<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 15, 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. 21 /X/
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 23 /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
---------------------------
Jack R. Thompson, 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)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 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 New Generation Fund -- Institutional Shares, and the Berger Small Company
- --------------------------------------------------------------------------------
Growth Fund -- 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 New Generation Fund - Institutional Shares class
One for the Berger Small Company Growth Fund - Institutional Shares
class
Two Statements of Additional Information:
One for the Berger New Generation Fund - Institutional Shares class
One for the Berger Small Company Growth 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 -- Investor Shares, Berger New
Generation Fund -- Investor Shares, Berger Balanced Fund, Berger Select Fund,
Berger Mid Cap Growth Fund, Berger Mid Cap Value Fund or Berger Information
Technology Fund -- Investor Shares or Institutional Shares.
<PAGE>
BERGER FUNDS PROSPECTUS
[Nature photo]
BERGER SMALL COMPANY GROWTH 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.
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. 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 in the Fund.
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 Small Company Growth 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.
BERGER SMALL COMPANY GROWTH FUND-Registered Trademark-- PAGE
INSTITUTIONAL SHARES
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 Manager PAGE
Special Fund Structure PAGE
FINANCIAL HIGHLIGHTS FOR THE FUND PAGE
THE BERGER FUNDS, THE BERGER MOUNTAIN LOGO and BERGER SMALL COMPANY GROWTH FUND
are registered trademarks 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 SMALL COMPANY GROWTH FUND
INSTITUTIONAL SHARES
Ticker Symbol: Not Available
[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 that goal, the Fund
primarily invests in the common stocks of small companies with the potential for
rapid earnings growth. The Fund's stock selection focuses on companies that
either occupy a dominant position in an emerging industry or have a growing
market share in a larger, fragmented industry.
The Fund's investment manager generally looks for companies with:
- - Strong entrepreneurial management with proven track records
- - A catalyst for rapid earnings growth, such as new products, ideas or
plans to enter new markets
- - Relatively strong balance sheets.
Under normal circumstances, the Fund invests at least 65% of its assets in
equity securities of companies whose market capitalization, at the time of
initial purchase, is less than the 12-month average of the maximum market
capitalization for companies included in the Russell 2000 Index (Russell 2000).
This average is updated monthly. 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 lightning 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.
The Fund's share price may fluctuate more than that of funds primarily invested
in stocks of mid-sized and large companies. Occasionally, small company
securities may underperform as compared to the securities of larger companies.
They may also pose greater risk due to narrow product lines, limited financial
resources, less depth in management or a limited trading market for their
stocks. The Fund's investments are often focused in a small number of business
sectors.
See "Investment Techniques, Securities and Associated Risks" later in this
prospectus for more information on principal risks and other risks.
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[icon-profile of head with scrolled paper in background]
THE FUND'S PAST PERFORMANCE
The information below shows the Fund's performance since it began operations
through December 31, 1998. 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.
Year-by-year returns show you how the Fund's performance has varied by
illustrating the differences for each full calendar year since the Fund began.
<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN AS OF DECEMBER 31(1)
1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C>
40%
30% 33.80%
20%
10% 13. 73% 16.77% 16.16%
0% 3.17%
(10)%
Best quarter: 12/31/98 26.61%
Worst quarter: 9/30/98 -29.22%
Calendar year-to-date through 6/30/99: [_____]%
</TABLE>
Average annual total return is a measure of the Fund's performance over time.
The Fund's average annual return is compared with the Russell 2000. While the
Fund does not seek to match the returns of the Russell 2000, this index is a
good indicator of small company stock market performance. You may not invest in
the Russell 2000 and unlike the Fund, it does not incur fees or charges.
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1998(1)
<TABLE>
<CAPTION>
1 Year 5 Years Life of the Fund
(December 30, 1993)
<S> <C> <C> <C>
The Fund 3.17% 16.32% 16.32%
Russell 2000 -2.55% 11.87% 11.87%
</TABLE>
1. Fund returns are from periods prior to the Fund's adoption of share classes
and therefore include a 0.25% 12b-1 fee which has not been paid by the
Institutional Shares since the inception of that class on August 16, 1999.
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[icon-two coins]
FUND EXPENSES
ANNUAL FUND OPERATING EXPENSES
As a shareholder in the Fund, you (deducted directly from the Fund)
do not pay any sales loads,
redemption or exchange fees, but Management fee .90%
you do bear indirectly Annual Other expenses(1) .27%
Fund Operating Expenses, which ----
vary from year to year. TOTAL ANNUAL FUND OPERATING EXPENSES 1.17%
1. "Other expenses" are based on estimated expenses for the Institutional Shares
class and include transfer agency fees, shareholder report expenses,
registration fees and custodian fees.
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:
Years $
- ---------------------------------------
One 119
Three 372
Five 644
Ten 1,420
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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.
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 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 contract 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.
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<PAGE>
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
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
LENDING PORTFOLIO SECURITIES to qualified financial institutions is
undertaken in order to earn income. The Fund lends securities only on a fully
collateralized basis. The Fund may lend portfolio securities only up to 33 1/3%
of its total assets. CREDIT RISK
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.
Page 7
<PAGE>
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.
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. 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.
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<PAGE>
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 219958
Kansas City, MO 64121
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 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, reduce 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 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
Generally, payment for your redeemed shares will be sent to you within
three business days after receipt of your redemption request in good
order.
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.)
Page 12
<PAGE>
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 each 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.
- - An exchange out of a Berger Fund results in the sale of that 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 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:
- - 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.
Page 13
<PAGE>
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 219958, Kansas City, MO 64121.
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 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.
Page 14
<PAGE>
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.
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 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) 259-2820 or write to the Berger Funds, P.O. Box 219958, Kansas City, MO
64121. 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.
ORGANIZATION OF THE FUND
INVESTMENT MANAGER
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. For these
services, Berger Associates earns a fee at the annual rate of 0.90% of the
Fund's average daily net assets. Berger Associates also provides administrative
services to the Fund.
Page 17
<PAGE>
AMY K. SELNER, Vice President of Berger Associates, is the Fund's investment
manager. Ms. Selner joined Berger Associates as a senior technology analyst in
April 1996 and assumed management of the Fund in November 1998. Ms. Selner has
more than seven years of experience in the investment industry.
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
The Fund offers two classes of shares. The Institutional Shares offered in this
prospectus are designed for investors who maintain a minimum account balance of
$250,000. 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 periods before the Fund first began
offering the Institutional Shares starting on August 16, 1999. Therefore, the
data on the table reflect a 0.25% 12b-1 fee not paid by the Institutional
Shares. The information in the table for the years ended September 30, 1995,
1996, 1997 and 1998, was audited by PricewaterhouseCoopers LLP, the Fund's
independent accountants. The information for the period ended March 31, 1999, is
unaudited.
