File No. 33-75138
As filed with the Securities and Exchange Commission on February 28, 1996
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 2 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 4 / X /
LORD ASSET MANAGEMENT TRUST
(Exact Name of Registrant as Specified in Charter)
440 South LaSalle Street, Chicago, Illinois 60605-1028
Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (312) 663-8300
Allan S. Mostoff, Esq. Thomas S. White
Dechert Price & Rhoads Lord Asset Management, Inc.
1500 K Street, N.W. 440 South LaSalle Street
Washington, D.C. 20005 Chicago, Illinois 60605-1028
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
X immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of Rule 485
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1993
Registrant has registered an indefinite number of shares of beneficial
interest under the Securities Act of 1933 pursuant to Rule 24f-2 under
the Investment Company Act of 1940. Registrant filed the notice
required by Rule 24f-2 with respect to its fiscal year ended
October 31, 1995 on December 27, 1995, and Registrant intends
to file its Rule 24f-2 Notice for its fiscal year ending
October 31, 1996 on or before December 30, 1996.
<PAGE>
LORD ASSET MANAGEMENT TRUST
CROSS-REFERENCE SHEET
Item No. Caption
Part A
1 Cover Page
2 Expense Table
3 Selected Financial
Information
4 General Description;
Investment Techniques
5 Management of the Fund
5A Not Applicable
6 General Information
7 How to Buy Shares of the
Fund
8 How to Sell Shares of the
Fund
9 Not Applicable
<PAGE>
Item No. Caption
Part B
10 Cover Page
11 Table of Contents
12 General Information and
History
13 Investment Objective and
Policies
14 Management of the Trust
15 Principal Shareholders
16 Investment Management and
Other Services
17 Brokerage Allocation
18 Description of Shares;
Part A
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Not Applicable
22 Performance Information
23 Financial Statements
<PAGE>
THOMAS WHITE FUNDS FAMILY
THOMAS WHITE WORLD FUND
440 South LaSalle Street
Chicago, IL 60605-1028
PROSPECTUS
March 1, 1996
INVESTMENT OBJECTIVE AND POLICIES. The THOMAS WHITE WORLD FUND
(the Fund ) seeks long-term capital growth through a flexible
policy of investing in stocks and debt obligations of companies
and governments of any nation, including underdeveloped
countries. The Fund is a series of LORD ASSET MANAGEMENT TRUST.
PURCHASE OF SHARES. Please complete and return the Account
Application form. If you need assistance in completing this Form,
please call our Account Services Department. The Fund's Shares
may be purchased at a price equal to their net asset value next
computed upon acceptance of the Application. The minimum initial
purchase order is $2500, with subsequent investments of $100 or
more.
PROSPECTUS INFORMATION. This Prospectus sets forth concisely
information about the Fund that a prospective investor ought to
know before investing. Investors are advised to read and retain
this Prospectus for future reference. A Statement of Additional
Information ( SAI ) dated March 1, 1996 has been filed with the
Securities and Exchange Commission and is incorporated in its
entirety by reference in and made a part of this Prospectus. This
SAI is available without charge upon request to the THOMAS WHITE
FUNDS FAMILY, Suite 3900, 440 South LaSalle Street, Chicago, Illinois
60605-1028 - Account Services Department - telephone 1-800-811-0535,
telecopy 1-312-663-8323.
Shares of the Fund are not deposits or obligations of, or
guaranteed or endorsed by, any bank; further, such shares are not
federally insured by the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
EXPENSE TABLE
SELECTED FINANCIAL INFORMATION
GENERAL DESCRIPTION
Investment Objective and Policies
INVESTMENT TECHNIQUES
Temporary Investments
Repurchase Agreements
Options on Securities or Indices
Forward Foreign Currency Contracts and Options on Foreign
Currencies
Futures Contracts
Brady Bonds
Depositary Receipts
Illiquid and Restricted Securities
Borrowing
Loans of Portfolio Securities
RISK FACTORS
HOW TO BUY SHARES OF THE FUND
Net Asset Value
Account Statements
HOW TO SELL SHARES OF THE FUND
INDIVIDUAL RETIREMENT ACCOUNTS (IRAs)
MANAGEMENT OF THE FUND
Investment Manager
Transfer Agent
Custodian
Brokerage Commissions
GENERAL INFORMATION
Description of Shares/Share Certificates
Meetings of Shareholders
Dividends and Distributions
Federal Tax Information
Inquiries
Performance Information
<PAGE>
EXPENSE TABLE
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases . . . . . . . None
Deferred Sales Charge . . . . . . . . . . . . . . . . None
Redemption Fee (as a percentage of the amount redeemed) None*
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET
ASSETS)
Management Fees . . . . . . . . . . . . . . . . . . . 1.00%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . None
Other Expenses (audit, legal, shareholder services,
transfer agent and custodian) . . . . . . . . . . . 0.49%
Total Fund Operating Expenses . . . . . . . . . . . . 1.49%**
___________________________
* The information in the table does not reflect the charge of up
to $15 per transaction if a Shareholder requests that
redemption proceeds be sent by express mail or wired to a
commercial bank account.
** Lord Asset Management, Inc. (the "Investment Manager") has agreed
to reimburse the Fund of its operating expenses in its current
fiscal year to the extent that the Fund's total operating expenses
exceed 1.50% of the Fund's average daily net assets.
Example
You would pay the following expenses on a $1,000 investment assuming
(1) 5% annual return and (2) redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
$15 $47 $81 $178
The table is based on estimated expenses for the
current fiscal year and is provided for purposes of
assisting current and prospective Shareholders in
understanding the various costs and expenses that an
investor in the Fund will bear, directly or indirectly. The
5% annual return and annual expenses should not be
considered a representation of actual or expected Fund
performance or expenses, both of which may vary.
SELECTED FINANCIAL INFORMATION
The following table of selected financial information
has been audited by McGladrey & Pullen LLP, independent
certified public accountants, for the period indicated in
their report which is included in the Fund's Annual Report dated
October 31, 1995 and incorporated by reference in the SAI. It
should be read in conjunction with the other financial statements
and notes thereto included in the Fund's Annual Report, which
contains further information about the Fund's performance, and
which is available to Shareholders upon request and without charge.
June 28, 1994
Per Share Operating Performance Year (commencement
(for a Share outstanding throughout Ended operations) to
the period) October 31, 1995 October 31, 1994
Net asset value, beginning of period $10.50 $10.00
Income from investment operations:
Net investment income 0.19 0.06
Net realized and unrealized gain 0.71 0.44
Distributions from net investment income (0.90)
Change in net asset value 0.81 0.50
Net asset value, end of period $11.31 $10.50
Total Return 8.65% 5.00%*
Ratios/supplemental data
Net assets, end of period (000) $32,979 $13,928
Ratio of expenses to average net assets 1.49% 2.36%**
Ratio of expenses, net of reimbursement,
to average net assets 1.49% 1.50%**
Ratio of net investment income to average
net assets 2.08% 1.79%**
Portfolio turnover rate 64.54% 0.01%
* Not annualized.
**Annualized
GENERAL DESCRIPTION
LORD ASSET MANAGEMENT TRUST (the Trust ) was organized
as a business trust under the laws of Delaware on February
9, 1994 and is registered under the Investment Company Act
of 1940 (the 1940 Act ) as an open-end diversified
management investment company. The Trust currently has one
series of Shares, which is a mutual fund: the THOMAS WHITE
WORLD FUND (the Fund ).
INVESTMENT OBJECTIVE AND POLICIES. The Fund's
investment objective is long-term capital growth. The Fund
seeks to achieve its objective through a flexible policy of
investing in stocks and debt obligations of companies and
governments of any nation, including underdeveloped
countries. Any income realized will be incidental.
The Fund invests in companies that the Investment
Manager believes will benefit from global economic trends,
promising technologies or products and specific country
opportunities resulting from changing geopolitical, currency
or economic relationships. It is expected that investments
will include companies of varying size as measured by
assets, sales or capitalization. The Fund generally invests
in equity securities of established companies listed on U.S.
or foreign securities exchanges, but also may invest in
securities traded over-the-counter. Although the Fund
generally invests in common stock, the Fund may also invest
in preferred stocks and certain debt securities, rated or
unrated, such as convertible bonds and bonds selling at a
discount, when the Investment Manager believes the potential
for appreciation will equal or exceed that available from
investments in common stock. The Fund may also invest in
warrants or rights to subscribe to or purchase such
securities, and sponsored or unsponsored American Depositary
Receipts ( ADRs ), European Depositary Receipts ( EDRs ) and
Global Depositary Receipts ( GDRs ) (collectively,
Depositary Receipts ). Under normal market conditions, the
Fund will invest its assets in at least three countries, one
of which may be the United States. Whenever, in the judgment of
the Investment Manager, market or economic conditions warrant, the
Fund may adopt a temporary defensive position and may invest
without limit in money market securities denominated in U.S.
dollars or in the currency of any foreign country. See Investment
Techniques -- Temporary Investments.
The Fund may invest no more than 5% of its total assets
in securities issued by any one company or government,
exclusive of U.S. Government securities. Although the Fund
may invest up to 25% of its total assets in a single
industry, it has no present intention of doing so. The Fund
may not invest more than 5% of its net assets in warrants
(exclusive of amounts acquired in units or attached to
securities) nor more than 15% of its total assets in
securities with a limited trading market. The Fund's
investment objective and the investment restrictions set
forth under Investment Objective and Policies -- Investment
Restrictions in the SAI are fundamental and may not be
changed without Shareholder approval. All other investment
policies and practices described in this Prospectus are not
fundamental, and may be changed by the Board of Trustees
without Shareholder approval. The Fund invests for long-term
growth of capital and does not intend to place emphasis upon
short-term trading profits. Accordingly, the Fund normally
expects to have an annual portfolio turnover rate of less
than 50%.
The Fund may also lend its portfolio securities and
borrow money for investment purposes (i.e., leverage its
portfolio). In addition, the Fund may enter into
transactions in options on securities, securities indices
and foreign currencies, forward foreign currency contracts,
and futures contracts and related options. When deemed
appropriate by the Investment Manager, the Fund may invest
cash balances in repurchase agreements and other money
market investments to maintain liquidity in an amount
sufficient to meet expenses or for day-to-day operating
purposes. These investment techniques are described below
under Investment Techniques and Risk Factors, and under
the heading Investment Objective and Policies in the SAI.
INVESTMENT TECHNIQUES
TEMPORARY INVESTMENTS. For temporary defensive
purposes, subject to the investment restrictions set forth
in the SAI, the Fund may invest up to 100% of its total
assets in the following money market securities, denominated
in U.S. dollars or in the currency of any foreign country,
issued by entities organized in the United States or any
foreign country: short-term (less than twelve months to
maturity) and medium-term (not greater than five years to
maturity) obligations issued or guaranteed by the U.S.
Government or the governments of foreign countries, their
agencies or instrumentalities; finance company and
corporate commercial paper, and other short-term corporate
obligations, in each case rated Prime-1 by Moody's Investors
Service, Inc. ( Moody's ) or A or better by Standard &
Poor's Corporation ( S&P ) or, if unrated, of comparable
quality as determined by the Investment Manager; obligations
(including certificates of deposit, time deposits and
bankers acceptances) of banks; and repurchase agreements
with banks and broker-dealers with respect to such
securities.
REPURCHASE AGREEMENTS. When the Fund acquires a
security from a U.S. bank or a registered broker-dealer, it
may simultaneously enter into a repurchase agreement,
wherein the seller agrees to repurchase the security at a
specified time and price. The repurchase price is in excess
of the purchase price by an amount which reflects an agreed-
upon rate of return, which is not tied to the coupon rate of
the underlying security. Under the 1940 Act, repurchase
agreements are considered to be loans collateralized by the
underlying security and therefore will be fully
collateralized. However, if the seller should default on its
obligation to repurchase the underlying security, the Fund
may experience delay or difficulty in exercising its rights
to realize upon the security and might incur a loss if the
value of the security declines, as well as costs in
liquidating the security.
OPTIONS ON SECURITIES OR INDICES. The Fund may write
(i.e., sell) covered put and call options and purchase put
and call options on securities or securities indices that
are traded on United States and foreign exchanges or in the
over-the-counter markets. An option on a security is a
contract that permits the purchaser of the option, in return
for the premium paid, the right to buy a specified security
(in the case of a call option) or to sell a specified
security (in the case of a put option) from or to the writer
of the option at a designated price during the term of the
option. An option on a securities index permits the
purchaser of the option, in return for the premium paid, the
right to receive from the seller cash equal to the
difference between the closing price of the index and the
exercise price of the option. The Fund may write a put or
call option only if the option is covered. This means
that so long as the Fund is obligated as the writer of a
call option, it will own the underlying securities subject
to the call, or hold a call at the same or lower exercise
price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund
maintains liquid high grade assets with a value equal to the
exercise price in a segregated account, or holds a put on
the same underlying securities at an equal or greater
exercise price. The value of the underlying securities and
securities indices on which options may be written at any
one time will not exceed 15% of the total assets of the
Fund. The Fund will not purchase put or call options if the
aggregate premium paid for such options would exceed 5% of
its total assets.
FORWARD FOREIGN CURRENCY CONTRACTS AND OPTIONS ON
FOREIGN CURRENCIES. The Fund will normally conduct its
foreign currency exchange transactions either on a spot
(i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market, or through entering into
forward contracts to purchase or sell foreign currencies.
The Fund will generally not enter into a forward contract
with a term of greater than one year. A forward contract is
an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually
negotiated and privately traded by currency traders and
their customers.
The Fund will generally enter into forward contracts
only under two circumstances. First, when the Fund enters
into a contract for the purchase or sale of a security
denominated in a foreign currency, it may desire to lock
in the U.S. dollar price of the security in relation to
another currency by entering into a forward contract to buy
the amount of foreign currency needed to settle the
transaction. Second, when the Investment Manager believes
that the currency of a particular foreign country may suffer
or enjoy a substantial movement against another currency, it
may enter into a forward contract to sell or buy the former
foreign currency (or another currency which acts as a proxy
for that currency) approximating the value of some or all of
the Fund's portfolio securities denominated in such foreign
currency. This second investment practice is generally
referred to as cross-hedging. The Fund has no specific
limitation on the percentage of assets it may commit to
forward contracts, subject to its stated investment
objective and policies, except that the Fund will not enter
a forward contract if the amount of assets set aside to
cover forward contracts would impede portfolio management or
the Fund's ability to meet redemption requests. Although
forward contracts will be used primarily to protect the Fund
from adverse currency movements, they also involve the risk
that anticipated currency movements will not be accurately
predicted.
The Fund may purchase put and call options and write
covered put and call options on foreign currencies for the
purpose of protecting against declines in the U.S. dollar
value of foreign currency denominated portfolio securities
and against increases in the U.S. dollar cost of such
securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign
currency constitutes only a partial hedge, up to the amount
of the premium received, and the Fund could be required to
purchase or sell foreign currencies at disadvantageous
exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective
hedge against fluctuations in exchange rates although, in
the event of rate movements adverse to the Fund's position,
it may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be
written or purchased by the Fund are traded on U.S. and
foreign exchanges or over-the-counter.
FUTURES CONTRACTS. The Fund may buy and sell financial
futures contracts, stock and bond index futures contracts,
foreign currency futures contracts and options on any of the
foregoing for hedging purposes only. A financial futures
contract is an agreement between two parties to buy or sell
a specified debt security at a set price on a future date.
An index futures contract is an agreement to take or make
delivery of an amount of cash based on the difference
between the value of the index at the beginning and at the
end of the contract period. A futures contract on a foreign
currency is an agreement to buy or sell a specified amount
of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must
make an initial deposit, known as initial margin, as a
partial guarantee of its performance under the contract. As
the value of the security, index or currency fluctuates,
either party to the contract is required to make additional
margin payments, known as variation margin, to cover any
additional obligation it may have under the contract. In
addition, when the Fund enters into a futures contract, it
will segregate assets or cover its position in accordance
with the 1940 Act. See Investment Objective and Policies --
Futures Contracts in the SAI. With respect to positions in
futures and related options that do not constitute bona
fide hedging positions as defined in regulations of the
Commodity Futures Trading Commission, the Fund will not
enter into a futures contract or related option contract if,
immediately thereafter, the aggregate initial margin
deposits relating to such positions plus premiums paid by it
for open futures option positions, less the amount by which
any such options are in-the-money, would exceed 5% of the
Fund's total assets. The value of the underlying securities
on which futures contracts will be written at any one time
will not exceed 25% of the total assets of the Fund.
BRADY BONDS. The Fund may invest a portion of its
assets in certain debt obligations customarily referred to
as Brady Bonds, which are created through the exchange of
existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring under a
plan introduced by former U.S. Secretary of the Treasury,
Nicholas F. Brady. Brady Bonds have been issued only
recently, and, accordingly, do not have a long payment
history. They may be collateralized or uncollateralized and
issued in various currencies (although most are U.S. dollar-
denominated), and they are actively traded in the over-the-
counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds,
which may be fixed rate par bonds or floating rate discount
bonds, are generally collateralized in full as to principal
by U.S. Treasury zero coupon bonds which have the same
maturity as the Brady Bonds. Interest payments on these
Brady Bonds generally are collateralized on a one-year or
longer rolling-forward basis by cash or securities in an
amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of
floating rate bonds, initially is equal to at least one
year's interest payments based on the applicable interest
rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to value
recovery payments in certain circumstances, which in effect
constitute supplemental interest payments, but generally are
not collateralized. Brady Bonds are often viewed as having
three or four valuation components: (i) the collateralized
repayment of principal at final maturity; (ii) the
collateralized interest payments; (iii) the uncollateralized
interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts
constitute the residual risk ). In light of the residual
risk of Brady Bonds and, among other factors, the history of
defaults with respect to commercial bank loans by public and
private entities of countries issuing Brady Bonds,
investments in Brady Bonds are considered speculative.
DEPOSITARY RECEIPTS. ADRs are Depositary Receipts
typically used by a U.S. bank or trust company which
evidence ownership of underlying securities issued by a
foreign corporation. EDRs and GDRs are typically issued by
foreign banks or trust companies, although they also may be
issued by U.S. banks or trust companies, and evidence
ownership of underlying securities issued by either a
foreign or a United States corporation. Generally,
Depositary Receipts in registered form are designed for use
in the U.S. securities market and Depositary Receipts in
bearer form are designed for use in securities markets
outside the United States. Depositary Receipts may not
necessarily be denominated in the same currency as the
underlying securities into which they may be converted. In
addition, the issuers of the securities underlying
unsponsored Depositary Receipts are not obligated to
disclose material information in the United States and,
therefore, there may be less information available regarding
such issuers and there may not be a correlation between such
information and the market value of the Depositary Receipts.
Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For
purposes of the Fund's investment policies, the Fund's
investments in Depositary Receipts will be deemed to be
investments in the underlying securities.
ILLIQUID AND RESTRICTED SECURITIES. The Fund may invest
up to 15% of its net assets in illiquid securities, for
which there is a limited trading market and for which a low
trading volume of a particular security may result in abrupt
and erratic price movements. The Fund may be unable to
dispose of its holdings in illiquid securities at then
current market prices and may have to dispose of such
securities over extended periods of time.
The Fund may also invest up to 10% of its total assets
in securities that are subject to contractual or legal
restrictions on subsequent transfer because they were sold
(i) in private placement transactions between their issuers
and their purchasers, or (ii) in transactions between
qualified institutional buyers pursuant to Rule 144A under
the U.S. Securities Act of 1933, as amended. As a result of
the absence of a public trading market, such restricted
securities may be less liquid and more difficult to value
than publicly traded securities. Although restricted
securities may be resold in privately negotiated
transactions, the prices realized from the sales could, due
to illiquidity, be less than those originally paid by the
Fund or less than their fair value. In addition, issuers
whose securities are not publicly traded may not be subject
to the disclosure and other investor protection requirements
that may be applicable if their securities were publicly
traded. If any privately placed or Rule 144A securities held
by the Fund are required to be registered under the
securities laws of one or more jurisdictions before being
resold, the Fund may be required to bear the expenses of
registration. Investment in Rule 144A securities could have
the effect of increasing the level of the Fund's illiquidity
to the extent that qualified institutional buyers become,
for a time, uninterested in purchasing such securities. Rule
144A securities determined by the Board of Trustees to be
liquid are not subject to the 15% limitation on investments
in illiquid securities.
BORROWING. The Fund may borrow up to one-third of the
value of its total assets from banks to increase its
holdings of portfolio securities. Under the 1940 Act, the
Fund is required to maintain continuous asset coverage of
300% with respect to such borrowings and to sell (within
three days) sufficient portfolio holdings to restore such
coverage if its value should decline to less than 300% due
to market fluctuations or otherwise, even if such
liquidations of the Fund's holdings may be disadvantageous
from an investment standpoint. Leveraging by means of
borrowing generally will exaggerate the effect of any
increase or decrease in the value of portfolio securities on
the Fund's net asset value, and money borrowed will be
subject to interest and other costs (which may include
commitment fees and/or the cost of maintaining minimum
average balances) which may or may not exceed the income
received from the securities purchased with borrowed funds.
Leveraging by means of borrowing is considered to be a
speculative investment technique.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to
banks and broker-dealers portfolio securities with an
aggregate market value of up to one-third of its total
assets. Such loans must be secured by collateral (consisting
of any combination of cash, U.S. Government securities or
irrevocable letters of credit) in an amount at least equal
(on a daily marked-to-market basis) to the current market
value of the securities loaned. The Fund may terminate the
loans at any time and obtain the return of the securities
loaned within five business days. The Fund will continue to
receive any interest or dividends paid on the loaned
securities and will continue to retain any voting rights
with respect to the securities. In the event that the
borrower defaults on its obligation to return borrowed
securities, because of insolvency or otherwise, the Fund
could experience delays and costs in gaining access to the
collateral and could suffer a loss to the extent that the
value of the collateral falls below the market value of the
borrowed securities.
RISK FACTORS
Shareholders should understand that all investments
involve risk and there can be no guarantee against loss
resulting from an investment in the Fund, nor can there be
any assurance that the Fund's investment objective will be
attained. As with any investment in securities, the value
of, and income from, an investment in the Fund can decrease
as well as increase, depending on a variety of factors which
may affect the values and income generated by the Fund's
portfolio securities, including general economic conditions,
market factors and currency exchange rates. Additionally,
investment decisions made by the Investment Manager will not
always be profitable or prove to have been correct. The Fund
is not intended as a complete investment program.
Successful use of futures contracts and related options
is subject to certain special risk considerations. A liquid
secondary market for any futures or option contract may not
be available when the Fund seeks to close a futures or
option position. In addition, there may be an imperfect
correlation between movements in the securities or foreign
currency on which the futures or option contract is based
and movements in the securities or currency in the Fund's
portfolio. Successful use of futures and options contracts
is further dependent on the Investment Manager's ability to
predict correctly movements in the direction of the
securities or foreign currency markets and no assurance can
be given that its judgment in this respect will be correct.
