-1 Plan by the
Trustees of the Trust with respect to the Investor Shares of the Fund is hereby
confirmed as of the day and year set forth below.
BERGER INVESTMENT PORTFOLIO TRUST
with respect to the series known as the
Berger Information Technology Fund
Date: , 1999 By
--------------------- ---------------------------------
Gerard M. Lavin, President
3
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<SERIES>
<NUMBER> 071
<NAME> BERGER INFORMATION TECHNOLOGY FUND; INSTITUTIONAL SHARES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> FEB-28-1999
<PERIOD-START> MAR-01-1998
<PERIOD-END> FEB-28-1999
<INVESTMENTS-AT-COST> 9086393
<INVESTMENTS-AT-VALUE> 12412406
<RECEIVABLES> 22194
<ASSETS-OTHER> 32007
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 12466607
<PAYABLE-FOR-SECURITIES> 9657
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 10948
<TOTAL-LIABILITIES> 20605
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 9021762
<SHARES-COMMON-STOCK> 280547
<SHARES-COMMON-PRIOR> 88685
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 98227
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3326013
<NET-ASSETS> 12446002
<DIVIDEND-INCOME> 5238
<INTEREST-INCOME> 16768
<OTHER-INCOME> 0
<EXPENSES-NET> 107896
<NET-INVESTMENT-INCOME> (85891)
<REALIZED-GAINS-CURRENT> 123091
<APPREC-INCREASE-CURRENT> 2901441
<NET-CHANGE-FROM-OPS> 3024532
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 233427
<NUMBER-OF-SHARES-REDEEMED> 41565
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 9772259
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (24864)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 68002
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 192141
<AVERAGE-NET-ASSETS> 7190423
<PER-SHARE-NAV-BEGIN> 30.15
<PER-SHARE-NII> (.31)
<PER-SHARE-GAIN-APPREC> 14.52
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 44.36
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
RULE 18f-3 PLAN FOR
MULTIPLE CLASSES OF SHARES OF THE
BERGER INFORMATION TECHNOLOGY FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
1. INTRODUCTION. The Trustees of Berger Investment Portfolio
Trust, a Delaware business trust (the "Trust"), have adopted this Rule 18f-3
Plan (the "Plan") pursuant to the terms of Rule 18f-3 under the Investment
Company Act of 1940, as amended (the "Act"), with respect to the shares of the
Trust's series known as the Berger Information Technology Fund (the "Fund"). In
accordance with the terms of this Plan, the Trust may offer from time to time
multiple classes of shares of the Fund.
2. CLASS CHARACTERISTICS. Except as otherwise provided in this
Plan, each share of a class will represent an identical interest in the
investment portfolio of the Fund and shall have identical voting, dividend,
liquidation and other rights and obligations as each other class.
3. CLASS DESIGNATIONS. The Fund shall initially issue two
classes of shares, consisting of Institutional Shares and Investor Shares.
Institutional Shares shall be offered at their net asset value, without any
initial sales charge, and shall not bear any expenses of distribution. Investor
Shares shall be offered at their net asset value, without any initial sales
charge, and shall bear the expense of distribution provided in a separate Rule
12b-1 plan adopted with respect to such class. Each class is subject to such
investment minimums and other conditions of eligibility as are set forth in the
prospectus for such class, as it may be amended from time to time. Subject to
the Trust's Trust Agreement and any other applicable provisions, the Trustees of
the Trust have the authority to create additional classes, or change existing
classes, from time to time, in accordance with Rule 18f-3 under the Act.
4. ALLOCATIONS OF INCOME AND EXPENSES. The gross income,
realized and unrealized capital gains and losses and expenses (other than "Class
Expenses," as defined below) of the Fund shall be allocated to each class on the
basis of the net asset value of the Fund attributable to shares of that class
relative to the net asset value of the Fund as a whole. Expenses to be so
allocated shall include expenses of the Fund that are not attributable to a
particular class but are allocated to the Fund, including but not limited to
Trustees' fees, insurance costs and certain legal fees.
"Class Expenses" shall include (a) payments made pursuant to a
Rule 12b-1 plan adopted with respect to a particular class, and fees and
expenses of other arrangements for shareholder services or the distribution of
shares adopted with respect to a particular class; (b) payments of fees and
expenses made for transfer agency and dividend disbursing agency services
incurred with respect to a particular class; (c) expenses related to preparing,
printing and distributing materials such as shareholder reports, prospectuses
and proxy statements to current shareholders of a specific class; (d) expenses
of administrative personnel and services required to support shareholders of a
specific class (including, but not limited to, maintaining telephone lines and
personnel to answer shareholder inquiries about their accounts or about the
Fund); (e) SEC,
1
<PAGE>
Blue Sky or foreign registration or other fees incurred with respect to a
specific class; (f) litigation or other legal expenses relating to a specific
class; (g) fees or expenses of the Trustees of the Trust and of counsel and
consultants to the Trustees, incurred as a result of issues relating to a
specific class; (h) accounting and consulting expenses relating to a specific
class; and (i) any other expenses that are actually incurred in a different
amount by a particular class or that vary by class as a result of services
received by a particular class of a different kind or to a different degree than
other classes and are classified by the Trustees of the Trust as Class Expenses;
PROVIDED that in no event shall Class Expenses include advisory or custodial
fees, tax return preparation fees or other expenses related to the management of
the Fund's assets. Class Expenses shall be separately allocated to the class
that incurred such expense.