BERGER SMALL COMPANY GROWTH FUND
For a Share Outstanding Throughout the Periods Presented
<TABLE>
<CAPTION>
Period Ended Years Ended
March 31, September 30,
--------- -------------
1999 1998 1997 1996 1995 1994(1)
---- ---- ---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $3.61 $5.33 $4.74 $3.61 $2.74 $2.50
---- ---- ---- ---- ---- ----
From investment operations:
Net investment income (loss).......... (0.02) -- (0.05) (0.03) (0.02) --
Net realized and unrealized gains
(losses) on investment and
foreign currency
transactions................. 0.88 (1.24) 0.84 1.16 0.89 0.24
---- ---- ---- ---- ---- ----
Total from investment operations............... 0.86 (1.24) 0.79 1.13 0.87 0.24
---- ---- ---- ---- ---- ----
Less dividends and distributions
Dividends (from net investment
income)............................... -- -- -- -- --(2) --
Distributions (from capital gains).... (0.70) (0.48) (0.20) -- -- --
Total dividends and distributions.............. (0.70) (0.48) (0.20) -- -- --
Net asset value, end of period................. $3.77 $3.61 $5.33 $4.74 $3.61 $2.74
==== ==== ==== ==== ==== ====
Total Return(3)................................ 26.27% (24.70)% 17.68% 31.30% 31.90% 9.60%
===== ===== ===== ===== ===== ====
Ratios/Supplemental Data:
Net assets, end of period (in thousands)....... $590,456 $561,741 $902,685 $871,467 $522,667 $211,852
Net expense ratio to average net assets(4)..... 1.69%(5) 1.48% 1.67% 1.68% 1.89% 2.10%(5)
Ratio of net income (loss) to average net
assets......................................... (1.20)%(5) (1.01)% (1.09)% (0.97)% (0.74)% 0.32%(5)
Gross expense ratio to average net assets ..... 1.69%(5) 1.59% 1.67% 1.68% 1.89% 2.10%(5)
Portfolio turnover rate(3)..................... 66% 97% 111% 91% 109% 108%
</TABLE>
1. Period from December 30, 1993 (commencement of investment operations) to
September 30, 1994. Other independent accountants audited this information.
2. Dividends from net investment income were less than $0.01 per share.
3. Not annualized for periods of less than one full year.
4. Net expenses represent gross expenses reduced by fees waived by the Advisor.
5. Annualized.
Page 19
<PAGE>
[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 219958
Kansas City, MO 64121
(800) 259-2820
bergerfunds.com
Text-only versions of Fund documents can be viewed online or downloaded from the
SEC's web site at 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 Small Company Growth Fund - Institutional Shares
Page 20
<PAGE>
BERGER FUNDS PROSPECTUS
[Nature photo]
BERGER NEW GENERATION 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.
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. 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 in the Fund.
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 New Generation 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.
BERGER NEW GENERATION FUND-Registered Trademark- - 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 Manager PAGE
Special Fund Structure PAGE
FINANCIAL HIGHLIGHTS FOR THE FUND PAGE
THE BERGER FUNDS, THE BERGER MOUNTAIN LOGO and BERGER NEW GENERATION FUND are
registered trademarks 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 NEW GENERATION FUND
INSTITUTIONAL SHARES
Ticker Symbol: Not Available
[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 that goal, the Fund
primarily invests in the common stocks of companies with potential for
significant earnings growth. The Fund focuses on leading-edge companies with new
ideas, technologies or methods of doing business. Its investment manager seeks
companies it believes have the potential to change the direction or dynamics of
the industries in which they operate or significantly influence the way
businesses or consumers conduct their affairs.
The Fund's investment manager generally looks for companies:
- - In business sectors characterized by rapid change, regardless of the
company's size
- - With favorable long-term growth potential due to their new or innovative
products or services
- - With management and financial strength to fulfill their vision and grow
their business.
The Fund invests in common stocks, both domestic and foreign, and other
securities with equity features, such as convertible securities and preferred
stocks. Due to the Fund's focus on companies with the characteristics described
above, the Fund generally is weighted toward small market capitalization
companies, although it is free to invest in companies with larger market
capitalizations as well. 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. The Fund's investment
manager has in the past and may in the future actively trade the portfolio in
pursuit of the Fund's goal. Due to this, the annual portfolio turnover rate may
be higher than other Berger Funds.
[icon-left facing profile of head with lightning 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 weighting toward small companies in rapidly changing
industries, its share price may fluctuate more than that of funds invested in
larger companies or more stable industries. Small companies may pose greater
risk due to narrow product lines, limited financial resources, less depth in
management or a limited trading market for their stocks. In addition, products
and services in rapidly changing industries may be subject to intense
competition and rapid obsolescence and may require regulatory approvals prior to
their use. The Fund's investments are often focused in a small number of
business sectors. In addition, higher turnover rates may result in higher
brokerage costs to the Fund and in higher net taxable gains for you as an
investor.
Page 3
<PAGE>
See "Investment Techniques, Securities and Associated Risks" later in this
prospectus for more information on principal risks and other risks.
[icon-profile of head with scrolled paper in background]
THE FUND'S PAST PERFORMANCE
The information below shows the Fund's performance since it began operations
through December 31, 1998. 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.
Year-by-year returns show you how the Fund's performance has varied by
illustrating the differences for each full calendar year since the Fund began.
<TABLE>
<CAPTION>
YEAR-BY-YEAR TOTAL RETURN AS OF DECEMBER 31(1)
1997 1998
<S> <C> <C>
40%
30%
20% 24.22% 23.00%
10%
0%
(10)%
(20)%
Best quarter: 12/31/98 32.04%
Worst quarter: 9/30/98 -18.43%
Calendar year-to-date through 6/30/99: [_____]%
</TABLE>
Average annual total return is a measure of the Fund's performance over time.
The Fund's average annual return is compared with the Standard & Poor's 500
Index (S&P 500). While the Fund does not seek to match the returns of the S&P
500, this index is a good indicator of general stock market performance. You may
not invest in the S&P 500 and unlike the Fund, it does not incur fees or
charges.
<TABLE>
<CAPTION>
AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 1998(1)
1 Year Life of the Fund
(March 29, 1996)
<S> <C> <C>
The Fund 23.00% 22.87%
S&P 500 28.74% 28.65%
</TABLE>
1. Fund returns are from periods prior to the Fund's adoption of share classes
and therefore include a 0.25% 12b-1 fee which has not been paid by the
Institutional Shares since the inception of that class on August 16, 1999.
Page 4
<PAGE>
[icon-two coins]
FUND EXPENSES
<TABLE>
<S> <C>
ANNUAL FUND OPERATING EXPENSES
As a shareholder in the Fund, you (deducted directly from the Fund)
do not pay any sales loads,
redemption or exchange fees, but Management fee .90%
you do bear indirectly Annual Other expenses(1) .31%
Fund Operating Expenses, which ----
vary from year to year.
TOTAL ANNUAL FUND OPERATING EXPENSES 1.21%
</TABLE>
1. "Other expenses" are based on estimated expenses for the Institutional Shares
class and include transfer agency fees, shareholder report expenses,
registration fees and custodian fees.
