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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 20, 2000
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.
[X] Post-Effective Amendment No. 29
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X] Amendment No. 30
(Check appropriate box or boxes)
BERGER INVESTMENT PORTFOLIO TRUST
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(Exact Name of Registrant as Specified in Charter)
210 University Boulevard, Suite 900, Denver, Colorado 80206
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (303) 329-0200
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Jack R. Thompson, 210 University Boulevard, Suite 900, Denver, CO 80206
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(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)
XX 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
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Berger Large Cap Value Fund - Investor Shares and Institutional Shares
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EXPLANATORY NOTE
This amendment to the Registration Statement of the Berger Investment
Portfolio Trust contains the following:
Two Prospectuses:
One for the Berger Large Cap Value Fund - Investor Shares class
One for the Berger Large Cap Value Fund - Institutional Shares class
Two Statements of Additional Information:
One for the Berger Large Cap Value Fund - Investor Shares class
One for the Berger Large Cap Value Fund - Institutional Shares class
One Part C
This amendment does not contain a Prospectus or Statement of Additional
Information for, nor affect any Prospectus or Statement of Additional
Information covering, these other series of the Berger Investment Portfolio
Trust: Berger Small Company Growth Fund, Berger New Generation Fund, Berger
Balanced Fund, Berger Select Fund, Berger Mid Cap Growth Fund, Berger Mid Cap
Value Fund or Berger Information Technology Fund.
<PAGE> 3
BERGER FUNDS PROSPECTUS
[ ] [Cover design]
BERGER LARGE CAP VALUE FUND
INVESTOR SHARES
, 2000
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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.
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Contents
THE BERGER FUNDS(R) are a no-load family of mutual funds. A mutual fund pools
money from shareholders and invests in a portfolio of securities. The following
section introduces the Berger Large Cap Value Fund, its goal, principal
investment strategies and principal risks. It also contains expense and
performance information.
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BERGER LARGE CAP VALUE FUND(TM) - INVESTOR SHARES PAGE 3
The Fund's Goal and Principal Investment Strategies PAGE 3
Principal Risks PAGE 3
The Fund's Past Performance PAGE 4
Fund Expenses PAGE 4
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS PAGE 5
Risk and Investment Table PAGE 5
Risk and Investment Glossary PAGE 8
BUYING SHARES PAGE 10
SELLING (REDEEMING) SHARES PAGE 12
Exchanging Shares PAGE 13
Signature Guarantees/Special Documentation PAGE 14
Your Share Price PAGE 14
Other Information About Your Account PAGE 15
Distributions and Taxes PAGE 17
Tax-Sheltered Retirement Plans PAGE 18
ORGANIZATION OF THE FUND
Investment Manager PAGE 18
Portfolio Turnover PAGE 19
12b-1 Arrangements PAGE 19
Special Fund Structure PAGE 19
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THE BERGER FUNDS and THE BERGER MOUNTAIN LOGO are registered trademarks of
Berger LLC; BERGER LARGE CAP VALUE FUND is a trademark of Berger LLC; and other
marks referred to herein are the trademarks or registered trademarks of the
respective owners thereof.
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BERGER LARGE CAP VALUE FUND
INVESTOR SHARES
Ticker Symbol: Not Available
THE FUND'S GOAL AND PRINCIPAL INVESTMENT STRATEGIES
The Fund aims for capital appreciation. In pursuing its goal, the Fund invests
primarily in the common stocks of large companies whose stock prices are
believed to be undervalued. The Fund's investment manager uses fundamental
analysis and proprietary valuation models to select a core holding of 25 to 40
stocks for the Fund.
The Fund's investment manager generally looks for companies:
o That have strong fundamentals and strong management
o Whose stock is trading at a discount relative to their assets,
earnings, cash flow or business franchise
o That have a specific catalyst or event driving their appreciation
potential.
Under normal circumstances, the Fund invests at least 65% of its assets in
common stocks of large companies whose market capitalization, at the time of
initial purchase, is greater than the 12-month average of the median market
capitalization for companies included in the Russell 1000(R) Index. This average
is updated monthly.
The Fund's investment manager will generally sell a stock when it has met the
manager's expectation for appreciation or when its price has depreciated by more
the 15% due to factors not related to the market. The investment manager will
also sell a stock when it believes the stock has become excessively overweighted
in the Fund or that the company's management has deviated from its strategy.
PRINCIPAL RISKS
You may be interested in the Fund if you are comfortable with the risks of
equity investing 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 investments may focus in a small number of business sectors, which
may pose greater market and liquidity risks. In addition, the Fund may invest in
certain securities with unique risks, such as special situations, which could
present greater market and information risks.
See "Investment Techniques, Securities and Associated Risks" later in this
prospectus for more information on principal risks and other risks.
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THE FUND'S PAST PERFORMANCE
The Fund has no performance history since it did not commence operations until
______________, 2000.
[icon-two coins]
FUND EXPENSES
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ANNUAL FUND OPERATING EXPENSES
As a shareholder in the (deducted directly from the Fund)
Fund, you do not pay any
sales load, redemption or Management fee .[__]%
exchange fees, but you do Distribution (12b-1) fee .25%
bear indirectly Annual Other expenses(1) .[__]%
Fund Operating Expenses,
which vary from year to TOTAL ANNUAL FUND OPERATING EXPENSES 1.[__]%
year. FEE WAIVER(2) (.[__])%
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NET EXPENSES 1.[__] %
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(1) "Other expenses" are based on estimated expenses for the Investor
Shares class and include transfer agency fees, shareholder report
expenses, registration fees and custodian fees.
(2) Under a written contract, the Fund's investment advisor waives its fee
to the extent that, at any time during the life of the Fund, the Fund's
annual operating expenses for the Investor Shares class exceed 1.[__]%.
The contract may not be terminated or amended except by a vote of the
Fund's Board of Trustees.
UNDERSTANDING EXPENSES
Annual Fund operating expenses are paid by the Fund. As a result, they reduce
the Fund's return. Fund expenses include management fees, 12b-1 fees and
administrative costs such as shareholder recordkeeping and reports, custodian
and pricing services and registration fees.
EXAMPLE COSTS
The following example helps you compare the cost of investing in the Fund to the
cost of investing in other mutual funds by showing what your costs may be over
time. It uses the same assumptions that other funds use in their prospectuses:
o $10,000 initial investment
o 5% total return for each year
o Fund operating expenses remain the same for each period
o 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:
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<CAPTION>
YEARS $
<S> <C>
One $[___]
Three $[___]
Five $[___]
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<CAPTION>
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INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS
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RISK AND INVESTMENT TABLE
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BERGER LARGE CAP VALUE FUND
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DIVERSIFICATION o
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SECTOR FOCUS [Y]
Market and liquidity risks
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SPECIAL SITUATIONS [Y]
Market and information risks
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SMALL AND MID-SIZED COMPANY SECURITIES Y
Market, liquidity and information risks
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FOREIGN SECURITIES Y
Market, currency, transaction, liquidity, information and political risks
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CONVERTIBLE SECURITIES(1) Y
Market, interest rate, prepayment and credit risks
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INVESTMENT GRADE BONDS (NONCONVERTIBLE) Y
Interest rate, market, call and credit risks
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COMPANIES WITH LIMITED OPERATING HISTORIES Y
Market, liquidity and information risks
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ILLIQUID AND RESTRICTED SECURITIES 15
Market, liquidity and transaction risk
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INITIAL PUBLIC OFFERINGS (IPOS)
Market, liquidity and information risk Y
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TEMPORARY DEFENSIVE MEASURES N
Opportunity risk
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LENDING PORTFOLIO SECURITIES 33A
Credit risk
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BORROWING 25Ao
Leverage risk
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HEDGING STRATEGIES
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FINANCIAL FUTURES(2) 5
Hedging, correlation, opportunity and leverage risk
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FORWARD FOREIGN CURRENCY CONTRACTS(2) Y
Hedging, credit, correlation, opportunity and leverage risk
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OPTIONS(2) 5
(EXCHANGE-TRADED AND OVER-THE-COUNTER)
Hedging, credit, correlation and leverage risk
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WRITING (SELLING) COVERED CALL OPTIONS(2) 25A
(EXCHANGE-TRADED AND OVER-THE-COUNTER)
Opportunity, credit and leverage risk
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BEFORE YOU INVEST ...
in the Fund, make sure you understand the risks involved. All investments
involve risk. Generally, the greater the risk, the greater the potential for
return. The reverse is also generally true, the lower the risk, the lower the
potential for return.
Like all mutual funds, an investment in the Fund is not a bank deposit and is
not insured or guaranteed by the FDIC or any other government agency. The Fund
is not a complete investment program, but may serve to diversify other types of
investments in your portfolio. There is no guarantee that the Fund will meet its
investment goal, and although you have the potential to make money, you could
also lose money by investing in the Fund.
The table on the opposite page will help you further understand the risks the
Fund takes by investing in certain securities and the investment techniques used
by the Fund. A glossary follows this page. You may get more detailed information
about the risks of investing in the Fund in the Statement of Additional
Information (SAI), including a discussion of debt security ratings in Appendix A
to the SAI.
KEY TO TABLE
Follow down the columns under the name of the Fund. The boxes will tell you:
[Y] Yes, the security or technique is permitted by the Fund and is
emphasized by the Fund.
Y Yes, the security or technique is permitted by the Fund.
N No, the security or technique is not permitted by the Fund.
o The restriction is fundamental to the Fund. (Fundamental restrictions
cannot be changed without a shareholder vote.)
25A Use of a security or technique is permitted, but subject to a
restriction of up to 25% of total assets.
33A Use of a security or technique is permitted, but subject to a
restriction of up to 33 1/3% of total assets.
5 Use of a security or technique is permitted, but subject to a
restriction of up to 5% of net assets.
15 Use of a security or technique is permitted, but subject to a
restriction of up to 15% of net assets.
NOTES TO TABLE
1. The Fund has no minimum quality standards for convertible securities,
although it will not invest in defaulted securities. It also will not
invest 20% or more of its assets in convertible securities rated below
investment grade or in unrated convertible securities that the sub-advisor
considers to be below investment grade.
2. The Fund may use futures, forwards and options only for hedging. Not more
than 5% of the Fund's net assets may be used for initial margins for
futures and premiums for options, although the Fund may have more at risk
under these contracts than the initial margin or premium. However, the
Fund's aggregate obligations under these contracts may not exceed the
total market value of the assets being hedged, such as some or all of the
value of the Fund's equity securities.
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RISK AND INVESTMENT GLOSSARY
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BORROWING refers to a loan of money from a bank or other financial institution
undertaken by the Fund for temporary or emergency reasons only.
CALL RISK is the possibility that an issuer may redeem or "call" a fixed income
security before maturity at a price below its current market price. An increased
likelihood of a call may reduce the security's price.
COMMON STOCK is a share of ownership (equity) interest in a company.
COMPANIES WITH LIMITED OPERATING HISTORIES are securities issued by companies
that have been in continuous operation for less than three years. Sometimes
called "unseasoned" issuers.
CONVERTIBLE SECURITIES are debt or equity securities which may be converted on
specified terms into stock of the issuer.
CORRELATION RISK occurs when the Fund "hedges" - uses one investment to offset
the Fund's position in another. If the two investments do not behave in relation
to one another the way Fund managers expect them to, then unexpected results may
occur.
CREDIT RISK means that the issuer of a security or the counterparty to an
investment 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.
FINANCIAL FUTURES are exchange-traded contracts on securities, securities
indexes or foreign currencies that obligate the holder to take or make future
delivery of a specified quantity of those underlying securities or currencies on
a predetermined future date at a predetermined price.
FOREIGN SECURITIES are issued by companies located outside of the United States.
The Fund considers a company to be located outside the United States if the
principal securities trading market for its equity securities is located outside
the U.S. or it is organized under the laws of, and has a principal office in, a
country other than the U.S.
FORWARD FOREIGN CURRENCY CONTRACTS are privately negotiated contracts committing
the holder to purchase or sell a specified quantity of a foreign currency on a
predetermined future date at a predetermined price.
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 do not include liquid Rule
144A securities.
INFORMATION RISK means that information about a security or issuer might not be
available, complete, accurate or comparable.
INITIAL PUBLIC OFFERING (IPO) is the sale of a company's securities to the
public for the first time. IPO companies can be small and have limited operating
histories. The price of IPO securities can be highly unstable due to prevailing
market psychology and the small number of shares available. In addition, the
quality and number of IPOs available for purchase may diminish in the future,
and their contribution to Fund performance may be less significant as the Fund
grows in size.
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.
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LENDING PORTFOLIO SECURITIES to qualified financial institutions is undertaken
in order to earn income. The Fund lends securities only on a fully
collateralized basis.
LEVERAGE RISK occurs in some securities or techniques that tend to magnify the
effect of small changes in an index or a market. This can result in a loss that
exceeds the amount that was invested in the contract.
LIQUIDITY RISK occurs when investments cannot be sold readily. The Fund may have
to accept a less-than-desirable price to complete the sale of an illiquid
security or may not be able to sell it at all.
MARKET 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 are contracts giving the holder the right but not the obligation to
purchase or sell a security on or before a predetermined future date for a fixed
price. Options on securities indexes are similar, but settle in cash.
POLITICAL RISK comes into play with investments, particularly foreign
investments, which may be adversely affected by nationalization, taxation, war,
government instability or other economic or political actions or factors.
SECTOR FOCUS occurs when a significant portion of the Fund's assets are invested
in a relatively small number of related industries. The Fund will not
concentrate more than 25% of its total assets in any one industry. Sector focus
may increase both market and liquidity risk.
SMALL AND MID-SIZED COMPANY SECURITIES are securities issued by small or
mid-sized companies, as measured by their market capitalization. The market
capitalization range targeted by funds investing in small or mid-sized companies
varies by fund. In general, the smaller the company, the greater its risks.
MARKET CAPITALIZATION is the total current market value of a company's
outstanding common stock.
SPECIAL SITUATIONS are companies about to undergo a structural, financial or
management change which may significantly affect the value of their securities.
TEMPORARY DEFENSIVE MEASURES increase a fund's investment in government
securities and other short-term securities when warranted due to market
conditions, without regard to the fund's investment restrictions, policies or
normal investment emphasis. The Fund's investment manager does not intend to use
this technique in the management of the Fund, but rather intends for the Fund to
remain as fully invested as possible at all times.
TRANSACTION RISK means that the Fund may be delayed or unable to settle a
transaction or that commissions and settlement expenses may be higher than
usual.
WRITING (SELLING) COVERED CALL OPTIONS is the selling of a contract to another
party which gives them the right but not the obligation to buy a particular
security from you. The Fund will write call options only if it already owns the
security (if it is "covered").
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BUYING SHARES
[SIDEBAR BOX]
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
[SIDEBAR TABLE]
MINIMUM INITIAL INVESTMENTS:
o Regular investment $ 2,000
o Low Minimum Investment Plan $ 100
MINIMUM SUBSEQUENT INVESTMENTS:
o Regular investment $ 50
o Regular automatic investment $ 50
o Low Minimum Investment Plan
(required monthly automatic investments) $ 100
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BY MAIL
Read this prospectus.
Fill out the application if you are opening a new account.
Make out a check to BERGER FUNDS for the amount you want to invest.
Send the application and a check to the Berger Funds in the envelope
provided.
To add to an existing account, be sure to include your account number on
your check and mail it to the appropriate address above.
BY TELEPHONE
If you already have a Berger Funds account, you may purchase additional
shares by telephone order.
You must pay for them within three business days by wire, electronic funds
transfer or overnight delivery of a check.
Call (800) 551-5849 for current wire or electronic funds transfer
instructions.
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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 SYSTEMATIC INVESTMENT PLAN
To automatically purchase more shares on a regular basis for a regular
minimum or Low Minimum Investment Plan account, fill out the Systematic
Investment Plan section of the application. Investments are transferred
automatically from your bank account.
The Low Minimum Investment Plan is designed for investors who would like to
begin a regular investment program but are reluctant to commit to higher
lump sum initial investments. In order to qualify for the Low Minimum
Investment Plan, an investor MUST commit to automatic monthly investments
totaling no less than $100 per month per account. Automatic monthly
investments must be made until the value of each account opened under the
Plan is at least $2,000 or the account will be assessed a $10 charge each
December.
All shareholders are automatically granted telephone and online transaction
privileges unless they decline them explicitly in writing, either on the
account application or by writing to the Berger Funds at the address above.
You may give up some level of security by choosing to buy and sell shares
by telephone or online rather than by mail.
IMPORTANT NOTES ABOUT PAYING FOR YOUR SHARES
Your check must be made payable to BERGER FUNDS.
You may not purchase shares by cash, credit card, third-party checks or
checks drawn on foreign banks.
Telephone and online purchase orders may not exceed ten times the value of
an account on the date the order is placed. Shares previously bought by
telephone or online access are included in calculating account size only if
payment has been received for those shares.
Orders not paid for on time will be canceled and shares will be redeemed
from your account to compensate for any decline in price of the shares
canceled.
The Fund reserves the right to reject any order and to waive minimums or
increase minimums following notice.
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SELLING (REDEEMING) SHARES
BY MAIL
Send a written request indicating your account number and the dollar amount
or number of shares you are redeeming to the appropriate address shown
under "Buying Shares."
Your request must be signed by each registered shareholder, with the
signature(s) appearing exactly as they do on your account registration.
BY TELEPHONE
Call (800) 551-5849.
BY ONLINE ACCESS
You will find us online at bergerfunds.com.
For limitations on telephone and online redemptions see "Signature
Guarantees/Special Documentation" below.
Telephone and online redemptions are not available for shares held in
retirement accounts sponsored by the Fund.
BY SYSTEMATIC WITHDRAWAL PLAN
Shares may be redeemed automatically ($50 minimum) monthly, quarterly,
semi-annually or annually.
A systematic withdrawal plan may be established if you own shares in the
Fund worth at least $5,000.
Call (800) 551-5849 for more information and forms.
IMPORTANT NOTES ABOUT PAYMENT FOR YOUR REDEEMED SHARES
In times of extreme economic or market conditions, transactions by
telephone or online may be difficult.
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.)
Wire and electronic funds transfers are subject to a $1,000 minimum and
$100,000 maximum.
You will be charged $10 if you request a wire transfer. There is no
charge for an electronic funds transfer.
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A wire transfer will be sent the next business day after receipt of
your order, and an electronic funds transfer will be sent the second
business day after receipt of your order.
Proceeds from the redemption of shares purchased by check may be
delayed until full payment for the shares has been received and
cleared, which may take up to 15 days from the purchase date.
INFORMATION ABOUT YOUR ACCOUNT
EXCHANGING SHARES
Shares of the Fund described in this prospectus may be exchanged for shares of
any other Berger Fund or for shares in the Cash Account Trust Portfolios (the
CAT Portfolios). The CAT Portfolios are three separately managed, unaffiliated
money market funds: the Money Market Portfolio, the Government Securities
Portfolio and the Tax-Exempt Portfolio.
The exchange privilege with the CAT Portfolios does not constitute an offering
or recommendation of the shares of these portfolios by the Berger Funds or
Berger LLC. Berger LLC is compensated for administrative services it performs
with respect to the CAT Portfolios.
When exchanging shares:
o Each account must be registered identically -- have the same signatures
and addresses.
o Each Fund or CAT Portfolio must be legally eligible for sale in your
state of residence.
o You may exchange out of each of the Berger Funds up to four times per
calendar year. At this time, there is no limit on the number of
exchanges permitted out of the CAT Portfolios.
o You may exchange by telephone, online access or mail.
o You are responsible for obtaining and reading the prospectus for the
Fund or CAT Portfolio into which you are exchanging.
o Exchanges result in the sale of one Fund's shares and the purchase of
another, normally resulting in a taxable event for you.
o Exchanges into any new Fund or CAT Portfolio are subject to that Fund's
or Portfolio's initial and subsequent investment minimums.
The Fund may terminate or modify the exchange privilege in the future.
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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:
o Your request exceeds $100,000.
o You request that payment be made to a name other than the one on your
account registration.
o 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.
o You change or add information relating to your designated bank.
The Berger Funds reserve the right to require Signature Guarantees under other
certain circumstances.
You can get a Signature Guarantee from most broker-dealers, national or state
banks, credit unions, federal savings and loan associations or other eligible
institutions. You cannot obtain a Signature Guarantee from a notary public.
Make sure the Signature Guarantee appears:
o Together with the signature(s) of all registered owner(s) of the
redeemed shares on the written redemption request.
o On any share certificates you hold for the redeemed shares or on a
separate statement of assignment (stock power) which may be obtained
from a bank or broker.
Additional documents are required for redemptions by corporations, executors,
administrators, trustees and guardians. For instructions, call (800) 551-5849 or
write to the Berger Funds, P.O. Box 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 Investor Shares of the Fund is
determined by adding the Investor Shares' pro rata portion of the total value of
the Fund's investments, cash and other assets, deducting the Investor Shares'
pro rata portion of the Fund's liabilities and the liabilities attributable
directly to the Investor Shares, and then dividing that value by the total
number of the Investor Shares outstanding. Share price is calculated separately
for each class of Fund shares.
The Fund's share price is calculated at the close of the regular trading session
of the New York Stock Exchange (normally 4:00 p.m. New York time) each day that
the Exchange is open. Share price is not calculated on the days that the
Exchange is closed.
For a purchase, redemption or exchange of Fund shares, your price is the share
price next calculated after your request is received in good order and accepted
by the Fund, its authorized agent or
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designee. To receive a specific day's price, your request must be received
before the close of the New York Stock Exchange on that day.
When the Fund calculates its share price, it values the securities it holds at
market value. Sometimes market quotes for some securities are not available or
are not representative of market value. Examples would be when events occur that
materially affect the value of a security at a time when the security is not
trading or when the securities are illiquid. In that case, securities may be
valued in good faith at fair value, using consistently applied procedures
decided on by the trustees. Money market instruments maturing within 60 days are
valued at amortized cost, which approximates market value. Assets and
liabilities expressed in foreign currencies are converted into U.S. dollars at
the prevailing market rates quoted by one or more banks or dealers shortly
before the close of the Exchange.
The Fund's foreign securities may trade on days that the Exchange is closed and
the Fund's daily share price is not calculated. As a result, the Fund's daily
share price may be affected and you will not be able to purchase or redeem
shares.
OTHER INFORMATION ABOUT YOUR ACCOUNT
SECURITY CONSIDERATIONS
You may give up some level of security by choosing to buy or sell shares by
telephone or online, rather than by mail. The Fund uses procedures designed to
give reasonable assurance that telephone and online instructions are genuine,
including recording the transactions, testing the identity of the shareholder
placing the order and sending prompt written confirmation of transactions to the
shareholder of record. The Fund, and its service providers, are not liable for
acting upon instructions communicated by telephone or online that they believe
to be genuine if these procedures are followed.
CONFIRMATION OF YOUR PURCHASES AND REDEMPTIONS
After any transaction, you will receive written confirmation including the share
price and the dollar amount and number of shares bought or redeemed. Exception:
Shares purchased under Automatic Investment Plans or redeemed under Systematic
Withdrawal Plans will be confirmed quarterly. Partial shares will be calculated
to three decimal places.