Successful use of options on securities or securities
indices is subject to similar risk considerations. In
addition, by writing covered call options, the Fund gives up
the opportunity, while the option is in effect, to profit
from any price increase in the underlying security above the
option exercise price.
The Fund has the right to purchase securities in any
foreign country, developed or underdeveloped. Investors
should consider carefully the substantial risks involved in
investing in securities issued by companies and governments
of foreign nations, which are in addition to the usual risks
inherent in domestic investments. There is the possibility
of expropriation, nationalization or confiscatory taxation,
taxation of income earned in foreign nations or other taxes
imposed with respect to investments in foreign nations,
foreign exchange controls (which may include suspension of
the ability to transfer currency from a given country),
default in foreign government securities, political or
social instability or diplomatic developments which could
affect investments in securities of issuers in foreign
nations. Some countries may withhold portions of interest
and dividends at the source. In addition, in many countries
there is less publicly available information about issuers
than is available in reports about companies in the United
States. Foreign companies are not generally subject to
uniform accounting, auditing and financial reporting
standards, and auditing practices and requirements may not
be comparable to those applicable to United States
companies. Further, the Fund may encounter difficulties or
be unable to pursue legal remedies and obtain judgments in
foreign courts. Commission rates in foreign countries, which
are sometimes fixed rather than subject to negotiation as in
the United States, are likely to be higher. Further, the
settlement period of securities transactions in foreign
markets may be longer than in domestic markets, which may
affect the timing of the Fund's receipt of proceeds from its
portfolio securities transactions. In many foreign
countries, there is less government supervision and
regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the United
States. The foreign securities markets of many of the
countries in which the Fund may invest may also be smaller,
less liquid, and subject to greater price volatility than
those in the United States.
Investments in companies domiciled in developing
countries may be subject to potentially higher risks than
investments in developed countries. These risks include (i)
less social, political and economic stability; (ii) the
small current size of the markets for such securities and
the currently low or nonexistent volume of trading, which
result in a lack of liquidity and in greater price
volatility; (iii) certain national policies which may
restrict the Fund's investment opportunities, including
restrictions on investment in issuers or industries deemed
sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed legal structures governing private
or foreign investment or allowing for judicial redress for
injury to private property; (vi) the absence, until recently
in certain Eastern European countries, of a capital market
structure or market-oriented economy; and (vii) the
possibility that recent favorable economic developments in
Eastern Europe may be slowed or reversed by unanticipated
political or social events in such countries.
Investments in Eastern European countries may involve
risks of nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private
property in the past, in many cases without adequate
compensation, and there can be no assurance that such
expropriation will not occur in the future. In the event of
such expropriation, the Fund could lose a substantial
portion of any investments it has made in the affected
countries. Further, no accounting standards exist in Eastern
European countries. Finally, even though certain Eastern
European currencies may be convertible into United States
dollars, the conversion rates may be artificial to the
actual market values and may be adverse to the Fund's
Shareholders.
The Fund is authorized to invest in medium quality or
high risk, lower quality debt securities that are rated in
any rating category by S&P or by Moody's, or which are not
rated by S&P or Moody's. As an operating policy, which may
be changed by the Board of Trustees without Shareholder
approval, the Fund will not invest or hold more than 5% of
its net assets in debt securities rated BBB or lower by S&P
or Baa or lower by Moody's or, if unrated, are of equivalent
investment quality as determined by the Investment Manager.
The Board may consider a change in this operating policy if,
in its judgment economic conditions change such that a
higher level of investment in high risk, lower quality debt
securities would be consistent with the interests of the
Fund and its Shareholders. High risk, lower quality debt
securities, commonly referred to as junk bonds, are
regarded, on balance, as predominantly speculative with
respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation and
may be in default. Unrated debt securities are not
necessarily of lower quality than rated securities but they
may not be attractive to as many buyers. Regardless of
rating levels, all debt securities considered for purchase
(whether rated or unrated) will be carefully analyzed by the
Investment Manager to insure, to the extent possible, that
the planned investment is sound. The Fund may, from time to
time, purchase defaulted debt securities if, in the opinion
of the Investment Manager, the issuer may resume interest
payments in the near future.
The Fund usually effects currency exchange transactions
on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign exchange market. However, some price spread on
currency exchange (to cover service charges) will be
incurred when the Fund converts assets from one currency to
another.
There are further risk considerations, including
possible losses through the holding of securities in
domestic and foreign custodial banks and depositories,
described in the SAI.
HOW TO BUY SHARES OF THE FUND
Shares of the Fund may be purchased from the Fund at
the offering price, which is the net asset value of the Fund
as next determined upon receipt, and acceptance after
determination to be in good form, by the Fund of a completed
Account Application Form and check. The minimum initial
purchase order is $2,500, with subsequent investments of
$100 or more. The Fund has the right to reject any
application. Completed applications should be mailed
directly to THOMAS WHITE WORLD FUND, c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, WI 53201-0701. To purchase
Shares by overnight or express mail, please use the
following street address: THOMAS WHITE WORLD FUND,
Shareholder Services Center, 3rd Floor, 615 East Michigan
Street, Milwaukee, WI 53202.
Investors may also invest in the Fund by direct wire
transfer. The establishment of a new account or any
additional purchases by wire transfer should be preceded by
a telephone call to Firstar Trust Company (the "Transfer
Agent") at 1-800-811-0535. The investor will be asked to
provide his name, address, social security or tax
identification number, the amount of his investment and the
name and address of the bank that will be wiring the
investment. Funds should be wired through the Federal
Reserve System as follows:
Firstar Bank Milwaukee, N.A.
ABA Number 0750-00022
Trust Funds, Account Number 112-952-137
For further credit to Thomas White World Fund
(investment account number)
(name or account registration)
If an Investor purchases his initial Shares by wire,
the Investor must prepare and file a Purchase Application,
marked follow-up, with the Transfer Agent. The Transfer
Agent must receive the Purchase Application before any of
the Shares purchased can be redeemed.
Investors can purchase additional Shares by telephone.
Telephone transactions may not be used for initial
purchases. Only bank accounts held at domestic institutions
that are Automated Clearing House ( ACH ) members can be
used for telephone transactions. Shares will be purchased at
the net asset value determined as of the close of regular
trading on the date the Transfer Agent receives payment for
Shares purchased by electronic funds transfer through the
ACH system. Most transfers are completed within three
business days after a call to place an order.
Shares of the Fund may be purchased or sold through
certain broker-dealers, financial institutions or other
service providers ( Processing Intermediaries ). When Shares
of the Fund are purchased in this manner, the Processing
Intermediary, rather than its customer, may be the
Shareholder of record of the Shares. Processing
Intermediaries may use procedures and impose restrictions in
addition to or different from those applicable to
Shareholders who invest directly in the Fund.
At the discretion of the Fund, investors may be
permitted to purchase Fund Shares by transferring securities
to the Fund that meet the Fund's investment objective and
policies. Securities transferred to the Fund will be valued
in accordance with the same procedures used to determine the
Fund's net asset value at the time of the next determination
of net asset value after such acceptance. Shares issued by
the Fund in exchange for securities will be issued at net
asset value determined as of the same time. All dividends,
interest, subscription, or other rights pertaining to such
securities shall become the property of the Fund and must be
delivered to the Fund by the investor upon receipt from the
issuer. Investors who are permitted to transfer such
securities will be required to recognize a gain or loss on
such transfer, and pay tax thereon, if applicable, measured
by the difference between the fair market value of the
securities and investor's basis therein. Securities will not
be accepted in exchange for shares of the Fund unless: (1)
such securities are, at the time of the exchange, eligible
to be included in the Fund and current market quotations are
readily available for such securities; (2) the investor
represents and warrants that all securities offered to be
exchanged are not subject to any restrictions upon their
sale by the Fund under the Securities Act of 1933 or under
the laws of the country in which the principal market for
such securities exists, or otherwise; and (3) the value of
any such security (except U.S. government securities) being
exchanged together with other securities of the same issuer
owned by the Fund, will not exceed 5% of the Fund's net
assets immediately after the transaction.
NET ASSET VALUE. The net asset value of the Shares of
the Fund is computed as of the close of trading on each day
the New York Stock Exchange is open for trading, by dividing
the value of the Fund's securities plus any cash and other
assets (including accrued interest and dividends receivable)
less all liabilities (including accrued expenses) by the
number of shares outstanding, adjusted to the nearest whole
cent. A security listed or traded on a recognized stock
exchange or NASDAQ, is valued at its last sale price on the
principal exchange on which the security is traded. The
value of a foreign security is determined in its national
currency as of the close of trading on the foreign exchange
on which it is traded or as of 4:00 p.m., New York time, if
that is earlier and that value is then converted into its
U.S. dollar equivalent at the foreign exchange rate in
effect at noon, New York time, with the exception of Canadian
securities, which are converted into their U.S. dollar equivalent
at the close of the Canadian market (4:00 p.m. New York time) on
the day the value of the foreign security is determined. If no sale
is reported at that time, the mean between the current bid and
asked price is used. Occasionally, events which affect the values
of such securities and such exchange rates may occur between
the times at which they are determined and the close of the
New York Stock Exchange, and will therefore not be reflected
in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur
during such period, then these securities will be valued at
fair value as determined by the management using methods
approved by the Board of Trustees and subsequently ratified
in good faith by the Board of Trustees. All other securities
for which over-the-counter market quotations are readily
available are valued at the mean between the current bid and
asked price. Securities for which market quotations are not
readily available and other assets are valued at fair value
as determined by the management using methods approved by
the Board of Trustees and subsequently ratified in good
faith by the Board of Trustees.
ACCOUNT STATEMENTS. Shareholder accounts are opened in
accordance with the Shareholder's registration instructions.
Transactions in the account, such as additional investments
and dividend reinvestments, will be reflected on regular
confirmation statements from the Fund.
HOW TO SELL SHARES OF THE FUND
Shares will be redeemed, without charge, on request of
the Shareholder in Proper Order to the Fund. "Proper
Order" means that the request to redeem must meet all the
following requirements:
1. It must be in writing, signed by the
Shareholder(s) exactly in the manner as the Shares are
registered, and must specify either the number of Shares, or
the dollar amount of Shares, to be redeemed and sent to the
THOMAS WHITE WORLD FUND, c/o Firstar Trust Company, P.O. Box
701, Milwaukee, WI 53201-0701;
2. The signature(s) of the redeeming Shareholder(s)
must be guaranteed by an eligible guarantor, including (1)
national or state banks, savings associations, savings and
loan associations, trust companies, savings banks,
industrial loan companies and credit unions; (2) national
securities exchanges, registered securities associations and
clearing agencies; (3) securities broker-dealers which are
members of a national securities exchange or a clearing
agency or which have minimum net capital of $100,000; or (4)
institutions that participate in the Securities Transfer
Agent Medallion Program ( STAMP ) or other recognized
signature medallion program. A notarized signature will not
be sufficient for the request to be in Proper Order. If the
Shares are registered in more than one name, the signature
of each of the redeeming Shareholders must be guaranteed. A
signature guarantee is not required for redemptions of
$25,000 or less, requested by and payable to all
Shareholders of record, to be sent to the address of record
for that account. However, the Fund reserves the right to
require signature guarantees on all redemptions. A signature
guarantee is also required in connection with any redemption
if the Fund has, within the 30-day period prior to receipt
of the redemption request, received instructions to change
the Shareholder's address of record;
3. Any outstanding certificates must accompany the
request together with a stock power signed by the
Shareholder(s), with signature(s) guaranteed as described in
Item 2 above; and
4. If the Shares being redeemed are registered in the
name of an estate, trust, custodian, guardian, retirement
plan or the like, or in the name of a corporation or
partnership, documents also must be included which, in the
judgment of the Fund, are sufficient to establish the
authority of the person(s) signing the request, and/or as
may be required by applicable laws or regulations, with
signature(s) guaranteed as described in Item 2 above.
Shares of the Fund may also be redeemed by calling the
Transfer Agent at 1-800-811-0535. To use this procedure, a
Shareholder must have elected this option on his account
application, which will be reflected in the records of the
Transfer Agent. The redemption proceeds must be mailed
directly to the investor or transmitted to the investor's
pre-authorized account at a domestic bank. To change the
designated account or address, a written request with
signature(s) guaranteed must be sent to the Transfer Agent.
Once made, telephone redemption requests cannot be modified
or canceled.
The Fund reserves the right to refuse a telephone
redemption if it is believed advisable to do so. Procedures
for redeeming Fund Shares by telephone may be modified or
terminated by the Fund at any time. In an effort to prevent
unauthorized or fraudulent redemption requests by telephone,
the Fund and the Transfer Agent have implemented procedures
designed to reasonably assure that telephone instructions
are genuine. These procedures include requesting
verification of various pieces of personal information,
recording telephone transactions, confirming transactions in
writing and restricting transmittal of redemption to pre-
authorized designations. Assuming that procedures such as
the above have been followed, the Fund will not be liable
for any loss, cost, or expense for acting upon an investor's
telephone redemption. As a result of this policy, the
investor will bear the risk of any loss unless the Fund
failed to follow such procedures.
To avoid delay in redemption or transfer, Shareholders
having questions about these requirements should contact the
Account Services Department by calling 1-800-811-0535.
The redemption price will be the net asset value of the
Shares next computed after the redemption request in Proper
Order is received by the Fund. Payment of the redemption
price ordinarily will be made by check (or by wire at the
sole discretion of the Fund if wire transfer is requested
including name and address of the bank and the Shareholder's
account number to which payment of the redemption proceeds
is to be wired) within seven days after receipt of the
redemption request in Proper Order. However, if Shares have
been purchased by check, the Fund will make redemption
proceeds available when a Shareholder's check received for
the Shares purchased has been cleared for payment by the
Shareholder's bank, which, depending upon the location of
the shareholder's bank, could take up to fifteen days from
the purchase date. The check will be mailed by first class
mail to the Shareholder's registered address (or as
otherwise directed). Remittance by wire (to a commercial
bank account in the same name(s) as the Shares are
registered that has been in existence for more than six
months) or express mail if requested, will be at a charge of
up to $15, which will be deducted from the redemption
proceeds.
The Fund may involuntarily redeem an investor's Shares
if the net asset value of such Shares is less than $2500
provided that involuntary redemptions will not result from
fluctuations in the value of an investor's Shares. An
investor who makes the minimum initial purchase of $2500 may
not redeem any portion of the investment without subjecting
the balance to involuntary redemption if the net asset value
of the investor's remaining Shares is less than $2500
following the redemption. In addition, the Fund may
involuntarily redeem the Shares of any investor who has
failed to provide the Fund with a certified taxpayer
identification number or such other tax-related
certifications as the Fund may require. A notice of
redemption, sent by first-class mail to the investor's
address of record, will fix a date not less than 30 days
after the mailing date and Shares will be redeemed at net
asset value at the close of business on that date, unless
sufficient additional Shares are purchased to bring the
aggregate account value up to $2500 or more, or unless a
certified taxpayer identification number (or such other
information as the Fund has requested) has been provided, as
the case may be. A check for the redemption proceeds will be
mailed to the investor at the address of record.
INDIVIDUAL RETIREMENT ACCOUNTS ( IRAs )
An individual investor can select the Shares of the
THOMAS WHITE WORLD FUND to fund either an IRA, a rollover
IRA or a non-working spousal IRA. To establish an IRA,
please complete the IRA Application, and if the assets are
being moved from an existing IRA, please complete the IRA
Transfer Form. Application forms, as well as descriptions of
applicable service fees and certain limitations on
contributions and withdrawals, are available from the Fund
or the Transfer Agent upon request.
The Fund's minimum initial investment for an IRA is
$1,500 ($250 for spousal IRAs). The minimum subsequent
investment in each case is $100. Under the Internal Revenue
Code of 1986, as amended (the Code ), individuals may make
wholly or partly tax-deductible contributions up to $2,000
annually, depending on whether they are active participants
in an employer-sponsored retirement plan and on their income
level. An individual with a non-working spouse may establish
a separate IRA for the spouse under the same conditions
provided that no more than $2,000 may be contributed to the
IRA of either spouse. Earnings on investments held in an IRA
are not taxed until withdrawal.
Because a retirement program involves commitments
covering future years, it is important that the investment
objective of the Fund is consistent with an investor's retirement
objectives. Premature withdrawals from a retirement plan
may result in adverse tax consequences. Consultation with a
competent financial and tax adviser is recommended.
MANAGEMENT OF THE FUND
The Board of Trustees of the Trust has overall
responsibility for the conduct of the affairs of the Fund
and the Trust. The Trustees serve indefinite terms of
unlimited duration. The Trustees appoint their own
successors, provided that at least two-thirds of the
Trustees, after such appointment, have been elected by
Shareholders. Shareholders may remove a Trustee upon the
vote of two-thirds of the Trust's outstanding Shares. A
Trustee may be removed upon the written declaration of two-
thirds of the Trustees. Information relating to the Trustees
is set forth under the heading Management of the Trust in
the SAI.
INVESTMENT MANAGER. The Investment Manager of the Fund
is LORD ASSET MANAGEMENT, INC., Chicago, Illinois, a
registered investment adviser under the Investment Advisers
Act of 1940.
The Investment Manager furnishes the Fund with
investment research, advice and supervision. The Investment
Manager may, but is not required to, furnish some overhead
items and facilities for the Fund. As compensation for its
services, the Fund pays the Investment Manager a monthly fee
at the rate of 1.00% annually of the Fund's average daily
net assets. This fee is higher than advisory fees paid by
most other U.S. investment companies, primarily because
investing in securities of companies in foreign markets,
many of which are not widely followed by professional
analysts, requires the Investment Manager to invest
additional time and incur added expense in developing
specialized resources, including research facilities. The
Fund also pays its own operating expenses. For the fiscal year
ended October 31, 1995, the ratio of operating expenses to
average daily net assets of the Fund was 1.49%.
The Investment Manager serves as adviser for a wide
variety of public and private clients in several nations.
The Investment Manager provides investment management and
advisory services to both an on- and off-shore client base,
including trusts, endowments, employee benefit plans and
individuals. Mr. Thomas S. White, Jr., the Fund's lead
portfolio manager and Chairman of the Investment Manager,
has been managing investments over the past 28 years. Mr.
White founded the Investment Manager in June, 1992. Before
that he was Managing Director and Chief Investment Officer
of The Chicago Group of Morgan Stanley Asset Management,
which he founded in 1982. Further information concerning the
Investment Manager is included under the heading Investment
Management and Other Services in the SAI.
TRANSFER AGENT. Firstar Trust Company, 615 East
Michigan Street, Milwaukee, WI 53202, serves as Transfer
Agent and monitors compliance with state "Blue Sky" laws.
CUSTODIAN. State Street Bank and Trust Company serves as
custodian of the Fund's assets.
BROKERAGE COMMISSIONS. The Fund's brokerage policies
are described under the heading Brokerage Allocation in
the SAI. The Fund's brokerage policies provide that the
receipt of research services from a broker and the sale of
Shares by a broker are factors which may be taken into
account in allocating securities transactions, so long as
the prices and execution provided by the broker equal the
best available within the scope of the Fund's brokerage
policies.
GENERAL INFORMATION
DESCRIPTION OF SHARES/SHARE CERTIFICATES. The
capitalization of the Trust consists of an unlimited number
of Shares of beneficial interest, par value $0.01 per Share.
The Board of Trustees is authorized, in its discretion, to
classify and allocate the unissued Shares of the Trust in an
unlimited number of separate series and may in the future
divide existing series into two or more classes. Each Share
entitles the holder to one vote. As of January 31, 1996, John W.
Galbraith owned a controlling interest of the Fund.
The Fund will not ordinarily issue certificates for
Shares purchased. Share certificates representing the whole
(not fractional) Shares are issued only upon the specific
request of the Shareholder made in writing to the Fund. No
charge is made for the issuance of one certificate for all
or some of the Shares purchased in a single order.
MEETINGS OF SHAREHOLDERS. Each share is entitled to one
vote on each matter presented to Shareholders. The Trust is
not required to hold annual Shareholder meetings and may
elect not to do so. Presently, the Trust does not intend to
hold annual Shareholder meetings. The Trust will call a
special meeting of Shareholders for the purpose of
considering the removal of a person serving as Trustee when
requested to do so by Shareholders holding at least 10% of
the Trust's outstanding Shares. In addition, the Trust is
required to assist Shareholder communications in connection
with the calling of Shareholder meetings to consider removal
of a Trustee or Trustees.
DIVIDENDS AND DISTRIBUTIONS. Each share of the Fund is
entitled to participate pro rata in any dividends and other
distributions declared by the board of Trustees with respect
to the Fund, and all shares of a series have equal rights in
the event of liquidation of that series.
Dividends and capital gain distributions (if any) are
usually paid in December representing all or substantially
all of the Fund's net investment income and net realized
capital gains. Income dividends and capital gain
distributions paid by the Fund, other than on those Shares
whose owners keep them registered in the name of a broker-
dealer, are automatically reinvested in whole or fractional
Shares of the Fund at net asset value as of the ex-dividend
date, unless a shareholder makes a written request for
payments in cash. Income dividends and capital gain
distributions will be paid in cash on Shares during the time
that their owners keep them registered in the name of a
broker-dealer, unless the broker-dealer has made
arrangements with the Fund for reinvestment.
Prior to purchasing Shares of the Fund, the impact of
dividends or capital gain distributions which have been
declared but not yet paid should be carefully considered.
Any dividend or capital gain distribution paid shortly after
a purchase by a Shareholder prior to the record date will
have the effect of reducing the per Share net asset value of
the Shares by the amount of the dividend or distribution.
All or a portion of such dividend or distribution, although
in effect a return of capital, generally will be subject to
tax.
Checks are forwarded by first class mail to the address
of record. The proceeds of any such checks which are not
accepted by the addressee and returned to the Fund will be
reinvested for the Shareholder's account in whole or
fractional Shares at net asset value next computed after the
check has been received by the Fund. Subsequent
distributions automatically will be reinvested at net asset
value as of the ex-dividend date in additional whole or
fractional Shares.
FEDERAL TAX INFORMATION. The Fund intends to elect to
be treated and to qualify each year as a regulated
investment company under Subchapter M of the Code. See the
SAI for a summary of the requirements that must be satisfied
to so qualify. A regulated investment company generally is
not subject to Federal income tax on income and gains
distributed in a timely manner to its shareholders. The Fund
intends to distribute to Shareholders substantially all of
its net investment income and realized capital gains, which
generally, will be taxable income or capital gains in their
hands. Distributions declared in October, November or
December to Shareholders of record on a date in such month
and paid during the following January will be treated as
having been received by Shareholders on December 31 in the
year such distributions were declared. The Fund will inform
Shareholders each year of the amount and nature of such
income or gains. A more detailed description of tax
consequences to Shareholders is contained in the SAI under
the heading Tax Status.