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 123
Three 384
Five 665
Ten 1,466
</TABLE>
Page 5
<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.
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 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 contract 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.
Page 6
<PAGE>
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
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
LENDING PORTFOLIO SECURITIES to qualified financial institutions is
undertaken in order to earn income. The Fund lends securities only on a fully
collateralized basis. The Fund may lend portfolio securities only up to 33 1/3%
of its total assets. CREDIT RISK
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.
Page 7
<PAGE>
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.
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. 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.
Page 8
<PAGE>
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 219958
Kansas City, MO 64121
OR FOR OVERNIGHT, CERTIFIED OR REGISTERED MAIL ONLY
Berger Funds
330 West 9th Street, 1st Floor
Kansas City, MO 64105
<TABLE>
<S> <C>
Minimums:
Initial investment $250,000
Subsequent investments No minimum
</TABLE>
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 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, reduce 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 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
Generally, payment for your redeemed shares will be sent to you within
three business days after receipt of your redemption request in good
order.
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.)
Page 12
<PAGE>
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 each 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.
- - An exchange out of a Berger Fund results in the sale of that 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 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:
- - 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.
Page 13
<PAGE>
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 219958, Kansas City, MO 64121.
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 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.
Page 14
<PAGE>
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.
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 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) 259-2820 or write to the Berger Funds, P.O. Box 219958, Kansas City, MO
64121. 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.
ORGANIZATION OF THE FUND
INVESTMENT MANAGER
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. For these
services, Berger Associates earns a fee at the annual rate of 0.90% of the
Fund's average daily net assets. Berger Associates also provides administrative
services to the Fund.
Page 17
<PAGE>
MARK S. SUNDERHUSE, Senior Vice President of Berger Associates, is the
investment manager of the Fund. Mr. Sunderhuse joined Berger Associates in
January 1998 and assumed management of the Fund in January 1999.
Mr. Sunderhuse has more than ten years of experience in the investment
management industry.
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
The Fund offers two classes of shares. The Institutional Shares offered in this
prospectus are designed for investors who maintain a minimum account balance of
$250,000. 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 periods before the Fund first began
offering the Institutional Shares starting on August 16, 1999. Therefore, the
data on the table reflect a 0.25% 12b-1 fee not paid by the Institutional
Shares. The information in the table for the periods/years ended September 30,
1996, 1997 and 1998, was audited by PricewaterhouseCoopers LLP, the Fund's
independent accountants. The information for the period ended March 31, 1999, is
unaudited.
BERGER NEW GENERATION FUND
For a Share Outstanding Throughout the Periods Presented
<TABLE>
<CAPTION>
Period Ended Years Ended
March 31, September 30,
--------- -------------
1999 1998 1997 1996(1)
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Net asset value, beginning of period................................ $ 12.66 $ 14.72 $ 11.82 $10.00
------- ------- ------- -------
From investment operations:
Net investment income (loss)................................ (0.10) -- (0.13) 0.56
Net realized and unrealized gains (losses) on investment and
foreign currency transactions.................... 6.16 (2.06) 3.64 1.26
------- ------- ------- -------
Total from investment operations................................... 6.06 (2.06) 3.51 1.82
------- ------- ------- -------
Less dividends and distributions
Dividends (from net investment income)...................... -- -- (0.61) --
Distributions (from capital gains).......................... (0.50) -- 0.00 --
Total dividends and distributions.................................. (0.50) -- (0.61) --
Net asset value, end of period..................................... $ 18.22 $ 12.66 $ 14.72 $11.82
------- ------- ------- -------
------- ------- ------- -------
Total Return(2).................................................... 49.05% (13.99)% 31.53% 18.20%
------- ------- ------- -------
------- ------- ------- -------
Ratios/Supplemental Data:
Net assets, end of period (in thousands)........................... $160,372 $113,693 $190,164 $116,912
Net expense ratio to average net assets (3) ....................... 1.72%(4) 1.72% 1.89% 1.90%(4)
Ratio of net income (loss) to average net assets................... (1.33)%(4) (1.37)% (1.51)% 12.35%(4)
Gross expense ratio to average net assets ......................... 1.72%(4) 1.72% 1.89% 2.09%(4)
Portfolio turnover rate (2)........................................ 95% 243% 184% 474%(5)
</TABLE>
1. Period from March 29, 1996 (commencement of investment operations) to
September 30, 1996.
2. Not annualized for periods of less than one full year.
3. Net expenses represent gross expenses reduced by fees waived by the Advisor.
4. Annualized.
5. Portfolio turnover was greater than anticipated during this period as a
result of portfolio transactions undertaken in response to volatile markets
and the short tax year for its initial period of operations.
Page 19
<PAGE>
[LOGO]
BERGER-Regestered 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 219958
Kansas City, MO 64121
(800) 259-2820
bergerfunds.com
Text-only versions of Fund documents can be viewed online or downloaded from the
SEC's web site at 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 New Generation Fund - Institutional Shares
Page 20
<PAGE>
BERGER SMALL COMPANY GROWTH 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 Small Company Growth 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.
The following financial statements of the Fund are incorporated herein by
reference:
- - The audited financial statements of the Fund for the fiscal year ended
September 30, 1998, from the Fund's 1998 Annual Report to Shareholders,
dated September 30, 1998.
- - The unaudited financial statements of the Fund for the semi-annual period
ended March 31, 1999, from the Fund's Semi-Annual Report to Shareholders,
dated March 31, 1999.
Copies of these Annual and Semi-Annual Reports are available, without
charge, upon request, by calling 1-800-333-1001.
DATED [_________], 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
&
CROSS-REFERENCES TO PROSPECTUS
- --------------------------------------------------------------------------------
TABLE OF CONTENTS CROSS-REFERENCES TO
RELATED DISCLOSURES
IN PROSPECTUS
- --------------------------------------------------------------------------------
<S> <C>
Introduction Contents
- --------------------------------------------------------------------------------
1. Investment Strategies and Risks of Berger Small Company Growth Fund;
the Fund Investment Techniques, Securities and
Associated Risks
- --------------------------------------------------------------------------------
2. Investment Restrictions Berger Small Company Growth Fund;
Investment Techniques, Securities and
Associated Risks
- --------------------------------------------------------------------------------
3. Management of the Fund Berger Small Company Growth Fund;
Organization of the Fund
- --------------------------------------------------------------------------------
4. Investment Advisor Berger Small Company Growth Fund;
Organization of the Fund
- --------------------------------------------------------------------------------
5. Expenses of the Fund Berger Small Company Growth Fund;
Financial Highlights for the Fund;
Organization of the Fund
- --------------------------------------------------------------------------------
6. Brokerage Policy Berger Small Company Growth 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 Small Company Growth Fund;
Financial Highlights for the Fund;
- --------------------------------------------------------------------------------
14. Additional Information Organization of the Fund; Special Fund
Structure
- --------------------------------------------------------------------------------
Financial Information Financial Highlights for the Fund
- --------------------------------------------------------------------------------
</TABLE>
<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 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 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 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 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.