SHAREHOLDER REPORTS
To reduce expenses, the Fund may mail only one copy of most financial reports,
prospectuses and proxies to your household, even if you have more than one
account in the Fund. Call (800) 551-5849 if you need additional copies of
financial reports or prospectuses.
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.
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<PAGE> 18
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.
DATE-RELATED INFORMATION
Mutual funds and businesses around the world could be adversely affected if
computers do not properly process date-related information. The Fund's advisor
is addressing these issues for its computers and is 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 manager considers 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.
ACCOUNT MINIMUMS
The Fund will charge all shareholder accounts with a balance of less than $2,000
that are not making automatic monthly investments an annual fee of $10. This
charge is designed to help offset the proportionately higher costs of
maintaining small accounts.
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<PAGE> 19
This charge will apply to accounts that have been over $2,000 at some point in
time only if the balance has dropped below this amount because shares were
redeemed, not because the share value declined.
Shares in accounts that do not meet the minimum balance requirement applicable
to them as described below may also be subject to involuntary redemption by the
Fund.
REDEMPTIONS BY THE FUND OF CERTAIN ACCOUNTS
To reduce its expenses, the Fund may involuntarily redeem the shares in your
account if your balance drops below $2,000 -- but only if it drops below this
amount because you have redeemed shares, not because the share value has
declined. You will be given 60 days' notice before the Fund undertakes any
involuntary redemption. During that time, you may buy more shares to bring your
account above the minimum.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS OF INCOME AND GAINS
Unless you tell us that you want to receive your distributions in cash, they
will be reinvested automatically in Fund shares. The Fund generally makes two
different kinds of distributions:
o Capital gains from the sale of portfolio securities held by the Fund.
The Fund will distribute any net realized capital gains annually,
normally in December.
o Net investment income from interest or dividends received on securities
held by the Fund. The Fund will distribute its investment income
annually, normally in December.
YOUR TAXES
You generally will owe tax on amounts distributed to you by the Fund in any
non-retirement account whether you reinvest them in additional shares or receive
them in cash.
Distributions of gains from the sale of assets held by the Fund for more than
one year generally are taxable to you at the applicable long-term capital gains
rate, regardless of how long you have owned your Fund shares. Distributions from
other sources generally are taxed as ordinary income.
Distributions made by the Fund to you will normally be capital gains. A portion
of those gains may be net short-term capital gains, which are taxed as ordinary
income. The Fund generally will not 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.
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<PAGE> 20
ADDITIONAL TAX INFORMATION
You should consult your own tax advisor about your particular situation. For
more information about other tax matters, including backup withholding for
certain taxpayers and other tax aspects of redemptions, see the SAI.
TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for individuals,
businesses and nonprofit organizations. For information about establishing an
IRA, Roth IRA, profit-sharing or money purchase pension plan, 403(b) Custodial
Account, SEP-IRA, SIMPLE IRA account or other retirement plans, please call
(800) 551-5849 or write to the Berger Funds, P.O. Box 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 LLC (210 University Blvd., Suite 900, Denver, CO 80206) is the Fund's
investment advisor. Berger LLC serves as investment advisor, sub-advisor,
administrator or sub-administrator to mutual funds and institutional investors.
Berger LLC has been in the investment advisory business for 25 years. When
acting as investment advisor, Berger LLC is responsible for managing the
investment operations of the Fund. Berger LLC also provides administrative
services to the Fund.
WILLIAM F. K. SCHAFF has been the investment manager for the Fund since its
inception. Mr. Schaff joined Berger LLC as Vice President in ________ 2000.
Previously, Mr. Schaff co-founded and was the co-owner of Bay Isle Financial
Corporation and now serves as its Chief Investment Officer. In ________ 2000,
Berger LLC purchased Bay Isle which is now a subsidiary of Berger LLC. Mr.
Schaff has been managing accounts of Bay Isle clients since 1987.
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<PAGE> 21
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.
12b-1 ARRANGEMENTS
The Fund is a "no-load" fund, meaning that you pay no sales charge or
commissions when you buy or sell Fund shares. However, the Fund has adopted a
12b-1 plan for its Investor Shares class, permitting it to pay a fee in
connection with distribution of those shares. Berger LLC is entitled to be paid
a fee under the plan of 0.25% of the Fund's average daily net assets
attributable to the Investor Shares. Because this fee is paid on an ongoing
basis, this may result in the cost of your investment increasing and over time
may cost you more than other types of sales charges. The fee may be used for
such things as marketing and promotion, compensation to dealers and others who
provide distribution and administrative services, and shareholder support
services (such as routine requests for information).
SPECIAL FUND STRUCTURE
The Fund offers two classes of shares. The Investor Shares offered in this
prospectus are available to the general public. The other class of shares,
Institutional Shares, are offered through a separate prospectus and are designed
for investors who maintain a minimum account balance of $250,000. Each class of
shares has its own expenses so that share price, performance and distributions
will differ between classes. The 12b-1 plan adopted by the Fund applies only to
the Investor Shares. For more information on Institutional Shares, please call
(800) 259-2820.
For more information on the multi-class fund structure, see the SAI.
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<PAGE> 22
[BACK COVER]
[LOGO]
BERGER(R)
FOR MORE INFORMATION
Additional information about the Funds' investments is available in the Funds'
semi annual and annual reports to shareholders. The Funds' annual report
contains a discussion of the market conditions and investment strategies that
affect the Funds' performance over the past year.
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 free copies of the annual and semi annual reports and 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 64121-9958
(800) 331-1001
bergerfunds.com
Text-only versions of Fund documents can be viewed online or downloaded from the
EDGAR database on 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 (202) 942-8090. Copies of documents may also be obtained, after paying a
duplicating fee, by sending your request to the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, DC 20549-6009.
INVESTMENT COMPANY ACT FILE NUMBER:
Berger Investment Portfolio Trust 811-8046
Berger Large Cap Value Fund - Investor Shares
Page 20
<PAGE> 23
BERGER FUNDS PROSPECTUS
[ ] [Cover Design]
BERGER LARGE CAP VALUE FUND
INSTITUTIONAL SHARES
, 2000
-------------------
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> 24
Contents
THE BERGER FUNDS(R) 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 Large Cap Value 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.
<TABLE>
<S> <C>
BERGER LARGE CAP VALUE FUND(TM) - INSTITUTIONAL SHARES PAGE 3
The Fund's Goal and Principal Investment Strategies PAGE 3
Principal Risks PAGE 3
The Fund's Past Performance PAGE 4
Fund Expenses PAGE 4
INVESTMENT TECHNIQUES, SECURITIES AND ASSOCIATED RISKS PAGE 5
Risk and Investment Glossary PAGE 5
BUYING SHARES PAGE 9
SELLING (REDEEMING) SHARES PAGE 11
Exchanging Shares PAGE 12
Signature Guarantees/Special Documentation PAGE 12
Your Share Price PAGE 13
Other Information About Your Account PAGE 14
Distributions and Taxes PAGE 15
Tax-Sheltered Retirement Plans PAGE 16
ORGANIZATION OF THE FUND
Investment Manager PAGE 16
Portfolio Turnover PAGE 17
Special Fund Structure PAGE 17
</TABLE>
THE BERGER FUNDS and THE BERGER MOUNTAIN LOGO are registered trademarks of
Berger LLC; BERGER LARGE CAP VALUE FUND is a trademark of Berger LLC; and other
marks referred to herein are the trademarks or registered trademarks of the
respective owners thereof.
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<PAGE> 25
BERGER LARGE CAP VALUE FUND
INSTITUTIONAL SHARES
Ticker Symbol: Not Available
THE FUND'S GOAL AND PRINCIPAL INVESTMENT STRATEGIES
The Fund aims for capital appreciation. In pursuing its goal, the Fund invests
primarily in the common stocks of large companies whose stock prices are
believed to be undervalued. The Fund's investment manager uses fundamental
analysis and proprietary valuation models to select a core holding of 25 to 40
stocks for the Fund.
The Fund's investment manager generally looks for companies:
o That have strong fundamentals and strong management
o Whose stock is trading at a discount relative to their assets,
earnings, cash flow or business franchise
o That have a specific catalyst or event driving their appreciation
potential.
Under normal circumstances, the Fund invests at least 65% of its assets in
common stocks of large companies whose market capitalization, at the time of
initial purchase, is greater than the 12-month average of the median market
capitalization for companies included in the Russell 1000(R) Index. This average
is updated monthly.
The Fund's investment manager will generally sell a stock when it has met the
manager's expectation for appreciation or when its price has depreciated by more
the 15% due to factors not related to the market. The investment manager will
also sell a stock when it believes the stock has become excessively overweighted
in the Fund or that the company's management has deviated from its strategy.
PRINCIPAL RISKS
You may be interested in the Fund if you are comfortable with the risks of
equity investing 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 investments may focus in a small number of business sectors, which
may pose greater market and liquidity risks. In addition, the Fund may invest in
certain securities with unique risks, such as special situations, which could
present greater market and information risks.
See "Investment Techniques, Securities and Associated Risks" later in this
prospectus for more information on principal risks and other risks.
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<PAGE> 26
[icon-profile of head with scrolled paper in background]
THE FUND'S PAST PERFORMANCE
The Fund has no performance history since it did not commence operations until
______________, 2000.
[icon-two coins]
FUND EXPENSES
<TABLE>
<S> <C> <C>
ANNUAL FUND OPERATING EXPENSES
As a shareholder in the (deducted directly from the Fund)
Fund, you do not pay any
sales load, redemption or Management fee .[__]%
exchange fees, but you do Other expenses (1) .[__]%
bear indirectly Annual
Fund Operating Expenses, TOTAL ANNUAL FUND OPERATING EXPENSES 1.[__]%
which vary from year to FEE WAIVER (2) (.[__])%
year. -------
NET EXPENSES 1.[__] %
</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.
(2) Under a written contract, the Fund's investment advisor waives its fee
to the extent that, at any time during the life of the Fund, the Fund's
annual operating expenses for the Institutional Shares class exceed
1.[__]%. The contract may not be terminated or amended except by a vote
of the Fund's Board of Trustees.
UNDERSTANDING EXPENSES
Annual Fund operating expenses are paid by the Fund. As a result, they reduce
the Fund's return. Fund expenses include management fees and administrative
costs such as shareholder recordkeeping and reports, custodian and pricing
services and registration fees.
EXAMPLE COSTS
The following example helps you compare the cost of investing in the Fund to the
cost of investing in other mutual funds by showing what your costs may be over
time. It uses the same assumptions that other funds use in their prospectuses:
o $10,000 initial investment
o 5% total return for each year
o Fund operating expenses remain the same for each period
o 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 $[___]
Three $[___]
Five $[___]
</TABLE>
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<PAGE> 27
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.
RISK AND INVESTMENT GLOSSARY
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
CALL RISK is the possibility that an issuer may redeem or "call" a
fixed-income security before maturity at a price below its current market price.
An increased likelihood of a call may reduce the security's price.
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,
prepayment 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 values 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> 28
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 at a predetermined price. 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 at a predetermined price.
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 do not include
liquid 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.
INITIAL PUBLIC OFFERING (IPO) is the sale of a company's securities to
the public for the first time. IPO companies can be small and have limited
operating histories. The price of IPO securities can be highly unstable due to
prevailing market psychology and the small number of shares available. In
addition, the quality and number of IPOs available for purchase may diminish in
the future, and their contribution to Fund performance may be less significant
as the Fund grows in size.
Market, Liquidity and Information Risks
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, Call and Credit
Risks
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<PAGE> 29
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.
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(3) 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(3) are companies about to undergo a structural,
financial or management change which may significantly affect the value of their
securities. Market and Information Risks
TEMPORARY DEFENSIVE MEASURES increase a fund's investment in government
securities and other short-term securities when warranted due to market
conditions, without regard to the fund's investment restrictions, policies or
normal investment emphasis. The Fund's investment manager does not intend to use
this technique in the management of the Fund, but rather intends for the Fund to
remain as fully invested as possible at all times. Opportunity Risk
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<PAGE> 30
TRANSACTION RISK means that the Fund may be delayed or unable to settle
a transaction or that commissions and settlement expenses may be higher than
usual.
WRITING (SELLING) COVERED CALL OPTIONS(2) is the selling of a contract
to another party which gives them the right but not the obligation to buy a
particular security from you. The Fund will write call options only if it
already owns the security (if it is "covered"). The Fund may only write call
options up to 25% of its total assets. Opportunity, Credit and Leverage Risks
1. The Fund has no minimum quality standards for convertible securities,
although it will not invest in defaulted securities. It also will not
invest 20% or more of its assets in convertible securities rated below
investment grade or in unrated convertible securities that the
sub-advisor considers to be below investment grade.
2. The Fund may use futures, forwards and options only for hedging. Not
more than 5% of the Fund's net assets may be used for initial margins
for futures and premiums for options, although the Fund may have more
at risk under these contracts than the initial margin or premium.
However, the Fund's aggregate obligations under these contracts may not
exceed the total market value of the assets being hedged, such as some
or all of the value of the Fund's equity securities.
3. The security or technique is emphasized by the Fund.
Page 8
<PAGE> 31
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.
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<PAGE> 32
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 or reduce
minimums, or increase minimums following notice.
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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
In times of extreme economic or market conditions, transactions by
telephone or online may be difficult.
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
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request providing your bank information with your signature guaranteed.
(See "Signature Guarantees/Special Documentation" below.)
A wire transfer will be sent the next business day after receipt of your
order, and an electronic funds transfer will be sent the second business
day after receipt of your order.
Proceeds from the redemption of shares purchased by check may be delayed
until full payment for the shares has been received and cleared, which may
take up to 15 days from the purchase date.
INFORMATION ABOUT YOUR ACCOUNT
EXCHANGING SHARES
Shares of the Fund may be exchanged for shares of any other publicly available
Berger Funds by calling (800) 960-8427. When exchanging shares:
o Each account must be registered identically -- have the same signatures and
addresses.
o Each Fund must be legally eligible for sale in your state of residence.
o You may exchange out of each of the Berger Funds up to four times per
calendar year.
o You may exchange by telephone, online access or mail.
o You are responsible for obtaining and reading the prospectus for the fund
into which you are exchanging.
o Exchanges result in the sale of one fund's shares and the purchase of
another, normally resulting in a taxable event for you.
o 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:
o You request that payment be made to a name other than the one on your
account registration.
o 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.
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<PAGE> 35
o You change or add information relating to your designated bank.
The Berger Funds reserve the right to require Signature Guarantees under other
certain circumstances. You can get a Signature Guarantee from most
broker-dealers, national or state banks, credit unions, federal savings and loan
associations or other eligible institutions. You cannot obtain a Signature
Guarantee from a notary public.
Make sure the Signature Guarantee appears:
o Together with the signature(s) of all registered owner(s) of the redeemed
shares on the written redemption request.
o 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 and accepted
by the Fund, its authorized agent or designee. To receive a specific day's
price, your request must be received before the close of the New York Stock
Exchange on that day.
When the Fund calculates its share price, it values the securities it holds at
market value. Sometimes market quotes for some securities are not available or
are not representative of market value. Examples would be when events occur that
materially affect the value of a security at a time when the security is not
trading or when the securities are illiquid. In that case, securities may be
valued in good faith at fair value, using consistently applied procedures
decided on by the trustees. Money market instruments maturing within 60 days are
valued at amortized cost, which approximates market value. Assets and
liabilities expressed in foreign currencies are converted into U.S. dollars at
the prevailing market rates quoted by one or more banks or dealers shortly
before the close of the Exchange.
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<PAGE> 36
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.
SHAREHOLDER REPORTS
To reduce expenses, a Fund may mail only one copy of most financial reports,
prospectuses and proxies to your household, even if you have more than one
account in the Fund. Call (800) 551-5849 if you need additional copies of
financial reports or prospectuses.
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
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<PAGE> 37
these companies may be authorized to designate other entities to accept purchase
and redemption orders on behalf of the Fund.
DATE-RELATED INFORMATION
Mutual funds and businesses around the world could be adversely affected if
computers do not properly process date-related information. The Fund's advisor
is addressing these issues for its computers and is 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 manager considers 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
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<PAGE> 38
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.
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) 960-8427.
ORGANIZATION OF THE FUND
INVESTMENT MANAGER
BERGER LLC (210 University Blvd., Suite 900, Denver, CO 80206) is the Fund's
investment advisor. Berger LLC serves as investment advisor, sub-advisor,
administrator or sub-administrator to mutual funds and institutional investors.
Berger LLC has been in the investment advisory business for 25 years. When
acting as investment advisor, Berger LLC is responsible for managing the
investment operations of the Fund. Berger LLC also provides administrative
services to the Fund.
WILLIAM F. K. SCHAFF has been the investment manager for the Fund since its
inception. Mr. Schaff joined Berger LLC as Vice President in _________ 2000.
Previously, Mr. Schaff co-founded and was the co-owner of Bay Isle Financial
Corporation and now serves as its Chief Investment Officer. In _______ 2000,
Berger LLC purchased Bay Isle which is now a subsidiary of Berger LLC. Mr.
Schaff has been managing accounts of Bay Isle clients since 1987.
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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.
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.
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<PAGE> 40
[LOGO]
BERGER(R)
FOR MORE INFORMATION
Additional information about the Funds' investments is available in the Funds'
semi annual and annual reports to shareholders. The Funds' annual report
contains a discussion of the market conditions and investment strategies that
affect the Funds' performance over the past year.
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 free copies of the annual and semi-annual reports and 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 64121-9958
(800) 331-1001
bergerfunds.com
Text-only versions of Fund documents can be viewed online or downloaded from the
EDGAR database on 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 (202) 942-8090. Copies of documents may also be obtained, after paying a
duplicating fee, by sending your request to the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, DC 20549-6009.
INVESTMENT COMPANY ACT FILE NUMBER:
Berger Investment Portfolio Trust 811-8046
Berger Large Cap Value Fund - Institutional Shares
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<PAGE> 41
BERGER LARGE CAP VALUE FUND
(A SERIES OF BERGER INVESTMENT PORTFOLIO TRUST)
INVESTOR SHARES
STATEMENT OF ADDITIONAL INFORMATION
SHAREHOLDER SERVICES: 1-800-551-5849
This Statement of Additional Information ("SAI") is not a
prospectus. It relates to the Prospectus for the Berger Large Cap Value Fund
(the "Fund") -- Investor Shares, dated ___________, 2000, as it may be amended
or supplemented from time to time, which may be obtained by writing the Fund at
P.O. Box 5005, Denver, Colorado 80217, or calling 1-800-333-1001.
The Fund is a "no-load" mutual fund, meaning that a buyer pays
no commissions or sales charge when buying or redeeming shares of the Fund,
although the Fund pays certain costs of distributing its Investor Shares. See
"Section 5. Expenses of the Fund -- 12b-1 Plan" below. This SAI provides further
description of the Fund.
DATED [_________], 2000
<PAGE> 42
TABLE OF CONTENTS
&
CROSS-REFERENCES TO PROSPECTUS
<TABLE>
<CAPTION>
CROSS-REFERENCES TO
RELATED DISCLOSURES
TABLE OF CONTENTS IN PROSPECTUS
----------------- -------------------
<S> <C>
Introduction Contents
1. Investment Strategies and Risks of the Fund Berger Large Cap Value Fund;
Investment Techniques, Securities and Associated Risks
2. Investment Restrictions Berger Large Cap Value Fund;
Investment Techniques, Securities and Associated Risks
3. Management of the Fund Berger Large Cap Value Fund;
Organization of the Fund
4. Investment Advisor and Sub-Advisor Berger Large Cap Value Fund;
Organization of the Fund
5. Expenses of the Fund Berger Large Cap Value Fund; Organization of the Fund
6. Brokerage Policy Berger Large Cap Value Fund;
Organization of the Fund
7. How to Purchase and Redeem Shares in the Fund Buying Shares; Exchanging Shares
8. How the Net Asset Value is Determined Your Share Price
9. Income Dividends, Capital Gains Distributions Distributions and Taxes
and Tax Treatment
10. Suspension of Redemption Rights Other Information About Your Account
11. Tax-Sheltered Retirement Plans Tax-Sheltered Retirement Plans
12. Exchange Privilege and Systematic Withdrawal Plan Exchanging Shares
13. Performance Information Berger Large Cap Value Fund
14. Additional Information Organization of the Fund; Special Fund Structure
Financial Information N/A
</TABLE>
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<PAGE> 43
INTRODUCTION
The Fund described in this SAI is a mutual fund, or open-end,
management investment company. The Fund is a diversified fund.
1. INVESTMENT STRATEGIES AND RISKS OF THE FUND
The Prospectus describes the investment objective of the Fund
and the principal investment policies and strategies used to achieve that
objective. It also describes the principal risks of investing in the Fund.
This section contains supplemental information concerning the
types of securities and other instruments in which the Fund may invest, the
investment policies and portfolio strategies that the Fund may utilize and
certain risks attendant to those investments, policies and strategies.
COMMON AND PREFERRED STOCKS. Stocks represent shares of
ownership in a company. Generally, preferred stock has a specified dividend and
ranks after bonds and before common stocks in its claim on income for dividend
payments and on assets should the company be liquidated. After other claims are
satisfied, common stockholders participate in company profits on a pro-rata
basis. Profits may be paid out in dividends or reinvested in the company to help
it grow. Increases and decreases in earnings are usually reflected in a
company's stock price, so common stocks generally have the greatest appreciation
and depreciation potential of all corporate securities. While most preferred
stocks pay dividends, the Fund may purchase preferred stock where the issuer has
omitted, or is in danger of omitting, payment of its dividends. Such investments
would be made primarily for their capital appreciation potential. All
investments in stocks are subject to market risk, meaning that their prices may
move up and down with the general stock market, and that such movements might
reduce their value.
DEBT SECURITIES. Debt securities (such as bonds or debentures)
are fixed-income securities which bear interest and are issued by corporations
or governments. The issuer has a contractual obligation to pay interest at a
stated rate on specific dates and to repay principal on a specific maturity
date. In addition to market risk, debt securities are generally subject to two
other kinds of risk: credit risk and interest rate risk. Credit risk refers to
the ability of the issuer to meet interest or principal payments as they come
due. The lower the rating given a security by a rating service (such as Moody's
Investor Service ("Moody's") and Standard & Poor's ("S&P")), the greater the
credit risk the rating service perceives with respect to that security. The Fund
will not purchase any nonconvertible securities rated below investment grade (Ba
or lower by Moody's, BB or lower by S&P). In cases where the ratings assigned by
more than one rating agency differ, the Fund will consider the security as rated
in the higher category. If nonconvertible securities purchased by the Fund are
downgraded to below investment grade following purchase, the trustees of the
Fund, in consultation with the Fund's sub-advisor, will determine what action,
if any, is appropriate in light of all relevant circumstances. For a further
discussion of debt security ratings, see Appendix A to this SAI.