The Fund may be required to withhold Federal income tax
at the rate of 31% of all taxable distributions (including
redemptions) paid to Shareholders who fail to provide the
Fund with their correct taxpayer identification number or to
make required certifications or where the Fund or the
Shareholder has been notified by the Internal Revenue
Service that the Shareholder is subject to backup
withholding. Corporate Shareholders and certain other
Shareholders specified in the Code are exempt from backup
withholding. Backup withholding is not an additional tax.
Any amounts withheld may be credited against the
Shareholder's Federal income tax liability.
INQUIRIES. Shareholders inquiries will be answered
promptly. They should be addressed to the THOMAS WHITE WORLD
FUND, c/o Firstar Trust Company, P.O. Box 701, Milwaukee, WI
53201-0701- telephone 1-800-811-0535, telecopy (312) 663-
8323.
Transcripts of Shareholder accounts less than three
years old are provided on request without charge; a fee of
$15 per account is charged for transcripts going back more
than three years from the date the request is received by
the Fund.
PERFORMANCE INFORMATION. The Fund may include its total
return in advertisements or reports to Shareholders or
prospective investors. Quotations of average annual total
return will be expressed in terms of the average annual
compounded rate of return on a hypothetical investment in
the Fund over a period of 1, 5 and 10 years (or up to the
life of the Fund), will reflect the deduction of a
proportional share of Fund expenses (on an annual basis),
and will assume that all dividends and distributions are
reinvested when paid. Total return may be expressed in terms
of the cumulative value of an investment in the Fund at the
end of a defined period of time. For a description of the
methods used to determine total return for the Fund, see the
SAI.
<PAGE>
THOMAS WHITE FUNDS FAMILY
THIS STATEMENT OF ADDITIONAL INFORMATION DATED
MARCH 1, 1996 IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
THOMAS WHITE WORLD FUND DATED MARCH 1, 1996 WHICH
MAY BE OBTAINED WITHOUT CHARGE UPON REQUEST TO
THE THOMAS WHITE FUNDS FAMILY
440 SOUTH LASALLE STREET, SUITE 3900
CHICAGO, ILLINOIS 60605-1028
TELEPHONE: 1-800-811-0535
TELECOPY: (312) 663-8323
TABLE OF CONTENTS
Page
GENERAL INFORMATION AND HISTORY
INVESTMENT OBJECTIVES AND POLICIES
Investment Policies
Repurchase Agreements
Loans of Portfolio Securities
Debt Securities
Futures Contracts
Options on Securities, Indices and Futures
Foreign Currency Hedging Transactions
Investment Restrictions
Additional Restrictions
Risk Factors
Trading Policies
MANAGEMENT OF THE TRUST
PRINCIPAL SHAREHOLDERS
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Management Agreement
Management Fees
Transfer Agent
The Investment Manager
Custodian
Legal Counsel
Independent Accountants
Reports to Shareholders
BROKERAGE ALLOCATION
PURCHASE, REDEMPTION AND PRICING OF SHARES
TAX STATUS
DESCRIPTION OF SHARES
PERFORMANCE INFORMATION
FINANCIAL STATEMENTS
<PAGE>
GENERAL INFORMATION AND HISTORY
After organizing as a business trust under the laws of
Delaware as LORD ASSET MANAGEMENT TRUST (the Trust ) and
registering under the Investment Company Act of 1940 (the 1940
Act ), the Trust commenced business as an investment company on
June 28, 1994 with one series of Shares: THE THOMAS WHITE WORLD
FUND (the Fund ).
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT POLICIES. The investment objective and policies
of the Fund are described in the Fund's Prospectus under the
heading General Description--Investment Objective and Policies.
REPURCHASE AGREEMENTS. Repurchase agreements are contracts
under which the buyer of a security simultaneously commits to
resell the security to the seller at an agreed-upon price and
date. Under a repurchase agreement, the seller is required to
maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. LORD ASSET
MANAGEMENT INC. (the Investment Manager ) will monitor the value
of such securities daily to determine that the value equals or
exceeds the repurchase price. Repurchase agreements may involve
risks in the event of default or insolvency of the seller,
including possible delays or restrictions upon a Fund's ability
to dispose of the underlying securities. The Fund will enter into
repurchase agreements only with parties who meet creditworthiness
standards approved by the Board of Trustees, i.e., banks or
broker-dealers which have been determined by the Investment
Manager to present no serious risk of becoming involved in
bankruptcy proceedings within the time frame contemplated by the
repurchase transaction.
LOANS OF PORTFOLIO SECURITIES. The Fund may lend to banks
and broker-dealers portfolio securities with an aggregate market
value of up to one-third of its total assets. Such loans must be
secured by collateral (consisting of any combination of cash,
U.S. Government securities or irrevocable letters of credit) in
an amount at least equal (on a daily marked-to-market basis) to
the current market value of the securities loaned. The Fund
retains all or a portion of the interest received on investment
of the cash collateral or receives a fee from the borrower. The
Fund may terminate the loans at any time and obtain the return of
the securities loaned within five business days. The Fund will
continue to receive any interest or dividends paid on the loaned
securities and will continue to have voting rights with respect
to the securities. However, as with other extensions of credit,
there are risks of delay in recovery or even loss of rights in
collateral should the borrower fail.
DEBT SECURITIES. The Fund may invest in debt securities
which are rated in any rating category by Moody's Investors
Service, Inc. ( Moody's ) or by Standard & Poor's Corporation
( S&P") or which are not rated by Moody's or S&P. As an operating
policy, the Fund will not invest or hold more than 5% of its net
assets in debt securities rated Baa or lower by Moody's or BBB or
lower by S&P or, if unrated, are of equivalent investment quality
as determined by the Investment Manager. The market value of debt
securities generally varies in response to changes in interest
rates and the financial condition of each issuer. During periods
of declining interest rates, the value of debt securities
generally increases. Conversely, during periods of rising
interest rates, the value of such securities generally declines.
These changes in market value will be reflected in the Fund's net
asset value.
Although they may offer higher yields than do higher rated
securities, low rated and unrated debt securities generally
involve greater volatility of price and risk of principal and
income, including the possibility of default by, or bankruptcy
of, the issuers of the securities. In addition, the markets in
which low rated and unrated debt securities are traded are more
limited than those in which higher rated securities are traded.
The existence of limited markets for particular securities may
diminish the Fund's ability to sell the securities at fair value
either to meet redemption requests or to respond to changes in
the economy or in the financial markets and could adversely
affect and cause fluctuations in the daily net asset value of the
Fund's Shares.
Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the values and
liquidity of low rated debt securities, especially in a thinly
traded market. Analysis of the creditworthiness of issuers of low
rated debt securities may be more complex than for issuers of
higher rated securities, and the ability of the Fund to achieve
its investment objective may, to the extent of investment in low
rated debt securities, be more dependent upon such
creditworthiness analysis than would be the case if the Fund were
investing in higher rated securities.
Low rated debt securities may be more susceptible to real or
perceived adverse economic and competitive industry conditions
than investment grade securities. The prices of low rated debt
securities have been found to be less sensitive to interest rate
changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments.
A projection of an economic downturn or of a period of rising
interest rates, for example, could cause a decline in low rated
debt securities prices because the advent of a recession could
lessen the ability of a highly leveraged company to make
principal and interest payments on its debt securities. If the
issuer of low rated debt securities defaults, a Fund may incur
additional expenses to seek recovery. The low rated bond market
is relatively new, and many of the outstanding low rated bonds
have not endured a major business recession.
The Fund may accrue and report interest on high yield bonds
structured as zero coupon bonds or pay-in-kind securities as
income even though it receives no cash interest until the
security's maturity or payment date. In order to qualify for
beneficial tax treatment afforded regulated investment companies,
the Fund must distribute substantially all of its net income to
Shareholders (see Tax Status ). Thus, the Fund may have to
dispose of its portfolio securities under disadvantageous
circumstances to generate cash in order to satisfy the
distribution requirement.
Recent legislation, which requires federally-insured savings
and loan associations to divest their investments in low rated
debt securities, may have a material adverse effect on the Fund's
net asset values and investment practices.
FUTURES CONTRACTS. The Fund may purchase and sell financial
futures contracts. Although some financial futures contracts call
for making or taking delivery of the underlying securities, in
most cases these obligations are closed out before the settlement
date. The closing of a contractual obligation is accomplished by
purchasing or selling an identical offsetting futures contract.
Other financial futures contracts by their terms call for cash
settlements.
The Fund may also buy and sell index futures contracts with
respect to any stock or bond index traded on a recognized stock
exchange or board of trade. An index futures contract is a
contract to buy or sell units of an index at a specified future
date at a price agreed upon when the contract is made. The index
futures contract specifies that no delivery of the actual
securities making up the index will take place. Instead,
settlement in cash must occur upon the termination of the
contract, with the settlement being the difference between the
contract price and the actual level of the index at the
expiration of the contract.
At the time the Fund purchases a futures contract, an amount
of cash, U.S. Government securities, or other highly liquid, high
grade debt securities equal to the market value of the contract
will be deposited in a segregated account with the Fund's
Custodian. When selling a futures contract, the Fund will
maintain with its Custodian liquid assets that, when added to the
amounts deposited with a futures commission merchant or broker as
margin, are equal to the market value of the instruments
underlying the contract. Alternatively, the Fund may cover its
position by owning the instruments underlying the contract or, in
the case of an index futures contract, owning a portfolio with a
volatility substantially similar to that of the index on which
the futures contract is based, or holding a call option
permitting the Fund to purchase the same futures contract at a
price no higher than the price of the contract written by the
Fund (or at a higher price if the difference is maintained in
liquid assets with the Fund's Custodian).
OPTIONS ON SECURITIES, INDICES AND FUTURES. The Fund may
write covered put and call options and purchase put and call
options on securities, securities indices and futures contracts
that are traded on United States and foreign exchanges and in the
over-the-counter markets.
An option on a security or a futures contract is a contract
that gives the purchaser of the option, in return for the premium
paid, the right to buy a specified security or futures contract
(in the case of a call option) or to sell a specified security or
futures contract (in the case of a put option) from or to the
writer of the option at a designated price during the term of the
option. An option on a securities index gives the purchaser of
the option, in return for the premium paid, the right to receive
from the seller cash equal to the difference between the closing
price of the index and the exercise price of the option.
The Fund may write a call or put option only if the option
is covered. A call option on a security or futures contract
written by the Fund is covered if the Fund owns the underlying
security or futures contract 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 on a security or futures contract is also covered
if the Fund holds a call on the same security or futures contract
and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the
exercise price of the call written or (b) is greater than the
exercise price of the call written if the difference is
maintained by the Fund in cash or high grade U.S. Government
securities in a segregated account with its custodian. A put
option on a security or futures contract written by the Fund is
covered if the Fund maintains cash or fixed income securities
with a value equal to the exercise price in a segregated account
with its custodian, or else holds a put on the same security or
futures contract and in the same principal amount as the put
written where the exercise price of the put held is equal to or
greater than the exercise price of the put written.
The Fund will cover call options on securities indices that
it writes by owning securities whose price changes, in the
opinion of the Investment Manager, are expected to be similar to
those of the index, or in such other manner as may be in
accordance with the rules of the exchange on which the option is
traded and applicable laws and regulations. Nevertheless, where
the Fund covers a call option on a securities index through
ownership of securities, such securities may not match the
composition of the index. In that event, the Fund will not be
fully covered and could be subject to risk of loss in the event
of adverse changes in the value of the index. The Fund will cover
put options on securities indices that it writes by segregating
assets equal to the option's exercise price, or in such other
manner as may be in accordance with the rules of the exchange on
which the option is traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call
option, which increases its gross income in the event the option
expires unexercised or is closed out at a profit. If the value of
a security, index or futures contract on which the Fund has
written a call option falls or remains the same, the Fund will
realize a profit in the form of the premium received (less
transaction costs) that could offset all or a portion of any
decline in the value of the portfolio securities being hedged. If
the value of the underlying security, index or futures contract
rises, however, the Fund will realize a loss in its call option
position, which will reduce the benefit of any unrealized
appreciation in its investments. By writing a put option, the
Fund assumes the risk of a decline in the underlying security,
index or futures contract. To the extent that the price changes
of the portfolio securities being hedged correlate with changes
in the value of the underlying security, index or futures
contract, writing covered put options will increase the Fund's
losses in the event of a market decline, although such losses
will be offset in part by the premium received for writing the
option.
The Fund may also purchase put options to hedge its
investments against a decline in value. By purchasing a put
option, the Fund will seek to offset a decline in the value of
the portfolio securities being hedged through appreciation of the
put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not
increase, its loss will be limited to the premium paid for the
option plus related transaction costs. The success of this
strategy will depend, in part, on the accuracy of the correlation
between the changes in value of the underlying security, index or
futures contract and the changes in value of the Fund's security
holdings being hedged.
The Fund may purchase call options on individual securities
or futures contracts to hedge against an increase in the price of
securities or futures contracts that it anticipates purchasing in
the future. Similarly, the Fund may purchase call options on a
securities index to attempt to reduce the risk of missing a broad
market advance, or an advance in an industry or market segment,
at a time when the Fund holds uninvested cash or short-term debt
securities awaiting investment. When purchasing call options, the
Fund will bear the risk of losing all or a portion of the premium
paid if the value of the underlying security, index or futures
contract does not rise.
There can be no assurance that a liquid market will exist
when the Fund seeks to close out an option position. Trading
could be interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or sellers, or
the options exchange could suspend trading after the price has
risen or fallen more than the maximum specified by the exchange.
Although the Fund may be able to offset to some extent any
adverse effects of being unable to liquidate an option position,
it may experience losses in some cases as a result of such
inability. The value of over-the-counter options purchased by the
Fund, as well as the cover for options written by the Fund are
considered not readily marketable and are subject to the Trust's
limitation on investments in securities that are not readily
marketable. See Investment Objectives and Policies Investment
Restrictions.
FOREIGN CURRENCY HEDGING TRANSACTIONS. In order to hedge
against foreign currency exchange rate risks, the Fund may enter
into forward foreign currency exchange contracts and foreign
currency futures contracts, as well as purchase put or call
options on foreign currencies, as described below. The Fund may
also conduct its foreign currency exchange transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market.
The Fund may enter into forward foreign currency exchange
contracts ( forward contracts ) to attempt to minimize the risk
to the Fund from adverse changes in the relationship between the
U.S. dollar and foreign currencies. A forward contract is an
obligation to purchase or sell a specific currency for an agreed
price at a future date which is individually negotiated and
privately traded by currency traders and their customers. The
Fund may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security
denominated in a foreign currency in order to lock in the U.S.
dollar price of the security. In addition, for example, when the
Fund believes that a foreign currency may suffer or enjoy a
substantial movement against another currency, it may enter into
a forward contract to sell an amount of the former foreign
currency approximating the value of some or all of its portfolio
securities denominated in such foreign currency. This second
investment practice is generally referred to as cross-hedging.
Because in connection with the Fund's forward foreign currency
transactions, an amount of its assets equal to the amount of the
purchase will be held aside or segregated to be used to pay for
the commitment, the Fund will always have cash, cash equivalents
or high quality debt securities available in an amount sufficient
to cover any commitments under these contracts or to limit any
potential risk. The segregated account will be marked-to-market
on a daily basis. While these contracts are not presently
regulated by the Commodity Futures Trading Commission ( CFTC ),
the CFTC may in the future assert authority to regulate forward
contracts. In such event, the Fund's ability to utilize forward
contracts in the manner set forth above may be restricted.
Forward contracts may limit potential gain from a positive change
in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result
in poorer overall performance for the Fund than if it had not
engaged in such contracts.
The Fund may purchase and write put and call options on
foreign currencies for the purpose of protecting against declines
in the dollar value of foreign portfolio securities and against
increases in the dollar cost of foreign securities to be
acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only
a partial hedge up to the amount of the premium received, and the
Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The
purchase of an option on foreign currency may constitute an
effective hedge against fluctuation in exchange rates, although,
in the event of rate movements adverse to its position, the Fund
may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written or
purchased by the Fund will be traded on U.S. and foreign
exchanges or over-the-counter.
The Fund may enter into exchange-traded contracts for the
purchase or sale for future delivery of foreign currencies
( foreign currency futures ). This investment technique will be
used only to hedge against anticipated future changes in exchange
rates which otherwise might adversely affect the value of the
Fund's portfolio securities or adversely affect the prices of
securities that the Fund intends to purchase at a later date. The
successful use of foreign currency futures will usually depend on
the ability of the Investment Manager to forecast currency
exchange rate movements correctly. Should exchange rates move in
an unexpected manner, the Fund may not achieve the anticipated
benefits of foreign currency futures or may realize losses.
INVESTMENT RESTRICTIONS. The Fund has imposed upon itself
certain investment restrictions which, together with its
investment objective, are fundamental policies except as
otherwise indicated. No changes in the Fund's investment
objective or these investment restrictions can be made without
the approval of the Fund's Shareholders. For this purpose, the
provisions of the 1940 Act require the affirmative vote of the
lesser of either (1) 67% or more of the Shares of the Fund
present at a Shareholders meeting at which more than 50% of the
outstanding Shares of the Fund are present or represented by
proxy or (2) more than 50% of the outstanding Shares of the Fund.
In accordance with these restrictions, the Fund will not:
1. Invest in real estate or mortgages on real estate (although
the Fund may invest in marketable securities secured by real
estate or interests therein or issued by companies or
investment trusts which invest in real estate or interests
therein); invest in other open-end investment companies
(except in connection with a merger, consolidation,
acquisition or reorganization); invest in interests (other
than debentures or equity stock interests) in oil, gas or
other mineral exploration or development programs; or
purchase or sell commodity contracts (except futures
contracts as described in the Fund's prospectus).
2. Purchase any security (other than obligations of the U.S.
Government, its agencies or instrumentalities) if, as a
result, as to 75% of the Fund's total assets (i) more than
5% of the Fund's total assets would then be invested in
securities of any single issuer, or (ii) the Fund would then
own more than 10% of the voting securities of any single
issuer.
3. Act as an underwriter; issue senior securities except as set
forth in investment restrictions 5 and 6 below; or purchase
on margin or sell short, except that the Fund may make
margin payments in connection with futures, options and
currency transactions.
4. Loan money, except that a Fund may (i) purchase a portion of
an issue of publicly distributed bonds, debentures, notes
and other evidences of indebtedness, (ii) enter into
repurchase agreements and (iii) lend its portfolio
securities.
5. Borrow money, except that the Fund may borrow money from
banks in an amount not exceeding one-third of the value of
its total assets (including the amount borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be
necessary in connection with permitted borrowings);
provided, however, this does not prohibit escrow, collateral
or margin arrangements in connection with its use of
options, futures contracts and options on future contracts.
7. Invest 25% or more of its total assets in a single industry.
For purposes of this restriction, a foreign government is
deemed to be an industry with respect to securities issued
by it.
8. Participate on a joint or a joint and several basis in any
trading account in securities. (See Investment Objectives
and Policies Trading Policies as to transactions in the
same securities for the Fund and/or other clients with the
same adviser.)
If the Fund receives from an issuer of securities held by
the Fund subscription rights to purchase securities of that
issuer, and if the Fund exercises such subscription rights at a
time when the Fund's portfolio holdings of securities of that
issuer would otherwise exceed the limits set forth in Investment
Restrictions 2 or 7 above, it will not constitute a violation if,
prior to receipt of securities upon exercise of such rights, and
after announcement of such rights, the Fund has sold at least as
many securities of the same class and value as it would receive
on exercise of such rights.
ADDITIONAL RESTRICTIONS. The Fund has adopted the following
additional restrictions which are not fundamental and which may
be changed without Shareholder approval, to the extent permitted
by applicable law, regulation or regulatory policy. Under these
restrictions, the Fund may not:
1. Purchase or retain securities of any company in which
Trustees or officers of the Trust or of the Investment
Manager, individually owning more than 1/2 of 1% of the
securities of such company, in the aggregate own more than
5% of the securities of such company.
2. Invest more than 5% of the value of its total assets in
securities of issuers which have been in continuous
operation less than three years.
3. Invest more than 5% of its net assets in warrants whether or
not listed on the New York or American Stock Exchanges, and
more than 2% of its net assets in warrants that are not
listed on those exchanges. Warrants acquired in units or
attached to securities are not included in this restriction.
4. Purchase or sell real estate limited partnership interests.
5. Purchase or sell interests in oil, gas and mineral leases
(other than securities of companies that invest in or
sponsor such programs).
6. Invest for the purpose of exercising control over management
of any company.
7. Purchase more than 10% of a company's outstanding voting
securities.
8. Invest more than 15% of the Fund's total assets in
securities that are not readily marketable (including
repurchase agreements maturing in more than seven days and
over-the-counter options purchased by the Fund), including
no more than 10% of its total assets in restricted
securities. Rule 144A securities determined by the Board of
Trustees to be liquid are not subject to the limitation on
investment in illiquid securities.
Whenever any investment policy or investment restriction
states a maximum percentage of the Fund's assets which may be
invested in any security or other property, it is intended that
such maximum percentage limitation be determined immediately
after and as a result of that Fund's acquisition of such security
or property. The value of a Fund's assets is calculated as
described in its Prospectus under the heading How to Buy Shares
of the Fund.
RISK FACTORS. The Fund has the right to purchase securities
in any foreign country, developed or underdeveloped. Investors
should consider carefully the substantial risks involved in
securities of companies and governments of foreign nations, which
are in addition to the usual risks inherent in domestic
investments.
There may be less publicly available information about
foreign companies comparable to the reports and ratings published
about companies in the United States. Foreign companies are not
generally subject to uniform accounting, auditing and financial
reporting standards, and auditing practices and requirements may
not be comparable to those applicable to United States companies.
Foreign markets have substantially less volume than the New York
Stock Exchange and securities of some foreign companies are less
liquid and more volatile than securities of comparable United
States companies. Commission rates in foreign countries, which
are generally fixed rather than subject to negotiation as in the
United States, are likely to be higher. In many foreign countries
there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United
States.
The Fund endeavors to buy and sell foreign currencies on as
favorable a basis as practicable. Some price spread in currency
exchange (to cover service charges) will be incurred,
particularly when the Fund changes investments from one country
to another or when proceeds of the sale of Shares in U.S. dollars
are used for the purchase of securities in foreign countries.
Also, some countries may adopt policies which would prevent the
Fund from transferring cash out of the country or withhold
portions of interest and dividends at the source. There is the
possibility of expropriation, nationalization or confiscatory
taxation, withholding and other foreign taxes on income or other
amounts, foreign exchange controls (which may include suspension
of the ability to transfer currency from a given country),
default in foreign government securities, political or social
instability, or diplomatic developments which could affect
investments in securities of issuers in foreign nations.