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 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.
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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 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 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 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.
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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 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 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 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.
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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 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 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.
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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 (including the
value of the collateral received to secure the loan). 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.
Although voting rights with respect to loaned securities pass to the
borrower, the Fund retains the right to recall a security (or terminate a loan)
for the purpose of exercising the security's voting rights. Efforts to recall
loaned securities in time to exercise voting rights may be unsuccessful,
especially for foreign securities or thinly traded securities. In addition, it
is expected that loaned securities will be recalled for voting only when the
items being voted on are, in the judgment of the Fund's advisor, either material
to the economic value of the security or threaten to materially impact the
issuing company's corporate governance policies or structure.
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").
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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 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. 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 advisor's
judgment of the cost of the hedge, its potential effectiveness and other factors
the 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
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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 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
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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 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
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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 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.
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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.
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").
-11-
<PAGE>
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 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.
-12-
<PAGE>
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.
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
-13-
<PAGE>
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 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.
TEMPORARY DEFENSIVE MEASURES. The Fund may increase its investment in
government securities, and other short-term, interest-bearing securities without
regard to the Fund's otherwise applicable percentage limits, policies or its
normal investment emphasis, when its advisor believes market conditions warrant
a temporary defensive position. Taking larger positions in such short-term
investments may serve as a means of preserving capital in unfavorable market
conditions. When in a defensive position, the Fund could miss the opportunity
to participate in any stock or bond market advances that occur during those
periods, which the Fund might have been able to participate in if it had
remained more fully invested.
PORTFOLIO TURNOVER. Investment changes in the Fund will be made whenever
the investment manager 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.
-14-
<PAGE>
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.
BERGER SMALL COMPANY GROWTH FUND
The following fundamental restrictions apply to the Berger Small Company
Growth 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
-15-
<PAGE>
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.
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.
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<PAGE>
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.
* JACK R. THOMPSON, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1949. President and a director since May 1999 (Executive Vice
President from February 1999 to May 1999) of Berger 100 Fund and
Berger Growth and Income Fund. President and a trustee since May 1999
(Executive Vice President from February 1999 to May 1999) of Berger
Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide Portfolios
Trust and Berger Omni Investment Trust. 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.
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
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<PAGE>
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.
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.
* AMY K. SELNER, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB:
1968. Vice President and portfolio manager of the Berger Mid Cap
Growth Fund since its inception in December 1997. Vice President and
portfolio manager of the Berger Small Company
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Growth Fund and the Berger IPT - Small Company Growth Fund since
November 1998. Vice President (since December 1997) and senior
research analyst (April 1996 through December 1997) with Berger
Associates. Formerly, Assistant Portfolio Manager and Research
Analyst with INVESCO Trust Company from March 1991 through March 1996.
* 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 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.
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 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:
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<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME AND POSITION AGGREGATE COMPENSATION FROM
WITH BERGER FUNDS
- --------------------------------------------------------------------------------
BERGER SMALL COMPANY GROWTH ALL BERGER FUNDS(1)
FUND
- --------------------------------------------------------------------------------
<S> <C> <C>
Dennis E. Baldwin(2) $10,808 $47,000
- --------------------------------------------------------------------------------
William M.B. $ 0 $ 0
Berger(2),(3)
- --------------------------------------------------------------------------------
Louis R. Bindner(2) $10,663 $46,400
- --------------------------------------------------------------------------------
Katherine A. $10,808 $47,000
Cattanach(2)
- --------------------------------------------------------------------------------
Lucy Black $1,982 $8,200
Creighton(2),(5)
- --------------------------------------------------------------------------------
Paul R. Knapp(2) $10,808 $47,000
- --------------------------------------------------------------------------------
Gerard M. Lavin(3),(4) $ 0 $ 0
- --------------------------------------------------------------------------------
Harry T. Lewis(2) $10,808 $47,000
- --------------------------------------------------------------------------------
Michael Owen(2) $13,107 $57,000
- --------------------------------------------------------------------------------
William Sinclaire(2) $10,663 $46,400
- --------------------------------------------------------------------------------
Jack R. $ 0 $ 0
Thompson(2),(3),(6)
- --------------------------------------------------------------------------------
</TABLE>
NOTES TO TABLE
(1) 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 figures for the
Berger Information Technology Fund, which was added to the Trust after September
30, 1998. 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.
(2) 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.
(3) Interested person of Berger Associates.
(4) Resigned as a director and trustee effective May 1999.
(5) Resigned as a director and trustee effective November 1997.
(6) 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. Appointed as President
and a director or trustee of the Funds effective May 1999.
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.
-20-
<PAGE>
As of May 28, 1999, the officers and trustees of the Fund as a group owned
of record or beneficially an aggregate of less than 1% of the outstanding shares
of the Fund.
4. INVESTMENT 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.
INVESTMENT ADVISORY AGREEMENT
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 Small Company Growth Berger Associates 0.90%(1)
Fund
- --------------------------------------------------------------------------------
</TABLE>
(1) Under a written agreement, the Fund's investment advisor waives its fee
to the extent that the annual operating expenses for the Investor Shares class
of the Fund in any fiscal year, including the investment advisory fee, but
excluding the 12b-1 fee, brokerage commissions, interest, taxes and
extraordinary expenses, exceed 2-1/2% of the first $30,000,000 of average daily
net assets, plus 2% of the next $70,000,000, plus 1-1/2% of the balance of the
average daily net assets of the Fund attributable to the Investor Shares for
that fiscal year. The agreement may be terminated by the advisor upon 90 days'
prior written notice to the Fund. 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 2000, 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
-21-
<PAGE>
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.
TRADE ALLOCATIONS
While investment decisions for the Fund are made independently by the
advisor, the same investment decision may be made for the Fund and one or more
accounts 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.
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 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.
-22-
<PAGE>
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 total dollar amounts of advisory fees and
administrative services fees paid by the Fund to Berger Associates for the
periods indicated and the amount of such fees waived on account of excess
expenses under applicable expense limitations.
<TABLE>
<CAPTION>
BERGER SMALL COMPANY GROWTH FUND
- --------------------------------------------------------------------------------
Fiscal Year Investment Administrative Advisory Fee TOTAL
Ended Advisory Fee Service Fee Waiver
September 30,
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 $6,984,000 $ 78,000 $ 0 $7,062,000
- --------------------------------------------------------------------------------
1997 $6,831,000 $ 78,000 $ 0 $6,909,000
- --------------------------------------------------------------------------------
1996 $5,902,000 $ 66,000 $ 0 $5,968,000
- --------------------------------------------------------------------------------
</TABLE>
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.
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. Earnings credits
received by the Fund can be
-23-
<PAGE>
found on the Fund's Statement of Operations in the Annual and Semi-Annual
Reports incorporated by reference into this Statement of Additional Information.
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.