Interest rate risk refers to the fact that the value of
fixed-income securities (like debt securities) generally fluctuates in response
to changes in interest rates. A decrease in interest rates will generally result
in an increase in the price of fixed-income securities held by the Fund.
Conversely, during periods of rising interest rates, the value of fixed-income
securities held by the Fund will generally decline. Longer-term securities are
generally more sensitive to interest rate changes and are more volatile than
shorter-term securities, but they generally offer higher yields to compensate
investors for the associated risks.
Certain debt securities can also present prepayment risk. For
example, a security may contain redemption and call provisions. If an issuer
exercises these provisions when interest rates are declining, the Fund could
sustain investment losses as well as have to reinvest the proceeds from the
security at lower interest rates, resulting in a decreased return for the Fund.
CONVERTIBLE SECURITIES. The Fund may also purchase debt or
equity securities which are convertible into common stock when the Fund's
sub-advisor believes they offer the potential for a higher total return than
nonconvertible securities. While fixed-income securities generally have a
priority claim
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on a corporation's assets over that of common stock, some of the convertible
securities which the Fund may hold are high-yield/high-risk securities that are
subject to special risks, including the risk of default in interest or principal
payments which could result in a loss of income to the Fund or a decline in the
market value of the securities. Convertible securities often display a degree of
market price volatility that is comparable to common stocks. The credit risk
associated with convertible securities generally is reflected by their ratings
by organizations such as Moody's or S&P or a similar determination of
creditworthiness by the Fund's sub-advisor. The Fund has no pre-established
minimum quality standards for convertible securities and may invest in
convertible securities of any quality, including lower rated or unrated
securities. However, the Fund will not invest in any security in default at the
time of purchase, and the Fund will invest less than 20% of the market value of
its assets at the time of purchase in convertible securities rated below
investment grade. If convertible securities purchased by the Fund are downgraded
following purchase, or if other circumstances cause 20% or more of the Fund's
assets to be invested in convertible securities rated below investment grade,
the trustees of the Fund, in consultation with the Fund's sub-advisor, will
determine what action, if any, is appropriate in light of all relevant
circumstances. For a further discussion of debt security ratings, see Appendix A
to this SAI.
SPECIAL SITUATIONS. The Fund may also invest in "special
situations." Special situations are companies that have recently experienced or
are anticipated to experience a significant change in structure, management,
products or services which may significantly affect the value of their
securities. Examples of special situations are companies being reorganized or
merged, companies emerging from bankruptcy, companies introducing unusual new
products or which enjoy particular tax advantages. Other examples are companies
experiencing changes in senior management, extraordinary corporate events,
significant changes in cost or capital structure or which are believed to be
probable takeover candidates. The opportunity to invest in special situations,
however, is limited and depends in part on the market's assessment of these
companies and their circumstances. By its nature, a "special situation" company
involves to some degree a break with the company's past experience. This creates
greater uncertainty and potential risk of loss than if the company were
operating according to long-established patterns. In addition, stocks of
companies in special situations may decline or not appreciate as expected if an
anticipated change or development does not occur or is not assessed by the
market as favorably as expected.
ZEROS/STRIPS. The Fund may invest also in zero coupon bonds or
in "strips." Zero coupon bonds do not make regular interest payments; rather,
they are sold at a discount from face value. Principal and accreted discount
(representing interest accrued but not paid) are paid at maturity. "Strips" are
debt securities that are stripped of their interest coupon after the securities
are issued, but otherwise are comparable to zero coupon bonds. The market values
of "strips" and zero coupon bonds generally fluctuate in response to changes in
interest rates to a greater degree than do interest-paying securities of
comparable term and quality. The Fund will not invest in mortgage-backed or
other asset-backed securities.
SECURITIES OF SMALLER COMPANIES. The Fund may invest in
securities of companies with small or mid-sized market capitalizations. Market
capitalization is defined as total current market value of a company's
outstanding common stock. Investments in companies with smaller market
capitalizations may involve greater risks and price volatility (that is, more
abrupt or erratic price movements) than investments in larger, more mature
companies since smaller companies may be at an earlier stage of development and
may have limited product lines, reduced market liquidity for their shares,
limited financial resources or less depth in management than larger or more
established companies. Smaller companies also may be less significant factors
within their industries and may have difficulty withstanding competition from
larger companies. While smaller companies may be subject to these additional
risks, they may also realize more substantial growth than larger or more
established companies.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The
Fund may invest in securities of companies with limited operating histories. The
Fund considers these to be securities of companies with a record of less than
three years' continuous operation, even including the operations of any
predecessors and parents. (These are sometimes referred to as "unseasoned
issuers.") These companies by their nature have only a limited operating history
which can be used for evaluating the company's growth prospects. As a result,
investment decisions for these securities may place a greater emphasis on
current or planned product lines and the reputation and experience of the
company's management and less emphasis
-2-
<PAGE> 45
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.
Investors in IPOs can be adversely affected by substantial
dilution in the value of their shares, by sales of additional shares and by
concentration of control in existing management and principal shareholders. In
addition, all of the factors that affect stock market performance may have a
greater impact on the shares of IPO companies.
The price of a company's securities may be highly unstable at
the time of its IPO and for a period thereafter due to market psychology
prevailing at the time of the IPO, the absence of a prior public market, the
small number of shares available and limited availability of investor
information. As a result of this or other factors, a Fund's advisor or
sub-advisor might decide to sell an IPO security more quickly than it would
otherwise, which may result in a significant gain or loss and greater
transaction costs to the Fund. Any gains from shares held for 12 months or less
will be treated as short-term gains, taxable as ordinary income to the Fund's
shareholders. In addition, IPO securities may be subject to varying patterns of
trading volume and may, at times, be difficult to sell without an unfavorable
impact on prevailing prices.
The effect of an IPO investment can have a magnified impact on
a Fund's performance when the Fund's asset base is small. Consequently, IPOs may
constitute a significant portion of a Fund's returns particularly when the Fund
is small. Since the number of securities issued in an IPO is limited, it is
likely that IPO securities will represent a smaller component of a Fund's assets
as it increases in size, and therefore have a more limited effect on the Fund's
performance.
There can be no assurance that IPOs will continue to be
available for any of the Funds to purchase. The number or quality of IPOs
available for purchase by a Fund may vary, decrease or entirely disappear. In
some cases, a Fund may not be able to purchase IPOs at the offering price, but
may have to purchase the shares in the aftermarket at a price greatly exceeding
the offering price, making it more difficult for the Fund to realize a profit.
The advisor's or sub-advisor's IPO trade allocation procedures
govern which Funds and other advised accounts participate in the allocation of
any IPO. See the heading "Trade Allocations" under Section 4 below. Under the
IPO allocation procedures of Berger LLC, a Fund generally will not participate
in an IPO if the securities available for allocation to the Fund are
insignificant relative to the Fund's net assets. As a result, any Fund or
account whose assets are very large (such as the Berger Growth Fund) is not
likely to participate in the allocation of many IPOs.
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
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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.
Costs associated with transactions in foreign securities are
generally higher than with transactions in U.S. securities. The Fund will incur
greater costs in maintaining assets in foreign jurisdictions and in buying and
selling foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, the Fund might have greater
difficulty taking appropriate legal action with respect to foreign investments
in non-U.S. courts than with respect to domestic issuers in U.S. courts, which
may heighten the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
If the Fund is invested in securities denominated or quoted in
currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S. investors
are concerned. If the foreign currency in which a security is denominated
appreciates against the U.S. dollar, the dollar value of the security will
increase. Conversely, a decline in the exchange rate of the foreign currency
against the U.S. dollar would adversely affect the dollar value of the foreign
securities. Foreign currency exchange rates are determined by forces of supply
and demand on the foreign exchange markets, which are in turn affected by the
international balance of payments and other economic and financial conditions,
government intervention, speculation and other factors.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS). The Fund may
purchase the securities of certain companies considered Passive Foreign
Investment Companies (PFICs) under U.S. tax laws. For certain types of PFICs, in
addition to bearing their proportionate share of the Fund's expenses (management
fees and operating expenses), shareholders will also indirectly bear similar
expenses of such PFIC. PFIC investments also may be subject to less favorable
U.S. tax treatment, as discussed in Section 9 below.
ILLIQUID AND RESTRICTED SECURITIES. The Fund is authorized to
invest in securities which are illiquid or not readily marketable because they
are subject to restrictions on their resale ("restricted securities") or
because, based upon their nature or the market for such securities, no ready
market is available. However, the Fund will not purchase any such security, the
purchase of which would cause the Fund to invest more than 15% of its net
assets, measured at the time of purchase, in illiquid securities. Investments in
illiquid securities involve certain risks to the extent that the Fund may be
unable to dispose of such a security at the time desired or at a reasonable
price or, in some cases, may be unable to dispose of it at all. In addition, in
order to resell a restricted security, the Fund might have to incur the
potentially substantial expense and delay associated with effecting
registration. If securities become illiquid following purchase or other
circumstances cause more than 15% of the Fund's net assets to be invested in
illiquid securities, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances.
Repurchase agreements maturing in more than seven days will be
considered as illiquid for purposes of this restriction. Pursuant to guidelines
established by the trustees, the Fund's sub-advisor will determine whether
securities eligible for resale to qualified institutional buyers pursuant to SEC
Rule 144A under the Securities Act of 1933 should be treated as illiquid
investments considering, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing
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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.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase
agreements with various financial organizations, including commercial banks,
registered broker-dealers and registered government securities dealers. A
repurchase agreement is an agreement under which the Fund acquires a debt
security (generally a debt security issued or guaranteed by the U.S. government
or an agency thereof, a banker's acceptance or a certificate of deposit) from a
commercial bank, broker or dealer, subject to resale to the seller at an agreed
upon price and date (normally, the next business day). A repurchase agreement
may be considered a loan collateralized by securities. The resale price reflects
an agreed upon interest rate effective for the period the instrument is held by
the Fund and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Fund (including accrued
interest earned thereon) must have a total value equal to or in excess of the
value of the repurchase agreement and are held by the Fund's custodian bank
until repurchased. In addition, the trustees will establish guidelines and
standards for review by the investment sub-advisor of the creditworthiness of
any bank, broker or dealer party to a repurchase agreement with the Fund. The
Fund will not enter into a repurchase agreement maturing in more than seven days
if as a result more than 15% of the Fund's net assets would be invested in such
repurchase agreements and other illiquid securities.
These transactions must be fully collateralized at all times
by debt securities (generally a security issued or guaranteed by the U.S.
Government or an agency thereof, a banker's acceptance or a certificate of
deposit), but involve certain risks, such as credit risk to the Fund if the
other party defaults on its obligation and the Fund is delayed or prevented from
liquidating the collateral. For example, if the other party to the agreement
defaults on its obligation to repurchase the underlying security at a time when
the value of the security has declined, the Fund may incur a loss upon
disposition of the security. If the other party to the agreement becomes
insolvent and subject to liquidation or reorganization under the Bankruptcy Code
or other laws, a court may determine that the underlying security is collateral
for a loan by the Fund not within the control of the Fund and therefore the
realization by the Fund on such collateral may automatically be stayed and
delayed. Further, it is possible that the Fund may not be able to substantiate
its interest in the underlying security and may be deemed an unsecured creditor
of the other party to the agreement. The Fund expects that these risks can be
controlled through careful monitoring procedures.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may
purchase and sell securities on a when-issued or delayed delivery basis.
However, the Fund currently does not intend to purchase or sell securities on a
when-issued or delayed delivery basis, if as a result more than 5% of its total
assets taken at market value at the time of purchase would be invested in such
securities. When-issued or delayed delivery transactions arise when securities
(normally, obligations of issuers eligible for investment by the Fund) are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price or
yield. However, the yield available on a comparable security when delivery takes
place may vary from the yield on the security at the time that the when-issued
or delayed delivery transaction was entered into. Any failure to consummate a
when-issued or delayed delivery transaction may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous.
When-issued and delayed delivery transactions may generally be expected to
settle within one month from the date the transactions are entered into, but in
no event later than 90 days. However, no payment or delivery is made by the Fund
until it receives delivery or payment from the other party to the transaction.
When the Fund purchases securities on a when-issued basis, it
will maintain in a segregated account with its custodian cash, U.S. government
securities or other liquid assets having an aggregate value equal to the amount
of such purchase commitments, until payment is 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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<PAGE> 48
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 sub-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").
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
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<PAGE> 49
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
sub-advisor's judgment of the cost of the hedge, its potential effectiveness and
other factors the sub-advisor considers pertinent.
A hedging transaction may partially protect the Fund from a
decline in the value of a particular security or its portfolio generally,
although hedging may also limit the Fund's opportunity to profit from favorable
price movements, and the cost of the transaction will reduce the potential
return on the security or the portfolio. Use of these instruments by the Fund
involves the potential for a loss that may exceed the amount of initial margin
the Fund would be permitted to commit to the contracts under its investment
limitation, or in the case of a call option written by the Fund, may exceed the
premium received for the option. However, the Fund is permitted to use such
instruments for hedging purposes only, and only if the aggregate amount of its
obligations under these contracts does not exceed the total market value of the
assets the Fund is attempting to hedge, such as a portion or all of its exposure
to equity securities or its holding in a specific foreign currency. To help
ensure that the Fund will be able to meet its obligations under its futures and
forward contracts and its obligations under options written by the Fund, the
Fund will be required to maintain liquid assets in a segregated account with its
custodian bank or to set aside portfolio securities to "cover" its position in
these contracts.
The principal risks of the Fund utilizing futures
transactions, forward contracts and options are: (a) losses resulting from
market movements not anticipated by the Fund; (b) possible imperfect correlation
between movements in the prices of futures, forwards and options and movements
in the prices of the securities or currencies hedged or used to cover such
positions; (c) lack of assurance that a liquid secondary market will exist for
any particular futures or options at any particular time, and possible
exchange-imposed price fluctuation limits, either of which may make it difficult
or impossible to close a position when so desired; (d) lack of assurance that
the counterparty to a forward contract would be willing to negotiate an offset
or termination of the contract when so desired; and (e) the need for additional
information and skills beyond those required for the management of a portfolio
of traditional securities. In addition, when the Fund enters into an
over-the-counter contract with a counterparty, the Fund will assume counterparty
credit risk, that is, the risk that the counterparty will fail to perform its
obligations, in which case the Fund could be worse off than if the contract had
not been entered into.
Following is additional information concerning the futures,
forwards and options which the Fund may utilize, provided that no more than 5%
of the Fund's net assets at the time the contract is entered into may be used
for initial margins for financial futures transactions and 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,
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<PAGE> 50
in most cases the contractual obligation will be offset before the delivery date
by buying (in the case of an obligation to sell) or selling (in the case of an
obligation to buy) an identical futures contract. Such a transaction cancels the
original obligation to make or take delivery of the instruments.
The Fund may enter into contracts for the purchase or sale for
future delivery of financial instruments, such as securities and foreign
currencies, or contracts based on financial indices including indices of U.S.
Government securities, foreign government securities or equity securities. U.S.
futures contracts are traded on exchanges which have been designated "contract
markets" by the Commodity Futures Trading Commission ("CFTC") and must be
executed through a futures commission merchant (an "FCM"), or brokerage firm,
which is a member of the relevant contract market. Through their clearing
corporations, the exchanges guarantee performance of the contracts as between
the clearing members of the exchange.
Both the buyer and seller are required to deposit "initial
margin" for the benefit of the FCM when a futures contract is entered into.
Initial margin deposits are equal to a percentage of the contract's value, as
set by the exchange on which the contract is traded, and may be maintained in
cash or other liquid assets. If the value of either party's position declines,
that party will be required to make additional "variation margin" payments to
the other party to settle the change in value on a daily basis. Initial and
variation margin payments are similar to good faith deposits or performance
bonds or party-to-party payments resulting from daily changes in the value of
the contract, unlike margin extended by a securities broker, and would be
released or credited to the Fund upon termination of the futures contract,
assuming all contractual obligations have been satisfied. Unlike margin extended
by a securities broker, initial and variation margin payments do not constitute
purchasing securities on margin for purposes of the Fund's investment
limitations. The Fund will incur brokerage fees when it buys or sells futures
contracts.
In the event of the bankruptcy of the FCM that holds margin on
behalf of the Fund, the Fund may be entitled to return of margin owed to the
Fund only in proportion to the amount received by the FCM's other customers. The
Fund will attempt to minimize the risk by careful monitoring of the
creditworthiness of the FCMs with which the Fund does business and by depositing
margin payments in a segregated account with the Fund's custodian for the
benefit of the FCM when practical or otherwise required by law.
The Fund intends to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the futures
markets. Accordingly, the Fund will not enter into any futures contract or
option on a futures contract if, as a result, the aggregate initial margin and
premiums required to establish such positions would exceed 5% of the Fund's net
assets.
Although the Fund would hold cash and liquid assets in a
segregated account with a mark-to-market value sufficient to cover the Fund's
open futures obligations, the segregated assets would be available to the Fund
immediately upon closing out the futures position.
The acquisition or sale of a futures contract may occur, for
example, when the Fund is considering purchasing or holds equity securities and
seeks to protect itself from fluctuations in 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.
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The ordinary spreads between prices in the cash and futures
markets, due to differences in the nature of those markets, are subject to
distortions. First, all participants in the futures market are subject to
initial margin and variation margin requirements. Rather than meeting additional
variation margin requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal price relationship
between the cash and futures markets. Second, the liquidity of the futures
market depends on participants entering into offsetting transactions rather than
making or taking delivery. To the extent participants decide to make or take
delivery, liquidity in the futures market could be reduced and prices in the
futures market distorted. Third, from the point of view of speculators, the
margin deposit requirements in the futures market are less than margin
requirements in the securities market. Therefore, increased participation by
speculators in the futures market may cause temporary price distortions. Due to
the possibility of the foregoing distortions, a correct forecast of general
price trends by the Fund still may not result in a successful use of futures.
Futures contracts entail additional risks. Although the Fund
will only utilize futures contracts when it believes that use of such contracts
will benefit the Fund, if the Fund's investment judgment is incorrect, the
Fund's overall performance could be worse than if the Fund had not entered into
futures contracts. For example, if the Fund has hedged against the effects of a
possible decrease in prices of securities held in the Fund's portfolio and
prices increase instead, the Fund will lose part or all of the benefit of the
increased value of these securities because of offsetting losses in the Fund's
futures positions. In addition, if the Fund has insufficient cash, it may have
to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which reflect the rising market and may occur at a time when the sales
are disadvantageous to the Fund. Although the buyer of an option cannot lose
more than the amount of the premium plus related transaction costs, a buyer or
seller of futures contracts could lose amounts substantially in excess of any
initial margin deposits made, due to the potential for adverse price movements
resulting in additional variation margin being required by such positions.
However, the Fund intends to monitor its investments closely and will attempt to
close its positions when the risk of loss to the Fund becomes unacceptably high.
The prices of futures contracts depend primarily on the value
of their underlying instruments. Because there are a limited number of types of
futures contracts, it is possible that the standardized futures contracts
available to the Fund will not match exactly the Fund's current or potential
investments. The Fund may buy and sell futures contracts based on underlying
instruments with different characteristics from the securities in which it
typically invests -- for example, by hedging investments in portfolio securities
with a futures contract based on a broad 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
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<PAGE> 52
may not be able to promptly liquidate unfavorable futures positions and
potentially could be required to continue to hold a futures position until the
delivery date, regardless of changes in its value. As a result, the Fund's
access to other assets held to cover its futures positions also could be
impaired.
Options on Futures Contracts. The Fund may buy and write
options on futures contracts for hedging purposes. An option on a futures
contract gives the Fund the right (but not the obligation) to buy or sell a
futures contract at a specified price on or before a specified date. The
purchase of a call option on a futures contract is similar in some respects to
the purchase of a call option on an individual security. Depending on the
pricing of the option compared to either the price of the futures contract upon
which it is based or the price of the underlying instrument, ownership of the
option may or may not be less risky than ownership of the futures contract or
the underlying instrument. As with the purchase of futures contracts, the Fund
may buy a call option on a futures contract to hedge against a market advance,
and the Fund might buy a put option on a futures contract to hedge against a
market decline.
The writing of a call option on a futures contract constitutes
a partial hedge against declining prices of the security or foreign currency
which is deliverable under, or of the index comprising, the futures contract. If
the futures price at the expiration of the call option is below the exercise
price, the Fund will retain the full amount of the option premium which provides
a partial hedge against any decline that may have occurred in the Fund's
portfolio holdings. If a call option the Fund has written is exercised, the Fund
will incur a loss which will be reduced by the amount of the premium it
received. Depending on the degree of correlation between change in the value of
its portfolio securities and changes in the value of the futures positions, the
Fund's losses from existing options on futures may to some extent be reduced or
increased by changes in the value of portfolio securities.
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
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<PAGE> 53
entering into forward currency contracts to sell an amount of that currency
approximating the value of some or all of its portfolio securities denominated
in that currency ("position hedge") or by participating in futures contracts (or
options on such futures) with respect to the currency. The Fund also may enter
into a forward currency contract with respect to a currency where the Fund is
considering the purchase or sale of investments denominated in that currency but
has not yet selected the specific investments ("anticipatory hedge").
These types of hedging minimize the effect of currency
appreciation as well as depreciation, but do not eliminate fluctuations in the
underlying U.S. dollar equivalent value of the proceeds of or rates of return on
the Fund's foreign currency denominated portfolio securities. The matching of
the increase in value of a forward contract and the decline in the U.S. dollar
equivalent value of the foreign currency denominated asset that is the subject
of the hedge generally will not be precise. Shifting the Fund's currency
exposure from one foreign currency to another limits the Fund's opportunity to
profit from increases in the value of the original currency and involves a risk
of increased losses to the Fund if its investment manager's projection of future
exchange rates is inaccurate. Unforeseen changes in currency prices may result
in poorer overall performance for the Fund than if it had not entered into such
contracts.
The Fund will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency being hedged. To the extent that the Fund
is not able to cover its forward currency positions with underlying portfolio
securities, the Fund's custodian will segregate cash or liquid assets having a
value equal to the aggregate amount of the Fund's commitments under forward
contracts entered into. If the value of the securities used to cover a position
or the value of segregated assets declines, the Fund must find alternative cover
or segregate additional cash or liquid assets on a daily basis so that the value
of the covered and segregated assets will be equal to the amount of the Fund's
commitments with respect to such contracts.
While forward contracts are not currently regulated by the
CFTC, the CFTC may in the future assert authority to regulate forward contracts.
In such event, the Fund's ability to utilize forward contracts may be
restricted. The Fund may not always be able to enter into forward contracts at
attractive prices and may be limited in its ability to use these contracts to
hedge Fund assets. In addition, when the Fund enters into a privately negotiated
forward contract with a counterparty, the Fund assumes counterparty credit risk,
that is, the risk that the counterparty will fail to perform its obligations, in
which case the Fund could be worse off than if the contract had not been entered
into. Unlike many exchange-traded futures contracts and options on futures,
there are no daily price fluctuation limits with respect to forward contracts
and other negotiated or over-the-counter instruments, and with respect to those
contracts, adverse market movements could therefore continue to an unlimited
extent over a period of time. However, the Fund intends to monitor its
investments closely and will attempt to renegotiate or close its positions when
the risk of loss to the Fund becomes unacceptably high.