The Fund may be affected either unfavorably or favorably by
fluctuations in the relative rates of exchange between the
currencies of different nations, by exchange control regulations
and by indigenous economic and political developments. Through
the flexible policy of the Fund, the Investment Manager endeavors
to avoid unfavorable consequences and to take advantage of
favorable developments in particular nations where from time to
time it places the investments of the Fund.
The exercise of this flexible policy may include decisions
to purchase securities with substantial risk characteristics and
other decisions such as changing the emphasis on investments from
one nation to another and from one type of security to another.
Some of these decisions may later prove profitable and others may
not. No assurance can be given that profits, if any, will exceed
losses.
The Trustees consider at least annually the likelihood of
the imposition by any foreign government of exchange control
restrictions which would affect the liquidity of the Fund's
assets maintained with custodians in foreign countries, as well
as the degree of risk from political acts of foreign governments
to which such assets may be exposed. They also consider the
degree of risk involved through the holding of portfolio
securities in domestic and foreign securities depositories (see
Investment Management and Other Services--Custodian and Transfer
Agent ). However, in the absence of willful misfeasance, bad
faith or gross negligence on the part of the Investment Manager,
any losses resulting from the holding of the Fund's portfolio
securities in foreign countries and/or with securities
depositories will be at the risk of the Shareholders. The
Trustees will take such measures, which may from time to time
include expropriation insurance or depository account insurance,
to the extent that, in their good faith judgment, they deem
advisable under prevailing conditions. No assurance can be given
that the Trustees appraisal of the risks will always be correct
or that such exchange control restrictions or political acts of
foreign governments might not occur.
There are additional risks involved in futures transactions.
These risks relate to the Fund's ability to reduce or eliminate
its futures positions, which will depend upon the liquidity of
the secondary markets for such futures. The Fund intends to
purchase or sell futures only on exchanges or boards of trade
where there appears to be an active secondary market, but there
is no assurance that a liquid secondary market will exist for any
particular contract at any particular time. Use of futures for
hedging may involve risks because of imperfect correlations
between movements in the prices of the futures on the one hand
and movements in the prices of the securities being hedged or of
the underlying security, currency or index on the other.
Successful use of futures by the Fund for hedging purposes also
depends upon the Investment Manager's ability to predict
correctly movements in the direction of the market, as to which
no assurance can be given.
There are several risks associated with transactions in
options. For example, there are significant differences between
the securities and options markets that could result in an
imperfect correlation between these markets, causing a given
transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of
skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or
unexpected events. There can be no assurance that a liquid market
will exist when the Fund seeks to close out an option position.
If the Fund were unable to close out an option that it had
purchased on a security or a securities index, it would have to
exercise the option in order to realize any profit or the option
may expire worthless. If trading were suspended in an option
purchased by the Fund, it would not be able to close out the
option. If restrictions on exercise were imposed, the Fund might
be unable to exercise an option it has purchased. Except to the
extent that a call option on a security or securities index
written by the Fund is covered by an option on the same security
or index purchased by the Fund, movements in the security or
index may result in a loss to the Fund. However, such losses may
be mitigated by changes in the value of the Fund's securities
during the period the option was outstanding.
TRADING POLICIES. The Investment Manager serves as
investment adviser to other clients. Accordingly, the respective
portfolios of the Fund and such clients may contain many or some
of the same securities. When the Fund and other clients of the
Investment Manager are engaged simultaneously in the purchase or
sale of the same security, the transactions will be placed for
execution in a manner designed to be equitable to all parties.
The larger size of the transaction may affect the price of the
security and/or the quantity which may be bought or sold for the
Fund. If the transaction is large enough, brokerage commissions
in certain countries may be negotiated below those otherwise
chargeable.
Sale or purchase of securities, without payment of brokerage
commissions, fees (except customary transfer fees) or other
remuneration in connection therewith, may be effected between the
Fund and other clients of the Investment Manager under procedures
adopted pursuant to Rule 17a-7 under the 1940 Act.
MANAGEMENT OF THE TRUST
The name, address, principal occupation during the past five
years and other information with respect to each of the Trustees
and Executive Officers of the Trust are as follows:
Name, Address and Principal Occupation
Offices with Trust During Past Five Years
Thomas S. White, Jr.* Chairman of LORD ASSET MANAGEMENT,
440 S. LaSalle St. INC.; former Managing Director,
Suite 3900 Morgan Stanley Asset Management
Chicago, IL 60605
Trustee, President
Brandon S. Joel Mutual Fund Administrative Manager of
440 S. LaSalle St. LORD ASSET MANAGEMENT, INC.; former
Suite 3900 Senior Mutual Fund Accountant, John
Chicago, IL 60605 Nuveen & Co.
Treasurer
Virge J. Trotter III Analyst and Vice-President of LORD
440 S. LaSalle St. ASSET MANAGEMENT, INC.; formerly with
Suite 3900 Exxon corporation in Treasury Department
Chicago,IL 60605
Vice President and
Secretary
Roberta J. Johnson Chief Account Administrator of LORD
440 S. LaSalle St. ASSET MANAGEMENT, INC.; former
Suite 3900 Assistant Vice President, The
Chicago, IL 60605 Chicago Corporation
Vice President
Douglas Jackman Analyst and Vice-President of LORD
440 S. LaSalle St. ASSET MANAGEMENT, INC.; formerly with
Suite 3900 Morgan Stanley, involved with equity
Chicago, IL 60605 analysis and foreign exchange.
Vice President
Jill F. Almeida Retired; former Vice President,
1448 N. Lake Security Pacific Bank
Shore Dr.
Chicago, IL 60610
Trustee
Philip R. Haag President, Baratek, Inc.
535 Balsam
Palatine, IL 60045
Trustee
Nicholas G. Manos* Attorney (of counsel), Gesas,
53 W. Jackson Blvd.Ltd. Pilati & Gesas
Suite 528
Chicago, IL 60604
Trustee
Edward E. Mack III President, Mack & Parker
55 East Jackson Street
Chicago, IL 60604
Trustee
Michael R. Miller Senior Vice President, CTI
22160 N. Pepper Road Industries
Barrington, IL 60010
Trustee
John N. Venson Medical Doctor (podiatry)
310 Meadowlake Lane
Lake Forest, IL 60045
Trustee
* Messrs. White and Manos are interested persons of the Trust
as that term is defined in the 1940 Act. Mr. Manos is the father-
in-law of Mr. White.
The Trust pays each Trustee who is not an "interested person" of the Trust,
as that term is defined in the 1940 Act, an annual fee of $3,000. For the
fiscal year ended October 31, 1995, the Trust paid the following compensation
to all Trustees of the Trust:
Pension or Estimated
Retirement Annual
Aggregate Benefits Accrued Benefits Upon Total
Compensation as Fund Expenses Retirement Compensation
Thomas S. White, Jr. $ 0 $0 $0 $ 0
Jill F. Almeida $3,000 $0 $0 $3,000
Philip R. Haag $3,000 $0 $0 $3,000
Nicholas G. Manos $ 0 $0 $0 $ 0
Edward E. Mack III $3,000 $0 $0 $3,000
Michael R. Miller $3,000 $0 $0 $3,000
John N. Venson $3,000 $0 $0 $3,000
PRINCIPAL SHAREHOLDERS
As of January 31, 1996, there were 3,149,663 Shares of the
Fund outstanding, of which 57,114 Shares (1.81%) were owned
beneficially, directly or indirectly, by all the Trustees and
officers of the Fund as a group. As of January 31, 1996, John W.
Galbraith, P.O. Box 33030, St. Petersburg, FL 33733, owned
beneficially, directly or indirectly, 2,556,815 Shares (81.18%) of
the Fund and on that basis may be able to control the resolution of
any matter submitted for a Shareholder vote.
INVESTMENT MANAGEMENT AND OTHER SERVICES
INVESTMENT MANAGEMENT AGREEMENT. The Investment Manager of
the Fund is LORD ASSET MANAGEMENT INC. (the Investment
Manager ), an Illinois corporation with offices in Chicago,
Illinois. The Investment Management Agreement between the
Investment Manager and the Trust on behalf of the Fund, dated
March 10 1995, was approved by the Board of Trustees, including
approval by a majority of the Trustees who were not parties to
the Investment Management Agreement or interested persons of any
such party, at a meeting on December 12, 1994 and by the Shareholders
of the Fund on March 10, 1995 and will continue through March 10,
1997. The Investment Management Agreement will continue from year to
year thereafter, subject to approval annually by the Board of Trustees
or by vote of a majority of the outstanding Shares of the Fund
(as defined in the 1940 Act) and also, in either event, with the
approval of a majority of those Trustees who are not parties to
the Agreement or interested persons of any such party in person
at a meeting called for the purpose of voting on such approval.
The Investment Management Agreement requires the Investment
Manager to furnish the Fund with investment research and advice.
In so doing, without cost to the Fund, the Investment Manager may
receive certain research services described below. The Investment
Manager is not required to furnish any personnel, overhead items
or facilities for the Fund, including daily pricing or trading
desk facilities, although such expenses are paid by investment
advisers of some other investment companies. It is currently
expected that these expenses will be borne by the Fund, although
certain of these expenses may be borne by the Investment Manager.
In addition, the Investment Manager may pay, out of its own
assets and at no cost to the Fund, amounts to certain broker-
dealers in connection with the provision of administrative
services and/or with the distribution of the Fund's Shares.
The Investment Management Agreement provides that the
Investment Manager will select brokers and dealers for execution
of the Fund's portfolio transactions consistent with the Trust's
brokerage policies (see Brokerage Allocation ). Although the
services provided by broker-dealers in accordance with the
brokerage policies incidentally may help reduce the expenses of
or otherwise benefit the Investment Manager and other investment
advisory clients of the Investment Manager, as well as the Fund,
the value of such services is indeterminable and the Investment
Manager's fee is not reduced by any offset arrangement by reason
thereof.
When the Investment Manager determines to buy or sell the
same securities for the Fund that the Investment Manager has
selected for one or more of its other clients, the orders for all
such securities transactions are placed for execution by methods
determined by the Investment Manager, with approval by the
Trust's Board of Trustees, to be impartial and fair, in order to
seek good results for all parties (see Investment Objective and
Policies--Trading Policies ). Records of securities transactions
of persons who know when orders are placed by the Fund are
available for inspection at least four times annually by the
Compliance Officer of the Trust so that the Independent Trustees
can be satisfied that the procedures are generally fair and
equitable for all parties.
The Investment Management Agreement further provides that
the Investment Manager shall have no liability to the Trust, the
Fund or any Shareholder of the Fund for any error of judgment,
mistake of law, or any loss arising out of any investment or
other act or omission in the performance by the Investment
Manager of its duties under the Agreement or for any loss or
damage resulting from the imposition by any government of
exchange control restrictions which might affect the liquidity of
the Fund's assets, or from acts or omissions of custodians or
securities depositories, or from any wars or political acts of
any foreign governments to which such assets might be exposed,
except for any liability, loss or damage resulting from willful
misfeasance, bad faith or gross negligence on the Investment
Manager's part or reckless disregard of its duties under the
Investment Management Agreement. The Investment Management
Agreement will terminate automatically in the event of its
assignment, and may be terminated by the Trust on behalf of the
Fund at any time without payment of any penalty on 60 days
written notice, with the approval of a majority of the Trustees
of the Trust in office at the time or by vote of a majority of
the outstanding Shares of the Fund (as defined by the 1940 Act).
The Trust uses the names LORD ASSET MANAGEMENT and Thomas
White in the names of the Trust and the Fund, respectively, by
license from the Investment Manager and would be required to stop
using those names if LORD ASSET MANAGEMENT INC. ceased to be the
Investment Manager of the Fund. The Investment Manager has the
right to use those names in connection with other enterprises,
including other investment companies.
MANAGEMENT FEES. For its services, the Fund pays the
Investment Manager a monthly fee at the rate of 1.00%
annually of the Fund's average daily net assets.
The amount of such fee would be reduced by the amount by
which the Fund's annual expenses for all purposes (including the
investment management fee) except taxes, brokerage fees and
commissions, and extraordinary expenses such as litigation,
exceed any applicable state regulations. The strictest rule
currently applicable to a fund is 2.5% of the first $30,000,000
of net assets, 2.0% of the next $70,000,000 of net assets and
1.5% of the remainder. However, the Investment Manager has agreed to
reimburse the Fund of its operating expenses in the current fiscal
year to the extent that the Fund's total operating expenses exceed
1.50% of the Fund's average daily net assets.
THE INVESTMENT MANAGER. The Investment Manager is wholly owned
by Thomas S. White, Jr.
TRANSFER AGENT. Firstar Trust Company serves as the transfer
and dividend disbursing agent for the Fund pursuant to the
transfer agency agreement (the Transfer Agent Agreement ), under
which Firstar (i) issues and redeems Shares, (ii) prepares and
transmits payments for dividends and distributions declared by
the Fund, (iii) prepares Shareholder meeting lists and, if
applicable, mail, receive and tabulate proxies, and (iv) provides
a Blue Sky System which will enable the Fund to monitor the total
number of Shares sold in each state. Firstar is located at 615
East Michigan Street, Milwaukee, WI 53202. Compensation for the
services of the Transfer Agent is based on a schedule of charges
agrees on from time to time.
CUSTODIAN. State Street Bank and Trust Company serves as
Custodian of the Fund's assets, which are maintained at the
Custodian's principal office, 1776 Heritage Drive, North Quincy
Massachusetts 02171, and at the offices of its branches and
agencies throughout the world. The Custodian has entered into
agreements with foreign sub-custodians approved by the Trustees
pursuant to Rule 17f-5 under the 1940 Act. The Custodian, its
branches and sub-custodians generally do not hold certificates
for the securities in their custody, but instead have book
records with domestic and foreign securities depositories,
which in turn have book records with the transfer agents of the
issuers of the securities. Compensation for the services of the
Custodian is based on a schedule of charges agreed on from
time to time.
LEGAL COUNSEL. Dechert Price & Rhoads, 1500 K Street, N.W.,
Washington, D.C. 20005, is legal counsel for the Trust.
INDEPENDENT ACCOUNTANTS. The firm of McGladrey & Pullen, LLP,
555 Fifth Avenue, New York, New York 10017, serves as
independent accountants for the Trust. Its audit services
comprise examination of the Fund's financial statements and
review of the Fund's filings with the Securities and Exchange
Commission and the Internal Revenue Service.
REPORTS TO SHAREHOLDERS. The Trust's fiscal year ends on
October 31. Shareholders will be provided at least semiannually
with reports showing the portfolio of the Fund and other
information, including an annual report with financial statements
audited by the independent accountants.
BROKERAGE ALLOCATION
The Investment Management Agreement provides that the
Investment Manager is responsible for selecting members of
securities exchanges, brokers and dealers (such members, brokers
and dealers being hereinafter referred to as brokers ) for the
execution of the Trust's portfolio transactions and, when
applicable, the negotiation of commissions in connection
therewith. All decisions and placements are made in accordance
with the following principles:
1. Purchase and sale orders will usually be placed with brokers
who are selected by the Investment Manager as able to
achieve best execution of such orders. Best execution
means prompt and reliable execution at the most favorable
securities price, taking into account the other provisions
hereinafter set forth. The determination of what may
constitute best execution and price in the execution of a
securities transaction by a broker involves a number of
considerations, including without limitation, the overall
direct net economic result to the Fund (involving both price
paid or received and any commissions and other costs paid),
the efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block
is involved, availability of the broker to stand ready to
execute possibly difficult transactions in the future, and
the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the
Investment Manager in determining the overall reasonableness
of brokerage commissions.
2. In selecting brokers for portfolio transactions, the
Investment Manager takes into account its past experience as
to brokers qualified to achieve best execution, including
brokers who specialize in any foreign securities held by the
Fund.
3. The Investment Manager is authorized to allocate brokerage
business to brokers who have provided brokerage and research
services, as such services are defined in Section 28 (e) of
the Securities Exchange Act of 1934 (the 1934 Act ), for
the company and/or other accounts, if any, for which the
Investment Manager exercises investment discretion (as
defined in Section 3 (a) (35) of the 1934 Act) and, as to
transactions as to which fixed minimum commission rates are
not applicable, to cause the Fund to pay a commission for
effecting a securities transaction in excess of the amount
another broker would have charged for effecting that
transaction, if the Investment Manager determines in good
faith that such amount of commission is 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 Investment Manager s overall
responsibilities with respect to the company and the other
accounts, if any, as to which it exercises investment
discretion. In reaching such determination, the Investment
Manager is not required to place or attempt to place a
specific dollar value on the research or execution services
of a broker or on the portion of any commission reflecting
either of said services. In demonstrating that such
determinations were made in good faith, the Investment
Manager shall be prepared to show that all commissions were
allocated and paid for purposes contemplated by the Trust's
brokerage policy; that commissions were paid only for
products or services which provide lawful and appropriate
assistance to the Investment Manager in the performance of
its investment decision-making responsibilities; and that
the commissions paid were within a reasonable range. The
determination that commissions were within a reasonable
range shall be based on any available information as to the
level of commissions known to be charged by other brokers on
comparable transactions, but there shall be taken into
account the Trust's policies that (i) obtaining a low
commission is deemed secondary to obtaining a favorable
securities price, since it is recognized that usually it is
more beneficial to the Fund to obtain a favorable price than
to pay the lowest commission; and (ii) the quality,
comprehensiveness and frequency of research studies which
are provided for the Trust and the Investment Manager are
useful to the Investment Manager in performing its advisory
services under its Investment Management Agreement with the
Trust. Research services provided by brokers to the
Investment Manager are considered to be in addition to, and
not in lieu of, services required to be performed by the
Investment Manager under its Investment Management
Agreement. Research furnished by brokers through whom the
Trust effects securities transactions may be used by the
Investment Manager for any of its accounts, and not all such
research may be used by the Investment Manager for the
Trust. When execution of portfolio transactions is allocated
to brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various services
provided by the broker, including quotations outside the
United States for daily pricing of foreign securities held
in a Fund's portfolio.
4. Purchases and sales of portfolio securities within the
United States other than on a securities exchange shall be
executed with primary market makers acting as principal
except where, in the judgment of the Investment Manager,
better prices and execution may be obtained on a commission
basis or from other sources.
5. Sales of the Fund's Shares (which shall be deemed to include
also shares of other investment companies registered under
the 1940 Act which have the same investment adviser) made by
a broker are one factor among others to be taken into
account in deciding to allocate portfolio transactions
(including agency transactions, principal transactions,
purchases in underwritings or tenders in response to tender
offers) for the account of the Fund to that broker; provided
that the broker shall furnish best execution as defined in
paragraph 1 above, and that such allocation shall be within
the scope of the Fund's policies as stated above; and
provided further, that in every allocation made to a broker
in which the sale of Shares is taken into account there
shall be no increase in the amount of the commissions or
other compensation paid to such broker beyond a reasonable
commission or other compensation determined, as set forth in
paragraph 3 above, on the basis of best execution alone or
best execution plus research services, without taking
account of or placing any value upon such sale of Shares.
Insofar as known to management, no Trustee or officer of the
Trust, nor the Investment Manager or any person affiliated with
any of them, has any material direct or indirect interest in any
broker employed by or on behalf of the Trust for the Fund. All
portfolio transactions will be allocated to broker-dealers only
when their prices and execution, in the good faith judgment of
the Investment Manager, are equal to the best available within
the scope of the Trust's policies. There is no fixed method used
in determining which broker-dealers receive which order or how
many orders.
For the period from June 28, 1994 (commencement of operations)
through October 31, 1994, the Fund paid brokerage commissions in the
amount of $2,772. For the fiscal year ended October 31, 1995, the
Fund paid brokerage commissions in the amount of $88,815, of which
$28,289, representing $7,473,276 of securities purchases, was
paid to broker-dealers that provided research services to the
Investment Manager.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus describes the manner in which the Fund's
Shares may be purchased and redeemed. See How to Buy Shares of
the Fund and How to Sell Shares of the Fund. Shares of the
Fund are offered directly to the public by the Fund. The Fund
employs no Distributor.
Net asset value per Share is determined as of the close of
business on the New York Stock Exchange, which currently is 4:00
p.m. (Eastern time) every Monday through Friday (exclusive of
national business holidays). The Trust's offices will be closed,
and net asset value will not be calculated, on those days on
which the New York Stock Exchange is closed, which currently are:
New Year's Day, Presidents Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Trading in securities on European and Far Eastern securities
exchanges and over-the-counter markets is normally completed well
before the close of business in New York on each day on which the
New York Stock Exchange is open. Trading of European or Far
Eastern securities generally, or in a particular country or
countries, may not take place on every New York business day.
Furthermore, trading takes place in various foreign markets on
days which are not business days in New York and on which a
Fund's net asset value is not calculated. Each Fund calculates
net asset value per Share, and therefore effects sales,
redemptions and repurchases of its Shares, as of the close of the
New York Stock Exchange once on each day on which that Exchange
is open. Such calculation does not take place contemporaneously
with the determination of the prices of many of the portfolio
securities used in such calculation and if events occur which
materially affect the value of those foreign securities, they
will be valued at fair market value as determined by the
management using methods approved by the Board of Trustees and
subsequently ratified in good faith by the Board of Trustees.
The Board of Trustees may establish procedures under which
the Fund may suspend the determination of net asset value for the
whole or any part of any period during which (1) the New York
Stock Exchange is closed other than for customary weekend and
holiday closings, (2) trading on the New York Stock Exchange is
restricted, (3) an emergency exists as a result of which disposal
of securities owned by the Fund is not reasonably practicable or
it is not reasonably practicable for the Fund fairly to determine
the value of its net assets, or (4) for such other period as the
Securities and Exchange Commission may by order permit for the
protection of the holders of the Fund's Shares.
TAX STATUS
The Fund intends normally to pay a dividend at least once
annually representing substantially all of its net investment
income (which includes, among other items, dividends and
interest) and to distribute at least annually any realized
capital gains. By so doing and meeting certain diversification of
assets and other requirements of the Internal Revenue Code of
1986, as amended (the Code ), the Fund intends to qualify
annually as a regulated investment company under the Code. The
status of the Fund as a regulated investment company does not
involve government supervision of management or of their
investment practices or policies. As a regulated investment
company, the Fund generally will be relieved of liability for
U.S. Federal income tax on that portion of its net investment
income and net realized capital gains which it distributes to its
Shareholders. Amounts not distributed on a timely basis in
accordance with a calendar year distribution requirement also are
subject to a non deductible 4% excise tax. To prevent application
of the excise tax, the Fund intends to make distributions in
accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term
capital gains are taxable to Shareholders as ordinary income.