6. 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 during the past three fiscal years were as follows:
BROKERAGE COMMISSIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
For the year ended September 30,
--------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Berger Small Company Growth $890,000 $1,044,000 $604,000
Fund
- --------------------------------------------------------------------------------
</TABLE>
-24-
<PAGE>
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. The Fund's advisor 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 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.
During the fiscal year ended September 30, 1998, of the brokerage
commissions paid by the Fund, the following amounts were paid to brokers who
provided to the Fund selected brokerage or research services prepared by the
broker or subscribed or paid for by the broker on behalf of the Fund:
-25-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FUND AMOUNT OF TRANSACTIONS AMOUNT OF
COMMISSIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Berger Small Company Growth $ 5,478,000 $19,000
Fund
- --------------------------------------------------------------------------------
</TABLE>
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.
Included in the brokerage commissions paid by the Fund during the last
three fiscal years, as stated in the preceding Brokerage Commissions table, are
the following amounts paid to DSTS, which served to reduce the Fund's
out-of-pocket expenses as follows:
<TABLE>
<CAPTION>
DSTS COMMISSIONS AND RELATED EXPENSE REDUCTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
DSTS Commissions Reduction in DSTS Reduction DSTS Reduction in
Paid Expenses FYE Commissions in Commissions Expenses FYE
FYE 9/30/98 9/30/98(1) Paid Expenses FYE Paid 9/30/96(1)
FYE 9/30/97 9/30/97(1) FYE 9/30/96
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Berger Small Company Growth $ 0 $ 0 $42,000 $31,000 $13,000 $10,000
Fund
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No portion of the commission is retained by DSTS. Difference between
commissions paid through DSTS and reduction in expenses constitute commissions
paid to an unaffiliated clearing broker.
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
-26-
<PAGE>
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.
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 following address:
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 (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.
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.
-27-
<PAGE>
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.
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
-28-
<PAGE>
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.
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
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<PAGE>
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 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,
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<PAGE>
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
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 1000 Value
Index, 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
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<PAGE>
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
Shares of the Fund had no class designations until July 6, 1999, when all
of the then-existing shares were designated as Investor Shares and the
Institutional Shares class of the Fund covered in this Statement of Additional
Information was established. The Fund commenced offering Institutional Shares
on August 16, 1999. Performance data for the Institutional Shares include
periods prior to the inception of the Institutional Shares class on August 16,
1999, and therefore reflect a 0.25% per year 12b-1 fee applicable to the
Investor Shares that is not paid by the Institutional Shares. 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.
AVERAGE ANNUAL TOTAL RETURNS
The average annual total return for the Fund for various periods ending
September 30, 1998, are shown on the following table:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
FUND 1-Year 3-Year 5-Year 10-Year Life of Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berger Small Company (24.70)% 5.18% N/A N/A 11.57%
Growth Fund (since 12/30/93)
- --------------------------------------------------------------------------------
</TABLE>
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 August 23, 1993. The name "Berger Small
Company Growth Fund-Registered Trademark-" was registered as a service mark in
September 1995.
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.
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<PAGE>
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 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.
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<PAGE>
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.
PRINCIPAL SHAREHOLDERS
Insofar as the management of the Fund is aware, as of May 28, 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 FUND PERCENTAGE
- --------------------------------------------------------------------------------
<S> <C> <C>
Charles Schwab & Co. Inc. Berger Small Company Growth Fund 20.64%
("Schwab")
101 Montgomery Street
San Francisco, CA 94104
- --------------------------------------------------------------------------------
National Financial Berger Small Company Growth Fund 6.72%
Services Corporation
("Fidelity")
200 Liberty Street
One World Financial
Center
New York, NY 10281
- --------------------------------------------------------------------------------
</TABLE>
In addition, as of that date, Schwab owned of record 24.19%, and Fidelity
owned of record 8.297%, of all the outstanding shares of the Berger Investment
Portfolio Trust, of which the Fund is one outstanding series.
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
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<PAGE>
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 2000, 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 Fund dated September 30,
1998, along with the Report of Independent Accountants thereon dated October 30,
1998:
Schedule of Investments as of September 30, 1998
Statement of Assets and Liabilities as of September 30, 1998
Statement of Operations for the Fiscal Year Ended September 30, 1998
Statement of Changes in Net Assets for each of the Fiscal Years Ended
September 30, 1997 and 1998
Notes to Financial Statements, September 30, 1998
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<PAGE>
Financial Highlights for each of the periods indicated
The following financial statements for the Fund are incorporated herein by
reference from the Semi-Annual Report to Shareholders of the Fund dated March
31, 1999:
Schedule of Investments as of March 31, 1999 (unaudited)
Statement of Assets and Liabilities as of March 31, 1999 (unaudited)
Statement of Operations for the Six-Month Period Ended March 31, 1999
(unaudited)
Statement of Changes in Net Assets for the Six-Month Period Ended March 31,
1999 (unaudited)
Notes to Financial Statements, March 31, 1999 (unaudited)
Financial Highlights for the Six-Month Period Ended March 31, 1999
(unaudited)
The above-referenced Annual and Semi-Annual Reports are enclosed with a
copy of this SAI. Additional copies of those Reports may be obtained upon
request without charge by calling the Fund at 1-800-333-1001.
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<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 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 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.
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<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
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<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.
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<PAGE>
BERGER NEW GENERATION 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 New Generation 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.
The following financial statements of the Fund are incorporated
herein by reference:
- - The audited financial statements of the Fund for the fiscal year
ended September 30, 1998, from the Fund's 1998 Annual Report to
Shareholders, dated September 30, 1998.
- - The unaudited financial statements of the Fund for the
semi-annual period ended March 31, 1999, from the Fund's
Semi-Annual Report to Shareholders, dated March 31, 1999.
Copies of these Annual and Semi-Annual Reports are available,
without charge, upon request, by calling 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 the Fund Berger New Generation Fund;
Investment Techniques, Securities and
Associated Risks
- ----------------------------------------------------------------------------------------------------------
2. Investment Restrictions Berger New Generation Fund;
Investment Techniques, Securities and
Associated Risks
- ----------------------------------------------------------------------------------------------------------
3. Management of the Fund Berger New Generation Fund;
Organization of the Fund
- ----------------------------------------------------------------------------------------------------------
4. Investment Advisor Berger New Generation Fund;
Organization of the Fund
- ----------------------------------------------------------------------------------------------------------
5. Expenses of the Fund Berger New Generation Fund; Financial
Highlights for the Fund; Organization of the
Fund
- ----------------------------------------------------------------------------------------------------------
6. Brokerage Policy Berger New Generation Fund;
Organization of the Fund
- ----------------------------------------------------------------------------------------------------------
7. How to Purchase and Redeem Shares in the Buying Shares; Exchanging Shares
Fund
- ----------------------------------------------------------------------------------------------------------
8. How the Net Asset Value is Determined Your Share Price
- ----------------------------------------------------------------------------------------------------------
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 New Generation 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 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 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 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 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.
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 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.