Options on Securities and Securities Indices. The Fund may buy
or sell put or call options and write covered call options on securities that
are traded on United States or foreign securities exchanges or over-the-counter.
Buying an option involves the risk that, during the option period, the price of
the underlying security will not increase (in the case of a call) to above the
exercise price, or will not decrease (in the case of a put) to below the
exercise price, in which case the option will expire without being exercised and
the holder would lose the amount of the premium. Writing a call option involves
the risk of an increase in the market value of the underlying security, in which
case the option could be exercised and the underlying security would then be
sold by the Fund to the option holder at a lower price than its current market
value and the Fund's potential for capital appreciation on the security would be
limited to the exercise price. Moreover, when the Fund writes a call option on a
securities index, the Fund bears the risk of loss resulting from imperfect
correlation between movements in the price of the index and the price of the
securities set aside to cover such position. Although they entitle the holder to
buy equity securities, call options to purchase equity securities do not entitle
the holder to dividends or voting rights with respect to the underlying
securities, nor do they represent any rights in the assets of the issuer of
those securities.
A call option written by the Fund is "covered" if the Fund
owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon
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<PAGE> 54
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 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
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<PAGE> 55
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.
PORTFOLIO TURNOVER. Investment changes in the Fund will be
made whenever management deems them appropriate even if this results in a higher
portfolio turnover rate. A 100% annual turnover rate results, for example, if
the equivalent of all of the securities in the Fund's portfolio are replaced in
a period of one year. In addition, portfolio turnover for the Fund may increase
as a result of large amounts of purchases and redemptions of shares of the Fund
due to economic, market or other factors that are not within the control of
management.
Higher portfolio turnover will necessarily result in
correspondingly higher brokerage costs for the Fund. The existence of a high
portfolio turnover rate has no direct relationship to the tax liability of the
Fund, although sales of certain stocks will lead to realization of gains, and,
possibly, increased taxable distributions to shareholders. The Fund's brokerage
policy is discussed further below under Section 6--Brokerage Policy, and
additional information concerning income taxes is located under Section
9--Income Dividends, Capital Gains Distributions and Tax Treatment.
2. INVESTMENT RESTRICTIONS
The investment objective of the Fund is capital appreciation.
The investment objective of the Fund is considered fundamental, meaning that it
cannot be changed without a shareholders' vote. There can be no assurance that
the Fund's investment objective will be realized.
The Fund has also adopted certain investment policies,
strategies, guidelines and procedures in pursuing its objective. These may be
changed without a shareholder vote. The principal policies and strategies used
by the Fund are described in the Prospectus.
In addition, the Fund has adopted certain fundamental and
non-fundamental restrictions on its investments and other activities, which are
listed below. Fundamental restrictions may not be changed without the approval
of (i) 67% or more of the voting securities of the Fund present at a meeting of
shareholders thereof if the holders of more than 50% of the outstanding voting
securities are present or represented by proxy, or (ii) more than 50% of the
outstanding voting securities of the Fund. Non-fundamental restrictions may be
changed in the future by action of the trustees without shareholder vote.
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<PAGE> 56
BERGER LARGE CAP VALUE FUND
The following fundamental restrictions apply to the Berger
Large Cap Value Fund. The Fund may not:
1. With respect to 75% of the Fund's total assets, purchase
the securities of any one issuer (except U.S. government securities) if
immediately after and as a result of such purchase (a) the value of the holdings
of the Fund in the securities of such issuer exceeds 5% of the value of the
Fund's total assets or (b) the Fund owns more than 10% of the outstanding voting
securities of such issuer.
2. Invest in any one industry (other than U.S. government
securities) 25% or more of the value of its total assets at the time of such
investment.
3. Borrow money, except from banks for temporary or emergency
purposes in amounts not to exceed 25% of the Fund's total assets (including the
amount borrowed) taken at market value, nor pledge, mortgage or hypothecate its
assets, except to secure permitted indebtedness and then only if such pledging,
mortgaging or hypothecating does not exceed 25% of the Fund's total assets taken
at market value. When borrowings exceed 5% of the Fund's total assets, the Fund
will not purchase portfolio securities.
4. Act as a securities underwriter (except to the extent the
Fund may be deemed an underwriter under the Securities Act of 1933 in disposing
of a security), issue senior securities (except to the extent permitted under
the Investment Company Act of 1940), invest in real estate (although it may
purchase shares of a real estate investment trust), or invest in commodities or
commodity contracts except financial futures transactions, futures contracts on
securities and securities indices and options on such futures, forward foreign
currency exchange contracts, forward commitments or securities index put or call
options.
5. Make loans, except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies. The Fund does not, for this purpose, consider the purchase
of all or a portion of an issue of publicly distributed bonds, bank loan
participation agreements, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities, to be the making of a loan.
In applying the industry concentration investment restriction
(no. 2 above), the Fund uses the industry groups used in the Data Monitor
Portfolio Monitoring System of William O'Neil & Co. Incorporated.
The trustees have adopted additional non-fundamental
investment restrictions for the Fund. These limitations may be changed by the
trustees without a shareholder vote. The non-fundamental investment restrictions
include the following:
1. The Fund may not purchase securities on margin from a
broker or dealer, except that the Fund may obtain such short-term credits as may
be necessary for the clearance of transactions, and may not make short sales of
securities, except that the Fund may make short sales if, at the time of the
short sale, the Fund owns or has the right to acquire an equivalent kind and
amount of the security being sold short at no additional cost (i.e., short sales
"against the box"). This limitation shall not prohibit or restrict the Fund from
entering into futures, forwards and options contracts or from making margin
payments and other deposits in connection therewith.
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.
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<PAGE> 57
5. Only for the purpose of hedging, the Fund may purchase and
sell financial futures, forward foreign currency exchange contracts and put and
call options, but no more than 5% of the Fund's net assets at the time of
purchase may be invested in initial margins for financial futures transactions
and premiums for options. The Fund may only write call options that are covered
and only up to 25% of the Fund's total assets.
6. The Fund may not purchase or sell securities on a
when-issued or delayed delivery basis, if as a result more than 5% of its total
assets taken at market value at the time of purchase would be invested in such
securities.
3. MANAGEMENT OF THE FUND
The Fund is supervised by trustees who are responsible for
major decisions about the Fund's policies and overall Fund oversight. The Fund's
trustees hire the companies that run day-to-day Fund operations, such as the
investment advisor, administrator, transfer agent and custodian.
The trustees and executive officers of the Fund are listed
below, together with information which includes their principal occupations
during the past five years and other principal business affiliations.
MICHAEL OWEN, 114 A Gallatin Dr., Bozeman, MT 59718, DOB: 1937.
Self-employed as a financial and management consultant, and in real
estate development. From 1993 to June 1999, Dean, and from 1989 to
1993, a member of the Finance faculty, of the College of Business,
Montana State University. Formerly (1976-1989), Chairman and Chief
Executive Officer of Royal Gold, Inc. (mining). Chairman of the Board
of Berger Growth Fund and Berger Growth and Income Fund. Chairman of
the Trustees of Berger Investment Portfolio Trust, Berger
Institutional Products Trust, Berger Worldwide Funds Trust, Berger
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 Growth 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 Worldwide Funds Trust, Berger Worldwide Portfolios
Trust and Berger Omni Investment Trust. President and Director since
June, 1999 (Executive Vice President from February 1999 to June 1999)
of Berger LLC. 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.
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<PAGE> 58
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 Growth Fund and Berger
Growth and Income Fund. Trustee of Berger Investment Portfolio Trust,
Berger Institutional Products Trust, Berger Worldwide Funds Trust,
Berger Worldwide Portfolios Trust and Berger Omni Investment Trust.
LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, DOB: 1925.
President, Climate Engineering, Inc. (building environmental
systems). Director of Berger Growth Fund and Berger Growth and Income
Fund. Trustee of Berger Investment Portfolio Trust, Berger
Institutional Products Trust, Berger Worldwide Funds Trust, Berger
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 Growth Fund and
Berger Growth and Income Fund. Trustee of Berger Investment Portfolio
Trust, Berger Institutional Products Trust, Berger Worldwide Funds
Trust, Berger 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), an 81%
owned subsidiary of DST Systems, Inc. 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 Growth Fund and Berger Growth and
Income Fund. Trustee of Berger Investment Portfolio Trust, Berger
Institutional Products Trust, Berger Worldwide Funds Trust, Berger
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 Growth Fund and Berger Growth and Income Fund.
Trustee of Berger Investment Portfolio Trust, Berger Institutional
Products Trust, Berger Worldwide Funds Trust, Berger 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 Growth Fund and Berger Growth and Income
Fund. Trustee of Berger Investment Portfolio Trust, Berger
Institutional Products Trust, Berger Worldwide Funds Trust, Berger
Worldwide Portfolios Trust and Berger Omni Investment Trust.
WILLIAM F.K. Schaff, 160 Sansome Street, 17th Floor, San Francisco, CA
94104. DOB: 1957. Vice President and portfolio manager of the Fund
since inception (______, 2000), Vice President and portfolio manager
of the Berger Information Technology Fund since inception (April,
1997). Vice President and portfolio manager with Berger LLC since
_______, 2000. Chief Investment Officer and a director (since
February 1998) of Bay Isle LLC. Chief Investment Officer (November
1989) of Bay Isle Financial Corporation. Investment Analyst/Advisor
of J. Stewart Investments from September, 1986 to February, 1989.
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<PAGE> 59
* JANICE M. TEAGUE, 210 University Boulevard, Suite 900, Denver, CO
80206, DOB: 1954. Vice President (since November 1998), Assistant
Secretary (since February 2000) and Secretary (November 1998 to
February 2000) of the Berger Funds. Assistant Secretary of the Berger
Funds from October 1996 to November 1998. Vice President (since
October 1997), Secretary (since November 1998) and Assistant
Secretary (October 1996 through November 1998) with Berger LLC. Vice
President and Secretary with Berger Distributors LLC, 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 LLC. Chief Financial Officer and
Treasurer (since May 1996), Assistant Secretary (since August 1998)
and Secretary (May 1996 to August 1998) with Berger Distributors LLC.
Formerly, Partner with Smith, Brock & Gwinn (accounting firm) from
January 1984 to August 1994.
* ANTHONY R. BOSCH, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1965. Vice President of the Berger Funds (since February 2000).
Vice President (since June 1999) with Berger LLC. Formerly, Assistant
Vice President of Federated Investors, Inc. from December 1996
through May 1999, and Attorney with the U.S. Securities and Exchange
Commission (from June 1990 through December 1996).
* 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 LLC. Chief Compliance Officer with
Berger Distributors LLC, 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 LLC.
Formerly, Manager of Accounting (December 1994 through October 1996)
and Senior Accountant (November 1991 through December 1994) with
Palmeri Fund Administrators, Inc.
* SUE VREELAND, 210 University Boulevard, Suite 900, Denver, CO
80206, DOB: 1948. Secretary of the Berger Funds (since February
2000). Assistant Secretary of Berger LLC and Berger Distributors LLC
since June 1999. Formerly, Assistant Secretary of the Janus Funds
from March 1994 to May 1999, Assistant Secretary of Janus
Distributors, Inc. from June 1995 to May 1997and Manager of Fund
Administration for Janus Capital Corporation from February 1992 to
May, 1999.
----------
* Interested person (as defined in the Investment Company Act of 1940) of one or
more of the Funds and/or of the Funds' advisors or sub-advisors.
The directors or trustees of the Funds have adopted a
director/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, 1999. However, trustees of the
Fund who are not "interested persons" of the
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<PAGE> 60
Fund or its advisor or sub-advisor are compensated for their services according
to a fee schedule, allocated among the Berger Funds. Neither the officers of the
Fund nor the trustees receive any form of pension or retirement benefit
compensation from the Fund.
The following table sets forth information regarding
compensation paid or accrued during the fiscal year ended September 30, 1999,
for each trustee of the Fund:
<TABLE>
<CAPTION>
NAME AND POSITION
WITH BERGER FUNDS AGGREGATE COMPENSATION FROM
----------------- ----------------------------
BERGER LARGE CAP VALUE FUND(1) ALL BERGER FUNDS(2)
------------------------------ -------------------
<S> <C> <C>
Dennis E. Baldwin(3) $ $
Louis R. Bindner(3) $ $
Katherine A. Cattanach(3) $ $
Paul R. Knapp(3) $ $
Harry T. Lewis(3) $ $
Michael Owen(3) $ $
William Sinclaire(3) $ $
Jack R. Thompson(3),(4),(5) $ 0 $ 0
</TABLE>
NOTES TO TABLE
(1) The Fund was not added as a series of the Trust until ______, 2000. Figures
are estimates for the first year of operations of the Fund as a series of the
Trust.
(2) Includes the Berger Growth 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 Worldwide Funds Trust (three series,
including the Berger International Fund), the Berger Worldwide Portfolios Trust
(one series) and the Berger Omni Investment Trust (including the Berger Small
Cap Value Fund). Aggregate compensation figures do not include first-year
estimates for the Fund or 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.
(3) Director of Berger Growth Fund and Berger Growth and Income Fund and trustee
of Berger Investment Portfolio Trust, Berger Institutional Products Trust,
Berger Worldwide Portfolios Trust, Berger Worldwide Funds Trust and Berger Omni
Investment Trust.
(4) Interested person of Berger LLC.
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<PAGE> 61
(5) President of Berger Growth Fund, Berger Growth and Income Fund, Berger
Investment Portfolio Trust, Berger Worldwide Portfolios Trust, Berger Worldwide
Funds Trust and Berger Omni Investment Trust.
Trustees may elect to defer receipt of all or a portion of
their fees pursuant to a fee deferral plan adopted by the Fund. Under the plan,
deferred fees are credited to an account and adjusted thereafter to reflect the
investment experience of whichever of the Berger Funds (or approved money market
funds) is designated by the trustee for this purpose. Pursuant to an SEC
exemptive order, the Fund is permitted to purchase shares of the designated
funds in order to offset its obligation to the trustees participating in the
plan. Purchases made pursuant to the plan are excepted from any otherwise
applicable investment restriction limiting the purchase of securities of any
other investment company. The Fund's obligation to make payments of deferred
fees under the plan is a general obligation of the Fund.
As of [__________], 2000, the officers and trustees of the
Fund as a group owned of record or beneficially no shares of the Fund.
4. INVESTMENT ADVISOR AND SUB-ADVISOR
BERGER LLC - INVESTMENT ADVISOR
Berger LLC, 210 University Boulevard, Suite 900, Denver, CO
80206, is the investment advisor to the Fund. Berger LLC is responsible for
managing the investment operations of the Fund and the composition of its
investment portfolio. Berger LLC also acts as the Fund's administrator and is
responsible for such functions as monitoring compliance with all applicable
federal and state laws.
Berger LLC 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 $7.7
billion as of March 31, 2000. Berger LLC is a subsidiary of Stilwell Management
Inc. ("Stilwell"), which owns more than 80% of Berger LLC, and is an indirect
subsidiary of Stilwell Financial, Inc. ("Stilwell Financial"), which in turn 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 indirectly (through Stilwell
Financial) also owns approximately 32% of the outstanding shares of DST Systems,
Inc. ("DST"), a publicly traded information and transaction processing company
which acts as the Funds' transfer agent. DST, in turn, owns 100% of DST
Securities, a registered broker-dealer, which executes portfolio trades for the
Funds.
INVESTMENT ADVISORY AGREEMENTS
Under the Investment Advisory Agreement between the Fund and
its advisor, the advisor is generally responsible for furnishing continuous
advice and making investment decisions as to the acquisition, holding or
disposition of securities or other assets which the Fund may own or contemplate
acquiring from time to time. The Investment Advisory Agreement provides that the
investment advisor shall not be liable for any error of judgment or mistake of
law or for any loss arising out of any investment or for any act or omission
taken with respect to the Fund, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties thereunder and except to the extent
otherwise provided by law.
Under the Agreement, the advisor is compensated for its
services by the payment of a fee at the following annual rate, calculated as a
percentage of the average daily net assets of the Fund:
<TABLE>
<CAPTION>
FUND ADVISOR INVESTMENT ADVISORY FEE
--- ------- -----------------------
<S> <C> <C>
Berger Large Cap Value Fund Berger LLC(1) 0.[__]%(2)
</TABLE>
----------
(1) Fund is sub-advised by Bay Isle. See text preceding and following this
table.
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<PAGE> 62
(2) Under a written contract, the Fund's investment advisor waives its fee or
reimburses the Fund for expenses to the extent that, at any time during the life
of the Fund, the annual operating expenses for the Investor Shares class of the
Fund in any fiscal year, including the investment advisory fee and the 12b-1
fee, but excluding brokerage commissions, interest, taxes and extraordinary
expenses, exceed [2.00]% of the Fund's average daily net assets attributable to
the Investor Shares for that fiscal year. The contract also provides that the
advisor will waive an additional amount of its fees or reimburse an additional
amount of expenses to the extent necessary to keep its fee waiver and
reimbursement for the Investor Shares class proportionate to its fee waiver and
reimbursement for the Fund's other outstanding share class. The contract may not
be terminated or amended except by a vote of the Fund's Board of Trustees. The
investment advisory fee is allocated among the Investor Shares and the other
class of the Fund on the basis of net assets attributable to each such class.
The Fund's Investment Advisory Agreement will continue in
effect until February 17, 2002, and thereafter from year to year if such
continuation is specifically approved at least annually by the trustees or by
vote of a majority of the outstanding shares of the Fund and in either case by
vote of a majority of the trustees who are not "interested persons" (as that
term is defined in the 1940 Act) of the Fund or the advisor. The Agreement is
subject to termination by the Fund or the advisor on 60 days' written notice,
and terminates automatically in the event of its assignment.
ARRANGEMENTS BETWEEN BERGER LLC AND BAY ISLE
In _________ 2000, Berger LLC purchased all of the outstanding
shares of Bay Isle Financial Corp., an investment adviser founded by the Fund's
portfolio manager William F.K. Schaff and Gary G. Pollock. Previously, Berger
LLC and Bay Isle formed a joint venture to provide asset management services to
certain private accounts. Bay Isle, currently a subsidiary of Berger LLC,
continues to provide investment advisory services to private accounts.
TRADE ALLOCATIONS
While investment decisions for the Fund are made independently
by the sub-advisor, the same investment decision may be made for the Fund and
one or more accounts 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 LLC, the Berger Funds and Berger Distributors LLC each
permits its directors, officers and employees to purchase and sell securities
for their own accounts in accordance with a policy regarding personal investing
in each of the Codes of Ethics for Berger LLC, the Berger Funds and Berger
Distributors LLC. 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 Funds or Berger LLC's other advisory clients. Directors and
officers of Berger LLC and Berger Distributors LLC, 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 Funds.
In addition to the pre-clearance requirements described above
for Berger LLC and Berger Distributors LLC, the policy subjects directors and
officers of Berger LLC, the Berger Funds and Berger Distributors LLC, investment
personnel and other access persons to various trading restrictions and reporting
obligations. All reportable transactions are
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<PAGE> 63
reviewed for compliance with the policy. The policy is administered by Berger
LLC and the provisions of the policy are subject to interpretation by and
exceptions authorized by its board of directors.
Bay Isle permits its officers, directors, employees and
consultants to purchase and sell securities for their own accounts and accounts
of related persons in accordance with provisions governing personal securities
trading in Bay Isle's code of ethics and related internal policies. Employees
must wait 3 days between the time a new recommendation or opinion change is made
and the time the employee may trade in those securities in their own or related
accounts, or alternatively may ask that their transaction be added to a "block"
trade that will be made for a group of clients. Any employee trade not included
in a "block" trade made must be pre-cleared if the trade exceeds certain
specified volume limits. Volume limits are set with the intent of requiring
prior approval of any trade that could potentially cause changes in the market
price of the security in question. In addition, no employee may sell (or buy)
any security which he or she has bought (or sold) within the past 5 trading days
unless a loss is realized on closing the position. No employee, officer or
director of Bay Isle may acquire any security in an initial public offering or
in a private placement without prior written approval from Bay Isle's President.
Any Bay Isle employee who is an "access person" of the Fund will also be subject
to the provisions of Berger LLC's Code of Ethics, if those provisions are more
restrictive than the provisions of Bay Isle's own code. Each employee must
acknowledge quarterly that they are in compliance with the Bay Isle code of
ethics and related policies.
5. EXPENSES OF THE FUND
In addition to paying an investment advisory fee to its
advisor, the Fund pays all of its expenses not assumed by its advisor,
including, but not limited to, custodian and transfer agent fees, legal and
accounting expenses, administrative and record keeping expenses, interest
charges, federal and state taxes, costs of share certificates, expenses of
shareholders' meetings, compensation of trustees who are not interested persons
of Berger LLC, 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.
Under a separate Administrative Services Agreement with
respect to the Fund, Berger LLC 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 LLC 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 Fund has appointed State Street Bank and Trust Company
("State Street"), 801 Pennsylvania, Kansas City, MO 64105, as its recordkeeping
and pricing agent. In addition, State Street also serves as the Fund's
custodian. The Fund has appointed DST Systems, Inc. ("DST"), P.O. Box 219958,
Kansas City, MO 64121 as its transfer agent and dividend disbursing agent.
Approximately 32% of the outstanding shares of DST are owned by KCSI.
As recordkeeping and pricing agent, State Street calculates
the daily net asset value of the Fund and performs certain accounting and
recordkeeping functions required by the Fund. The Fund pays State Street a
monthly base fee plus an asset-based fee. State Street is also reimbursed for
certain out-of-pocket expenses.
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<PAGE> 64
State Street, 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, State Street receives an
asset-based fee plus certain transaction fees and out-of-pocket expenses.
As transfer agent and dividend disbursing agent, DST 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, DST
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.
All of State Street's and DST's fees are subject to reduction
pursuant to an agreed formula for certain earnings credits on the cash balances
of the Fund.
12b-1 PLAN
The Fund has adopted a 12b-1 plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940, which provides for the payment to
Berger LLC of a 12b-1 fee of 0.25% per annum of the Fund's average daily net
assets attributable to the Investor Shares to finance activities primarily
intended to result in the sale of those shares. The Plan is intended to benefit
the Investor Shares class of the Fund by attracting new assets into the class
and thereby affording potential cost reductions due to economies of scale.