Distributions of net investment income may be eligible for the
corporate dividends-received deduction to the extent attributable
to the Fund's qualifying dividend income. However, the
alternative minimum tax applicable to corporations may reduce the
benefit of the dividends-received deduction. Distributions of net
capital gains (the excess of net long-term capital gains over net
short-term capital losses) designated by the Fund as capital gain
dividends are taxable to Shareholders as long-term capital gains,
regardless of the length of time the Fund's Shares have been held
by a Shareholder, and are not eligible for the dividends-received
deduction. All dividends and distributions are taxable to
Shareholders, whether or not reinvested in Shares of the Fund.
Shareholders will be notified annually as to the Federal tax
status of dividends and distributions they receive and any tax
withheld thereon.
Distributions by the Fund reduce the net asset value of the
Fund Shares. Should a distribution reduce the net asset value
below a Shareholder's cost basis, the distribution nevertheless
would be taxable to the Shareholder as ordinary income or capital
gain as described above, even though, from an investment
standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax
implication of buying Shares just prior to a distribution by the
Fund. The price of Shares purchased at that time includes the
amount of the forthcoming distribution, but the distribution will
generally be taxable to them.
Certain of the debt securities acquired by the Fund may be
treated as debt securities that were originally issued at a
discount. Original issue discount can generally be defined as the
difference between the price at which a security was issued and
its stated redemption price at maturity. Although no cash income
is actually received by the Fund, original issue discount on a
taxable debt security earned in a given year generally is treated
for Federal income tax purposes as interest and, therefore, such
income would be subject to the distribution requirements of the
Code.
Some of the debt securities may be purchased by the Fund at
a discount which exceeds the original issue discount on such debt
securities, if any. This additional discount represents market
discount for Federal income tax purposes. The gain realized on
the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does
not exceed the accrued market discount on such debt security.
Generally, market discount accrues on a daily basis for each day
the debt security is held by the Fund at a constant rate over the
time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes
into account the semi-annual compounding of interest.
The Fund may invest in stocks of foreign companies that are
classified under the Code as passive foreign investment companies
( PFICs ). In general, a foreign company is classified as a PFIC
if at least one-half of its assets constitute investment-type
assets or 75% or more of its gross income is investment-type
income. Under the PFIC rules, an excess distribution received
with respect to PFIC stock is treated as having been realized
ratably over the period during which the Fund held the PFIC
stock. The Fund itself will be subject to tax on the portion, if
any, of the excess distribution that is allocated to that Fund's
holding period in prior taxable years (and an interest factor
will be added to the tax, as if the tax had actually been payable
in such prior taxable years) even though the Fund distributes the
corresponding income to Shareholders. Excess distributions
include any gain from the sale of PFIC stock as well as certain
distributions from a PFIC. All excess distributions are taxable
as ordinary income.
The Fund may be able to elect alternative tax treatment with
respect to PFIC stock. Under an election that currently may be
available, the Fund generally would be required to include in its
gross income its share of the earnings of a PFIC on a current
basis, regardless of whether any distributions are received from
the PFIC. If this election is made, the special rules, discussed
above, relating to the taxation of excess distributions, would
not apply. Alternatively, the Fund may be able to elect to mark
to market its PFIC stock, resulting in the stock being treated as
sold at fair market value on the last business day of each
taxable year. Any resulting gain would be reported as ordinary
income, and any resulting loss would not be recognized. If this
election were made, the special rules described above with
respect to excess distributions would still apply. The Fund's
intention to qualify annually as a regulated investment company
may limit its election with respect to PFIC stock.
Because the application of the PFIC rules may affect, among
other things, the character of gains, the amount of gain or loss
and the timing of the recognition of income with respect to PFIC
stock, as well as subject the Fund itself to tax on certain
income from PFIC stock, the amount that must be distributed to
Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased
substantially as compared to a fund that did not invest in PFIC
stock.
Income received by a Fund from sources within foreign
countries may be subject to withholding and other income or
similar taxes imposed by such countries. If more than 50% of the
value of the Fund's total assets at the close of its taxable year
consists of securities of foreign corporations, the Fund will be
eligible and intends to elect to pass through to the Fund's
Shareholders the amount of foreign taxes paid by the Fund.
Pursuant to this election, a Shareholder will be required to
include in gross income (in addition to taxable dividends
actually received) his pro rata share of the foreign taxes paid
by a Fund, and will be entitled either to deduct (as an itemized
deduction) his pro rata share of foreign income and similar taxes
in computing his taxable income or to use it as a foreign tax
credit against his U.S. Federal income tax liability, subject to
limitations. No deduction for foreign taxes may be claimed by a
Shareholder who does not itemize deductions, but such a
Shareholder may be eligible to claim the foreign tax credit (see
below). Each Shareholder will be notified within 60 days after
the close of the Fund's taxable year whether the foreign taxes
paid by the Fund will pass through for that year.
Generally, a credit for foreign taxes is subject to the
limitation that it may not exceed the Shareholder's U.S. tax
attributable to his foreign source taxable income. For this
purpose, if the pass-through election is made, the source of the
Fund's income flows through to its Shareholders. With respect to
the Fund, gains from the sale of securities will be treated as
derived from U.S. sources and certain currency fluctuation gains
including fluctuation gains from foreign currency denominated
debt securities, receivables and payables, will be treated as
ordinary income derived from U.S. sources. The limitation on
foreign tax credit is applied separately to foreign source
passive income (as defined for purposes of the foreign tax
credit), including the foreign source passive income passed
through by the Fund. Shareholders may be unable to claim a credit
for the full amount of their proportionate share of the foreign
taxes paid by a Fund. Foreign taxes may not be deducted in
computing alternative minimum taxable income and the foreign tax
credit can be used to offset only 90% of the alternative minimum
tax (as computed under the Code for purposes of this limitation)
imposed on corporations and individuals. If a Fund is not
eligible to make the election to pass through to its
Shareholders its foreign taxes, the foreign income taxes it pays
generally will reduce investment company taxable income and the
distributions by a Fund will be treated as United States source
income.
Certain options and futures and foreign currency forward
contracts in which the Fund may invest may be section 1256
contracts. Gains or losses on section 1256 contracts generally
are considered 60% long-term and 40% short-term capital gains or
losses ( 60/40 ) however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may
be treated as ordinary income or loss. Also, section 1256
contracts held by the Fund at the end of each taxable year (and
on certain other dates as prescribed under the Code) are marked-
to-market with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund
may result in straddles for U.S. Federal income tax purposes.
The straddle rules may affect the character of gains (or losses)
realized by the Fund. In addition, losses realized by the Fund on
positions that are part of the straddle may be deferred under the
straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the
losses are realized. Because only a few regulations implementing
the straddle rules have been promulgated, the tax consequences to
the Fund of hedging transactions are not entirely clear. The
hedging transactions may increase the amount of short-term
capital gain realized by the Fund which is taxed as ordinary
income when distributed to Shareholders.
The Fund may make one or more of the elections available
under the Code which are applicable to straddles. If the Fund
makes any of the elections, the amount, character, and timing of
the recognition of gains or losses from the affected straddle
positions will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
Because application of the straddle rules may affect the
character of gains or losses, defer losses and/or accelerate the
recognition of gains or losses from the affected straddle
positions, the amount which must be distributed to Shareholders
and which will be taxed to Shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared
to a fund that did not engage in such hedging transactions.
Requirements relating to the Fund's tax status as a
regulated investment company may limit the extent to which the
Fund will be able to engage in transactions in options and
futures and foreign currency forward contracts.
Under the Code, gains or losses attributable to fluctuations
in foreign currency exchange rates which occur between the time
the Fund accrues income or other receivables or accrues expenses
or other liabilities denominated in a foreign currency and the
time the Fund actually collects such receivables or pays such
liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of some investments, including
debt securities denominated in a foreign currency and certain
futures contracts and options, gains or losses attributable to
fluctuations in the value of foreign currency between the date of
acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These
gains and losses, referred to under the Code as section 988
gains and losses, may increase or decrease the amount of the
Fund's net investment income to be distributed to its
Shareholders as ordinary income. For example, fluctuations in
exchange rates may increase the amount of income that the Fund
must distribute in order to qualify for treatment as a regulated
investment company and to prevent application of an excise tax on
undistributed income. Alternatively, fluctuations in exchange
rates may decrease or eliminate income available for
distribution. If section 988 losses exceed other net investment
income during a taxable year, the Fund would not be able to make
ordinary dividend distributions, or distributions made before the
losses were realized would be recharacterized as return of
capital to Shareholders for Federal income tax purposes, rather
than as an ordinary dividend, reducing each Shareholder's basis
in his Fund Shares.
Upon the sale or exchange of his Shares, a Shareholder will
realize a taxable gain or loss depending upon his basis in the
Shares. Such gain or loss will be treated as capital gain or loss
if the Shares are capital assets in the Shareholder's hands, and
generally will be long-term if the Shareholder's holding period
for the Shares is more than one year and generally otherwise will
be short-term. Any loss realized on a sale or exchange will be
disallowed to the extent that the Shares disposed of are replaced
(including replacement through the reinvesting of dividends and
capital gain distributions in the Fund) within a period of 61
days beginning 30 days before and ending 30 days after the
disposition of the Shares. In such a case, the basis of the
Shares acquired will be adjusted to reflect the disallowed loss.
Any loss realized by a Shareholder on the sale of the Fund's
Shares held by the Shareholder for six months or less will be
treated for Federal income tax purposes as a long-term capital
loss to the extent of any distributions of long-term capital
gains received by the Shareholder with respect to such Shares.
The Fund generally will be required to withhold Federal
income tax at a rate of 31% ( backup withholding ) from dividends
paid, capital gain distributions, and redemption proceeds to
shareholders if (1) the Shareholder fails to furnish the Fund
with the Shareholder's correct taxpayer identification number or
social security number and to make such certifications as the
Fund may require, (2) the Internal Revenue Service notifies the
Shareholder or the Fund that the Shareholder has failed to report
properly certain interest and dividend income to the Internal
Revenue Service and to respond to notices to that effect, or (3)
when required to do so, the Shareholder fails to certify that he
is not subject to backup withholding. Any amounts withheld may be
credited against the Shareholder's Federal income tax liability.
Ordinary dividends and taxable capital gain distributions
declared in October, November, or December with a record date in
such month and paid during the following January will be treated
as having been paid by the Fund and received by Shareholders on
December 31 of the calendar year in which declared, rather than
the calendar year in which the dividends are actually received.
Distributions and redemptions also may be subject to state,
local and foreign taxes. U.S. tax rules applicable to foreign
investors may differ significantly from those outlined above.
This discussion does not purport to deal with all of the tax
consequences relating to an investment in the Fund. Shareholders
are advised to consult their own tax advisers for details with
respect to the particular tax consequences to them of an
investment in the Fund.
DESCRIPTION OF SHARES
The Shares of the Fund have the same preferences, conversion
and other rights, voting powers, restrictions and limitations as
to dividends, qualifications and terms and conditions of
redemption, except as follows: all consideration received from
the sale of Shares of the Fund, together with all income,
earnings, profits and proceeds thereof, belongs to the Fund and
is charged with liabilities in respect of the general liabilities
of the Trust. The net asset value of a Share of the Fund is based
on the assets belonging to the Fund less the liabilities charged
to the Fund, and dividends are paid on Shares of the Fund only
out of lawfully available assets belonging to the Fund. In the
event of liquidation or dissolution of the Trust, the
Shareholders of the Fund will be entitled, to the assets
belonging to the Fund out of assets of the Trust available for
distribution.
The Shares have non-cumulative voting rights so that the
holders of a plurality of the Shares voting for the election of
Trustees at a meeting at which 50% of the outstanding Shares are
present can elect all the Trustees and in such event, the holders
of the remaining Shares voting for the election of Trustees will
not be able to elect any person or persons to the Board of
Trustees.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective
investors. 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 one, five, or ten years (up to the life of the Fund)
calculated pursuant to the following formula: P(1+T)superscript n
= RV (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 the Fund's expenses on
an annual basis, and assume that all dividends and distributions
are reinvested when paid. Total return for the fiscal year ended
October 31, 1995 was 8.7%. The average annual total return from June
28, 1994 (commencement of operations) through October 31, 1995 was
10.3%.
Performance information for the Fund may be compared, in
reports and promotional literature, to: (i) the Standard & Poor's
500 Stock Index, Dow Jones Industrial Average, or other unmanaged
indices so that investors may compare each Fund's results with
those of a group of unmanaged securities widely regarded by
investors as representative of the securities market in general;
(ii) other groups of mutual funds tracked by Lipper Analytical
Services, a widely used independent research firm which ranks
mutual funds by overall performance, investment objectives and
assets, or tracked by other services, companies, publications, or
persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for
inflation) to assess the real rate of return from an investment
in the Fund. Unmanaged indices may assume the reinvestment of
dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Performance information for the Fund reflects only the
performance of a hypothetical investment in the Fund during the
particular time period on which the calculations are based.
Performance information should be considered in light of the
Fund's investment objective and policies, characteristics and
quality of the portfolio and the market conditions during the
given time period, and should not be considered as a
representation of what may be achieved in the future.
From time to time, the Fund and the Investment Manager may
also refer to the following information:
(1) The Investment Manager's and its affiliates market share of
international equities managed in mutual funds prepared or
published by Strategic Insight or a similar statistical
organization.
(2) The performance of U.S. equity and debt markets relative to
foreign markets prepared or published by Morgan Stanley
Capital International or a similar financial organization.
(3) The capitalization of U.S. and foreign stock markets as
prepared or published by the International Finance Corp.,
Morgan Stanley Capital International or a similar financial
organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The gross national product and populations, including age
characteristics, of various countries as published by
various statistical organizations.
(6) To assist investors in understanding the different returns
and risk characteristics of various investments, the Fund
may show historical returns of various investments and
published indices (e.g., Ibbotson Associates, Inc. Charts
and Morgan Stanley EAFE -Index).
(7) The major industries located in various jurisdictions as
published by the Morgan Stanley Index.
In addition, the Fund and the Investment Manager may also refer
to the number of shareholders in the Fund or the dollar amount of
fund and private account assets under management in advertising
materials.
<PAGE>
Financial Statements
The Trust's audited financial statements for the Fund, including the related
notes thereto, dated October 31, 1995, are incorporated by reference in the SAI
from the Annual Report of the Trust dated as of October 31, 1995. A copy of the
Annual Report delivered with this SAI should be retained for future reference.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Audited financial
statements as of October 31, 1995 are incorporated
by reference in Part B of the Registration
Statement from the Trust's Annual Report dated as
of October 31, 1995 and include the following:
Independent Auditor's Report
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Investment Portfolio
(b) Exhibits:
(1) Trust Instrument (1)
(2) By-Laws (2)
(3) Not Applicable
(4) Specimen security (2)
(5) Form of investment management agreement
(6) Not Applicable
(7) Not Applicable
(8) Form of custody agreement
(9) (a) Form of transfer agent agreement
(b) Form of blue sky compliance servicing
agreement
(10) Opinion and consent of counsel (2)
(11) Consent of independent public accountants
(12) Annual Report dated October 31, 1995
(13) Initial capital agreement (2)
(14) Not Applicable
(15) Not Applicable
(16) Form of computation of performance
evaluations (3)
(18) Not Applicable
(19) (a) Powers of attorney for Messrs. White, Miller,
Haag, Manos, and Mack, and for Ms. Almeida (2)
(b) Powers of attorney for Messrs. Joel and Venson
(20) Secretary's certificate pursuant to Rule
483(b) (3)
(27) Financial data schedule
___________________
(1) Filed with Registrant's initial Registration Statement on
February 9, 1994.
(2) Filed with Pre-Effective Amendment No. 2 to Registrant's
Registration Statement on June 23, 1994.
(3) Filed with Post-Effective Amendment No. 1 to Registrant's
Registration Statement on December 28, 1994.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Record Holders
Shares of Beneficial Interest, par value $0.01 per
share: 60 shareholders as of January 31, 1996.
Item 27. Indemnification
Reference is made to Article X, Section 10.02 of the
Registrant's Trust Instrument, which is filed herewith.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
trustees, officers and controlling persons of the
Registrant by the Registrant pursuant to the Trust
Instrument or otherwise, the Registrant is aware that
in the opinion of the Securities and Exchange
Commission, such indemnification is against public
policy as expressed in the Act and, therefore, is
unenforceable. In the event that a claim for
indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or
paid by trustees, officers or controlling persons of
the Registrant in connection with the successful
defense of any act, suit or proceeding) is asserted by
such trustees, officers or controlling persons in
connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be
governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Advisers
and their Officers and Directors
The business and other connections of Lord Asset
Management, Inc. are described in Parts A and B.
For information relating to the investment advisers'
officers and directors, reference is made to Form ADV
filed under the Investment Advisers Act of 1940 by Lord
Asset Management, Inc.
Item 29. Principal Underwriters
Not Applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of
the Investment Company Act of 1940 and rules promul-
gated thereunder are in the possession of Lord Asset
Management, Inc., 440 South LaSalle Street, Chicago,
Illinois 60605-1028.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the
question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10%
of the Registrant's outstanding shares of
beneficial interest and in connection with such
meeting to comply with the shareholder
communications provisions of Section 16(c) of the
Investment Company Act of 1940.
(c) Registrant undertakes to furnish to each person to
whom a prospectus is delivered a copy of the
Registrant's latest Annual Report to Shareholders
upon request and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all the requirements for effectiveness of the
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 2 to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City
of Washington, D.C. on this 28 day of February, 1996.
Lord Asset Management Trust
By: *
Thomas S. White, Jr.
President
Pursuant to the requirements of the Securities Act of 1933,
this Post-Effective Amendment No. 2 to the Registration Statement
on Form N-1A has been signed below by the following persons on
behalf of Lord Asset Management Trust in the capacities and on
the date indicated:
Signature Title Date
* Trustee and February 28, 1996
Thomas S. White, Jr. President (Prin-
cipal Executive
Officer)
* Treasurer (Prin- February 28, 1996
Brandon S. Joel cipal Financial and
Accounting Officer)
* Trustee February 28, 1996
Michael R. Miller
* Trustee February 28, 1996
Jill F. Almeida
<PAGE>
* Trustee February 28, 1996
Philip R. Haag
* Trustee February 28, 1996
Nicholas G. Manos
* Trustee February 28, 1996
Edward E. Mack, III
* Trustee February 28, 1996
John N. Venson
*By: /s/ William J. Kotapish
William J. Kotapish
as attorney-in-fact
* Powers of Attorney are included as exhibits in Pre-Effective
Amendment No. 2 filed June 23, 1994 and in this Post-Effective
Amendment No. 2.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
FILED
WITH
REGISTRATION STATEMENT
ON
FORM N-1A
LORD ASSET MANAGEMENT TRUST
Exhibit Number Description
8 Form of custody agreement
9(a) Form of transfer agent agreement
9(b) Form of blue sky compliance servicing
agreement
5 Form of investment management agreement
11 Consent of independent public
accountants
12 Annual Report dated October 31, 1995
19(b) Powers of attorney
27 Financial data schedule
CUSTODIAN CONTRACT
Between
LORD ASSET MANAGEMENT TRUST
and
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
Page
1. Employment of Custodian and Property to be Held By
It 1
2. Duties of the Custodian with Respect to Property
of the Fund Held by the Custodian in the United States 2
2.1 Holding Securities 2
2.2 Delivery of Securities 2
2.3 Registration of Securities 5
2.4 Bank Accounts 5
2.5 Availability of Federal Funds 5
2.6 Collection of Income 6
2.7 Payment of Fund Monies 6
2.8 Liability for Payment in Advance of Receipt of
Securities Purchased 7
2.9 Appointment of Agents 7
2.10 Deposit of Fund Assets in U.S. Securities System 8
2.11 Fund Assets Held in the Custodian's Direct
Paper System 9
2.12 Segregated Account 10
2.13 Ownership Certificates for Tax Purposes 11
2.14 Proxies 11
2.15 Communications Relating to Portfolio
Securities 11
3. Duties of the Custodian with Respect to Property of
the Fund Held Outside of the United States 11
3.1 Appointment of Foreign Sub-Custodians 11
3.2 Assets to be Held 12
3.3 Foreign Securities Systems 12
3.4 Holding Securities 12
3.5 Agreements with Foreign Banking Institutions 12
3.6 Access of Independent Accountants of the Fund 13
3.7 Reports by Custodian 13
3.8 Transactions in Foreign Custody Account 13
3.9 Liability of Foreign Sub-Custodians 13
3.10 Liability of Custodian 14
3.11 Monitoring Responsibilities 14
3.12 Branches of U.S. Banks 14
3.13 Tax Law 15
4. Payments for Sales or Repurchases or Redemptions
of Shares of the Fund 15
5. Proper Instructions 16
6. Actions Permitted Without Express Authority 16
7. Evidence of Authority 17
8. Duties of Custodian With Respect to the Books of Account
and Calculation of Net Asset Value and Net Income 17
9. Records 17
10. Opinion of Fund's Independent Accountants 18
11. Reports to Fund by Independent Public Accountants 18
12. Compensation of Custodian 18
13. Responsibility of Custodian 18
14. Effective Period, Termination and Amendment 20
15. Successor Custodian 21
16. Interpretive and Additional Provisions 21
17. Additional Funds 22
18. Massachusetts Law to Apply 22
19. Prior Contracts 22
20. Shareholder Communications Election 22
CUSTODIAN CONTRACT
This Contract between Lord Asset Management Trust, a business trust organized
and existing under the laws of Delaware, having its principal place of
busines at 440 South LaSalle Street, Chicago, Illinois, 60605 hereinafter
called the "Fund", and State Street Bank and Trust Company, a Massachusetts
trust company,having its principal place of business at 225 Franklin Street,
Boston, Massachusetts, 02110, hereinafter called the "Custodian",
WITNESSETH:
WHEREAS, the Fund is authorized to issue shares in separate series, with each
such series representing interests in a separate portfolio of securities and
other assets; and
WHEREAS, the Fund intends to initially offer shares in one series, the Thomas
White World Fund (such series together with all other series subsequently
established by the Fund and made subject to this Contract in accordance with
paragraph 17, being herein referred to as the "Portfolio(s)");
NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs the Custodian as the custodian of the assets of the
Portfolios of the Fund, including securities which the Fund, on behalf of the
applicable Portfolio desires to be held in places within the United States
("domestic securities") and securities it desires to be held outside the
United States ("foreign securities") pursuant to the provisions of the Fund's
Trust Instrument. The Fund on behalf of the Portfolio(s) agrees to deliver to
the Custodian all securities and cash of the Portfolios, and all payments of
income, payments of principal or capital distributions received by it with
respect to all securities owned by the Portfolio(s) from time to time, and
the cash consideration received by it for such new or treasury shares of
beneficial interest of the Fund representing interests in the Portfolios,
("Shares") as may be issued or sold from time to time. The Custodian shall not
be responsible for any property of a Portfolio held or received by the
Portfolio and not delivered to the Custodian. The Custodian shall use its
best efforts, consistent with Custodian's business and personnel needs, to
maintain consistency in staffing positions related to the servicing of, and
communication with, the Fund.