-2-
<PAGE>
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 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 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
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.
-3-
<PAGE>
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
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 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 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.
-4-
<PAGE>
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 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 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.
-5-
<PAGE>
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 (including the
value of the collateral received to secure the loan). 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.
Although voting rights with respect to loaned securities pass to
the borrower, the Fund retains the right to recall a security (or terminate a
loan) for the purpose of exercising the security's voting rights. Efforts to
recall loaned securities in time to exercise voting rights may be unsuccessful,
especially for foreign securities or thinly traded securities. In addition, it
is expected that loaned securities will be recalled for voting only when the
items being voted on are, in the judgment of the Fund's advisor, either material
to the economic value of the security or threaten to materially impact the
issuing company's corporate governance policies or structure.
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").
-6-
<PAGE>
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 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. 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 advisor's
judgment of the cost of the hedge, its potential effectiveness and other factors
the 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
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<PAGE>
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 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
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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 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
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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 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.
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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.
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").
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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 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.
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<PAGE>
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.
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
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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 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.
TEMPORARY DEFENSIVE MEASURES. The Fund may increase its
investment in government securities, and other short-term, interest-bearing
securities without regard to the Fund's otherwise applicable percentage limits,
policies or its normal investment emphasis, when its advisor believes market
conditions warrant a temporary defensive position. Taking larger positions in
such short-term investments may serve as a means of preserving capital in
unfavorable market conditions. When in a defensive position, the Fund could miss
the opportunity to participate in any stock or bond market advances that occur
during those periods, which the Fund might have been able to participate in if
it had remained more fully invested.
PORTFOLIO TURNOVER. Investment changes in the Fund will be made
whenever the investment manager 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.
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<PAGE>
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.
BERGER NEW GENERATION FUND
The following fundamental restrictions apply to the Berger New
Generation 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
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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.
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.
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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.
* JACK R. THOMPSON, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1949. President and a director since May 1999 (Executive Vice
President from February 1999 to May 1999) of Berger 100 Fund and
Berger Growth and Income Fund. President and a trustee since May 1999
(Executive Vice President from February 1999 to May 1999) of Berger
Investment Portfolio Trust, Berger Institutional Products Trust,
Berger/BIAM Worldwide Funds Trust, Berger/BIAM Worldwide Portfolios
Trust and Berger Omni Investment Trust. 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.
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
-17-
<PAGE>
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.
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.
* MARK S. SUNDERHUSE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1961. Portfolio manager of the Berger New Generation Fund since
January 1999. Senior Vice President (since January 1998) and portfolio
manager (since January 1999) with Berger
-18-
<PAGE>
Associates. Formerly, Senior Vice President and Assistant Portfolio
Manager with Crestone Capital Management, Inc. (from January 1991
through January 1998); Investment Officer with United Bank of Denver
(from April 1989 through January 1991); and officer and registered
representative with Boettcher & Company, Inc. (investment banking)
(from May 1985 through April 1989).
* 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 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.
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 are compensated for
their services according to a fee schedule, allocate 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:
-19-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
NAME AND POSITION AGGREGATE COMPENSATION FROM
WITH BERGER FUNDS
- ----------------------------------------------------------------------------------------------------------------
BERGER NEW GENERATION FUND ALL BERGER FUNDS(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dennis E. Baldwin(2) $1,852 $47,000
- ----------------------------------------------------------------------------------------------------------------
William M.B. Berger(2),(3) $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Louis R. Bindner(2) $1,828 $46,400
- ----------------------------------------------------------------------------------------------------------------
Katherine A. Cattanach(2) $1,852 $47,000
- ----------------------------------------------------------------------------------------------------------------
Lucy Black Creighton(2),(5) $334 $8,200
- ----------------------------------------------------------------------------------------------------------------
Paul R. Knapp(2) $1,852 $47,000
- ----------------------------------------------------------------------------------------------------------------
Gerard M. Lavin(3),(4) $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Harry T. Lewis(2) $1,852 $47,000
- ----------------------------------------------------------------------------------------------------------------
Michael Owen(2) $2,246 $57,000
- ----------------------------------------------------------------------------------------------------------------
William Sinclaire(2) $1,828 $46,400
- ----------------------------------------------------------------------------------------------------------------
Jack R. Thompson(2),(3),(6) $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES TO TABLE
(1) 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 figures for the
Berger Information Technology Fund, which was added to the Trust after September
30, 1998. 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.
(2) 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.
(3) Interested person of Berger Associates.
(4) Resigned as President and as a director and trustee effective May 1999.
(5) Resigned as a director and trustee effective November 1997.
(6) 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. Appointed as President
and a director or trustee of the Funds effective May 1999.
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.
-20-
<PAGE>
As of May 28, 1999, the officers and trustees of the Fund as a
group owned of record or beneficially an aggregate of less than 1% of the
outstanding shares of the Fund.
4. INVESTMENT 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.
INVESTMENT ADVISORY AGREEMENT
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 New Generation Fund Berger Associates 0.90%(1)
- --------------------------------------------------------------------------------
</TABLE>
(1) Under a written agreement, the Fund's investment advisor waives its fee to
the extent that 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 1.90% of the Fund's average daily net assets attributable to
the Investor Shares for that fiscal year. The agreement may be terminated by the
advisor upon 90 days' prior written notice to the Fund. 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 2000, 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
-21-
<PAGE>
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.
TRADE ALLOCATIONS
While investment decisions for the Fund are made independently by
the advisor, the same investment decision may be made for the Fund and one or
more accounts 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.
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 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.
-22-
<PAGE>
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 total dollar amounts of advisory
fees and administrative services fees paid by the Fund to Berger Associates for
the periods indicated and the amount of such fees waived on account of excess
expenses under applicable expense limitations.
<TABLE>
<CAPTION>
BERGER NEW GENERATION FUND
- ----------------------------------------------------------------------------------------------------
Fiscal Year Ended Investment Administrative Advisory Fee TOTAL
September 30, Advisory Fee Service Fee Waiver
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998 $1,229,000 $14,000 $ 0 $1,243,000
- ----------------------------------------------------------------------------------------------------
1997 $ 962,000 $20,000 $ 0 $ 982,000
- ----------------------------------------------------------------------------------------------------
1996* $ 398,000 $ 4,000 $ (85,000) $ 317,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Covers period from March 29, 1996 (commencement of operations) through the end
of the Fund's first fiscal year on September 30, 1996.
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.
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.
-23-
<PAGE>
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. Earnings
credits received by the Fund can be found on the Fund's Statement of Operations
in the Annual and Semi-Annual Reports incorporated by reference into this
Statement of Additional Information.
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.
6. 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 during the past three fiscal years were as follows:
-24-
<PAGE>
<TABLE>
<CAPTION>
BROKERAGE COMMISSIONS
- ----------------------------------------------------------------------------------------------------
FOR THE YEAR/PERIOD ENDED SEPTEMBER 30,
--------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BERGER NEW GENERATION FUND $340,000 $165,000 $939,000(1)
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) Covers period from March 29, 1996 (commencement of operations) through the
end of the Fund's first fiscal year on September 30, 1996. The Fund paid more
brokerage commissions than anticipated during this period as a result of
portfolio transactions undertaken in response to volatile markets and the short
tax year for its initial period of operations.