The expenses paid by Berger LLC may include, but are not limited to:
o payments made to, and costs incurred by, the Fund's principal underwriter
in connection with the distribution of Investor Shares, including payments
made to and expenses of officers and registered representatives of the
Distributor;
o payments made to and expenses of other persons (including employees of
Berger LLC) who are engaged in, or provide support services in connection
with, the distribution of Investor Shares, such as answering routine
telephone inquiries and processing shareholder requests for information;
o compensation (including incentive compensation and/or continuing
compensation based on the amount of customer assets maintained in the
Fund) paid to securities dealers, financial institutions and other
organizations which render distribution and administrative services in
connection with the distribution of Investor Shares, including services to
holders of Investor Shares and prospective investors;
o 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;
o costs of printing and distributing prospectuses and reports to prospective
shareholders of Investor Shares;
o costs involved in preparing, printing and distributing sales literature
for Investor Shares;
o costs involved in obtaining whatever information, analyses and reports
with respect to market and promotional activities on behalf of the Fund
relating to Investor Shares that Berger LLC deems advisable;
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<PAGE> 65
o and such other costs relating to Investor Shares as the Fund may from time
to time reasonably deem necessary or appropriate in order to finance
activities primarily intended to result in the sale of Investor Shares.
Such 12b-1 fee payments are to be made by the Fund to Berger
LLC with respect to each fiscal year of the Fund without regard to the actual
distribution expenses incurred by Berger LLC in such year; that is, if the
distribution expenditures incurred by Berger LLC are less than the total of such
payments in such year, the difference is not to be reimbursed to the Fund by
Berger LLC, and if the distribution expenditures incurred by Berger LLC are more
than the total of such payments, the excess is not to be reimbursed to Berger
LLC by the Fund.
From time to time the Fund may engage in activities which
jointly promote the sale of Investor Shares and other funds that are or may in
the future be advised or administered by Berger LLC, which costs are not readily
identifiable as related to any one fund. In such cases, the Fund's 12b-1 fees
may be used to finance the joint promotion of the shares of the Investor Shares,
along with the shares of the other fund. Berger LLC allocates the cost of such
joint promotional activity among the funds involved on the basis of their
respective net assets, unless otherwise directed by the trustees.
The current 12b-1 Plan will continue in effect until the end
of April 2000, and from year to year thereafter if approved at least annually by
the Fund's trustees and those trustees who are not interested persons of the
Fund and have no direct or indirect financial interest in the operation of the
Plan or any related agreements by votes cast in person at a meeting called for
such purpose. The Plan may not be amended to increase materially the amount to
be spent on distribution of Investor Shares without shareholder approval.
OTHER EXPENSE INFORMATION
The trustees of the Fund have authorized portfolio
transactions to be placed on an agency basis through DST Securities, Inc.
("DSTS"), a wholly-owned broker-dealer subsidiary of DST. When transactions are
effected through DSTS, the commission received by DSTS is credited against, and
thereby reduces, certain operating expenses that the Fund would otherwise be
obligated to pay. No portion of the commission is retained by DSTS. See Section
6--Brokerage Policy for further information concerning the expenses reduced as a
result of these arrangements. DSTS may be considered an affiliate of Berger LLC
due to the ownership interest of KCSI in both DST and Berger LLC.
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 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 LLC (the "Distributor"), 210 University Boulevard, Suite
900, Denver, CO 80206. The Distributor may be reimbursed by Berger LLC for its
costs in distributing the Fund's shares.
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<PAGE> 66
6. BROKERAGE POLICY
Although the Fund retains full control over its own investment
policies, under the terms of its Investment Advisory Agreement, Berger LLC 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 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 LLC.
Berger LLC 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 LLC 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 LLC's 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 LLC 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 LLC's level of business, market conditions and other relevant factors.
Even under these arrangements, however, the placement of all Fund transactions,
must be consistent with the Fund's brokerage placement and execution policies,
and must be directed to a broker who renders satisfactory service in the
execution of orders at the most favorable prices and at reasonable commission
rates.
These brokerage and research services received from brokers
are often helpful to Berger LLC in performing its investment advisory
responsibilities to the Fund, and the availability of such services from brokers
does not reduce the responsibility of Berger LLC's 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 LLC in making investment decisions for its other
advisory accounts, and, conversely, information obtained by reason of placement
of brokerage business of
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<PAGE> 67
such other accounts may be used by Berger LLC in rendering investment advice to
the Fund. Although such brokerage and research services may be deemed to be of
value to Berger LLC, they are not expected to decrease the expenses that Berger
LLC would otherwise incur in performing its investment advisory services for the
Fund nor will the advisory fees that are received by Berger LLC 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 LLC due to the ownership interest of KCSI in both DST and
Berger LLC.
The Fund's advisor places securities orders with a limited
number of major institutional brokerage firms chosen for the reliability and
quality of execution; commission rates; quality of research coverage of major
U.S. companies, the U.S. economy and the securities markets; promptness; back
office capabilities; capital strength and financial stability; prior performance
in serving the advisor and its clients; and knowledge of other buyers and
sellers. The advisor selects the broker for each order based on the factors
above, as well as the size, difficulty and other characteristics of the order.
The trustees of the Fund have also authorized sales of shares of the Fund by a
broker-dealer and the recommendations of a broker-dealer to its customers that
they purchase Fund shares to be considered as factors in the selection of
broker-dealers to execute portfolio transactions for the Fund. In addition, the
advisor may also consider payments made by brokers to the Fund or to other
persons on behalf of the Fund for services provided to the Fund for which it
would otherwise be obligated to pay, such as transfer agency fees. In placing
portfolio business with any such broker or dealer, the advisor of the Fund will
seek the best execution of each transaction.
7. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND
<TABLE>
<S> <C> <C>
MINIMUM INITIAL INVESTMENTS:
Regular investment $2,000
Low Minimum Investment Plan $ 100
MINIMUM SUBSEQUENT INVESTMENTS:
Regular investment $ 50
Automatic investment $ 50
Low Minimum Investment Plan
(required monthly automatic investments) $ 100
</TABLE>
To purchase shares in the Fund, simply complete the
application form enclosed with the Prospectus. Then mail it with a check payable
to "Berger Funds" to the following address:
Berger Funds
P.O. Box 419958
Kansas City, MO 64141
If a shareholder is adding to an existing account, shares
may also be purchased by placing an order by telephone call to the Fund at
1-800-551-5849 or via on-line access, and remitting payment to DST Systems, Inc.
Payment for shares ordered on-line must be made by electronic funds transfer. In
order to make sure that payment for telephone purchases is received on time,
shareholders are encouraged to remit payment by electronic funds transfer.
Shareholders may also remit payment for telephone purchases by wire or by
overnight delivery.
In addition, Fund shares may be purchased through certain
broker-dealers that have established mutual fund programs and certain other
organizations connected with pension and retirement plans. These broker-dealers
and other organizations may charge investors a transaction or other fee for
their services, may require different minimum initial and subsequent investments
than the Fund and may impose other charges or restrictions different from those
applicable to shareholders who invest in the Fund directly. Fees charged by
these organizations will have the effect of reducing a shareholder's total
return on an investment in Fund shares. No such charge will apply to an investor
who purchases Fund shares directly from the Fund as described above.
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<PAGE> 68
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 LLC 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 share price for the Investor Shares of the Fund is
determined by adding the Investor Shares' pro rata portion of the total value of
the Fund's investments, cash and other assets, deducting the Investor Shares'
pro rata portion of the Fund's liabilities and the liabilities attributable
directly to the Investor Shares, and then dividing that value by the total
number of the Investor Shares outstanding. Since net asset value for the Fund is
calculated by class, and since the Investor Shares and each other class of the
Fund has its own expenses, the per share net asset value of the Fund will vary
by class.
In determining net asset value, securities listed or traded
primarily on national exchanges, The Nasdaq Stock Market and foreign exchanges
are valued at the last sale price on such markets, or, if such a price is
lacking for the trading period immediately preceding the time of determination,
such securities are valued at the mean of their current bid and asked prices.
Securities that are traded in the over-the-counter market are valued at the mean
between their current bid and asked prices. The market value of individual
securities held by the Fund will be determined by using prices provided by
pricing services which provide market prices to other mutual funds or, as
needed, by obtaining market quotations from independent broker/dealers.
Short-term money market securities maturing within 60 days are valued on the
amortized cost basis, which approximates market value. All assets and
liabilities initially expressed in terms of non-U.S. dollar currencies are
translated into U.S. dollars at the prevailing market rates as quoted by one or
more banks or dealers shortly before the close of the Exchange. Securities and
assets for which quotations are not readily available or are not representative
of market value may be valued at their fair value determined in good faith
pursuant to consistently applied procedures established by the trustees.
Examples would be when events occur that materially affect the value of a
security at a time when the security is not trading or when the securities are
illiquid.
Generally, trading in foreign securities markets is
substantially completed each day at various times prior to the close of the
Exchange. The values of foreign securities used in computing the net asset value
of the shares of the Fund are determined as of the earlier of such market close
or the closing time of the Exchange. Occasionally, events affecting the value of
such securities may occur between the times at which they are determined and the
close of the Exchange, or when the foreign market on which such securities trade
is closed but the Exchange is open, which will not be reflected in the
computation of net asset value. If during such periods, events occur which
materially affect the value of such securities, the securities may be valued at
their fair value as determined in good faith pursuant to consistently applied
procedures established by the trustees.
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.
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<PAGE> 69
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 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
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alternative tax treatments with respect to PFIC shares which would avoid these
taxes and charges, but also may affect, among other things, the amount and
character of gain or loss and the timing of the recognition of income with
respect to PFIC shares. Accordingly, the amounts, character and timing of income
distributed to shareholders of the Fund holding PFIC shares may differ
substantially as compared to a fund that did not invest in PFIC shares.
INCOME FROM CERTAIN TRANSACTIONS. Some or all of the Fund's
investments may include transactions that are subject to special tax rules.
Transactions involving foreign currencies may give rise to gain or loss that
could affect the Fund's ability to make ordinary dividend distributions.
Investment in certain financial instruments, such as options, futures contracts
and forward contracts, may require annual recognition of unrealized gains and
losses. Transactions that are treated as "straddles" may affect the character
and/or timing of other gains and losses of the Fund. If the Fund enters into a
transaction (such as a "short sale against the box") that reduces the risk of
loss on an appreciated financial position that it already holds, the entry into
the transaction may constitute a constructive sale and require immediate
recognition of gain.
BACKUP WITHHOLDING. In general, if a shareholder is subject to
backup withholding, the Fund will be required to withhold federal income tax at
a rate of 31% from distributions to that shareholder. These payments are
creditable against the shareholder's federal income tax liability.
FOREIGN SHAREHOLDERS. Foreign shareholders of the Fund
generally will be subject to a 30% U.S. withholding tax on dividends paid by the
Fund from ordinary income and short-term capital gain, although the rate may be
reduced by a tax treaty. If a foreign shareholder dies while owning Fund shares,
those shares may be subject to U.S. estate taxes.
10. SUSPENSION OF REDEMPTION RIGHTS
The right of redemption may be suspended for any period during
which the New York Stock Exchange is closed or the Securities and Exchange
Commission determines that trading on the Exchange is restricted, or when there
is an emergency as determined by the Securities and Exchange Commission as a
result of which it is not reasonably practicable for the Fund to dispose of
securities owned by it or to determine the value of its net assets, or for such
other period as the Securities and Exchange Commission may by order permit for
the protection of shareholders of the Fund.
The Fund intends to redeem its shares only for cash, although
it retains the right to redeem its shares in-kind under unusual circumstances,
in order to protect the interests of the remaining shareholders, by the delivery
of securities selected from its assets at its discretion. The Fund is, however,
governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to
which the Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% of the net assets of the Fund during any 90-day period for any
one shareholder. For purposes of this threshold, each underlying account holder
whose shares are held of record in certain omnibus accounts is treated as one
shareholder. Should redemptions by any shareholder during any 90-day period
exceed such limitation, the Fund will have the option of redeeming the excess in
cash or in-kind. If shares are redeemed in-kind, the redeeming shareholder
generally will incur brokerage costs in converting the assets to cash. The
redeeming shareholder may have difficulty selling the securities and recovering
the amount of the redemption if the securities are illiquid. The method of
valuing securities used to make redemption in-kind will be the same as the
method of valuing portfolio securities described under Section 8.
11. TAX-SHELTERED RETIREMENT PLANS
The Fund offers several tax-qualified retirement plans for
individuals, businesses and non-profit organizations, including a Profit-Sharing
Plan, a Money Purchase Pension Plan, an Individual Retirement Account (IRA), a
Roth IRA and a 403(b) Custodial Account for adoption by employers and
individuals who wish to participate in such Plans. For information on other
types of retirement plans offered by the Fund, please call 1-800-333-1001 or
write to the Fund c/o Berger LLC, P.O. Box 5005, Denver, CO 80217.
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PROFIT-SHARING AND MONEY PURCHASE PENSION PLANS
Employers, self-employed individuals and partnerships may make
tax-deductible contributions to the tax-qualified retirement plans offered by
the Fund. All income and capital gains accumulated in the Plans are tax free
until withdrawn. The amounts that are deductible depend upon the type of Plan or
Plans adopted.
If you, as an employer, self-employed person or partnership,
adopt the Profit-Sharing Plan, you may vary the amount of your contributions
from year to year and may elect to make no contribution at all for some years.
If you adopt the Money Purchase Pension Plan, you must commit yourself to make a
contribution each year according to a formula in the Plan that is based upon
your employees' compensation or your earned income. By adopting both the
Profit-Sharing and the Money Purchase Pension Plan, you can increase the amount
of contributions that you may deduct in any one year.
If you wish to purchase shares of the Fund in conjunction with
one or both of these tax-qualified plans, you may use an Internal Revenue
Service approved prototype Trust Agreement and Retirement Plan available from
the Fund. State Street serves as trustee of the Plan, for which it charges an
annual trustee's fee for the Fund or Cash Account Trust Money Portfolio
(discussed below) in which the participant's account is invested. Contributions
under the Plans are invested exclusively in shares of the Fund or the Cash
Account Trust Money Market Portfolios, which are then held by the trustee under
the terms of the Plans to create a retirement fund in accordance with the tax
code.
Distributions from the Profit-Sharing and Money Purchase
Pension Plans generally may not be made without penalty until the participant
reaches age 59 1/2 and must begin no later than April 1 of the calendar year
following the year in which the participant attains age 70 1/2. A participant
who is not a 5% owner of the employer may postpone such distributions to April 1
of the calendar year following the year of retirement. This exception does not
apply to distributions from an individual retirement account (IRA). Except for
required distributions after age 70 1/2, periodic distributions over more than
10 years and the distribution of any after-tax contributions, distributions are
subject to 20% Federal income tax withholding unless those distributions are
rolled directly to another qualified plan or an IRA. Participants may not be
able to receive distributions immediately upon request because of certain
requirements under federal tax law. Since distributions which do not satisfy
these requirements can result in adverse tax consequences, consultation with an
attorney or tax advisor regarding the Plans is recommended. You should also
consult with your tax advisor regarding state tax law implications of
participation in the Plans.
In order to receive the necessary materials to create a
Profit-Sharing or Money Purchase Pension Plan, please write to the Fund, c/o
Berger LLC, Inc., P.O. Box 5005, Denver, Colorado 80217, or call 1-800-333-1001.
Trustees for 401(k) or other existing plans interested in utilizing Fund shares
as an investment or investment alternative in their plans should contact the
Fund at 1-800-333-1001.
INDIVIDUAL RETIREMENT ACCOUNT (IRA)
If you are an individual with compensation or earned income,
whether or not you are actively participating in an existing qualified
retirement plan, you can provide for your own retirement by adopting an IRA.
Under an IRA, you can contribute each year up to the lesser of 100% of your
compensation or $2,000. If you are married and you file a joint return, you and
your spouse together may make contributions totaling up to $4,000 to two IRAs
(with no more than $2,000 being contributed to either account) if your joint
income is $4,000 or more, even if one spouse has no earned income. If neither
you nor your spouse are active participants in an existing qualified retirement
plan, or if your income does not exceed certain amounts, the amounts contributed
to your IRA can be deducted for Federal income tax purposes whether or not your
deductions are itemized. If you or your spouse are covered by an existing
qualified retirement plan, the deductibility of your IRA contributions will be
phased out for federal income tax purposes if your income exceeds specified
amounts, although the income level at which your IRA contributions will no
longer be deductible is higher if only your spouse (but not you) is an active
participant. However, whether your contributions are deductible or not, the
income and capital gains accumulated in your IRA are not taxed until the account
is distributed.
If you wish to create an IRA to invest in shares of the Fund,
you may use the Fund's IRA custodial agreement form which is an adaptation of
the form provided by the Internal Revenue Service. Under
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the IRA custodial agreement, State Street will serve as custodian, for which it
will charge an annual custodian fee for the Fund and each other Berger Fund and
Cash Account Trust Money Market Portfolio in which the IRA is invested.
Distributions from an IRA generally may not be made without
penalty until you reach age 59 1/2 and must begin no later than April 1 of the
calendar year following the year in which you attain age 70 1/2. Since
distributions which do not satisfy these requirements can result in adverse tax
consequences, consultation with an attorney or tax advisor is recommended. You
should also consult with your tax advisor about state taxation of your account.
In order to receive the necessary materials to create an IRA
account, please write to the Fund, c/o Berger LLC, Inc., P.O. Box 5005, Denver,
Colorado 80217, or call 1-800-333-1001.
ROTH IRA
If you are an individual with compensation or earned income,
you may contribute up to the lesser of $2,000 or 100% of your compensation to a
Roth IRA, as long as your income does not exceed a specified income level
($95,000 for single individuals, $150,000 for married individuals filing
jointly). A Roth IRA is similar in many respects to a traditional IRA, as
described above. However, the maximum amount you may contribute to a Roth IRA is
phased out between that income level and a maximum income amount ($110,000 and
$160,000, respectively), and you may not make any contribution at all to a Roth
IRA if your income exceeds the maximum income amount. Also, you can make
contributions to a Roth IRA even after you reach age 70-1/2, and you are not
required to take distributions from a Roth IRA prior to your death.
Contributions to a Roth IRA are not deductible for federal
income tax purposes. However, the income and capital gains accumulated in a Roth
IRA are not taxed while held in the IRA, and distributions can be taken tax-free
if the Roth IRA has been established for a minimum of five years and the
distribution is after age 59-1/2, for a first time home purchase, or upon death
or disability.
An individual with an income of less than $100,000 who is not
married filing separately can roll his or her existing IRA into a Roth IRA.
However, the individual must pay taxes on the taxable amount of the traditional
IRA account balance. Individuals who complete the rollover in 1998 will be
permitted to spread the tax liability over a four-year period. After 1998, all
taxes on such a rollover will be due in the year in which the rollover is made.
403(b) CUSTODIAL ACCOUNTS
If you are employed by a public school system or certain
federally tax-exempt private schools, colleges, universities, hospitals,
religious and charitable or other nonprofit organizations, you may establish a
403(b) Custodial Account. Your employer must participate in the establishment of
the account.
If your employer participates, it will automatically deduct
the amount you designate from your gross salary and contribute it to your 403(b)
Custodial Account. The amount which you may contribute annually under a salary
reduction agreement is generally the lesser of $9,500 or your exclusion
allowance, which is based upon a specified formula, and other Internal Revenue
Code limits apply. There is a $50 minimum investment in the 403(b) Custodial
Account. Contributions made to the account reduce the amount of your current
income subject to Federal income tax. Federal income tax is not paid on your
contribution until you begin making withdrawals. In addition, all income and
capital gains accumulated in the account are tax-free until withdrawn.
Withdrawals from your 403(b) Custodial Agreement may begin as
soon as you reach age 59-1/2 and must begin no later than April 1 of the year
following the later of the calendar year in which you attain age 70 1/2 or the
calendar year in which you retire. Except for required distributions after age
70 1/2 and periodic distributions over more than 10 years, distributions are
subject to 20% Federal income tax withholding unless those distributions are
rolled directly to another 403(b) account or annuity or an individual retirement
account (IRA). You may not be able to receive distributions immediately upon
request because of certain notice requirements under federal tax law. Since
distributions which do not satisfy these requirements can
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result in adverse tax consequences, consultation with an attorney or tax advisor
regarding the 403(b) Custodial Account is recommended. You should also consult
with your tax advisor about state taxation of your account.
Individuals who wish to purchase shares of the Fund in
conjunction with a 403(b) Custodial Account may use a Custodian Account
Agreement and related forms available from the Fund. State Street serves as
custodian of the 403(b) Custodial Account, for which it charges an annual
custodian fee for the Fund and each other Berger Fund and Cash Account Trust
Money Market Portfolio in which the participant's account is invested.
In order to receive the necessary materials to create a 403(b)
Custodial Account, please write to the Fund, c/o Berger LLC, Inc., P.O. Box
5005, Denver, Colorado 80217, or call 1-800-333-1001.
12. EXCHANGE PRIVILEGE AND SYSTEMATIC WITHDRAWAL PLAN
A shareholder who owns shares of the Fund worth at least
$5,000 at the current net asset value may establish a Systematic Withdrawal
account from which a fixed sum will be paid to the shareholder at regular
intervals by the Fund in which the shareholder is invested.
To establish a Systematic Withdrawal account, the shareholder
deposits Fund shares with the Fund and appoints the Fund as agent to redeem
shares in the shareholder's account in order to make monthly, quarterly,
semi-annual or annual withdrawal payments to the shareholder of a fixed amount.
The minimum withdrawal payment is $50.00. These payments generally will be made
on the 25th day of the month.
Withdrawal payments are not yield or income on the
shareholder's investment, since portions of each payment will normally consist
of a return of the shareholder's investment. Depending on the size of the
disbursements requested and the fluctuation in value of the Fund's portfolio,
redemptions for the purpose of making such disbursements may reduce or even
exhaust the shareholder's account.
The shareholder may vary the amount or frequency of withdrawal
payments, temporarily discontinue them, or change the designated payee or
payee's address, by notifying the Fund. The shareholder may, of course, make
additional deposits of Fund shares in the shareholder's account at any time.
Since redemption of shares to make withdrawal payments is a
taxable event, each investor should consult a tax advisor concerning proper tax
treatment of the redemption.
Any shareholder may exchange any or all of the shareholder's
shares in the Fund for shares of any of the other available Berger Funds or for
shares of the Money Market Portfolio, the Government Securities Portfolio or the
Tax-Exempt Portfolio of the Cash Account Trust ("CAT Portfolios"), separately
managed, unaffiliated money market funds, without charge, after receiving a
current prospectus of the other Fund or CAT Portfolio. The exchange privilege
with the CAT Portfolios does not constitute an offering or recommendation of the
shares of any such CAT Portfolio by the Fund or Berger LLC. Berger LLC is
compensated for administrative services it performs with respect to the CAT
Portfolios.
Exchanges into or out of the Fund are made at the net asset
value per share next determined after the exchange request is received. Each
exchange represents the sale of shares from one Fund and the purchase of shares
in another, which may produce a gain or loss for income tax purposes. An
exchange of shares may be made by written request directed to DST Systems, Inc.,
via on-line access, or simply by telephoning the Berger Funds at 1-800-551-5849.
This privilege may be terminated or amended by the Fund, and is not available in
any state in which the shares of the Fund or CAT Portfolio being acquired in the
exchange are not eligible for sale. Shareholders automatically have telephone
and on-line privileges to authorize exchanges unless they specifically decline
this service in the account application or in writing.