Upon receipt of "Proper Instructions" (within the meaning of Article 5), the
Custodian shall on behalf of the applicable Portfolio(s) from time to time
employ one or more sub-custodians, located in the United States but only in
accordance with an applicable vote by the Board of Trustees of the Fund on
behalf of the applicable Portfolio(s), and provided that the Custodian shall
have no more or less responsibility or liability to the Fund on account of
any actions or omissions of any sub-custodian so employed than any such sub-
custodian has to the Custodian. The Custodian may employ as sub-custodian for
the Fund's foreign securities on behalf of the applicable Portfolio(s) the
foreign banking institutions and foreign securities depositories designated in
Schedule A hereto but only in accordance with the provisions of Article 3.
2. Duties of the Custodian with Respect to Property of the Fund Held By the
Custodian in the United States
2.1 Holding Securities. The Custodian shall hold and physically segregate for
the account of each Portfolio all non-cash property, to be held by it in the
United States including all domestic securities owned by such Portfolio, other
than (a) securities which are maintained pursuant to Section 2.10 in a clearing
agency which acts as a securities depository or in a book-entry system uthorized
by the U.S. Department of the Treasury (each, a U.S. Securities System") and (b)
commercial paper of an issuer for which State Street Bank and Trust Company acts
as issuing and paying agent ("Direct Paper") which is deposited and/or
maintained in the Direct Paper System of the Custodian (the "Direct Paper
System") pursuant to Section 2.11.
2.2 Delivery of Securities. The Custodian shall release and deliver domestic
securities owned by a Portfolio held by the Custodian or in a U.S. Securities
System account of the Custodian or in the Custodian's Direct Paper book entry
system account ("Direct Paper System Account") only upon receipt of Proper
Instructions from the Fund on behalf of the applicable Portfolio, which may
be continuing instructions when deemed appropriate by the parties, and only in
the following cases:
1) Upon sale of such securities for the account of the Portfolio and receipt
of payment therefor;
2) Upon the receipt of payment in connection with any repurchase agreement
related to such securities entered into by the Portfolio;
3) In the case of a sale effected through a U.S. Securities System, in
accordance with the provisions of Section 2.10 hereof;
4) To the depository agent in connection with tender or other similar offers
for securities of the Portfolio;
5) To the issuer thereof or its agent when such securities are called,
redeemed, retired or otherwise become payable; provided that, in any such
case, the cash or other consideration is to be delivered to the Custodian
prior to or simultaneously with the release of such securities;
6) To the issuer thereof, or its agent, for transfer into the name of the
Portfolio or into the name of any nominee or nominees of the Custodian or
into the name or nominee name of any agent appointed pursuant to Section 2.9
or into the name or nominee name of any sub-custodian appointed pursuant to
Article 1; or for exchange for a different number of bonds, certificates or
other evidence representing the same aggregate face amount or number of
units; provided that, in any such case, the new securities are to be
delivered to the Custodian prior to or simultaneously with the release of
such securities;
7) Upon the sale of such securities for the account of the Portfolio, to the
broker or its clearing agent, against a receipt, for examination in
accordance with "street delivery" custom; provided that in any such case,
the Custodian shall have no responsibility or liability for any loss arising
from the delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's own negligence
or willful misconduct;
8) For exchange or conversion pursuant to any plan of merger, consolidation,
recapitalization, reorganization or readjustment of the securities of the
issuer of such securities, or pursuant to provisions for conversion
contained in such securities, or pursuant to any deposit agreement;
provided that, in any such case, the new securities and cash, if any, are
to be delivered to the Custodian prior to or simultaneously with the
release of such securities;
9) In the case of warrants, rights or similar securities, the surrender thereof
in the exercise of such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian prior to or simultaneously with
the release of such securities;
10) For delivery in connection with any loans of securities made by the
Portfolio, but only against receipt of adequate collateral as agreed upon
from time to time by the Custodian and the Fund on behalf of the
Portfolio, which may be in the form of cash or obligations issued by the
United States government, its agencies or instrumentalities, except that
in connection with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the Portfolio prior
to the receipt of such collateral;
11) For delivery as security in connection with any borrowings by the Fund on
behalf of the Portfolio requiring a pledge of assets by the Fund on behalf
of the Portfolio, but only against receipt of amounts borrowed;
12) For delivery in accordance with the provisions of any agreement among the
Fund on behalf of the Portfolio, the Custodian and a broker-dealer
registered under the Securities Exchange Act of 1934 (the "Exchange Act")
and a member of The National Association of Securities Dealers, Inc.
("NASD"), relating to compliance with the rules of The Options Clearing
Corporation and of any registered national securities exchange, or of
any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by the Portfolio of the Fund;
13) For delivery in accordance with the provisions of any agreement among the
Fund on behalf of the Portfolio, the Custodian, and a Futures Commission
Merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any Contract Market, or any similar organization or organizations,
regarding account deposits in connection with transactions by the Portfolio
of the Fund;
14) Upon receipt of instructions from the transfer agent ("Transfer Agent")
for the Fund, for delivery to such Transfer Agent or to the holders of
shares in connection with distributions in kind, as may be described from
time to time in the currently effective prospectus and statement of
additional information of the Fund, related to the Portfolio
("Prospectus"), in satisfaction of requests by holders of Shares for
repurchase or redemption; and
15) For any other proper corporate purpose, but only upon receipt of, in
addition to Proper Instructions from the Fund on behalf of the applicable
Portfolio, a certified copy of a resolution of the Board of Trustees or of
the Executive Committee signed by an officer of the Fund and certified
by the Secretary or an Assistant Secretary, specifying the securities of
the Portfolio to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such
securities shall be made.
2.3 Registration of Securities. Domestic securities held by the Custodian
(other than bearer securities) shall be registered in the name of the
Portfolio or in the name of any nominee of the Fund on behalf of the Portfolio
or of any nominee of the Custodian which nominee shall be assigned exclusively
to the Portfolio, unless the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered investment companies
having the same investment adviser as the Portfolio, or in the name or nominee
name of any agent appointed pursuant to Section 2.9 or in the name or nominee
name of any sub-custodian appointed pursuant to Article 1. All securities
accepted by the Custodian on behalf of the Portfolio under the terms of this
Contract shall be in "street name" or other good delivery form. If, however,
the Fund directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely collect income due the
Fund on such securities and to notify the Fund on a best efforts basis only of
relevant corporate actions including, without limitation, pendency of calls,
maturities, tender or exchange offers.
2.4 Bank Accounts. The Custodian shall open and maintain a separate bank
account or accounts in the United States in the name of each Portfolio of the
Fund, subject only to draft or order by the Custodian acting pursuant to the
terms of this Contract, and shall hold in such account or accounts, subject to
the provisions hereof, all cash received by it from or for the account of the
Portfolio, other than cash maintained by the Portfolio in a bank account
established and used in accordance with Rule 17f-3 under the Investment Company
Act of 1940. Funds held by the Custodian for a Portfolio may be deposited by it
to its credit as Custodian in the Banking Department of the Custodian or in such
other banks or trust companies as it may in its discretion deem necessary or
desirable; provided, however, that every such bank or trust company shall be
qualified to act as a custodian under the Investment Company Act of 1940 and
that each such bank or trust company and the funds to be deposited with each
such bank or trust company shall on behalf of each applicable Portfolio be
approved by vote of a majority of the Board of Trustees of the Fund. Such funds
shall be deposited by the Custodian in its capacity as Custodian and shall be
withdrawable by the Custodian only in that capacity.
2.5 Availability of Federal Funds. Upon mutual agreement between the Fund on
behalf of each applicable Portfolio and the Custodian, the Custodian shall, upon
the receipt of Proper Instructions from the Fund on behalf of a Portfolio, make
federal funds available to such Portfolio as of specified times agreed upon from
time to time by the Fund and the Custodian in the amount of checks received
in payment for Shares of such Portfolio which are deposited into the Portfolio's
account.
2.6 Collection of Income. Subject to the provisions of Section 2.3, the
Custodian shall collect on a timely basis all income and other payments with
respect to registered domestic securities held hereunder to which each Portfolio
shall be entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other payments with
respect to bearer domestic securities if, on the date of payment by the issuer,
such securities are held by the Custodian or its agent thereof and shall credit
such income, as collected, to such Portfolio's custodian account. Without
limiting the generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on securities held
hereunder. Income due each Portfolio on securities loaned pursuant to the
provisions of Section 2.2 (10) shall be the responsibility of the Fund. The
Custodian will have no duty or responsibility in connection therewith, other
than to provide the Fund with such information or data as may be necessary to
assist the Fund in arranging for the timely delivery to the Custodian of the
income to which the Portfolio is properly entitled.
2.7 Payment of Fund Monies. Upon receipt of Proper Instructions from the Fund
on behalf of the applicable Portfolio, which may be continuing instructions when
deemed appropriate by the parties, the Custodian shall pay out monies of a
Portfolio in the following cases only:
1) Upon the purchase of domestic securities, options, futures contracts or
options on futures contracts for the account of the Portfolio but only (a)
against the delivery of such securities or evidence of title to such
options, futures contracts or options on futures contracts to the Custodian
(or any bank, banking firm or trust company doing business in the United
States or abroad which is qualified under the Investment Company Act of
1940, as amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose) registered in the name of the
Portfolio or in the name of a nominee of the Custodian referred to in
Section 2.3 hereof or in proper form for transfer; (b) in the case of a
purchase effected through a U.S. Securities System, in accordance with the
conditions set forth in Section 2.10 hereof; (c) in the case of a purchase
involving the Direct Paper System, in accordance with the conditions set
forth in Section 2.11; (d) in the case of repurchase agreements entered into
between the Fund on behalf of the Portfolio and the Custodian, or another
bank, or a broker-dealer which is a member of NASD, (i) against delivery of
the securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or
(ii) against delivery of the receipt evidencing purchase by the Portfolio of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the Portfolio
or (e) for transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign; such transfer may be effected prior to receipt
of a confirmation from a broker and/or the applicable bank pursuant to
Proper Instructions from the Fund as defined in Article 5;
2) In connection with conversion, exchange or surrender of securities owned by
the Portfolio as set forth in Section 2.2 hereof;
3) For the redemption or repurchase of Shares issued by the Portfolio as set
forth in Article 4 hereof;
4) For the payment of any expense or liability incurred by the Portfolio,
including but not limited to the following payments for the account of the
Portfolio: interest, taxes, management, accounting, transfer agent and
legal fees, and operating expenses of the Fund whether or not such expenses
are to be in whole or part capitalized or treated as deferred expenses;
5) For the payment of any dividends on Shares of the Portfolio declared
pursuant to the governing documents of the Fund;
6) For payment of the amount of dividends received in respect of securities
sold short;
7) For any other proper purpose, but only upon receipt of, in addition to
Proper Instructions from the Fund on behalf of the Portfolio, a certified
copy of a resolution of the Board of Trustees or of the Executive Committee
of the Fund signed by an officer of the Fund and certified by its Secretary
or an Assistant Secretary, specifying the amount of such payment, setting
forth the purpose for which such payment is to be made, declaring such
purpose to be a proper purpose, and naming the person or persons to whom
such payment is to be made.
2.8 Liability for Payment in Advance of Receipt of Securities Purchased. Except
as specifically stated otherwise in this Contract, in any and every case where
payment for purchase of domestic securities for the account of a Portfolio is
made by the Custodian in advance of receipt of the securities purchased in the
absence of specific written instructions from the Fund on behalf of such
Portfolio to so pay in advance, the Custodian shall be absolutely liable to the
Fund for such securities to the same extent as if the securities had been
received by the Custodian.
2.9 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
2.10 Deposit of Fund Assets in U.S. Securities Systems. The Custodian may
deposit and/or maintain securities owned by a Portfolio in a clearing agency
registered with the Securities and Exchange Commission under Section 17A of
the Securities Exchange Act of 1934, which acts as a securities depository, or
in the book-entry system authorized by the U.S. Department of the Treasury and
certain federal agencies, collectively referred to herein as "U.S. Securities
System" in accordance with applicable Federal Reserve Board and Securities and
Exchange Commission rules and regulations, if any, and subject to the following
provisions:
1) The Custodian may keep securities of the Portfolio in a U.S. Securities
System provided that such securities are represented in an account
("Account") of the Custodian in the U.S. Securities System which shall not
include any assets of the Custodian other than assets held as a fiduciary,
custodian or otherwise for customers;
2) The records of the Custodian with respect to securities of the Portfolio
which are maintained in a U.S. Securities System shall identify by book-
entry those securities belonging to the Portfolio;
3) The Custodian shall pay for securities purchased for the account of the
Portfolio upon (i) receipt of advice from the U.S. Securities System that
such securities have been transferred to the Account, and (ii) the making of
an entry on the records of the Custodian to reflect such payment and
transfer for the account of the Portfolio. The Custodian shall transfer
securities sold for the account of the Portfolio upon (i) receipt of
advice from the U.S. Securities System that payment for such securities has
been transferred to the Account, and (ii) the making of an entry on the
records of the Custodian to reflect such transfer and payment for the
account of the Portfolio. Copies of all advices from the U.S. Securities
System of transfers of securities for the account of the Portfolio shall
identify the Portfolio, be maintained for the Portfolio by the Custodian
and be provided to the Fund at its request. Upon request, the Custodian
shall furnish the Fund on behalf of the Portfolio confirmation of each
transfer to or from the account of the Portfolio in the form of a written
advice or notice and shall furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each day's transactions in the
U.S. Securities System for the account of the Portfolio;
4) The Custodian shall provide the Fund for the Portfolio with any report
obtained by the Custodian on the U.S. Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the U.S. Securities System;
5) The Custodian shall have received from the Fund on behalf of the Portfolio
the initial or annual certificate, as the case may be, required by Article
14 hereof;
6) Anything to the contrary in this Contract notwithstanding, the Custodian
shall be liable to the Fund for the benefit of the Portfolio for any loss or
damage to the Portfolio resulting from use of the U.S. Securities System by
reason of any negligence, misfeasance or misconduct of the Custodian or any
of its agents or of any of its or their employees or from failure of the
Custodian or any such agent to enforce effectively such rights as it may
have against the U.S. Securities System; at the election of the Fund, it
shall be entitled to be subrogated to the rights of the Custodian with
respect to any claim against the U.S. Securities System or any other person
which the Custodian may have as a consequence of any such loss or damage if
and to the extent that the Portfolio has not been made whole for any such
loss or damage.
2.11 Fund Assets Held in the Custodian's Direct Paper System. The Custodian may
deposit and/or maintain securities owned by a Portfolio in the Direct Paper
System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will be
effected in the absence of Proper Instructions from the Fund on behalf of
the Portfolio;
2) The Custodian may keep securities of the Portfolio in the Direct Paper
System only if such securities are represented in an account ("Account") of
the Custodian in the Direct Paper System which shall not include any assets
of the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
3) The records of the Custodian with respect to securities of the Portfolio
which are maintained in the Direct Paper System shall identify by book-entry
those securities belonging to the Portfolio;
4) The Custodian shall pay for securities purchased for the account of the
Portfolio upon the making of an entry on the records of the Custodian to
reflect such payment and transfer of securities to the account of the
Portfolio. The Custodian shall transfer securities sold for the account
of the Portfolio upon the making of an entry on the records of the Custodian
to reflect such transfer and receipt of payment for the account of the
Portfolio;
5) The Custodian shall furnish the Fund on behalf of the Portfolio confirmation
of each transfer to or from the account of the Portfolio, in the form of a
written advice or notice, of Direct Paper on the next business day following
such transfer and shall furnish to the Fund on behalf of the Portfolio
copies of daily transaction sheets reflecting each day's transaction in the
U.S. Securities System for the account of the Portfolio;
6) The Custodian shall provide the Fund on behalf of the Portfolio with any
report on its system of internal accounting control as the Fund may
reasonably request from time to time.
2.12 Segregated Account. The Custodian shall upon receipt of Proper
Instructions from the Fund on behalf of each applicable Portfolio establish and
maintain a segregated account or accounts for and on behalf of each such
Portfolio, into which account or accounts may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.10 hereof, (i) in accordance with the provisions of any
agreement among the Fund on behalf of the Portfolio, the Custodian and a broker-
dealer registered under the Exchange Act and a member of the NASD (or any
futures commission merchant registered under the Commodity Exchange Act),
relating to compliance with the rules of The Options Clearing Corporation and
of any registered national securities exchange (or the Commodity Futures
Trading Commission or any registered contract market), or of any similar
organization or organizations, regarding escrow or other arrangements in
connection with transactions by the Portfolio, (ii) for purposes of segregating
cash or government securities in connection with options purchased, sold or
written by the Portfolio or commodity futures contracts or options thereon
purchased or sold by the Portfolio, (iii) for the purposes of compliance by the
Portfolio with the procedures required by Investment Company Act Release No.
10666, or any subsequent release or releases of the Securities and Exchange
Commission relating to the maintenance of segregated accounts by registered
investment companies and (iv) for other proper corporate purposes, but only,
in the case of clause (iv), upon receipt of, in addition to Proper Instructions
from the Fund on behalf of the applicable Portfolio, a certified copy of a
resolution of the Board of Trustees or of the Executive Committee signed by an
officer of the Fund and certified by the Secretary or an Assistant Secretary,
setting forth the purpose or purposes of such segregated account and declaring
such purposes to be proper corporate purposes.
2.13 Ownership Certificates for Tax Purposes. The Custodian shall execute
ownership and other certificates and affidavits for all federal and state tax
purposes in connection with receipt of income or other payments with respect
to domestic securities of each Portfolio held by it and in connection with
transfers of securities.
2.14 Proxies. The Custodian shall, with respect to the domestic securities held
hereunder, cause to be promptly executed by the registered holder of such
securities, if the securities are registered otherwise than in the name of the
Portfolio or a nominee of the Portfolio, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly deliver to the
Portfolio such proxies, all proxy soliciting materials and all notices relating
to such securities.
2.15 Communications Relating to Portfolio Securities. Subject to the provisions
of Section 2.3, the Custodian shall transmit promptly to the Fund for each
Portfolio all written information (including, without limitation, pendency of
calls and maturities of domestic securities and expirations of rights in
connection therewith and notices of exercise of call and put options written by
the Fund on behalf of the Portfolio and the maturity of futures contracts
purchased or sold by the Portfolio) received by the Custodian from issuers of
the securities being held for the Portfolio. With respect to tender or exchange
offers, the Custodian shall transmit promptly to the Portfolio all written
information received by the Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents) making the
tender or exchange offer. If the Portfolio desires to take action with
respect to any tender offer, exchange offer or any other similar transaction,
the Portfolio shall notify the Custodian at least three business days prior to
the date on which the Custodian is to take such action.
3. Duties of the Custodian with Respect to Property of the Fund Held Outside of
the United States
3.1 Appointment of Foreign Sub-Custodians. The Fund hereby authorizes and
instructs the Custodian to employ as sub-custodians for the Portfolio's
securities and other assets maintained outside the United States the foreign
banking institutions and foreign securities depositories designated on Schedule
A hereto ("foreign sub-custodians"). Upon receipt of "Proper Instructions", as
defined in Section 5 of this Contract, together with a certified resolution of
the Fund's Board of Trustees, the Custodian and the Fund may agree to amend
Schedule A hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as sub-custodian. Upon
receipt of Proper Instructions, the Fund may instruct the Custodian to cease the
employment of any one or more such sub-custodians for maintaining custody of the
Portfolio's assets.
3.2 Assets to be Held. The Custodian shall limit the securities and other
assets maintained in the custody of the foreign sub-custodians to: (a)
"foreign securities", as defined in paragraph (c)(1) of Rule 17f-5 under the
Investment Company Act of 1940, and (b) cash and cash equivalents in such
amounts as the Custodian or the Fund may determine to be reasonably necessary to
effect the Portfolio's foreign securities transactions. The Custodian shall
identify on its books as belonging to the Fund, the foreign securities of the
Fund held by each foreign sub-custodian.
3.3 Foreign Securities Systems. Except as may otherwise be agreed upon in
writing by the Custodian and the Fund, assets of the Portfolios shall be
maintained in a clearing agency which acts as a securities depository or in a
book-entry system for the central handling of securities located outside the
United States (each a "Foreign Securities System") only through arrangements
implemented by the foreign banking institutions serving as sub-custodians
pursuant to the terms hereof (Foreign Securities Systems and U.S. Securities
Systems are collectively referred to herein as the "Securities Systems"). Each
Foreign Securities System will be an "eligible foreign custodian" as defined in
paragraph (c)(2) of Rule 17f-5 under the Investment Company Act of 1940. Where
possible, such arrangements shall include entry into agreements containing the
provisions set forth in Section 3.5 hereof.
3.4 Holding Securities. The Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign sub-
custodian in a single account that is identified as belonging to the Custodian
for the benefit of its customers, provided however, that (i) the records of the
Custodian with respect to securities and other non-cash property of the Fund
which are maintained in such account shall identify by book-entry those
securities and other non-cash property belonging to the Fund and (ii) the
Custodian shall require that securities and other non-cash property so held by
the foreign sub-custodian be held separately from any assets of the foreign sub-
custodian or of others.
3.5 Agreements with Foreign Banking Institutions. Each agreement with a foreign
banking institution shall provide that: (a) the assets of each Portfolio will
not be subject to any right, charge, security interest, lien or claim of any
kind in favor of the foreign banking institution or its creditors or agent,
except a claim of payment for their safe custody or administration; (b)
beneficial ownership for the assets of each Portfolio will be freely
transferable without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained identifying the assets
as belonging to each applicable Portfolio; (d) officers of or auditors employed
by, or other representatives of the Custodian, including the independent public
accountants for the Fund, will be given access to the books and records of the
foreign banking institution relating to its actions under its agreement with the
Custodian; and (e) assets of the Portfolios held by the foreign sub-custodian
will be subject only to the instructions of the Custodian or its agents.
3.6 Access of Independent Accountants of the Fund. Upon request of the Fund,
the Custodian will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of any
foreign banking institution employed as a foreign sub-custodian insofar as such
books and records relate to the performance of such foreign banking institution
under its agreement with the Custodian.
3.7 Reports by Custodian. The Custodian will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and other
assets of the Portfolio(s) held by foreign sub-custodians, including but not
limited to an identification of entities having possession of the Portfolio(s)
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of each applicable Portfolio indicating,
as to securities acquired for a Portfolio, the identity of the entity having
physical possession of such securities.