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. The Fund's advisor 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 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
-25-
<PAGE>
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.
During the fiscal year ended September 30, 1998, of the brokerage
commissions paid by the Fund, the following amounts were paid to brokers who
provided to the Fund selected brokerage or research services prepared by the
broker or subscribed or paid for by the broker on behalf of the Fund:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
FUND AMOUNT OF TRANSACTIONS AMOUNT OF
COMMISSIONS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Berger New Generation Fund $ 13,883,000 $39,000
- ----------------------------------------------------------------------------------------------------
</TABLE>
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 avail ability 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.
Included in the brokerage commissions paid by the Fund during the
last three fiscal years, as stated in the preceding Brokerage Commissions table,
are the following amounts paid to DSTS, which served to reduce the Fund's
out-of-pocket expenses as follows:
<TABLE>
<CAPTION>
DSTS COMMISSIONS AND RELATED EXPENSE REDUCTIONS
- ---------------------------------------------------------------------------------------------------------------------------
DSTS Reduction DSTS Reduction DSTS Reduction
Commissions in Commissions in Commissions in
Paid Expenses Paid Expenses Paid Expenses
FYE 9/30/98 FYE FYE 9/30/97 FYE FYE 9/30/96 FYE
9/30/98(1) 9/30/97(1) 9/30/96(1)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Berger New Generation $2,000(2) $1,500 $ 0 $ 0 $ 0 $ 0
Fund
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) No portion of the commission is retained by DSTS. Difference between
commissions paid through DSTS and reduction in expenses constitute commissions
paid to an unaffiliated clearing broker.
-26-
<PAGE>
(2) Constitutes less than 1% of the aggregate brokerage commissions paid by the
Berger New Generation Fund and less than 1% of the aggregate dollar amount of
transactions placed by the Berger New Generation Fund.
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
Minimum Initial Investment $250,000
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.
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 following address:
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 (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.
-27-
<PAGE>
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.
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 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.
-28-
<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 loss, the treatment of which will depend on the
shareholder's holding period in the Fund shares. Tax laws
-29-
<PAGE>
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.
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
-30-
<PAGE>
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 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
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 1000 Value
Index, 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,
-31-
<PAGE>
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
Shares of the Fund had no class designations until July 6, 1999,
when all of the then-existing shares were designated as Investor Shares and the
Institutional Shares class of the Fund covered in this Statement of Additional
Information was established. The Fund commenced offering Institutional Shares on
August 16, 1999. Performance data for the Institutional Shares include periods
prior to the inception of the Institutional Shares class on August 16, 1999, and
therefore reflect a 0.25% per year 12b-1 fee applicable to the Investor Shares
that is not paid by the Institutional Shares. 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.
AVERAGE ANNUAL TOTAL RETURNS
The average annual total return for the Fund for various
periods ending September 30, 1998, are shown on the following table:
-32-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FUND 1-YEAR 3-YEAR 5-YEAR 10-YEAR LIFE OF FUND
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berger New Generation (13.99)% N/A N/A N/A 12.27%
Fund (since 3/29/96)
- ------------------------------------------------------------------------------------------------------------
</TABLE>
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 December 21, 1995. The name
"Berger New Generation Fund-Registered Trademark" was registered as a service
mark in December 1996.
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
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.
-33-
<PAGE>
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.
PRINCIPAL SHAREHOLDERS
Insofar as the management of the Fund is aware, as of May 28,
1999, no person owned, beneficially or of record, more than 5% of the
outstanding shares of the Fund, except for the following:
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<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
OWNER FUND PERCENTAGE
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Charles Schwab & Co. Inc. Berger New Generation Fund 17.21%
("Schwab")
101 Montgomery Street
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------------------------
National Financial Services Berger New Generation Fund 7.87%
Corporation ("Fidelity")
200 Liberty Street
One World Financial Center
New York, NY 10281
- ------------------------------------------------------------------------------------------------------------
</TABLE>
In addition, as of that date, Schwab owned of record 24.19%,
and Fidelity owned of record 8.299%, of all the outstanding shares of the
Berger Investment Portfolio Trust, of which the Fund is one outstanding series.
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 2000, 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.
-35-
<PAGE>
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 Fund dated
September 30, 1998, along with the Report of Independent Accountants thereon
dated October 30, 1998:
Schedule of Investments as of September 30, 1998
Statement of Assets and Liabilities as of September 30, 1998
Statement of Operations for the Fiscal Year Ended September 30,
1998
Statement of Changes in Net Assets for each of the Fiscal
Years Ended September 30, 1997 and 1998
Notes to Financial Statements, September 30, 1998
Financial Highlights for each of the periods indicated
The following financial statements for the Fund are incorporated
herein by reference from the Semi-Annual Report to Shareholders of the Fund
dated March 31, 1999:
Schedule of Investments as of March 31, 1999 (unaudited)
Statement of Assets and Liabilities as of March 31, 1999
(unaudited)
Statement of Operations for the Six-Month Period Ended March 31,
1999 (unaudited)
Statement of Changes in Net Assets for the Six-Month Period Ended
March 31, 1999 (unaudited)
Notes to Financial Statements, March 31, 1999 (unaudited)
Financial Highlights for the Six-Month Period Ended March 31,
1999 (unaudited)
The above-referenced Annual and Semi-Annual Reports are enclosed
with a copy of this SAI. Additional copies of those Reports may be obtained upon
request without charge by calling the Fund at 1-800-333-1001.
-36-
<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 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 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.
-37-
<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
-38-
<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.
-39-
<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 25. 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 26. 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.
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
C-1
<PAGE>
- --Berger Balanced Fund
- --Berger Select Fund
- --Berger Mid Cap Growth Fund
- --Berger Mid Cap Value Fund
- --Berger Information Technology 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.
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
C-2
<PAGE>
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.
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 14th day of June, 1999.
BERGER INVESTMENT PORTFOLIO TRUST
---------------------------------
(Registrant)
By Jack R. Thompson
---------------------------
Name: Jack R. Thompson
-----------------------
Title: President
----------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Jack R. Thompson, Janice M. Teague and
Lester R. Woodward, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, and in his or her name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
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
--------- ----- ----
Jack R. Thompson President (Principal June 14, 1999
- ----------------------------- Executive Officer)
Jack R. Thompson and Director
David J. Schultz Vice President and June 14, 1999
- ----------------------------- Treasurer (Principal
David J. Schultz Financial Officer)
John Paganelli Assistant Treasurer June 14, 1999
- ----------------------------- (Principal Accounting
John Paganelli Officer)
C-4
<PAGE>
Dennis E. Baldwin Trustee June 14, 1999
- -----------------------------
Dennis E. Baldwin
William M.B. Berger Trustee June 14, 1999
- -----------------------------
William M.B. Berger
Louis R. Bindner Trustee June 14, 1999
- -----------------------------
Louis R. Bindner
Katherine A. Cattanach Trustee June 14, 1999
- -----------------------------
Katherine A. Cattanach
Paul R. Knapp Trustee June 14, 1999
- -----------------------------
Paul R. Knapp
Harry T. Lewis, Jr. Trustee June 14, 1999
- -----------------------------
Harry T. Lewis, Jr.