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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 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.
Total return of the Investor Shares and other classes of
shares of the Fund will be calculated separately. Because each class of shares
is subject to different expenses, the performance of each class for the same
period will differ.
14. ADDITIONAL INFORMATION
FUND ORGANIZATION
The Fund is a separate series of the Berger Investment
Portfolio Trust (the "Trust"), a Delaware business trust established under the
Delaware Business Trust Act. The Fund was established on [__________], 1999.
The Trust is authorized to issue an unlimited number of shares
of beneficial interest in series or portfolios. Currently, the Fund is one of
eight 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
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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.
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
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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 Investor Shares covered by this SAI and the Institutional Shares
offered through a separate Prospectus and SAI. The Fund implemented its
multi-class structure by adopting a Rule 18f-3 Plan under the 1940 Act
permitting it to issue its shares in classes. The Fund's Rule 18f-3 Plan governs
such matters as class features, dividends, voting, allocation of income and
expenses between classes, exchange and trustee monitoring of the Plan. Each
class is subject to such investment minimums and other conditions of eligibility
as are set forth in the relevant prospectus for the class, as it may be amended
from time to time. Institutional Shares are designed for institutional,
individual and other investors willing to maintain a higher minimum account
balance, currently set at $250,000. Information concerning Institutional Shares
is available from the Fund at 1-800-706-0539.
Subject to the Trust's Trust Instrument and any other
applicable provisions, the trustees of the Trust have the authority to create
additional classes, or change existing classes, from time to time, in accordance
with Rule 18f-3 under the Act.
PRINCIPAL SHAREHOLDERS
Insofar as the management of the Fund is aware, as of
[_________], 2000, no person owned, beneficially or of record, more than 5% of
the outstanding shares of the Fund.
DISTRIBUTION
Berger Distributors LLC, as the Fund's Distributor, is the
principal underwriter of the Fund's shares. The Distributor is a wholly-owned
subsidiary of Berger LLC. 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 Vice
President and Assistant Secretary of the Fund. Brian Ferrie, Vice President and
Chief Compliance Officer of the Distributor, is also Vice President of the Fund.
The Fund and the Distributor are parties to a Distribution
Agreement that continues through April 2001, and thereafter from year to year if
such continuation is specifically approved at least annually by the trustees or
by vote of a majority of the outstanding shares of the Fund and in either case
by vote of a majority of the trustees who are not "interested persons" (as that
term is defined in the Investment Company Act of 1940) of the Fund or the
Distributor. The Distribution Agreement is subject to termination by the Fund or
the Distributor on 60 days' prior written notice, and terminates automatically
in the event of its assignment. Under the Distribution Agreement, the
Distributor continuously offers shares of the Fund and solicits orders to
purchase Fund shares at net asset value. The Distributor is not compensated for
its services under the Distribution Agreement, but may be reimbursed by Berger
LLC 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.
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Davis, Graham & Stubbs LLP, 370 Seventeenth Street, Denver,
Colorado, acts as counsel to the Fund.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver,
Colorado, has been appointed to act as independent accountants for the Trust and
the Fund for the fiscal year ended September 30, 2000. In that capacity,
PricewaterhouseCoopers LLP will audit the financial statements of the Fund and
assist the Fund in connection with the preparation of its 2000 income tax
return.
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APPENDIX A
HIGH-YIELD/HIGH-RISK SECURITIES
The Fund may invest in convertible securities of any quality,
including unrated securities or securities rated below investment grade (Ba or
lower by Moody's, BB or lower by S&P) (sometimes referred to as "junk bonds").
However, the Fund will not purchase any security in default at the time of
purchase. The Fund will not invest more than 20% of the market value of its
assets at the time of purchase in convertible securities rated below investment
grade.
Securities rated below investment grade are subject to greater
risk that adverse changes in the financial condition of their issuers or in
general economic conditions, or an unanticipated rise in interest rates, may
impair the ability of their issuers to make payments of interest and principal
or dividends. The market prices of lower grade securities are generally less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to economic changes or individual corporate developments. Periods of
economic uncertainty and change can be expected to result in volatility of
prices of these securities. Lower rated securities also may have less liquid
markets than higher rated securities, and their liquidity as well as their value
may be adversely affected by poor economic conditions. Adverse publicity and
investor perceptions as well as new or proposed laws may also have a negative
impact on the market for high-yield/high-risk bonds. In the event of an
unanticipated default, the Fund will experience a reduction in its income and
could expect a decline in the market value of the securities affected. The
prices of these securities may be more volatile and the markets for them may be
less liquid than those for higher-rated securities.
Unrated securities, while not necessarily of lower quality
than rated securities, may not have as broad a market. Unrated securities will
be included in the Fund's percentage limits for investments rated below
investment grade, unless the Fund's sub-advisor deems such securities to be the
equivalent of investment grade. If securities purchased by the Fund are
downgraded following purchase, or if other circumstances cause the Fund to
exceed its percentage limits on assets invested in securities rated below
investment grade, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances.
Relying in part on ratings assigned by credit agencies in
making investments will not protect the Fund from the risk that the securities
will decline in value, since credit ratings represent evaluations of the safety
of principal, dividend and/or interest payments, and not the market values of
such securities. Moreover, such ratings may not be changed on a timely basis to
reflect subsequent events.
Although the market for high-yield debt securities has been in
existence for many years and from time to time has experienced economic
downturns, this market has involved a significant increase in the use of
high-yield debt securities to fund highly leverage corporate acquisitions and
restructurings. Past experience may not, therefore, provide an accurate
indication of future performance of the high-yield debt securities market,
particularly during periods of economic recession.
Expenses incurred in recovering an investment in a defaulted
security may adversely affect the Fund's net asset value. Moreover, the reduced
liquidity of the secondary market for such securities may adversely affect the
market price of, and the ability of the Fund to value, particular securities at
certain times, thereby making it difficult to make specific valuation
determinations.
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.
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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 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.
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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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BERGER LARGE CAP VALUE 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 Large Cap Value Fund
(the "Fund") -- Institutional Shares, dated [___________], 2000, 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.
DATED [_________], 2000
<PAGE> 82
TABLE OF CONTENTS
&
CROSS-REFERENCES TO PROSPECTUS
<TABLE>
<CAPTION>
CROSS-REFERENCES TO
RELATED DISCLOSURES
TABLE OF CONTENTS IN PROSPECTUS
----------------- --------------------
<S> <C>
Introduction Contents
1. Investment Strategies and Risks of the Fund Berger Large Cap Value Fund;
Investment Techniques, Securities and Associated Risks
2. Investment Restrictions Berger Large Cap Value Fund;
Investment Techniques, Securities and Associated Risks
3. Management of the Fund Berger Large Cap Value Fund;
Organization of the Fund
4. Investment Advisor and Sub-Advisor Berger Large Cap Value Fund;
Organization of the Fund
5. Expenses of the Fund Berger Large Cap Value Fund;
Organization of the Fund
6. Brokerage Policy Berger Large Cap Value Fund;
Organization of the Fund
7. How to Purchase and Redeem Shares in the Fund Buying Shares; Exchanging Shares
8. How the Net Asset Value is Determined Your Share Price
9. Income Dividends, Capital Gains Distributions Distributions and Taxes
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 Large Cap Value Fund
14. Additional Information Organization of the Fund; Special Fund Structure
Financial Information N/A
</TABLE>
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INTRODUCTION
The Fund described in this SAI is a mutual fund, or open-end,
management investment company. The Fund is a diversified fund.
1. INVESTMENT STRATEGIES AND RISKS OF THE FUND
The Prospectus describes the investment objective of the Fund
and the principal investment policies and strategies used to achieve that
objective. It also describes the principal risks of investing in the Fund.
This section contains supplemental information concerning the
types of securities and other instruments in which the Fund may invest, the
investment policies and portfolio strategies that the Fund may utilize and
certain risks attendant to those investments, policies and strategies.
COMMON AND PREFERRED STOCKS. Stocks represent shares of
ownership in a company. Generally, preferred stock has a specified dividend and
ranks after bonds and before common stocks in its claim on income for dividend
payments and on assets should the company be liquidated. After other claims are
satisfied, common stockholders participate in company profits on a pro-rata
basis. Profits may be paid out in dividends or reinvested in the company to
help it grow. Increases and decreases in earnings are usually reflected in a
company's stock price, so common stocks generally have the greatest
appreciation and depreciation potential of all corporate securities. While most
preferred stocks pay dividends, the Fund may purchase preferred stock where the
issuer has omitted, or is in danger of omitting, payment of its dividends. Such
investments would be made primarily for their capital appreciation potential.
All investments in stocks are subject to market risk, meaning that their prices
may move up and down with the general stock market, and that such movements
might reduce their value.
DEBT SECURITIES. Debt securities (such as bonds or
debentures) are fixed-income securities which bear interest and are issued by
corporations or governments. The issuer has a contractual obligation to pay
interest at a stated rate on specific dates and to repay principal on a
specific maturity date. In addition to market risk, debt securities are
generally subject to two other kinds of risk: credit risk and interest rate
risk. Credit risk refers to the ability of the issuer to meet interest or
principal payments as they come due. The lower the rating given a security by a
rating service (such as Moody's Investor Service ("Moody's") and Standard &
Poor's ("S&P")), the greater the credit risk the rating service perceives with
respect to that security. The Fund will not purchase any nonconvertible
securities rated below investment grade (Ba or lower by Moody's, BB or lower by
S&P). In cases where the ratings assigned by more than one rating agency
differ, the Fund will consider the security as rated in the higher category. If
nonconvertible securities purchased by the Fund are downgraded to below
investment grade following purchase, the trustees of the Fund, in consultation
with the Fund's sub-advisor, will determine what action, if any, is appropriate
in light of all relevant circumstances. For a further discussion of debt
security ratings, see Appendix A to this SAI.
Interest rate risk refers to the fact that the value of
fixed-income securities (like debt securities) generally fluctuates in response
to changes in interest rates. A decrease in interest rates will generally
result in an increase in the price of fixed-income securities held by the Fund.
Conversely, during periods of rising interest rates, the value of fixed-income
securities held by the Fund will generally decline. Longer-term securities are
generally more sensitive to interest rate changes and are more volatile than
shorter-term securities, but they generally offer higher yields to compensate
investors for the associated risks.
Certain debt securities can also present prepayment risk. For
example, a security may contain redemption and call provisions. If an issuer
exercises these provisions when interest rates are declining, the Fund could
sustain investment losses as well as have to reinvest the proceeds from the
security at lower interest rates, resulting in a decreased return for the Fund.
CONVERTIBLE SECURITIES. The Fund may also purchase debt or
equity securities which are convertible into common stock when the Fund's
sub-advisor believes they offer the potential for a higher
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<PAGE> 84
total return than nonconvertible securities. While fixed-income securities
generally have a priority claim on a corporation's assets over that of common
stock, some of the convertible securities which the Fund may hold are
high-yield/high-risk securities that are subject to special risks, including
the risk of default in interest or principal payments which could result in a
loss of income to the Fund or a decline in the market value of the securities.
Convertible securities often display a degree of market price volatility that
is comparable to common stocks. The credit risk associated with convertible
securities generally is reflected by their ratings by organizations such as
Moody's or S&P or a similar determination of creditworthiness by the Fund's
sub-advisor. The Fund has no pre-established minimum quality standards for
convertible securities and may invest in convertible securities of any quality,
including lower rated or unrated securities. However, the Fund will not invest
in any security in default at the time of purchase, and the Fund will invest
less than 20% of the market value of its assets at the time of purchase in
convertible securities rated below investment grade. If convertible securities
purchased by the Fund are downgraded following purchase, or if other
circumstances cause 20% or more of the Fund's assets to be invested in
convertible securities rated below investment grade, the trustees of the Fund,
in consultation with the Fund's sub-advisor, will determine what action, if
any, is appropriate in light of all relevant circumstances. For a further
discussion of debt security ratings, see Appendix A to this SAI.
SPECIAL SITUATIONS. The Fund may also invest in "special
situations." Special situations are companies that have recently experienced or
are anticipated to experience a significant change in structure, management,
products or services which may significantly affect the value of their
securities. Examples of special situations are companies being reorganized or
merged, companies emerging from bankruptcy, companies introducing unusual new
products or which enjoy particular tax advantages. Other examples are companies
experiencing changes in senior management, extraordinary corporate events,
significant changes in cost or capital structure or which are believed to be
probable takeover candidates. The opportunity to invest in special situations,
however, is limited and depends in part on the market's assessment of these
companies and their circumstances. By its nature, a "special situation" company
involves to some degree a break with the company's past experience. This
creates greater uncertainty and potential risk of loss than if the company were
operating according to long-established patterns. In addition, stocks of
companies in special situations may decline or not appreciate as expected if an
anticipated change or development does not occur or is not assessed by the
market as favorably as expected.
ZEROS/STRIPS. The Fund may invest also in zero coupon bonds
or in "strips." Zero coupon bonds do not make regular interest payments;
rather, they are sold at a discount from face value. Principal and accreted
discount (representing interest accrued but not paid) are paid at maturity.
"Strips" are debt securities that are stripped of their interest coupon after
the securities are issued, but otherwise are comparable to zero coupon bonds.
The market values of "strips" and zero coupon bonds generally fluctuate in
response to changes in interest rates to a greater degree than do
interest-paying securities of comparable term and quality. The Fund will not
invest in mortgage-backed or other asset-backed securities.
SECURITIES OF SMALLER COMPANIES. The Fund may invest in
securities of companies with small or mid-sized market capitalizations. Market
capitalization is defined as total current market value of a company's
outstanding common stock. Investments in companies with smaller market
capitalizations may involve greater risks and price volatility (that is, more
abrupt or erratic price movements) than investments in larger, more mature
companies since smaller companies may be at an earlier stage of development and
may have limited product lines, reduced market liquidity for their shares,
limited financial resources or less depth in management than larger or more
established companies. Smaller companies also may be less significant factors
within their industries and may have difficulty withstanding competition from
larger companies. While smaller companies may be subject to these additional
risks, they may also realize more substantial growth than larger or more
established companies.
SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The
Fund may invest in securities of companies with limited operating histories.
The Fund considers these to be securities of companies with a record of less
than three years' continuous operation, even including the operations of any
predecessors and parents. (These are sometimes referred to as "unseasoned
issuers.") These
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<PAGE> 85
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 Funds 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.
Investors in IPOs can be adversely affected by substantial
dilution in the value of their shares, by sales of additional shares and by
concentration of control in existing management and principal shareholders. In
addition, all of the factors that affect stock market performance may have a
greater impact on the shares of IPO companies.
The price of a company's securities may be highly unstable at
the time of its IPO and for a period thereafter due to market psychology
prevailing at the time of the IPO, the absence of a prior public market, the
small number of shares available and limited availability of investor
information. As a result of this or other factors, a Fund's advisor or
sub-advisor might decide to sell an IPO security more quickly than it would
otherwise, which may result in a significant gain or loss and greater
transaction costs to the Fund. Any gains from shares held for 12 months or less
will be treated as short-term gains, taxable as ordinary income to the Fund's
shareholders. In addition, IPO securities may be subject to varying patterns of
trading volume and may, at times, be difficult to sell without an unfavorable
impact on prevailing prices.
The effect of an IPO investment can have a magnified impact
on a Fund's performance when the Fund's asset base is small. Consequently, IPOs
may constitute a significant portion of a Fund's returns particularly when the
Fund is small. Since the number of securities issued in an IPO is limited, it
is likely that IPO securities will represent a smaller component of a Fund's
assets as it increases in size, and therefore have a more limited effect on the
Fund's performance.
There can be no assurance that IPOs will continue to be
available for any of the Funds to purchase. The number or quality of IPOs
available for purchase by a Fund may vary, decrease or entirely disappear. In
some cases, a Fund may not be able to purchase IPOs at the offering price, but
may have to purchase the shares in the aftermarket at a price greatly exceeding
the offering price, making it more difficult for the Fund to realize a profit.
The advisor's or sub-advisor's IPO trade allocation
procedures govern which Funds and other advised accounts participate in the
allocation of any IPO. See the heading "Trade Allocations" under Section 4
below. Under the IPO allocation procedures of Berger LLC, a Fund generally will
not participate in an IPO if the securities available for allocation to the
Fund are insignificant relative to the Fund's net assets. As a result, any Fund
or account whose assets are very large (such as the Berger Growth Fund) is not
likely to participate in the allocation of many IPOs.
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
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<PAGE> 86
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.
Costs associated with transactions in foreign securities are
generally higher than with transactions in U.S. securities. The Fund will incur
greater costs in maintaining assets in foreign jurisdictions and in buying and
selling foreign securities generally, resulting in part from converting foreign
currencies into U.S. dollars. In addition, the Fund might have greater
difficulty taking appropriate legal action with respect to foreign investments
in non-U.S. courts than with respect to domestic issuers in U.S. courts, which
may heighten the risk of possible losses through the holding of securities by
custodians and securities depositories in foreign countries.
If the Fund is invested in securities denominated or quoted
in currencies other than the U.S. dollar, changes in foreign currency exchange
rates will affect the value of the investments in its portfolio and the
unrealized appreciation or depreciation of investments insofar as U.S.
investors are concerned. If the foreign currency in which a security is
denominated appreciates against the U.S. dollar, the dollar value of the
security will increase. Conversely, a decline in the exchange rate of the
foreign currency against the U.S. dollar would adversely affect the dollar
value of the foreign securities. Foreign currency exchange rates are determined
by forces of supply and demand on the foreign exchange markets, which are in
turn affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.
PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS). The Fund may
purchase the securities of certain companies considered Passive Foreign
Investment Companies (PFICs) under U.S. tax laws. For certain types of PFICs,
in addition to bearing their proportionate share of the Fund's expenses
(management fees and operating expenses), shareholders will also indirectly
bear similar expenses of such PFIC. PFIC investments also may be subject to
less favorable U.S. tax treatment, as discussed in Section 9 below.
ILLIQUID AND RESTRICTED SECURITIES. The Fund is authorized to
invest in securities which are illiquid or not readily marketable because they
are subject to restrictions on their resale ("restricted securities") or
because, based upon their nature or the market for such securities, no ready
market is available. However, the Fund will not purchase any such security, the
purchase of which would cause the Fund to invest more than 15% of its net
assets, measured at the time of purchase, in illiquid securities. Investments
in illiquid securities involve certain risks to the extent that the Fund may be
unable to dispose of such a security at the time desired or at a reasonable
price or, in some cases, may be unable to dispose of it at all. In addition, in
order to resell a restricted security, the Fund might have to incur the
potentially substantial expense and delay associated with effecting
registration. If securities become illiquid following purchase or other
circumstances cause more than 15% of the Fund's net assets to be invested in
illiquid securities, the trustees of the Fund, in consultation with the Fund's
sub-advisor, will determine what action, if any, is appropriate in light of all
relevant circumstances.
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Repurchase agreements maturing in more than seven days will be
considered as illiquid for purposes of this restriction. Pursuant to guidelines
established by the trustees, the Fund's sub-advisor will determine whether
securities eligible for resale to qualified institutional buyers pursuant to SEC
Rule 144A under the Securities Act of 1933 should be treated as illiquid
investments considering, among other things, the following factors: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
the transfer). The liquidity of the Fund's investments in Rule 144A securities
could be impaired if qualified institutional buyers become uninterested in
purchasing these securities.
REPURCHASE AGREEMENTS. The Fund may invest in repurchase
agreements with various financial organizations, including commercial banks,
registered broker-dealers and registered government securities dealers. A
repurchase agreement is an agreement under which the Fund acquires a debt
security (generally a debt security issued or guaranteed by the U.S. government
or an agency thereof, a banker's acceptance or a certificate of deposit) from a
commercial bank, broker or dealer, subject to resale to the seller at an agreed
upon price and date (normally, the next business day). A repurchase agreement
may be considered a loan collateralized by securities. The resale price reflects
an agreed upon interest rate effective for the period the instrument is held by
the Fund and is unrelated to the interest rate on the underlying instrument. In
these transactions, the securities acquired by the Fund (including accrued
interest earned thereon) must have a total value equal to or in excess of the
value of the repurchase agreement and are held by the Fund's custodian bank
until repurchased. In addition, the trustees will establish guidelines and
standards for review by the investment sub-advisor of the creditworthiness of
any bank, broker or dealer party to a repurchase agreement with the Fund. The
Fund will not enter into a repurchase agreement maturing in more than seven days
if as a result more than 15% of the Fund's net assets would be invested in such
repurchase agreements and other illiquid securities.
These transactions must be fully collateralized at all times
by debt securities (generally a security issued or guaranteed by the U.S.
Government or an agency thereof, a banker's acceptance or a certificate of
deposit), but involve certain risks, such as credit risk to the Fund if the
other party defaults on its obligation and the Fund is delayed or prevented from
liquidating the collateral. For example, if the other party to the agreement
defaults on its obligation to repurchase the underlying security at a time when
the value of the security has declined, the Fund may incur a loss upon
disposition of the security. If the other party to the agreement becomes
insolvent and subject to liquidation or reorganization under the Bankruptcy Code
or other laws, a court may determine that the underlying security is collateral
for a loan by the Fund not within the control of the Fund and therefore the
realization by the Fund on such collateral may automatically be stayed and
delayed. Further, it is possible that the Fund may not be able to substantiate
its interest in the underlying security and may be deemed an unsecured creditor
of the other party to the agreement. The Fund expects that these risks can be
controlled through careful monitoring procedures.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may
purchase and sell securities on a when-issued or delayed delivery basis.
However, the Fund currently does not intend to purchase or sell securities on a
when-issued or delayed delivery basis, if as a result more than 5% of its total
assets taken at market value at the time of purchase would be invested in such
securities. When-issued or delayed delivery transactions arise when securities
(normally, obligations of issuers eligible for investment by the Fund) are
purchased or sold by the Fund with payment and delivery taking place in the
future in order to secure what is considered to be an advantageous price or
yield. However, the yield available on a comparable security when delivery takes
place may vary from the yield on the security at the time that the when-issued
or delayed delivery transaction was entered into. Any failure to consummate a
when-issued or delayed delivery transaction may result in the Fund missing the
opportunity of obtaining a price or yield considered to be advantageous.
When-issued and delayed delivery transactions may generally be expected to
settle within one month from the date the transactions are entered into, but in
no event later than 90 days. However, no payment or delivery is made by the Fund
until it receives delivery or payment from the other party to the transaction.
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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.
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 sub-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
sub-advisor's judgment of the cost of the hedge, its potential effectiveness
and other factors the sub-advisor considers pertinent.