3.8 Transactions in Foreign Custody Account. (a) Except as otherwise provided
in paragraph (b) of this Section 3.8, the provision of Sections 2.2 and 2.7 of
this Contract shall apply, mutatis mutandis to the foreign securities of the
Fund held outside the United States by foreign sub-custodians.
(b) Notwithstanding any provision of this Contract to the contrary, settlement
and payment for securities received for the account of each applicable
Portfolio and delivery of securities maintained for the account of each
applicable Portfolio may be effected in accordance with the customary
established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser
thereof or to a dealer therefor (or an agent for such purchaser or dealer)
against a receipt with the expectation of receiving later payment for such
securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign sub-custodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of this Contract, and the Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such
securities.
3.9 Liability of Foreign Sub-Custodians. Each agreement pursuant to which the
Custodian employs a foreign banking institution as a foreign sub-custodian shall
require the institution to exercise reasonable care in the performance of its
duties and to indemnify, and hold harmless, the Custodian and the Fund from and
against any loss, damage, cost, expense, liability or claim arising out of or in
connection with the institution's performance of such obligations. At the
election of the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking institution as a
consequence of any such loss, damage, cost, expense, liability or claim if and
to the extent that the Fund has not been made whole for any such loss, damage,
cost, expense, liability or claim.
3.10 Liability of Custodian. The Custodian shall be liable for the acts or
omissions of a foreign banking institution to the same extent as set forth with
respect to sub-custodians generally in this Contract and, regardless of whether
assets are maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by paragraph
3.13 hereof, the Custodian shall not be liable for any loss, damage, cost,
expense, liability or claim resulting from nationalization, expropriation,
currency restrictions, or acts of war or terrorism or any loss where the sub-
custodian has otherwise exercised reasonable care. Notwithstanding the
foregoing provisions of this paragraph 3.10, in delegating custody duties to
State Street London Ltd., the Custodian shall not be relieved of any
responsibility to the Fund for any loss due to such delegation, except such loss
as may result from (a) political risk (including, but not limited to, exchange
control restrictions, confiscation, expropriation, nationalization,
insurrection, civil strife or armed hostilities) or (b) other losses (excluding
a bankruptcy or insolvency of State Street London Ltd. not caused by political
risk) due to Acts of God, nuclear incident or other losses under circumstances
where the Custodian and State Street London Ltd. have exercised reasonable care.
3.11 Monitoring Responsibilities. The Custodian shall furnish annually to the
Fund, during the month of June, information concerning the foreign sub-
custodians employed by the Custodian. Such information shall be similar in kind
and scope to that furnished to the Fund in connection with the initial approval
of this Contract. In addition, the Custodian will promptly inform the Fund in
the event that the Custodian learns of a material adverse change in the
financial condition of a foreign sub-custodian or any loss of the assets of the
Fund or in the case of any foreign sub-custodian not the subject of an exemptive
order from the Securities and Exchange Commission is notified by such foreign
sub-custodian that there appears to be a substantial likelihood that its
shareholders' equity will decline below $200 million (U.S. dollars or the
equivalent thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted U.S.
accounting principles).
3.12 Branches of U.S. Banks. (a) Except as otherwise set forth in this
Contract, the provisions hereof shall not apply where the custody of the
Portfolios assets are maintained in a foreign branch of a banking institution
which is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a sub-custodian shall be governed by paragraph
1 of this Contract.
(b) Cash held for each Portfolio of the Fund in the United Kingdom shall be
maintained in an interest bearing account established for the Fund with the
Custodian's London branch, which account shall be subject to the direction
of the Custodian, State Street London Ltd. or both.
3.13 Tax Law. The Custodian shall have no responsibility or liability for any
obligations now or hereafter imposed on the Fund or the Custodian as custodian
of the Fund by the tax law of the United States of America or any state or
political subdivision thereof. It shall be the responsibility of the Fund to
notify the Custodian of the obligations imposed on the Fund or the Custodian as
custodian of the Fund by the tax law of jurisdictions other than those mentioned
in the above sentence, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Custodian with regard to such tax law
shall be to use reasonable efforts to assist the Fund with respect to any claim
for exemption or refund under the tax law of jurisdictions for which the Fund
has provided such information.
4. Payments for Sales or Repurchases or Redemptions of Shares of the Fund
The Custodian shall receive from the distributor for the Shares or from the
Transfer Agent of the Fund and deposit into the account of the appropriate
Portfolio such payments as are received for Shares of that Portfolio issued or
sold from time to time by the Fund. The Custodian will provide timely
notification to the Fund on behalf of each such Portfolio and the Transfer Agent
of any receipt by it of payments for Shares of such Portfolio.
From such funds as may be available for the purpose but subject to the
limitations of the Fund's Trust Instrument and any applicable votes of the Board
of Trustees of the Fund pursuant thereto, the Custodian shall, upon receipt of
instructions from the Transfer Agent, make funds available for payment to
holders of Shares who have delivered to the Transfer Agent a request for
redemption or repurchase of their Shares. In connection with the redemption or
repurchase of Shares of a Portfolio, the Custodian is authorized upon receipt of
instructions from the Transfer Agent to wire funds to or through a commercial
bank designated by the redeeming shareholders. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian shall honor checks
drawn on the Custodian by a holder of Shares, which checks have been furnished
by the Fund to the holder of Shares, when presented to the Custodian in
accordance with such procedures and controls as are mutually agreed upon from
time to time between the Fund and the Custodian.
5. Proper Instructions
Proper Instructions as used throughout this Contract means a writing signed or
initialed by one or more person or persons as the Board of Trustees shall have
from time to time authorized. Each such writing shall set forth the specific
transaction or type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral instructions will be
considered Proper Instructions if the Custodian reasonably believes them to have
been given by a person authorized to give such instructions with respect to the
transaction involved. The Fund shall cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Trustees of the Fund
accompanied by a detailed description of procedures approved by the Board of
Trustees, Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Board of
Trustees and the Custodian are satisfied that such procedures afford adequate
safeguards for the Portfolios' assets. For purposes of this Section, Proper
Instructions shall include instructions received by the Custodian pursuant to
any three - party agreement which requires a segregated asset account in
accordance with Section 2.12.
6. Actions Permitted without Express Authority
The Custodian may in its discretion, without express authority from the Fund on
behalf of each applicable Portfolio:
1) make payments to itself or others for minor expenses of handling securities
or other similar items relating to its duties under this Contract, provided
that all such payments shall be accounted for to the Fund on behalf of the
Portfolio;
2) surrender securities in temporary form for securities in definitive form;
3) endorse for collection, in the name of the Portfolio, checks, drafts and
other negotiable instruments; and
4) in general, attend to all non-discretionary details in connection with the
sale, exchange, substitution, purchase, transfer and other dealings with the
securities and property of the Portfolio except as otherwise directed by the
Board of Trustees of the Fund.
7. Evidence of Authority
The Custodian shall be protected in acting upon any instructions, notice,
request, consent, certificate or other instrument or paper believed by it to be
genuine and to have been properly executed by or on behalf of the Fund. The
Custodian may receive and accept a certified copy of a vote of the Board of
Trustees of the Fund as conclusive evidence (a) of the authority of any person
to act in accordance with such vote or (b) of any determination or of any action
by the Board of Trustees pursuant to the Fund's Trust Instrument as described
in such vote, and such vote may be considered as in full force and effect until
receipt by the Custodian of written notice to the contrary.
8. Duties of Custodian with Respect to the Books of Account and Calculation of
Net Asset Value and Net Income
The Custodian shall cooperate with and supply necessary information to the
entity or entities appointed by the Board of Trustees of the Fund to keep the
books of account of each Portfolio and/or compute the net asset value per share
of the outstanding shares of each Portfolio or, if directed in writing to do so
by the Fund on behalf of the Portfolio, shall itself keep such books of account
and/or compute such net asset value per share. If so directed, the Custodian
shall also calculate daily the net income of the Portfolio as described in the
Fund's currently effective prospectus related to such Portfolio and shall advise
the Fund and the Transfer Agent daily of the total amounts of such net income
and, if instructed in writing by an officer of the Fund to do so, shall advise
the Transfer Agent periodically of the division of such net income among its
various components. The calculations of the net asset value per share and the
daily income of each Portfolio shall be made at the time or times described from
time to time in the Fund's currently effective prospectus related to such
Portfolio.
9. Records
The Custodian shall with respect to each Portfolio create and maintain all
records relating to its activities and obligations under this Contract in such
manner as will meet the obligations of the Fund under the Investment Company Act
of 1940, with particular attention to Section 31 thereof and Rules 31a-1 and
31a-2 thereunder. All such records shall be the property of the Fund and shall
at all times during the regular business hours of the Custodian be open for
inspection by duly authorized officers, employees or agents of the Fund and
employees and agents of the Securities and Exchange Commission. The Custodian
shall, at the Fund's request, supply the Fund with a tabulation of securities
owned by each Portfolio and held by the Custodian and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon between the
Fund and the Custodian, include certificate numbers in such tabulations.
10. Opinion of Fund's Independent Accountant
The Custodian shall take all reasonable action, as the Fund on behalf of each
applicable Portfolio may from time to time request, to obtain from year to year
favorable opinions from the Fund's independent accountants with respect to its
activities hereunder in connection with the preparation of the Fund's Form N-1A,
and Form N-SAR or other annual reports to the Securities and Exchange Commission
and with respect to any other requirements of such Commission.
11. Reports to Fund by Independent Public Accountants
The Custodian shall provide the Fund, on behalf of each of the Portfolios at
such times as the Fund may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting control and
procedures for safeguarding securities, futures contracts and options on futures
contracts, including securities deposited and/or maintained in a Securities
System, relating to the services provided by the Custodian under this Contract;
such reports, shall be of sufficient scope and in sufficient detail, as may
reasonably be required by the Fund to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there are
no such inadequacies, the reports shall so state.
12. Compensation of Custodian
The Custodian shall be entitled to reasonable compensation for its services and
expenses as Custodian, as agreed upon from time to time between the Fund on
behalf of each applicable Portfolio and the Custodian.
13. Responsibility of Custodian
So long as and to the extent that it is in the exercise of reasonable care, the
Custodian shall not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered by it pursuant
to this Contract and shall be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be genuine
and to be signed by the proper party or parties, including any futures
commission merchant acting pursuant to the terms of a three-party futures or
options agreement. The Custodian shall be held to the exercise of reasonable
care in carrying out the provisions of this Contract, but shall be kept
indemnified by and shall be without liability to the Fund for any action taken
or omitted by it in good faith without negligence. The Custodian will be
responsible for and will reimburse the Fund and any Portfolio thereof for any
loss, liability, claim or expense arising out of the negligence or willful
misconduct of the Custodian, any agent of the Custodian or any employee of the
Custodian or any agent, and, to the extent that the Custodian is liable
therefor under Section 1 of this Agreement, any sub-custodian or agent or
employee thereof. The Custodian shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund) on all matters, and shall
be without liability for any action reasonably taken or omitted pursuant to such
advice.
Except as may arise from the Custodian's own negligence or willful misconduct
or the negligence or willful misconduct of a sub-custodian or agent, or any
employee of any such entity the Custodian shall be without liability to the Fund
for any loss, liability, claim or expense resulting from or caused by; (i)
events or circumstances beyond the reasonable control of the Custodian or any
sub-custodian or Securities System or any agent or nominee of any of the
foregoing, including, without limitation, nationalization or expropriation,
imposition of currency controls or restrictions, the interruption, suspension or
restriction of trading on or the closure of any securities market, power or
other mechanical or technological failures or interruptions, computer viruses or
communications disruptions, acts of war or terrorism, riots, revolutions, work
stoppages, natural disasters or other similar events or acts; (ii) errors by the
Fund or the Investment Advisor in their instructions to the Custodian provided
such instructions have been in accordance with this Contract; (iii) the
insolvency of or acts or omissions by a Securities System; (iv) any delay or
failure of any broker, agent or intermediary, central bank or other commercially
prevalent payment or clearing system to deliver to the Custodian's sub-custodian
or agent securities purchased or in the remittance or payment made in connection
with securities sold; (v) any delay or failure of any company, corporation, or
other body in charge or registering or transferring securities in the name of
the Custodian, the Fund, the Custodian's sub-custodians, nominees or agents or
agents or any consequential losses arising out of such delay or failure to
transfer such securities including non-receipt of bonus, dividends and rights
and other accretions or benefits; (vi) delays or inability to perform its duties
due to any disorder in market infrastructure with respect to any particular
security or Securities System; and (vii) any provision of any present or future
law or regulation or order of the United States of America, or any state
thereof, or any other country, or political subdivision thereof or of any court
of competent jurisdiction.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to sub-custodians
generally in this Contract.
If the Fund requires the Custodian to take any action with respect to
securities, which action involves the payment of money or which action may, in
the opinion of the Custodian, result in the Custodian or its nominee assigned to
the Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take such
action, shall provide indemnity to the Custodian in an amount and form
satisfactory to it.
If the Fund requests that the Custodian or its agents advance cash or
securities for any purpose for the benefit of a Portfolio, including but not
limited to securities settlements, the purchase or sale of foreign exchange or
contracts for foreign exchange, or in the event that the Custodian or its
nominee shall incur or be assessed any taxes, charges, expenses, assessments,
claims or liabilities in connection with the performance of this Contract that
are properly attributable to the Fund or a Portfolio, except such as may arise
from its or its nominee's own negligent action, negligent failure to act or
willful misconduct, the property held for the account of the applicable
Portfolio shall be security therefor, but only to the extent of such advance,
tax, charge, expense, assessment, claim or liability. Custodian promptly shall
make a claim for reimbursement from the Fund and should the Fund fail to repay
the Custodian promptly, the Custodian shall be entitled to utilize available
cash and to dispose of the applicable Portfolio's assets to the extent necessary
to obtain reimbursement.
In no event shall the Custodian be liable for indirect, special or
consequential damages.
14. Effective Period, Termination and Amendment
This Contract shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided, may be amended
at any time by mutual agreement of the parties hereto and may be terminated by
either party by an instrument in writing delivered or mailed, postage prepaid to
the other party, such termination to take effect not sooner than thirty (30)
days after the date of such delivery or mailing; provided, however that the
Custodian shall not with respect to a Portfolio act under Section 2.10 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees of the Fund has approved the
initial use of a particular Securities System by such Portfolio, as required by
Rule 17f-4 under the Investment Company Act of 1940, as amended and that the
Custodian shall not with respect to a Portfolio act under Section 2.11 hereof in
the absence of receipt of an initial certificate of the Secretary or an
Assistant Secretary that the Board of Trustees has approved the initial use of
the Direct Paper System by such Portfolio ; provided further, however, that the
Fund shall not amend or terminate this Contract in contravention of any
applicable federal or state regulations, or any provision of the Declaration of
Trust, and further provided, that the Fund on behalf of one or more of the
Portfolios may at any time by action of its Board of Trustees (i) substitute
another bank or trust company for the Custodian by giving notice as described
above to the Custodian, or (ii) immediately terminate this Contract in the event
of the appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or upon the happening of a like event at the
direction of an appropriate regulatory agency or court of competent
jurisdiction.
Upon termination of the Contract, the Fund on behalf of each applicable
Portfolio shall pay to the Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Custodian for its
costs, expenses and disbursements.
15. Successor Custodian
If a successor custodian for the Fund, of one or more of the Portfolios shall
be appointed by the Board of Trustees of the Fund, the Custodian shall, upon
termination, deliver to such successor custodian at the office of the Custodian,
duly endorsed and in the form for transfer, all securities of each applicable
Portfolio then held by it hereunder and shall transfer to an account of the
successor custodian all of the securities of each such Portfolio held in a
Securities System.
If no such successor custodian shall be appointed, the Custodian shall, in like
manner, upon receipt of a certified copy of a vote of the Board of Trustees of
the Fund, deliver at the office of the Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor custodian or
certified copy of a vote of the Board of Trustees shall have been delivered to
the Custodian on or before the date when such termination shall become
effective, then the Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the Investment Company Act of 1940,
doing business in Boston, Massachusetts, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $25,000,000, all securities, funds and other
properties held by the Custodian on behalf of each applicable Portfolio and all
instruments held by the Custodian relative thereto and all other property held
by it under this Contract on behalf of each applicable Portfolio and to transfer
to an account of such successor custodian all of the securities of each such
Portfolio held in any Securities System. Thereafter, such bank or trust company
shall be the successor of the Custodian under this Contract.
In the event that securities, funds and other properties remain in the
possession of the Custodian after the date of termination hereof owing to
failure of the Fund to procure the certified copy of the vote referred to or of
the Board of Trustees to appoint a successor custodian, the Custodian shall be
entitled to fair compensation for its services during such period as the
Custodian retains possession of such securities, funds and other properties and
the provisions of this Contract relating to the duties and obligations of the
Custodian shall remain in full force and effect.
16. Interpretive and Additional Provisions
In connection with the operation of this Contract, the Custodian and the Fund
on behalf of each of the Portfolios, may from time to time agree on such
provisions interpretive of or in addition to the provisions of this Contract as
may in their joint opinion be consistent with the general tenor of this
Contract. Any such interpretive or additional provisions shall be in a writing
signed by both parties and shall be annexed hereto, provided that no such
interpretive or additional provisions shall contravene any applicable federal or
state regulations or any provision of the Declaration of Trust of the Fund. No
interpretive or additional provisions made as provided in the preceding sentence
shall be deemed to be an amendment of this Contract.
17. Additional Funds
In the event that the Fund establishes one or more series of Shares in addition
to Thomas White World Fund with respect to which it desires to have the
Custodian render services as custodian under the terms hereof, it shall so
notify the Custodian in writing, and if the Custodian agrees in writing to
provide such services, such series of Shares shall become a Portfolio hereunder.
18. Massachusetts Law to Apply
This Contract shall be construed and the provisions thereof interpreted under
and in accordance with laws of The Commonwealth of Massachusetts.
19. Prior Contracts
This Contract supersedes and terminates, as of the date hereof, all prior
contracts between the Fund on behalf of each of the Portfolios and the Custodian
relating to the custody of the Fund's assets.
20. Shareholder Communications Election
Securities and Exchange Commission Rule 14b-2 requires banks which hold
securities for the account of customers to respond to requests by issuers of
securities for the names, addresses and holdings of beneficial owners of
securities of that issuer held by the bank unless the beneficial owner has
expressly objected to disclosure of this information. In order to comply with
the rule, the Custodian needs the Fund to indicate whether it authorizes the
Custodian to provide the Fund's name, address, and share position to requesting
companies whose securities the Fund owns. If the Fund tells the Custodian "no",
the Custodian will not provide this information to requesting companies. If the
Fund tells the Custodian "yes" or does not check either "yes" or "no" below, the
Custodian is required by the rule to treat the Fund as consenting to disclosure
of this information for all securities owned by the Fund or any funds or
accounts established by the Fund. For the Fund's protection, the Rule prohibits
the requesting company from using the Fund's name and address for any purpose
other than corporate communications. Please indicate below whether the Fund
consents or objects by checking one of the alternatives below.
YES [ ] The Custodian is authorized to release the Fund's name, address, and
share positions.
NO [ ] The Custodian is not authorized to release the Fund's name, address,
and share positions.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the 16th day of January, 1996.
ATTEST LORD ASSET MANAGEMENT TRUST
By
ATTEST STATE STREET BANK AND TRUST COMPANY
By
Executive Vice President
<PAGE>
Schedule A
The following foreign banking institutions and foreign securities depositories
have been approved by the Board of Trustees of Lord Asset Management Trust for
use as sub-custodians for the Fund's securities and other assets:
(Insert banks and securities depositories)
Certified:
Fund's Authorized Officer
Date: Janaury 16, 1996
<PAGE>
TRANSFER AGENT AGREEMENT
THIS AGREEMENT is made and entered into on this First day of November, 1996,
by and between Lord Asset Management Trust, which sponsors the Thomas White
World Fund (the "Fund"), an open-end investment company (the Trust) and Firstar
Trust Company, a corporation organized under the laws of the State of Wisconsin
(the "Agent").
W I T N E S S E T H:
WHEREAS, the Trust is an open-ended management investment company which is
registered under the Investment Company Act of 1940; and
WHEREAS, the Agent is a trust company and, among other things, is in the
business of administering transfer and dividend disbursing agent functions for
the benefit of its customers;
NOW, THEREFORE, the Trust, on behalf of the Fund, and the Agent do mutually
promise and agree as follows:
1. Terms of Appointment; Duties of the Agent
Subject to the terms and conditions set forth in this Agreement, the Fund
hereby employs and appoints the Agent to act as transfer agent and dividend
disbursing agent.
The Agent shall perform all of the customary services of a transfer agent
and dividend disbursing agent, and as relevant, agent in connection with
accumulation, open account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to:
A. Receive orders for the purchase of shares, with prompt delivery, where
appropriate, of payment and supporting documentation to the Fund's
custodian;
B. Process purchase orders and issue the appropriate number of certificated
or uncertificated shares with such uncertificated shares being held in
the appropriate shareholder account;
C. Process redemption requests received in good order and, where relevant,
deliver appropriate documentation to the Fund's custodian;
D. Pay monies (upon receipt from the Fund's custodian, where relevant) in
accordance with the instructions of redeeming shareholders;
E. Process transfers of shares in accordance with the shareowner's
instructions;
F. Process exchanges between funds within the same family of funds;
G. Issue and/or cancel certificates as instructed; replace lost, stolen or
destroyed certificates upon receipt of satisfactory indemnification or
surety bond;
H. Prepare and transmit payments for dividends and distributions declared by
the Fund;
I. Make changes to shareholder records, including, but not limited to,
address changes in plans (i.e., systematic withdrawal, automatic
investment, dividend reinvestment, etc.);
J. Record the issuance of shares of the Fund and maintain, pursuant to
Section Rule 17ad-10(e), a record of the total number of shares of the
Fund which are authorized, issued and outstanding;
K. Prepare shareholder meeting lists and, if applicable, mail, receive and
tabulate proxies;
L. Mail shareholder reports and prospectuses to current shareholders;
M. Prepare and file U.S. Treasury Department forms 1099 and other
appropriate information returns required with respect to dividends and .
distributions for all shareholders;
N. Provide shareholder account information upon request and prepare and mail
confirmations and statements of account to shareholders for all
purchases, redemptions and other confirmable transactions as agreed upon
with the Fund; and
O. Provide a Blue Sky System which will enable the Fund to monitor the total
number of shares sold in each state.
2. Compensation
The Fund agrees to pay the Agent for performance of the duties listed in
this Agreement; the fees and out-of-pocket expenses include, but are not limited
to the following: printing, postage, forms, stationery, record retention,
mailing, insertion, programming, labels, shareholder lists and proxy expenses.
The Agent agrees to the performance based servicing standards detailed in
the attached Schedule A.