Michael Owen Trustee June 14, 1999
- -----------------------------
Michael Owen
William Sinclaire Trustee June 14, 1999
- -----------------------------
William Sinclaire
<PAGE>
BERGER INVESTMENT PORTFOLIO TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
N-1A EDGAR
Exhibit Exhibit
No. No. Name of Exhibit
- ------------- ---------- --------------------------
<S> <C> <C> <C> <C>
(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
(29) Exhibit 23(d)-8 Form of Investment Advisory Agreement for
Berger Information Technology Fund
(29) Exhibit 23(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
(29) Exhibit 23(h)-9 Form of Administrative Services Agreement
for the Berger Information Technology Fund
<PAGE>
(29) Exhibit 23(i)-1 Opinion and consent of Davis, Graham &
Stubbs LLP (relating to the Berger Information
Technology Fund)
* Exhibit 23(i)-2 EX-99.B23(i)-2 Opinion and consent of Davis, Graham &
Stubbs LLP (relating to the Berger New
Generation Fund -- Institutional Shares and
the Berger Small Company Growth Fund --
Institutional Shares)
* Exhibit 23(j)-1 EX-99.B23(j)-1 Consent of
PricewaterhouseCoopers LLP
(29) Exhibit 23(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
(29) Exhibit 23(m)-7 Rule 12b-1 Plan for the Investor Shares of the
Berger Information Technology Fund
* Exhibit 23(m)-8 EX-99.B23(m)-8 Amended and Restated Rule 12b-1 Plan for
the Investor Shares of the Berger Small
Company Growth Fund
* Exhibit 23(m)-9 EX-99.B23(m)-9 Amended and Restated Rule 12b-1 Plan for
the Investor Shares of the Berger New
Generation Fund
(28) Exhibit 23(n)-1 Financial Data Schedule for Berger Small
Company Growth Fund - Investor Shares
(28) Exhibit 23(n)-2 Financial Data Schedule for Berger New
Generation Fund - Investor Shares
(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
(29) Exhibit 23(n)-8 Financial Data Schedule for Berger
Information Technology Fund - Institutional
Shares
** Exhibit 23(n)-9 Financial Data Schedule for Berger Small
Company Growth Fund - Institutional Shares
<PAGE>
** Exhibit 23(n)-10 Financial Data Schedule for Berger New
Generation Fund - Institutional Shares
(29) Exhibit 23(o)-1 Rule 18f-3 Plan for the Berger Information
Technology Fund
* Exhibit 23(o)-2 EX-99B.23(o)-2 Rule 18f-3 Plan for the Berger Small Company
Growth Fund
* Exhibit 23(o)-3 EX-99B.23(o)-3 Rule 18f-3 Plan for the Berger New
Generation Fund
- -------------
</TABLE>
* 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.
(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.
<PAGE>
(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.
(29) Filed as Exhibit number listed with Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on Form N-1A, filed April 16, 1999.
<PAGE>
EXHIBIT 23(i)-2
DAVIS, GRAHAM & STUBBS LLP
A Limited Liability Partnership
Attorneys at Law
370 17th Street
Suite 4700
Denver, CO 80202
303-892-9400 (telephone)
303-893-1379 (facsimile)
June 14, 1999
Berger Investment Portfolio Trust
210 University Blvd., Suite 900
Denver, Colorado 80206
Re: Berger Small Company Growth Fund -- Institutional Shares
Berger New Generation Fund -- Institutional Shares
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 the class of shares of
beneficial interest, $.01 par value, known as Institutional Shares (the
"Institutional Shares"), of each of the Berger Small Company Growth Fund and the
Berger New Generation Fund (the "Funds"), two series of the Trust, described in
Post-Effective Amendment No. 21 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 June 14, 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 Institutional 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 Institutional
Shares have been duly authorized and, when sold as contemplated in the
Registration Statement, including receipt by the relevant Fund of full payment
for the Institutional 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
Institutional Shares of such Fund and 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
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this
Post-Effective Amendment No. 21 to the registration statement on Form N-1A
(the "Registration Statement") of our report dated October 30, 1998, relating
to the financial statements and financial highlights appearing in the
September 30, 1998 Annual Report to Shareholders of Berger New Generation
Fund and Berger Small Company Growth Fund (two of the funds constituting
Berger Investment Portfolio Trust), which is also incorporated by reference
into the Registration Statement. We also consent to the references to us
under the heading "Financial Highlights" in the Prospectuses and under the
heading "Independent Accountants" in the Statements of Additional Information.
PricewaterhouseCoopers LLP
Denver, Colorado
June 14, 1999
<PAGE>
EXHIBIT 23(m)-8
AMENDED AND RESTATED
RULE 12b-1 PLAN FOR
THE INVESTOR SHARES OF THE
BERGER SMALL COMPANY GROWTH 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 Amended and Restated
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 Small Company Growth 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. This Plan amends, restates and
replaces in its entirety that Rule 12b-1 Plan previously adopted by the Trustees
with respect to the Fund, dated December 22, 1993.
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
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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.
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.
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<PAGE>
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 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
Small Company Growth Fund
Date: , 1999 By
-------------- -------------------------------------
Jack R. Thompson, President
3
<PAGE>
EXHIBIT 23(m)-9
AMENDED AND RESTATED
RULE 12b-1 PLAN FOR
THE INVESTOR SHARES OF THE
BERGER NEW GENERATION 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 Amended and Restated
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 New Generation 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. This Plan amends, restates and
replaces in its entirety that Rule 12b-1 Plan previously adopted by the Trustees
with respect to the Fund, dated March 6, 1996.
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
1
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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.
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.
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<PAGE>
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 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 New Generation Fund
Date: , 1999 By
----------------- ------------------------------
Jack R. Thompson, President
3
<PAGE>
EXHIBIT 23(o)-2
RULE 18f-3 PLAN FOR
MULTIPLE CLASSES OF SHARES OF THE
BERGER SMALL COMPANY GROWTH 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 Small Company Growth 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,
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<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
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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 Small Company Growth Fund
Date: , 1999 By
------------------ -------------------------------------
Jack R. Thompson, President
3
<PAGE>
EXHIBIT 23(o)-3
RULE 18f-3 PLAN FOR
MULTIPLE CLASSES OF SHARES OF THE
BERGER NEW GENERATION 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 New Generation 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
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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
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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
New Generation Fund
Date: , 1999 By
-------------- ---------------------------------------
Jack R. Thompson, President
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