A hedging transaction may partially protect the Fund from a
decline in the value of a particular security or its portfolio generally,
although hedging may also limit the Fund's opportunity to profit from favorable
price movements, and the cost of the transaction will reduce the potential
return on the security or the portfolio. Use of these instruments by the Fund
involves the potential for a loss that may exceed the amount of initial margin
the Fund would be permitted to commit to the contracts under its investment
limitation, or in the case of a call option written by the Fund, may exceed the
premium received for the option. However, the Fund is permitted to use such
instruments for hedging purposes only, and only if the aggregate amount of its
obligations under these contracts does not exceed the total market value of the
assets the Fund is attempting to hedge, such as a portion or all of its
exposure to equity securities or its holding in a specific foreign currency. To
help ensure that the Fund will be able to meet its obligations under its
futures and forward contracts and its obligations under options written by the
Fund, the Fund will be required to maintain liquid assets in a segregated
account with its custodian bank or to set aside portfolio securities to "cover"
its position in these contracts.
The principal risks of the Fund utilizing futures
transactions, forward contracts and options are: (a) losses resulting from
market movements not anticipated by the Fund; (b) possible imperfect
correlation between movements in the prices of futures, forwards and options
and movements in the prices of the securities or currencies hedged or used to
cover such positions; (c) lack of assurance that a liquid secondary market will
exist for any particular futures or options at any particular time, and
possible exchange-imposed price fluctuation limits, either of which may make it
difficult or impossible to close a position when so desired; (d) lack of
assurance that the counterparty to a forward contract would be willing to
negotiate an offset or termination of the contract when so desired; and (e) the
need for additional information and skills beyond those required for the
management of a portfolio of traditional securities. In addition, when the Fund
enters into an over-the-counter contract with a counterparty, the Fund will
assume counterparty credit risk, that is, the risk that the counterparty will
fail to perform its obligations, in which case the Fund could be worse off than
if the contract had not been entered into.
Following is additional information concerning the futures,
forwards and options which the Fund may utilize, provided that no more than 5%
of the Fund's net assets at the time the contract is
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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 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
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securities in the portfolio by a corresponding increase in the value of the
futures contract position held by the Fund and thereby preventing the Fund's
net asset value from declining as much as it otherwise would have. The Fund
also could protect against potential price declines by selling portfolio
securities and investing in money market instruments. However, the use of
futures contracts as a hedging technique allows the Fund to maintain a
defensive position without having to sell portfolio securities.
Similarly, when prices of equity securities are expected to
increase, futures contracts may be bought to attempt to hedge against the
possibility of having to buy equity securities at higher prices. This technique
is sometimes known as an anticipatory hedge. Since the fluctuations in the
value of futures contracts should be similar to those of equity securities, the
Fund could take advantage of the potential rise in the value of equity
securities without buying them until the market has stabilized. At that time,
the futures contracts could be liquidated and the Fund could buy equity
securities on the cash market.
The ordinary spreads between prices in the cash and futures
markets, due to differences in the nature of those markets, are subject to
distortions. First, all participants in the futures market are subject to
initial margin and variation margin requirements. Rather than meeting
additional variation margin requirements, investors may close out futures
contracts through offsetting transactions which could distort the normal price
relationship between the cash and futures markets. Second, the liquidity of the
futures market depends on participants entering into offsetting transactions
rather than making or taking delivery. To the extent participants decide to
make or take delivery, liquidity in the futures market could be reduced and
prices in the futures market distorted. Third, from the point of view of
speculators, the margin deposit requirements in the futures market are less
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market may cause temporary price
distortions. Due to the possibility of the foregoing distortions, a correct
forecast of general price trends by the Fund still may not result in a
successful use of futures.
Futures contracts entail additional risks. Although the Fund
will only utilize futures contracts when it believes that use of such contracts
will benefit the Fund, if the Fund's investment judgment is incorrect, the
Fund's overall performance could be worse than if the Fund had not entered into
futures contracts. For example, if the Fund has hedged against the effects of a
possible decrease in prices of securities held in the Fund's portfolio and
prices increase instead, the Fund will lose part or all of the benefit of the
increased value of these securities because of offsetting losses in the Fund's
futures positions. In addition, if the Fund has insufficient cash, it may have
to sell securities from its portfolio to meet daily variation margin
requirements. Those sales may be, but will not necessarily be, at increased
prices which reflect the rising market and may occur at a time when the sales
are disadvantageous to the Fund. Although the buyer of an option cannot lose
more than the amount of the premium plus related transaction costs, a buyer or
seller of futures contracts could lose amounts substantially in excess of any
initial margin deposits made, due to the potential for adverse price movements
resulting in additional variation margin being required by such positions.
However, the Fund intends to monitor its investments closely and will attempt
to close its positions when the risk of loss to the Fund becomes unacceptably
high.
The prices of futures contracts depend primarily on the value
of their underlying instruments. Because there are a limited number of types of
futures contracts, it is possible that the standardized futures contracts
available to the Fund will not match exactly the Fund's current or potential
investments. The Fund may buy and sell futures contracts based on underlying
instruments with different characteristics from the securities in which it
typically invests -- for example, by hedging investments in portfolio
securities with a futures contract based on a broad 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
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markets, from structural differences in how futures and securities are traded,
and from imposition of daily price fluctuation limits for futures contracts.
The Fund may buy or sell futures contracts with a value less than or equal to
the securities it wishes to hedge or is considering purchasing. If price
changes in the Fund's futures positions are poorly correlated with its other
investments, its futures positions may fail to produce desired gains or result
in losses that are not offset by the gains in the Fund's other investments.
Because futures contracts are generally settled within a day
from the date they are closed out, compared with a longer settlement period for
most types of securities, the futures markets can provide superior liquidity to
the securities markets. Nevertheless, there is no assurance a liquid secondary
market will exist for any particular futures contract at any particular time.
In addition, futures exchanges may establish daily price fluctuation limits for
futures contracts and may halt trading if a contract's price moves upward or
downward more than the limit in a given day. On volatile trading days when the
price fluctuation limit is reached, it may be impossible for the Fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, the Fund may not be able to promptly liquidate unfavorable futures
positions and potentially could be required to continue to hold a futures
position until the delivery date, regardless of changes in its value. As a
result, the Fund's access to other assets held to cover its futures positions
also could be impaired.
Options on Futures Contracts. The Fund may buy and write
options on futures contracts for hedging purposes. An option on a futures
contract gives the Fund the right (but not the obligation) to buy or sell a
futures contract at a specified price on or before a specified date. The
purchase of a call option on a futures contract is similar in some respects to
the purchase of a call option on an individual security. Depending on the
pricing of the option compared to either the price of the futures contract upon
which it is based or the price of the underlying instrument, ownership of the
option may or may not be less risky than ownership of the futures contract or
the underlying instrument. As with the purchase of futures contracts, the Fund
may buy a call option on a futures contract to hedge against a market advance,
and the Fund might buy a put option on a futures contract to hedge against a
market decline.
The writing of a call option on a futures contract
constitutes a partial hedge against declining prices of the security or foreign
currency which is deliverable under, or of the index comprising, the futures
contract. If the futures price at the expiration of the call option is below
the exercise price, the Fund will retain the full amount of the option premium
which provides a partial hedge against any decline that may have occurred in
the Fund's portfolio holdings. If a call option the Fund has written is
exercised, the Fund will incur a loss which will be reduced by the amount of
the premium it received. Depending on the degree of correlation between change
in the value of its portfolio securities and changes in the value of the
futures positions, the Fund's losses from existing options on futures may to
some extent be reduced or increased by changes in the value of portfolio
securities.
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
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<PAGE> 93
exchange-traded contracts, forward contracts can be specifically drawn to meet
the needs of the parties that enter into them. The parties to a forward
contract may agree to offset or terminate the contract before its maturity, or
may hold the contract to maturity and complete the contemplated exchange.
The following discussion summarizes the Fund's principal uses
of forward foreign currency exchange contracts ("forward currency contracts").
The Fund may enter into forward currency contracts with stated contract values
of up to the value of the Fund's assets. A forward currency contract is an
obligation to buy or sell an amount of a specified currency for an agreed price
(which may be in U.S. dollars or a foreign currency) on a specified date. The
Fund will exchange foreign currencies for U.S. dollars and for other foreign
currencies in the normal course of business and may buy and sell currencies
through forward currency contracts in order to fix a price (in terms of a
specified currency) for securities it has agreed to buy or sell ("transaction
hedge"). The Fund also may hedge some or all of its investments denominated in
foreign currency against a decline in the value of that currency (or a proxy
currency whose price movements are expected to have a high degree of
correlation with the currency being hedged) relative to the U.S. dollar by
entering into forward currency contracts to sell an amount of that currency
approximating the value of some or all of its portfolio securities denominated
in that currency ("position hedge") or by participating in futures contracts
(or options on such futures) with respect to the currency. The Fund also may
enter into a forward currency contract with respect to a currency where the
Fund is considering the purchase or sale of investments denominated in that
currency but has not yet selected the specific investments ("anticipatory
hedge").
These types of hedging minimize the effect of currency
appreciation as well as depreciation, but do not eliminate fluctuations in the
underlying U.S. dollar equivalent value of the proceeds of or rates of return
on the Fund's foreign currency denominated portfolio securities. The matching
of the increase in value of a forward contract and the decline in the U.S.
dollar equivalent value of the foreign currency denominated asset that is the
subject of the hedge generally will not be precise. Shifting the Fund's
currency exposure from one foreign currency to another limits the Fund's
opportunity to profit from increases in the value of the original currency and
involves a risk of increased losses to the Fund if its investment manager's
projection of future exchange rates is inaccurate. Unforeseen changes in
currency prices may result in poorer overall performance for the Fund than if
it had not entered into such contracts.
The Fund will cover outstanding forward currency contracts by
maintaining liquid portfolio securities denominated in the currency underlying
the forward contract or the currency 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
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exchanges or over-the-counter. Buying an option involves the risk that, during
the option period, the price of the underlying security will not increase (in
the case of a call) to above the exercise price, or will not decrease (in the
case of a put) to below the exercise price, in which case the option will
expire without being exercised and the holder would lose the amount of the
premium. Writing a call option involves the risk of an increase in the market
value of the underlying security, in which case the option could be exercised
and the underlying security would then be sold by the Fund to the option holder
at a lower price than its current market value and the Fund's potential for
capital appreciation on the security would be limited to the exercise price.
Moreover, when the Fund writes a call option on a securities index, the Fund
bears the risk of loss resulting from imperfect correlation between movements
in the price of the index and the price of the securities set aside to cover
such position. Although they entitle the holder to buy equity securities, call
options to purchase equity securities do not entitle the holder to dividends or
voting rights with respect to the underlying securities, nor do they represent
any rights in the assets of the issuer of those securities.
A call option written by the Fund is "covered" if the Fund
owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also deemed to be covered if the Fund holds a call
on the same security and in the same principal amount as the call written and
the exercise price of the call held (i) is equal to or less than the exercise
price of the call written or (ii) is greater than the exercise price of the
call written if the difference is maintained by the Fund in liquid assets in a
segregated account with its custodian.
The writer of a call option may have no control when the
underlying securities must be sold. Whether or not an option expires
unexercised, the writer retains the amount of the premium. This amount, of
course, may, in the case of a covered call option, be offset by a decline in
the market value of the underlying security during the option period.
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
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<PAGE> 95
transactions or both, (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options or
underlying securities, (iv) unusual or unforeseen circumstances may interrupt
normal operations on an Exchange, (v) the facilities of an Exchange or of the
Options Clearing Corporation ("OCC") may not at all times be adequate to handle
current trading volume, or (vi) one or more Exchanges could, for economic or
other reasons, decide or be compelled at some future date to discontinue the
trading of options (or a particular class or series of options), in which event
the secondary market on that Exchange (or in that class or series of options)
would cease to exist, although outstanding options on that Exchange that had
been issued by the OCC as a result of trades on that Exchange would continue to
be exercisable in accordance with their terms.
In addition, when the Fund enters into an over-the-counter
option contract with a counterparty, the Fund assumes counterparty credit risk,
that is, the risk that the counterparty will fail to perform its obligations,
in which case the Fund could be worse off than if the contract had not been
entered into.
An option on a securities index is similar to an option on a
security except that, rather than the right to take or make delivery of a
security at a specified price, an option on a securities index gives the holder
the right to receive, on exercise of the option, an amount of cash if the
closing level of the securities index on which the option is based is greater
than, in the case of a call, or less than, in the case of a put, the exercise
price of the option.
The Fund may buy call options on securities or securities
indices to hedge against an increase in the price of a security or securities
that the Fund may buy in the future. The premium paid for the call option plus
any transaction costs will reduce the benefit, if any, realized by the Fund
upon exercise of the option, and, unless the price of the underlying security
or index rises sufficiently, the option may expire and become worthless to the
Fund. The Fund may buy put options to hedge against a decline in the value of a
security or its portfolio. The premium paid for the put option plus any
transaction costs will reduce the benefit, if any, realized by the Fund upon
exercise of the option, and, unless the price of the underlying security or
index declines sufficiently, the option may expire and become worthless to the
Fund.
An example of a hedging transaction using an index option
would be if the Fund were to purchase a put on a stock index, in order to
protect the Fund against a decline in the value of all securities held by it to
the extent that the stock index moves in a similar pattern to the prices of the
securities held. While the correlation between stock indices and price
movements of the stocks in which the Fund will generally invest may be
imperfect, the Fund expects, nonetheless, that the use of put options that
relate to such indices will, in certain circumstances, protect against declines
in values of specific portfolio securities or the Fund's portfolio generally.
Although the purchase of a put option may partially protect the Fund from a
decline in the value of a particular security or its portfolio generally, the
cost of a put will reduce the potential return on the security or the
portfolio.
PORTFOLIO TURNOVER. Investment changes in the Fund will be
made whenever management deems them appropriate even if this results in a
higher portfolio turnover rate. A 100% annual turnover rate results, for
example, if the equivalent of all of the securities in the Fund's portfolio are
replaced in a period of one year. In addition, portfolio turnover for the Fund
may increase as a result of large amounts of purchases and redemptions of
shares of the Fund due to economic, market or other factors that are not within
the control of management.
Higher portfolio turnover will necessarily result in
correspondingly higher brokerage costs for the Fund. The existence of a high
portfolio turnover rate has no direct relationship to the tax liability of the
Fund, although sales of certain stocks will lead to realization of gains, and,
possibly, increased taxable distributions to shareholders. The Fund's brokerage
policy is discussed further below under Section 6--Brokerage Policy, and
additional information concerning income taxes is located under Section
9--Income Dividends, Capital Gains Distributions and Tax Treatment.
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<PAGE> 96
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 LARGE CAP VALUE FUND
The following fundamental restrictions apply to the Berger
Large Cap Value Fund. The Fund may not:
1. With respect to 75% of the Fund's total assets, purchase
the securities of any one issuer (except U.S. government securities) if
immediately after and as a result of such purchase (a) the value of the
holdings of the Fund in the securities of such issuer exceeds 5% of the value
of the Fund's total assets or (b) the Fund owns more than 10% of the
outstanding voting securities of such issuer.
2. Invest in any one industry (other than U.S. government
securities) 25% or more of the value of its total assets at the time of such
investment.
3. Borrow money, except from banks for temporary or emergency
purposes in amounts not to exceed 25% of the Fund's total assets (including the
amount borrowed) taken at market value, nor pledge, mortgage or hypothecate its
assets, except to secure permitted indebtedness and then only if such pledging,
mortgaging or hypothecating does not exceed 25% of the Fund's total assets
taken at market value. When borrowings exceed 5% of the Fund's total assets,
the Fund will not purchase portfolio securities.
4. Act as a securities underwriter (except to the extent the
Fund may be deemed an underwriter under the Securities Act of 1933 in disposing
of a security), issue senior securities (except to the extent permitted under
the Investment Company Act of 1940), invest in real estate (although it may
purchase shares of a real estate investment trust), or invest in commodities or
commodity contracts except financial futures transactions, futures contracts on
securities and securities indices and options on such futures, forward foreign
currency exchange contracts, forward commitments or securities index put or
call options.
5. Make loans, except that the Fund may enter into repurchase
agreements and may lend portfolio securities in accordance with the Fund's
investment policies. The Fund does not, for this purpose, consider the purchase
of all or a portion of an issue of publicly distributed bonds, bank loan
participation agreements, bank certificates of deposit, bankers' acceptances,
debentures or other securities, whether or not the purchase is made upon the
original issuance of the securities, to be the making of a loan.
In applying the industry concentration investment restriction
(no. 2 above), the Fund uses the industry groups used in the Data Monitor
Portfolio Monitoring System of William O'Neil & Co. Incorporated.
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<PAGE> 97
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.
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, 114 A Gallatin Dr., Bozeman, MT 59718, DOB: 1937.
Self-employed as a financial and management consultant, and in real
estate development. From 1993 to June 1999, Dean, and from 1989 to
1993, a member of the Finance faculty of the College of Business,
Montana State University. Formerly (1976-1989), Chairman and Chief
Executive Officer of Royal Gold, Inc. (mining). Chairman of the
Board of Berger Growth 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.
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<PAGE> 98
* 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 Growth 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. President and
Director since June, 1999 (Executive Vice President from February
1999 to June 1999) of Berger LLC. 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 Janus Aspen
Series 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 Growth 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.
LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, DOB: 1925. President,
Climate Engineering, Inc. (building environmental systems). Director
of Berger Growth 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 Growth 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, an 81% owned subsidiary of DST Systems, Inc.) 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 Growth Fund and
Berger Growth and Income Fund. Trustee of Berger Investment
Portfolio Trust, Berger
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<PAGE> 99
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 Growth 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 F.K. SCHAFF, 160 Sansome Street, 17th Floor, San Francisco, CA
94104. DOB: 1957. Vice President and portfolio manager of the Fund
since inception (_____, 2000), Vice President and portfolio manager
with Berger LLC since _______, 2000. Chief Investment Officer
(November 1989) of Bay Isle Financial Corporation. Investment
Analyst/Advisor of J. Stewart Investments from September, 1986 to
February, 1989.
* JANICE M. TEAGUE, 210 University Boulevard, Suite 900, Denver, CO 80206,
DOB: 1954. Vice President (since November 1998), Assistant Secretary
(since February 2000) and Secretary (November 1998 to February 2000)
of the Berger Funds. Assistant Secretary of the Berger Funds from
October 1996 to November 1998. Vice President (since October 1997),
Secretary (since November 1998) and Assistant Secretary (October
1996 through November 1998) with Berger LLC. Vice President and
Secretary with Berger Distributors LLC, since August 1998.
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<PAGE> 100
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
LLC. Chief Financial Officer and Treasurer (since May 1996),
Assistant Secretary (since August 1998) and Secretary (May
1996 to August 1998) with Berger Distributors LLC Formerly,
Partner with Smith, Brock & Gwinn (accounting firm) from
January 1984 to August 1994.
* ANTHONY R. BOSCH, 210 University Boulevard, Suite 900, Denver, CO
80206, DOB: 1965. Vice President of the Berger Funds since
February 2000. Vice President (since June 1999) with Berger
LLC. Formerly, Assistant Vice President of Federated
Investors, Inc. from December 1996 through May 1999, and
Attorney with the U.S. Securities and Exchange Commission
from June 1990 through December 1996.
* 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 LLC. Chief
Compliance Officer with Berger Distributors LLC, 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 LLC. Formerly, Manager of Accounting (December
1994 through October 1996) and Senior Accountant (November
1991 through December 1994) with Palmeri Fund Administrators,
Inc.
* SUE VREELAND, 210 University Boulevard, Suite 900, Denver, CO
80206, DOB: 1948. Secretary of the Berger Funds since
February 2000. Assistant Secretary of Berger LLC and Berger
Distributors LLC since June 1999. Formerly, Assistant
Secretary of the Janus Funds from March 1994 to May 1999,
Assistant Secretary of Janus Distributors, Inc. from June
1995 to May 1997and Manager of Fund Administration for Janus
Capital Corporation from February 1992 to May, 1999.
----------
* Interested person (as defined in the Investment Company Act of 1940) of one
or more of the Funds and/or of the Funds' advisors or sub-advisors.
The directors or trustees of the Funds have adopted a
director/trustee retirement age of 75 years.
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<PAGE> 101
TRUSTEE COMPENSATION
The officers of the Fund received no compensation from the
Fund during the fiscal year ended September 30, 1999. However, trustees of the
Fund who are not "interested persons" of the Fund or its advisor or sub-advisor
are compensated for their services according to a fee schedule, allocated among
the Berger Funds. Neither the officers of the Fund nor the trustees receive any
form of pension or retirement benefit compensation from the Fund.
The following table sets forth information regarding
compensation paid or accrued during the fiscal year ended September 30, 1999,
for each trustee of the Fund:
<TABLE>
<CAPTION>
NAME AND POSITION
WITH BERGER FUNDS AGGREGATE COMPENSATION FROM
----------------- ---------------------------
BERGER LARGE CAP VALUE FUND(1) ALL BERGER FUNDS(2)
------------------------------ -------------------
<S> <C> <C>
Dennis E. Baldwin(3) $ $
--------- ----------
Louis R. Bindner(3) $ $
--------- ----------
Katherine A. Cattanach(3) $ $
--------- ----------
Paul R. Knapp(3) $ $
--------- ----------
Harry T. Lewis(3) $ $
--------- ----------
Michael Owen(3) $ $
--------- ----------
William Sinclaire(3) $ $
--------- ----------
Jack R. Thompson(3),(4),(5) $ 0 $ 0
--------- ----------
</TABLE>
NOTES TO TABLE
(1) The Fund was not added as a series of the Trust until _______, 2000.
Figures are estimates for the first year of operations of the Fund as a series
of the Trust.
(2) Includes the Berger Growth 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 Worldwide Funds Trust (three series,
including the Berger International Fund), the Berger Worldwide Portfolios Trust
(one series) and the Berger Omni Investment Trust (including the Berger Small
Cap Value Fund). Aggregate compensation figures do not include first-year
estimates for the Fund or 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.
(3) Director of Berger Growth Fund and Berger Growth and Income Fund and
trustee of Berger Investment Portfolio Trust, Berger Institutional Products
Trust, Berger Worldwide Portfolios Trust, Berger Worldwide Funds Trust and
Berger Omni Investment Trust.
(4) Interested person of Berger LLC.
(5) President of Berger Growth Fund, Berger Growth and Income Fund, Berger
Investment Portfolio Trust, Berger Worldwide Portfolios Trust, Berger Worldwide
Funds Trust and Berger Omni Investment Trust.
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
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<PAGE> 102
trustees participating in the plan. Purchases made pursuant to the plan are
excepted from any otherwise applicable investment restriction limiting the
purchase of securities of any other investment company. The Fund's obligation
to make payments of deferred fees under the plan is a general obligation of the
Fund.
As of [__________], 1999, the officers and trustees of the
Fund as a group owned of record or beneficially no shares of the Fund.
4. INVESTMENT ADVISOR AND SUB-ADVISOR
BERGER LLC - INVESTMENT ADVISOR
Berger LLC, 210 University Boulevard, Suite 900, Denver, CO
80206, is the investment advisor to the Fund. Berger LLC is responsible for
managing the investment operations of the Fund and the composition of its
investment portfolio. Berger LLC also acts as the Fund's administrator and is
responsible for such functions as monitoring compliance with all applicable
federal and state laws.