5. VOTING RIGHTS. Each class of shares shall have exclusive
voting rights as a class on any matter submitted to shareholders of the Fund
that relates solely to such class or to any 12b-1 plan adopted with respect to
such class, or to the arrangements contained in this Plan concerning allocation
of expenses to such class. Each class shall have separate voting rights as a
class on any matter submitted to shareholders of the Fund in which the interest
of one class differs from the interest of any other class.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. To the extent any
dividends are paid or other distributions are made by the Fund with respect to
its shares, such dividends and distributions shall be calculated with respect to
each class in the same manner, at the same time and shall be in the same amount,
except that any payments under a Rule 12b-1 plan adopted with respect to a class
of shares and any Class Expenses relating to a class shall be borne exclusively
by that class.
7. WAIVERS OR REIMBURSEMENTS OF EXPENSES. Expenses may be
waived or reimbursed by the Fund's advisor, underwriter or any other provider of
services to the Fund.
8. EXCHANGE PRIVILEGES. Shareholders of any class of the Fund
may exchange their shares for shares of any other fund made available by the
Fund's advisor or distributor for this purpose, with no sales charge, on the
basis of relative net asset value, subject to any investment minimums and other
conditions of eligibility as are set forth in the then current prospectus of the
fund into which the shareholder wishes to exchange.
9. CONVERSION FEATURE. There shall be no conversion feature
associated with the Institutional Shares or the Investor Shares of the Fund,
except that shareholders of any class of the Fund may convert their shares into
shares of any other class of the Fund in the event and only in the event the
shareholder ceases to be eligible to purchase or hold shares of the original
class, or becomes eligible to purchase shares of a different class, by reason of
a change in the shareholder's status under the conditions of eligibility in
effect for such class at that time.
10. TRUSTEE MONITORING. On an ongoing basis, the Trustees shall
monitor the Fund for the existence of any material conflicts between the
interests of the various classes of shares of the Fund. The Trustees, including
a majority of the Trustees who are not "interested
2
<PAGE>
persons" of the Fund or its advisor, as defined in the Act (the "Independent
Trustees"), shall take such action as is reasonably necessary to reconcile
fairly any such conflict that may develop. The Fund's advisor and its
distributor shall be responsible for alerting the Trustees to any material
conflicts of which they become aware. The Trustees shall further monitor on an
ongoing basis the use of any waivers or reimbursements by the advisor or
distributor of expenses to guard against cross-subsidization between classes.
If an irreconcilable conflict arises, the advisor and the distributor, at their
own cost, shall remedy such conflict by appropriate action, up to and including
establishing one or more new series or funds.
11. REPORTS. At least annually, the Trustees shall receive a
report with respect to the methodology and procedures for calculating the net
asset value, dividends and distributions for the various classes of the Fund,
and the proper allocation of income and expenses among the classes. The report
to the Trustees shall also address whether the Fund has adequate facilities in
place to ensure the implementation of the methodology and procedures for proper
calculation of the net asset value, dividends and distributions for the classes,
and the proper allocation of income and expense among the classes.
12. AMENDMENTS. This Plan may be amended from time to time in
accordance with the provisions and requirements of Rule 18f-3 under the Act.
13. LIMITATION ON PERSONAL LIABILITY. NOTICE IS HEREBY GIVEN
that the Trust is a business trust organized under the Delaware Business Trust
Act pursuant to a Certificate of Trust filed in the office of the Secretary of
State of the State of Delaware. The Trust is a series trust and all debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular series shall be enforceable against the
assets held with respect to such series only, and not against the assets of the
Trust generally or against the assets held with respect to any other series and
further that no Trustee, officer or holder of shares of beneficial interest of
the Trust shall be personally liable for any of the foregoing.
IN WITNESS WHEREOF, the adoption of this Rule 18f-3 Plan by the
Trustees of the Trust with respect to the Fund is hereby confirmed as of the day
and year set forth below.
BERGER INVESTMENT PORTFOLIO TRUST
with respect to the series known as the
Berger Information Technology Fund
Date: _______________, 1999 By_______________________________
Gerard M. Lavin, President
3