Berger LLC 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 $7.7
billion as of March 31, 2000. Berger LLC is a subsidiary of Stilwell Management
Inc. ("Stilwell"), which owns more than 80% of Berger LLC, and is an indirect
subsidiary of Stilwell Financial, Inc. ("Stilwell Financial"), which in turn 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 indirectly (through
Stilwell Financial) also owns approximately 32% of the outstanding shares of
DST Systems, Inc. ("DST"), a publicly traded information and transaction
processing company which acts as the Funds' transfer agent. DST, in turn, owns
100% of DST Securities, a registered broker-dealer, which executes portfolio
trades for the Funds.
INVESTMENT ADVISORY AGREEMENTS
Under the Investment Advisory Agreement between the Fund and
its advisor, the advisor is generally responsible for furnishing continuous
advice and making investment decisions as to the acquisition, holding or
disposition of securities or other assets which the Fund may own or contemplate
acquiring from time to time. The Investment Advisory Agreement provides that
the investment advisor shall not be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
taken with respect to the Fund, except for willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of reckless
disregard of its obligations and duties thereunder and except to the extent
otherwise provided by law.
Under the Agreement, the advisor is compensated for its
services by the payment of a fee at the following annual rate, calculated as a
percentage of the average daily net assets of the Fund:
<TABLE>
<CAPTION>
FUND ADVISOR INVESTMENT ADVISORY FEE
---- ------- -----------------------
<S> <C> <C>
Berger Large Cap Value Fund Berger LLC(1) 0.[__]%(2)
</TABLE>
----------
(1) Fund is sub-advised by Bay Isle. See text preceding and following this
table.
(2) Under a written contract, the Fund's investment advisor waives its fee or
reimburses the Fund for expenses to the extent that, at any time during the
life of the Fund, the annual operating expenses for the Institutional Shares
class of the Fund in any fiscal year, including the investment advisory fee,
but excluding brokerage commissions, interest, taxes and extraordinary
expenses, exceed [1.50]% of the Fund's average daily net assets attributable to
the Institutional Shares for that fiscal year. The contract also provides that
the advisor will waive an additional amount of its fees or reimburse an
additional amount of expenses to the extent necessary to keep its fee waiver
and reimbursement for the Institutional Shares class proportionate to its fee
waiver and reimbursement for the Fund's other outstanding share class. The
contract may not be terminated or amended except by a vote of
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<PAGE> 103
the Fund's Board of Trustees. The investment advisory fee is allocated among
the Institutional Shares and the other class of the Fund on the basis of net
assets attributable to each such class.
The Fund's Investment Advisory Agreement will continue in
effect until February 17, 2002, and thereafter from year to year if such
continuation is specifically approved at least annually by the trustees or by
vote of a majority of the outstanding shares of the Fund and in either case by
vote of a majority of the trustees who are not "interested persons" (as that
term is defined in the 1940 Act) of the Fund or the advisor. The Agreement is
subject to termination by the Fund or the advisor on 60 days' written notice,
and terminates automatically in the event of its assignment.
ARRANGEMENTS BETWEEN BERGER LLC AND BAY ISLE
In _____________ 2000, Berger LLC purchased all of the
outstanding shares of Bay Isle Financial Corp., an investment adviser founded
by the Fund's portfolio manager William F.K. Schaff and Gary G. Pollock.
Previously, Berger LLC and Bay Isle formed a joint venture to provide asset
management services to certain private accounts. Bay Isle, currently a
subsidiary of Berger LLC, continues to provide investment advisory services to
private accounts.
TRADE ALLOCATIONS
While investment decisions for the Fund are made
independently by the sub-advisor, the same investment decision may be made for
the Fund and one or more accounts 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 LLC, the Berger Funds and Berger Distributors LLC
each permits its directors, officers and employees to purchase and sell
securities for their own accounts in accordance with a policy regarding
personal investing in each of the Codes of Ethics for Berger LLC, the Berger
Funds and Berger Distributors LLC. 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 LLC' other advisory
clients. Directors and officers of Berger LLC and Berger Distributors LLC,
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
for Berger LLC and Berger Distributors LLC, the policy subjects directors and
officers of Berger LLC, the Berger Funds and Berger Distributors LLC, 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 LLC and the provisions of the
policy are subject to interpretation by and exceptions authorized by its board
of directors.
Bay Isle permits its officers, directors, employees and
consultants to purchase and sell securities for their own accounts and accounts
of related persons in accordance with provisions governing personal securities
trading in Bay Isle's code of ethics and related internal policies. Employees
must wait
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<PAGE> 104
3 days between the time a new recommendation or opinion change is made and the
time the employee may trade in those securities in their own or related
accounts, or alternatively may ask that their transaction be added to a "block"
trade that will be made for a group of clients. Any employee trade not included
in a "block" trade made must be pre-cleared if the trade exceeds certain
specified volume limits. Volume limits are set with the intent of requiring
prior approval of any trade that could potentially cause changes in the market
price of the security in question. In addition, no employee may sell (or buy)
any security which he or she has bought (or sold) within the past 5 trading
days unless a loss is realized on closing the position. No employee, officer or
director of Bay Isle may acquire any security in an initial public offering or
in a private placement without prior written approval from Bay Isle's
President. Any Bay Isle employee who is an "access person" of the Fund will
also be subject to the provisions of Berger LLC' Code of Ethics, if those
provisions are more restrictive than the provisions of Bay Isle's own code.
Each employee must acknowledge quarterly that they are in compliance with the
Bay Isle code of ethics and related policies.
5. EXPENSES OF THE FUND
In addition to paying an investment advisory fee to its
advisor, the Fund pays all of its expenses not assumed by its advisor,
including, but not limited to, custodian and transfer agent fees, legal and
accounting expenses, administrative and record keeping expenses, interest
charges, federal and state taxes, costs of share certificates, expenses of
shareholders' meetings, compensation of trustees who are not interested persons
of Berger LLC, 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.
Under a separate Administrative Services Agreement with
respect to the Fund, Berger LLC 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 LLC 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 Fund has appointed State Street Bank and Trust Company
("State Street"), 801 Pennsylvania, Kansas City, MO 64105, as its recordkeeping
and pricing agent. In addition, State Street also serves as the Fund's
custodian. The Fund has appointed DST Systems, Inc. ("DST"), P.O. Box 219958,
Kansas City, Mo 64121 as its transfer agent and dividend disbursing agent.
Approximately 32% of the outstanding shares of DST are owned by KCSI.
As recordkeeping and pricing agent, State Street calculates
the daily net asset value of the Fund and performs certain accounting and
recordkeeping functions required by the Fund. The Fund pays State Street a
monthly base fee plus an asset-based fee. State Street is also reimbursed for
certain out-of-pocket expenses.
State Street, 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, State Street receives an
asset-based fee plus certain transaction fees and out-of-pocket expenses.
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As transfer agent and dividend disbursing agent, DST
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, DST 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.
All of State Street's and DST's fees are subject to
reduction pursuant to an agreed formula for certain earnings credits on the
cash balances of the Fund.
OTHER EXPENSE INFORMATION
The trustees of the Fund have authorized portfolio
transactions to be placed on an agency basis through DST Securities, Inc.
("DSTS"), a wholly-owned broker-dealer subsidiary of DST. When transactions are
effected through DSTS, the commission received by DSTS is credited against, and
thereby reduces, certain operating expenses that the Fund would otherwise be
obligated to pay. No portion of the commission is retained by DSTS. See Section
6--Brokerage Policy for further information concerning the expenses reduced as
a result of these arrangements. DSTS may be considered an affiliate of Berger
LLC due to the ownership interest of KCSI in both DST and Berger LLC.
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 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 LLC(the "Distributor"), 210 University Boulevard, Suite
900, Denver, CO 80206. The Distributor may be reimbursed by Berger LLC 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 LLC 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 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
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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 LLC.
Berger LLC 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 LLC 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 LLC 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 LLC 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 LLC level of business, market conditions and other
relevant factors. Even under these arrangements, however, the placement of all
Fund transactions, must be consistent with the Fund's brokerage placement and
execution policies, and must be directed to a broker who renders satisfactory
service in the execution of orders at the most favorable prices and at
reasonable commission rates.
These brokerage and research services received from brokers
are often helpful to Berger LLC in performing its investment advisory
responsibilities to the Fund, and the availability of such services from
brokers does not reduce the responsibility of Berger LLC 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 LLC 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 LLC in
rendering investment advice to the Fund. Although such brokerage and research
services may be deemed to be of value to Berger LLC, they are not expected to
decrease the expenses that Berger LLC would otherwise incur in performing its
investment advisory services for the Fund nor will the advisory fees that are
received by Berger LLC 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
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commission is retained by DSTS. DSTS may be considered an affiliate of Berger
LLC due to the ownership interest of KCSI in both DST and Berger LLC.
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.
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 LLC may, at its own risk, waive
certain of those procedures and related requirements.
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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.
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
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shareholders. It also may be subject to an excise tax on undistributed income
if it does not meet certain timing requirements for distributions. The Fund
intends to qualify as a RIC annually and to make timely distributions in order
to avoid income and excise tax liabilities.
TAX ON FUND DISTRIBUTIONS. With certain exceptions provided
by law, the Fund will report annually to the Internal Revenue Service and to
each shareholder information about the tax treatment of the shareholder's
distributions. Dividends paid by the Fund, whether received in cash or
reinvested in additional Fund shares, will be treated as ordinary income to the
shareholders. Distributions of net capital gain, whether received in cash or
reinvested in Fund shares, will be taxable to the shareholders, but the rate of
tax will vary depending upon the Fund's holding periods in the assets whose
sale resulted in the capital gain. Dividends and distributions that are
declared in October, November or December but not distributed until the
following January will be considered to be received by the shareholders on
December 31.
In general, net capital gains from assets held by the Fund
for more than 12 months will be subject to a maximum tax rate of 20% and net
capital gains from assets held for 12 months or less will be taxed as ordinary
income. Distributions will be subject to these capital gains rates, regardless
of how long a shareholder has held Fund shares. Assets contributed to the Fund
in an in-kind purchase of Fund shares may generate more gain upon their sale
than if the assets had been purchased by the Fund with cash contributed to the
Fund in a cash purchase of Fund shares.
If the Fund's distributions for a taxable year exceeds its
tax earnings and profits available for distribution, all or a portion of its
distributions may be treated as a return of capital or as capital gains. To the
extent a distribution is treated as a return of capital, a shareholder's basis
in his or her Fund shares will be reduced by that amount.
If a shareholder has elected to receive dividends and/or
capital gain distributions in cash and the U.S. Postal Service is unable to
deliver checks to the shareholder's address of record, or if a shareholder's
checks remain uncashed for six months, the Fund reserves the right to reinvest
the amount distributed in additional Fund shares at the then-current NAV and to
convert the shareholder's distribution option from receiving cash to having all
dividend and other distributions reinvested in additional shares. In addition,
no interest will accrue on amounts represented by uncashed distribution or
redemption checks.
TAX ON REDEMPTIONS OF FUND SHARES. Shareholders may be
subject to tax on the redemption of their Fund shares. In general, such
redemptions may give rise to a capital gain or loss, the treatment of which
will depend on the shareholder's holding period in the Fund shares. Tax laws
may prevent the deduction of a loss on the sale of Fund shares if the
shareholder reinvests in the Fund shortly before or after the sale giving rise
to the loss. Any loss on the redemption or other sale or exchange of Fund
shares held for six months or less will be treated as a long-term capital loss
to the extent of any long-term capital gain distribution received on the
shares.
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.
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<PAGE> 110
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 LLC,
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.
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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 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.
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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.
14. ADDITIONAL INFORMATION
FUND ORGANIZATION
The Fund is a separate series of the Berger Investment
Portfolio Trust (the "Trust"), a Delaware business trust established under the
Delaware Business Trust Act. The Fund was established on [__________], 1999.
The Trust is authorized to issue an unlimited number of
shares of beneficial interest in series or portfolios. Currently, the Fund is
one of eight 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.
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.
-30-
<PAGE> 113
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
[_________], 2000, no person owned, beneficially or of record, more than 5% of
the outstanding shares of the Fund.
DISTRIBUTION
Berger Distributors LLC, as the Fund's Distributor, is the
principal underwriter of the Fund's shares. The Distributor is a wholly-owned
subsidiary of Berger LLC. The Distributor is a registered broker-dealer under
the Securities Exchange Act of 1934 and is a member of the National Association
of Securities Dealers, Inc. The Distributor acts as the agent of the Fund in
connection with the sale of the Fund's shares in all states in which the shares
are eligible for sale and in which the Distributor is qualified as a
broker-dealer. David J. Schultz, Chief Financial Officer, Assistant Secretary
and Treasurer of the Distributor, is also Vice President and Treasurer of the
Fund. Janice M. Teague, Vice President and Secretary of the Distributor, is
also Vice President and Secretary of the Fund. Brian Ferrie, Vice President and
Chief Compliance Officer of the Distributor, is also Vice President of the
Fund.
The Fund and the Distributor are parties to a Distribution
Agreement that continues through April 2001, and thereafter from year to year
if such continuation is specifically approved at least annually by the trustees
or by vote of a majority of the outstanding shares of the Fund and in either
case by vote of a majority of the trustees who are not "interested persons" (as
that term is defined in the
-31-
<PAGE> 114
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 LLC 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, 1670 Broadway, Suite 1000,
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 2000 income
tax return.
-32-
<PAGE> 115
APPENDIX A
HIGH-YIELD/HIGH-RISK SECURITIES
The Fund may invest in convertible securities of any quality,
including unrated securities or securities rated below investment grade (Ba or
lower by Moody's, BB or lower by S&P) (sometimes referred to as "junk bonds").
However, the Fund will not purchase any security in default at the time of
purchase. The Fund will not invest more than 20% of the market value of its
assets at the time of purchase in convertible securities rated below investment
grade.
Securities rated below investment grade are subject to greater risk
that adverse changes in the financial condition of their issuers or in general
economic conditions, or an unanticipated rise in interest rates, may impair the
ability of their issuers to make payments of interest and principal or
dividends. The market prices of lower grade securities are generally less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to economic changes or individual corporate developments. Periods of
economic uncertainty and change can be expected to result in volatility of
prices of these securities. Lower rated securities also may have less liquid
markets than higher rated securities, and their liquidity as well as their
value may be adversely affected by poor economic conditions. Adverse publicity
and investor perceptions as well as new or proposed laws may also have a
negative impact on the market for high-yield/high-risk bonds. In the event of
an unanticipated default, the Fund will experience a reduction in its income
and could expect a decline in the market value of the securities affected. The
prices of these securities may be more volatile and the markets for them may be
less liquid than those for higher-rated securities.
Unrated securities, while not necessarily of lower quality than rated
securities, may not have as broad a market. Unrated securities will be included
in the Fund's percentage limits for investments rated below investment grade,
unless the Fund's sub-advisor deems such securities to be the equivalent of
investment grade. If securities purchased by the Fund are downgraded following
purchase, or if other circumstances cause the Fund to exceed its percentage
limits on assets invested in securities rated below investment grade, the
trustees of the Fund, in consultation with the Fund's sub-advisor, will
determine what action, if any, is appropriate in light of all relevant
circumstances.
Relying in part on ratings assigned by credit agencies in making
investments will not protect the Fund from the risk that the securities will
decline in value, since credit ratings represent evaluations of the safety of
principal, dividend and/or interest payments, and not the market values of such
securities. Moreover, such ratings may not be changed on a timely basis to
reflect subsequent events.
Although the market for high-yield debt securities has been in
existence for many years and from time to time has experienced economic
downturns, this market has involved a significant increase in the use of
high-yield debt securities to fund highly leverage corporate acquisitions and
restructurings. Past experience may not, therefore, provide an accurate
indication of future performance of the high-yield debt securities market,
particularly during periods of economic recession.
Expenses incurred in recovering an investment in a defaulted security
may adversely affect the Fund's net asset value. Moreover, the reduced
liquidity of the secondary market for such securities may adversely affect the
market price of, and the ability of the Fund to value, particular securities at
certain times, thereby making it difficult to make specific valuation
determinations.
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.
-33-
<PAGE> 116
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 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.
-34-
<PAGE> 117
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.
-35-
<PAGE> 118
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 LLC, 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 LLC (current and for the past two years) is listed in Schedules A and D
of Berger LLC's Form ADV as filed with the Securities and Exchange Commission
(File No. 801-9451, dated June 15, 2000), 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:
Berger Growth Fund, Inc.
Berger Growth and Income Fund, Inc.
Berger Investment Portfolio Trust
--Berger Small Company Growth Fund
--Berger New Generation Fund
--Berger Balanced Fund
--Berger Select Fund
--Berger Mid Cap Growth Fund
--Berger Mid Cap Value Fund
--Berger Information Technology Fund
C-1
<PAGE> 119
Berger Omni Investment Trust
--Berger Small Cap Value Fund
Berger Institutional Products Trust
--Berger IPT - Growth Fund
--Berger IPT - Growth and Income Fund
--Berger IPT - Small Company Growth Fund
--Berger IPT - International Fund
--Berger IPT - New Generation Fund
Berger Worldwide Funds Trust
--Berger International Fund
--International Equity Fund
--Berger International CORE Fund
(b) For Berger Distributors LLC:
<TABLE>
<CAPTION>
Name Positions and Positions and
Offices with Offices with
Underwriter Registrant
---------------------------------- ----------------------------------------- ---------------------------------------
<S> <C> <C>
David G. Mertens President and CEO None
David J. Schultz Vice President, Treasurer and Chief Vice President and Treasurer
Financial Officer
Brian Ferrie Vice President and Chief Compliance Vice President
Officer
Janice M. Teague Vice President and Secretary Vice President and Assistant
Secretary
Sue Vreeland Assistant 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 transfer
agent, DST Systems, Inc., P.O. Box 219958, Kansas City, MO 64121;
(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> 120
Recordkeeping and Pricing Agent, State Street Bank and Trust
("State Street"), 801 Pennsylvania, Kansas City, Missouri 64105.
Other records of the Registrant relating to purchases and sales;
the Trust Instrument, minute books and other trust records;
brokerage orders; performance information and other records are
maintained at the offices of the Registrant at 210 University
Boulevard, Suite 900, Denver, Colorado 80206.
(c) Certain records relating to day-to-day portfolio management of the
Fund are kept at the offices of Berger LLC, 210 University Blvd.,
Suite 900, Denver, CO 80206 and at 160 Sansome Street, 17th Floor,
San Francisco, CA 94104.
Item 29. Management Services
The Registrant has no management-related service contract which is not
discussed in Parts A and B of this form.
Item 30. Undertakings
Not applicable.
C-3
<PAGE> 121
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 20th day of June, 2000.
BERGER INVESTMENT PORTFOLIO TRUST
---------------------------------------
(Registrant)
By /s/ Jack R. Thompson
------------------------------------
Name: Jack R. Thompson
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
amendment to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Jack R. Thompson President (Principal June 20, 2000
--------------------------------- Executive Officer)
Jack R. Thompson and Director
/s/ David J. Schultz Vice President and June 20, 2000
--------------------------------- Treasurer (Principal
David J. Schultz Financial Officer)
/s/ John Paganelli Assistant Treasurer June 20, 2000
--------------------------------- (Principal Accounting
John Paganelli Officer)
Dennis E. Baldwin Trustee June 20, 2000
---------------------------------
Dennis E. Baldwin*
Louis R. Bindner Trustee June 20, 2000
---------------------------------
Louis R. Bindner*
Katherine A. Cattanach Trustee June 20, 2000
---------------------------------
Katherine A. Cattanach*
Paul R. Knapp Trustee June 20, 2000
---------------------------------
Paul R. Knapp*
Harry T. Lewis, Jr. Trustee June 20, 2000
---------------------------------
Harry T. Lewis, Jr.*
</TABLE>
C-4
<PAGE> 122
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Michael Owen Trustee June 20, 2000
---------------------------------
Michael Owen*
William Sinclaire Trustee June 20, 2000
---------------------------------
William Sinclaire*
/s/ Jack R. Thompson
---------------------------------
* By Jack R. Thompson
Attorney-in-Fact
</TABLE>
C-5
<PAGE> 123
BERGER INVESTMENT PORTFOLIO TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
N-1A EDGAR
Exhibit Exhibit
No. No. Name of Exhibit
------- ------- ---------------
<S> <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
*** Exhibit 23(d)-10 EX-99.B23(d)-10 Form of Investment Advisory Agreement for
Berger Large Cap Value 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
*** Exhibit 23(h)-10 EX-99.B23(h)-10 Form of Administrative Services Agreement for
the Berger Large Cap Value Fund
</TABLE>
<PAGE> 124
<TABLE>
<CAPTION>
N-1A EDGAR
Exhibit Exhibit
No. No. Name of Exhibit
------- ------- ---------------
<S> <C> <C>
(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 Large Cap Value Fund)
(28) Exhibit 23(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
(30) Exhibit 23(m)-8 Amended and Restated Rule 12b-1 Plan for the
Investor Shares of the Berger Small Company Growth Fund
(30) Exhibit 23(m)-9 Amended and Restated Rule 12b-1 Plan for the
Investor Shares of the Berger New Generation Fund
*** Exhibit 23(m)-10 EX-99.B23(m)-10 Rule 12b-1 Plan for the Investor Shares of the
Berger Large Cap Value Fund
(29) Exhibit 23(o)-1 Rule 18f-3 Plan for the Berger Information
Technology Fund
(30) Exhibit 23(o)-2 Rule 18f-3 Plan for the Berger Small Company Growth Fund
(30) Exhibit 23(o)-3 Rule 18f-3 Plan for the Berger New Generation Fund
*** Exhibit 23(o)-4 EX-99B.23(o)-4 Rule 18f-3 Plan for the Berger Large Cap Value Fund
</TABLE>
---------------------------
** Not required to be filed until financial statements for the new class of
the Fund are required.
*** To be provided in subsequent filing.
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.
<PAGE> 125
(15) Filed as Exhibit 9.2.4 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31, 1997.
(16) Filed as Exhibit 9.2.5 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31, 1997.
(17) Filed as Exhibit 9.2.6 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(18) Filed as Exhibit 9.3 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(19) Filed as Exhibit 9.4 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(20) Filed as Exhibit 10 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(21) Filed as Exhibit 13 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(22) Filed as Exhibit 15.1 with Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A, filed April 30, 1998.
(23) Filed as Exhibit 15.2 with Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A, filed February 23, 1996.
(24) Filed as Exhibit 15.3 with Post-Effective Amendment No. 11 to the
Registrant's Registration Statement on Form N-1A, filed August 28, 1997.
(25) Filed as Exhibit 15.4 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31, 1997.
(26) Filed as Exhibit 15.5 with Post-Effective Amendment No. 13 to the
Registrant's Registration Statement on Form N-1A, filed December 31, 1997.
(27) Filed as Exhibit 15.6 with Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A, filed June 16, 1998.
(28) Filed as Exhibit number listed with Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A, filed January 25, 1999.
(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.
(30) Filed as Exhibit number listed with Post-Effective Amendment No. 21 to the
Registrant's Registration Statement on Form N-1A, filed June 15, 1999.