These fees and reimbursable expenses may be changed from time to time
subject to mutual written agreement between the Trust, on behalf of the Fund,
and the Agent.
The Fund agrees to pay all fees and reimbursable expenses within ten (10)
business days following the mailing of the billing notice.
3. Representations of Agent
The Agent represents and warrants to the Fund that:
A. It is a trust company duly organized, existing and in good standing
under the laws of Wisconsin;
B. It is duly qualified to carry on its business in the state of Wisconsin;
C. It is empowered under applicable laws and by its charter and bylaws to
enter into and perform this Agreement;
D. All requisite corporate proceedings have been taken to authorize it to
enter and perform this Agreement; and
E. It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
F. It will use its best efforts to ensure the individuals primarily
responsible for daily communications with the Fund remain as primary
contacts for as long as reasonably possible or as otherwise agreed to
from time to time between the Fund and the Agent.
4. Representations of the Fund
The Fund represents and warrants to the Agent that:
A. The Trust is an open-ended diversified investment company under the
Investment Company Act of 1940;
B. The Trsut is a business trust organized, existing, and in good standing
under the laws of Delaware;
C. The Fund is empowered under applicable laws and by its Trust Instrument
and bylaws to enter into and perform this Agreement on behalf of the
Fund;
D. All necessary proceedings required by the Trust Instrument have been
taken to authorize it to enter into and perform this Agreement;
E. The Fund will comply with all applicable requirements of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended,
the Investment Company Act of 1940, as amended, and any laws, rules and
regulations of governmental authorities having jurisdiction; and
F. A registration statement under the Securities Act of 1933 is currently
effective and will remain effective.
5. Covenants of Fund and Agent
The Fund shall furnish the Agent a certified copy of the resolution of the
Board of Trustees of the Trust authorizing the appointment of the Agent and the
execution of this Agreement. The Fund shall provide to the Agent a copy of the
Trust Instrument, bylaws of the Trust, and all amendments.
The Agent shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules thereunder, the Agent agrees that all such records prepared or
maintained by the Agent relating to the services to be performed by the Agent
hereunder are the property of the Fund and will be preserved, maintained and
made available in accordance with such section and rules and wil be surrendered
to the Fund on and in accordance with its request.
6. Indemnification; Remedies Upon Breach
The Agent agrees to use reasonable care and act in good faith in performing
its duties hereunder.
Notwithstanding the foregoing, the Agent shall not be liable or responsible
for delays or errors occurring by reason of circumstances beyond its control,
including acts of civil or military authority, national or state emergencies,
fire mechanical or equipment failure, flood or catastrophe, acts of God,
insurrection or war. In the event of a mechanical breakdown beyond its control,
the Agent shall take all reasonable steps to minimize service interruptions for
any period that such interruption continues beyond the Agent's control. The
agent will make every reasonable effort to restore any lost or damaged data, and
the correcting of any errors resulting from such a breakdown will be at the
Agent's expense. The Agent agrees that it shall, at all times, have reasonable
contingency plans with appropriate parties, making reasonable provision for
emergency use of electrical data processing equipment to the extent appropriate
equipment is available. Representatives of the Trust shall be entitled to
inspect the Agent's premises and operating capabilities at any time during
regular business hours of the Agent, upon reasonable notice to the Agent.
The Agent will indemnify and hold the Fund harmless against any and all
losses claims, damages, liabilities or expenses (including reasonable counsel
fees and expenses) resulting from any claim, demand, action or suit resulting
from the Agent's bad faith or negligence, and arising out of or in connection
with the Agent's duties on behalf of the Fund hereunder. The Fund will
indemnify and hold the Agent harmless against any and all losses, claims,
damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim, demand, action, or suit not resulting from
the Agent's bad faith or negligence, and arising out of or in connection with
the Agent's duties on behalf of the Fund hereunder.
Further, the Fund will indemnify and hold the Agent harmless against any
and all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) resulting from any claim, demand, action, or suit
as a result of the negligence of the Fund or the principal underwriter, if any,
(unless contributed to by the Agent's own negligence or bad faith); or as a
result of the Agent acting upon telephone instructions relating to the exchange
or redemption of shares received by the Agent and reasonably believed by the
Agent to have originated from the record owner of the subject shares; or as a
result of the Agent upon any instructions executed or orally communicated by a
duly authorized officer or employee of the Fund, according to such lists of
authorized officers and employees furnished to the Agent and as amended from
time to time in writing by a resolution of the Board of Trustees of the Trust;
or as a result of acting in reliance upon any genuine instrument or stock
certificate signed, countersigned, or executed by any person or persons
authorized to sign, countersign, or execute the same.
In order for this section to apply, it is understood that if in any case
the Fund may be asked to indemnify or hold harmless the Agent, the Fund shall
be advised of all pertinent facts concerning the situation in question, and it
is further understood that the Agent will use reasonable care to notify the Fund
promptly concerning any situation which presents or appears likely to present a
claim for indemnification against the Fund. The Fund shall have the option to
defend the Agent against any claim which may be the subject of this
indemnification and, in the event the Fund so elects, the Agent will so notify
the Fund, and thereupon the Fund shall take over complete defense of the claim,
and the Agent shall sustain no further legal or other expenses in such situation
for which the Agent shall seek indemnification under this section. The Agent
will in no case confess any claim or make any compromise in any case in which
the Fund will be asked to indemnify the Agent, except with the Trust's prior
written consent, on behalf of the Fund.
7. Confidentiality
The Agent agrees on behalf of itself and its employees to treat
confidentially all records and other information relative to the Fund and its
shareholders and shall not be disclosed to any other party, except after prior
notification to and approval in writing by the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Agent may be exposed to
civil or criminal contempt proceedings for failure to comply after being
requested to divulge such information by duly constituted authorities.
Additional Series. The Lord Asset Management Trust is authorized to issue
separate classes of shares of beneficial interest representing interests in
separate investment portfolios. The parties intend that each portfolio
established by the Trust, now or in the future, be covered by the terms and
conditions of this agreement.
8. Wisconsin Law to Apply
This Agreement shall be construed and the provisions thereof interpreted
under and in accordance with the laws of the state of Wisconsin.
9. Amendment, Assignment, Termination and Notice
A. This Agreement may be amended by the mutual written consent of the
parties.
B. After the first full year, this Agreement may be terminated upon ninety
(90) day's written notice given by one party to the other.
C. This Agreement and any right or obligation hereunder may not be assigned
by either party without the signed, written consent of the other party.
D. Any notice required to be given by the parties to each other under the
terms of this Agreement shall be in writing, addressed and delivered, or
mailed to the principal place of business of the other party.
E. In the event that the Fund gives to the Agent its written intention to
terminate and appoint a successor transfer agent, the Agent agrees to
cooperate in the transfer of its duties and responsibilities to the
successor, including any and all relevant books, records and other data
established or maintained by the Agent under this Agreement.
F. Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be
paid by the Fund.
10. Disclaimer of Liability
This Agreement is executed on behalf of the Fund by its officers in their
capacities as officers and not individually. The obligations of the Fund
under this Agreement are not binding upon the Fund's trustees, officers, or
shareholders individually, but are binding only upon the assets and property
of the Fund to which the services performed pursuant to this Agreement relate.
Lord Asset Management Trust Firstar Trust Company
By: ______________________________ By: ______________________________
Attest: __________________________ Attest: __________________________
Assistant Secretary
<PAGE>
Schedule A
Transfer Agent Performance Standards
Service Standard
I. Transaction Processing
Financial Transactions 100% on date of receipt in good form
Nonfinancial Transactions 100% within two business days
Transfers 100% within one business day
Adjustment Transactions 100% within two business days
Error Ratio Less than .20% of total financial
transactions
Quality Control 100% on date of receipt
II. Mailing of Shareholder Items
Shareholder Statements 100% within two business days
Certificates 100% within three business days
Liquidation Checks 100% within one business days
Client Reports
Daily 100% within one business day
Month-End 100% within three business day
Wire Order Confirms 100% within one business day
III. Investor Services-Reital and Institutional
Average Speed of Answer Less than 20 seconds
Call answered in 20 Seconds Greater than 90%
Abandon Rate (Calls > 20 seconds) Less than 3% of all calls
Research Requests 95% within one hour
100% within one business day
IV. Correspondence
Respond to written requests 97% same day
100% within two business days
Qualified Plan Transfer-in Requests 100% within one business day
Qualified Plan Second Requests 100% within three business weeks
Rejected Transaction Requests 100% wihtin one business day
V. Communications
Daily Cash information to Client Prior to 9:30 a.m. each day
Blue Sky Compliance Servicing Agreement
This contract between the Lord Asset Management Trust, a Delaware business
trust, on behalf of the Thomas White World Fund (the "Fund"), an open-end
investment company (the "Trust"), and Firstar Trust Company, a Wisconsin
corporation ("FTC"), is entered into on this First day of November, 1995.
Witnesseth:
Whereas, the Trust is an open-end management company which is registered
under the Investment Company Act of 1940; and
Whereas, the Fund desires FTC to provide state registration compliance
services; and
Whereas, FTC is in the business of providing, among other things, state
registration services to investment companies;
Now, therefore, the parties do mutually promise and agree as follows:
I. Duties and responsibilities of FTC
A. Prepare and file all initial state registrations and renewals, including
all necessary post-effective amendments, sales reports, and other
required state filings
1. All renewals subject to written approval signed by an authorized
official of the Fund
2. FTC agrees to register the Fund as so to minimize the registration
fees paid to each state, as agreed upon from time to time between the
Fund and FTC, by taking into account such items as exempt
transactions.
B. Monitor status in each state
C. Develop Blue Sky sales interface with all relevant discount brokerage
and other financial institutions as directed by the Fund
D. Send periodic reports to the Fund reflecting status of each state
permit
II. Compensation
The Fund agrees to pay FTC for performance of the duties listed in this
Agreement and the fees and out-of-pocket expenses as set forth in the
attached Schedule B.
These fees may be changed from time to time, subject to mutual written
Agreement between the Fund and FTC.
The Fund agrees to pay all fees and reimbursable expenses within ten (10)
business days following the mailing of the billing notice.
III. Performance of Service; Limitation of Liability
FTC shall exercise reasonable care in the performance of its duties under
the Agreement. FTC will indemnify and make the Fund whole for any loss or
damages (including reasonable fees and expenses of legal counsel) arising
out of or in connection with FTC's bad faith, willful misconduct, or
negligence in the performance of its duties under theis Agreement. The Fund
agrees to reimburse and make FTC whole for any loss or damages (including
reasonable fees and expenses of legal counsel) arising out of or in
connection with its actions under this Agreement so long as FTC acts in
good faith and is not negligent or guilty of any willful misconduct.
Except as specified below, FTC shall not be liable or responsible for
delays or errors occurring by reason of circumstances beyond its control,
including acts of civil or military authority, natural or state
emergencies, fire, mechanical breakdown, flood or catastrophe, act of God,
insurrection, war, riots, or failure of transportation, communication,
or power supply.
In the event of a mechanical breakdown beyond its control, FTC shall take
all reasonable steps to minimize service interruptions for any period that
such interruption continues beyond FTC's control. FTC will make every
reasonable effort to restore any lost or damaged data and correct any
errors resulting from such a breakdown at the expense of FTC. FTC agrees
that it shall, at all times, have reasonable contingency plans with
appropriate parties, making reasonable provisions for emergency use of
electrical data processing equipment to the extent appropriate equipment is
available. Representatives of the Trust shall be entitled to inspect FTC's
premises and operating capabilities at any time during regular business
hours of FTC, upon reasonable notice to FTC.
This indemnification includes any act, omission to act, or delay by FTC in
reliance upon, or in accordance with, any written or oral instruction it
receives from any duly authorized officer of the Trust.
Regardless of the above, FTC reserves the right to reprocess and correct
administrative errors at its own expense.
IV. Confidentiality
FTC shall handle, in confidence, all information relating to the Fund's
business which is received by FTC during the course of rendering any
service hereunder.
V. Data Necessary to Perform Service
The Fund or its agent, which may be FTC, shall furnish to FTC the data
necessary to perform the services described herein at times and in such
form as mutually agreed upon.
VI. Terms of Agreement
This Agreement shall become effective as of the date hereof and, unless
sooner terminated as provided herein, shall continue in effect with respect
to the Fund for a period of two years. Thereafter, if not terminated, this
Agreement shall continue automatically in effect for successive annual
periods unless otherwise terminated by either party upon giving ninety (90)
days prior written notice to the other party or such shorter period as is
mutually agreed upon by the parties.
VII. Duties in the Event of Termination
In the event that, in connection with termination, a successor to any of
FTC's duties or responsibilities hereunder is designated by the Fund by
written notice to FTC, FTC will promptly, upon such termination and at the
expense of the Fund, transfer to such successor all relevant books, records,
correspondence, and other data established or maintained by FTC under this
Agreement in a form reasonably acceptable to the Fund (if such form differs
from the form in which FTC has maintained, the Fund shall pay any expense
associated with transferring the data to such form), and will cooperate in
the reasonable transfer of such duties and responsibilities, including
provision for assistance from FTC's personnel in the establishment of books,
records, and other data by such successor.
VIII. Choice of Law
This Agreement shall be construed in accordance with the laws of the State
of Wisconsin.
IX. Disclaimer of Liability
This Agreement is executed on behalf of the Trust by its officers in their
capacities as officers and not individually. The obligations of the Trust
under this Agreement are not binding upon the Trust's trustees, officers, or
shareholders individually, but are binding only upon the assets and property
of the Fund to which the services performed pursuant to this Agreement
relate.
LORD ASSET MANAGEMENT TRUST FIRSTAR TRUST COMPANY
By: Thomas S. White Jr. By: James C. Tyler
Attest: Peter A. Zaldivar Attest: Mary E. Klabunde
<PAGE>
Schedule B
Thomas White World Fund
Blue Sky Compliance
Fee Schedule
Annual Fee
Registration for up to 25 states $7,500.00
Registration for more than 25 states $10,000.00
Out-of-pocket expenses, including, but not limited to:
Postage
Stationary
Programming
Proxies
Retention of records
Special Reports
Federal and State regulatory filings
Certian insurance premiums
All other out-of-pocket expenses
Expenses from the Board of Trustees meetings
Auditing and legal expenses
Out-of-pocket expenses charged at cost
Fees are billed monthly
<PAGE>
LORD ASSET MANAGEMENT TRUST
on behalf of
THOMAS WHITE WORLD FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on March 10, 1995, between Lord Asset
Management, Inc. (the "Adviser") and Lord Asset Management Trust (the "Trust")
on behalf of Thomas White World Fund (the "Fund").
WHEREAS, the Trust is a Delaware Business Trust of the series type organized
under the trust instrument dated February 9, 1994, (the "Trust Instrument") and
is registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end, diversified management investment company, and the Fund
is the initial series of the Trust;
WHEREAS, the Trust wishes to retain the Adviser to render investment
advisory services to the Fund, and the Adviser is willing to furnish such
services to the Fund;
WHEREAS, the Adviser is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended ("Advisers Act"):
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between the Trust and the Adviser as follows:
1. Appointment. The Trust hereby appoints the Adviser to act as investment
adviser to the Fund for the periods and on the terms set forth in this
Agreement. The Adviser accepts such appointment and agrees to furnish the
services herein set forth, for the compensation herein provided.
2. Investment Advisory Duties. Subject to the supervision of the Trustees
of the Trust, the Adviser will (a) provide a program of continuous investment
management for the Fund in accordance with the Fund's investment objectives,
policies and limitations as stated in the Fund's prospectus and Statement of
Additional Information included as part of the Trust's Registration Statement
filed with the Securities and Exchange Commission, as they may be amended from
time to time, copies of which shall be provided to the Adviser by the Trust: (b)
make investment decisions for the Fund: and (c) place orders to purchase and
sell securuties for the Fund.
In performing its investment management services to the Fund hereunder, the
Adviser will provide the Fund with ongoing investment guidance and policy
direction, including oral and written research, analysis, advice, statistical
and economic data and judgments regarding individual investments, general
economic conditions and trends and long-range investment policy. The Adviser
will determine the securities, instruments, repurchase agreements, options
and other investments and techniques that the Fund will purchase, sell, enter
into or use, and will provide an ongoing evaluation of the Fund's portfolio.
The Advisor will determine what portion of the Fund's portfolio shall be
invested in securities and other assets, and what portion, if any, should be
univested.
The Adviser further agrees that, in performing its duties hereunder, it
will:
(a) comply with the 1940 Act and all rules and regulations thereunder, the
Advisers Act, the Internal Revenue Code (the "Code") and all other applicable
federal and state laws and regulations, and with any applicable procedures
adopted by the Trustees;
(b) use reasonable efforts to manage the Fund so that it will qualify, and
continue to qualify, as a regulated investment company under Subchapter M of the
Code and regulations issued thereunder;
(c) place orders pursuant to its investment determinations for the Fund
directly with the issuer, or with any broker or dealer, in accordance with
applicable policies expressed in the Fund's prospectus and/or Statement of
Additional Information and in accordance with applicable legal requirements;
(d) furnish to the Trust whatever statistical information the Trust may
reasonably request with respect to the Fund's assets or contemplated
investments. In addition, the Adviser will keep the Trust and the Trustees
informed of developments materially affecting the Fund's portfolio and shall,
on the Adviser's own initiative, furnish to the Trust from time to time whatever
information the Adviser believes appropriate for this purpose;
(e) make available to the Trust, promptly upon its request, such copies of
its investment records and ledgers with respect to the Fund as may be required
to assist the Trust in its compliance with applicable laws and regulations.
The Adviser will furnish the Trustees with such periodic and special reports
regarding the Fund as they may reasonably request;
(f) immediately notify the Trust in the event that the Adviser or any of
its affiliates: (1) becomes aware that it is subject to a statutory
disqualification that prevents the Adviser from serving as investment adviser
pursuant to this Agreement; or (2) becomes aware that it is the subject of an
administrative proceeding or enforcement action by the Securities and Exchange
Commission ("SEC") or other regulatory authority. The Adviser further agrees to
notify the Trust immediately of any material fact known to the Advisor
respecting or relating to the Adviser that is not contained on the Trust's
Registration Statement regarding the Fund, or any amendment or supplement
thereto, but that is required to be disclosed thereon, and of any statement
contained therein that becomes untrue in any material respect;
(g) in making investment decisions for the Fund, use no inside information
that may be in its possession or in the possession of any of its affiliates, nor
will the Adviser seek to obtain any such information.
3. Allocation of Charges and Expenses. Except as otherwise specifically
provided in this section 3, the Adviser shall pay the compensation and expenses
of all its directors, officers and employees who serve as officers and executive
employees of the Trust (including the Trust's share of payroll taxes), and the
Adviser shall make available, without expense to the Fund, the service of its
directors, officers and employees who may be duly elected officers of the Trust,
subject to their individual consent to serve and to any limitations imposed by
law;
The Adviser shall not be required to pay any expenses of the Fund other than
those specifically allocated to the Adviser in this section 3. In particular,
but without limiting the generality of the foregoing, the Adviser shall not be
responsible, except to the extent of the reasonable compensation of such of the
Trust's employees as are officers or employees of the Adviser whose services may
be involved, for the following expenses of the Fund: organization and certain
offering expenses of the Fund (including out-of-pocket expenses, but not
including the Adviser's overhead and employee costs) fees payable to the
Adviser and to any other Fund advisers or consultants; legal expenses; auditing
and accounting expenses; interest expenses; telephone, telex, facsimile, postage
and other communications expenses; taxes and governmental fees; fees, dues and
expenses incurred by or with respect to the Fund in connection with membership
in investment company trade organizations; cost of insurance relating to
fidelity coverage for the Trust's officers and employees; fees and expenses of
the Fund's custodian or of any subcustodian, transfer agent, registrar, or
dividend dispursing agent of the Fund; other payments for portfolio pricing or
valuation services to pricing agents, accountants, bankers and other
specialists, if any; expenses of preparing share certificates; other expenses
in connection with the issuance, offering, distribution or sale of securities
issued by the Fund; expenses relating to investor and public relations expenses
of registering and qualifying shares of the Fund for sale; freight, insurance
and other charges in connection with the shipment of the Fund's portfolio
securities; brokerage commissions or other costs of acquiring or disposing of
any portfolio securities or other assets of the Fund, or of entering into other
transactions or engaging in any investment practices with respect to the Fund;
expenses of printing and distributing prospectuses, Statements of Additional
Information, reports, notices and dividends to stockholders; costs of stationery
or other office supplies; any litigation expenses costs of stockholders' and
other meetings; the compensation and all expenses (specifically including
travel expenses relating to the Fund's business) of officers, trustees and
employees of the Trust who are not interested persons of the Advisor; and travel
expenses (or an appropriate portion thereof) of officers, trustees and employees
of the Trust who are not interested persons of the Adviser to the extent that
such expenses relate to attendance at meetings of the Board of Trustees of the
Trust who are officers, directors or employees of the Adviser to the extent that
such expenses relate to attendance at meetings of the Board of Trustees of the
Trust with respect to matters concerning the Fund, or any committees thereof or
advisers thereto, or such expenses that relate to meetings whose primary purpose
is with respect to Fund matters.
4. Compensation. As compensation for the services provided and expenses
assumed by the Adviser under this Agreement, the Trust will arrange for the Fund
to pay the Adviser at the beginning of each calendar month an advisory fee
computed at the rate of 1/12 of 1% (1.00% annually) of the Fund's average daily
net assets. The value of net assets of the Fund shall always be determined
pursuant to the applicable provisions of the Trust Instrument and the
Registration Statement. If, pursuant to such provisions, the determination of
net asset value is suspended for any particular business day, then for the
purposes of this section 4, the value of the net assets of the Fund as last
determined shall be deemed to be the value of its net assets as of the close of
the New York Stock Exchange, or as of such other time as the value of the net
assets of the Fund's portfolio may lawfully be determined, on that day. If the
determination of the net asset value of the shares of the Fund has been so
suspended for a period including any month end when the Adviser's compensation
is computed pursuant to this section, then the Adviser's compensation computed
at the end of such month shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such month).
If the Fund determines the value of the net assets of its portfolio more than
once on any day, then the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of this
section 4.
In the event that the Adviser's gross compensation hereunder shall, when
added to the other expenses of the Fund, cause the aggregate expenses of the
Fund to exceed the maximum expenses permitted under the lowest applicable
expense limitation established pursuant to the statutes or regulations of any
jurisdiction in which the shares of the Fund may be qualified for offer or sale,
the total compensation paid or payable to the Adviser shall be reduced (but not
below zero) to the extent necessary to cause the Fund not to exceed such expense
limitation. Except to the extent that such reduction has been reflected in
lowered monthly payments to the Adviser, the Adviser shall refund to the Fund
the amount by which the total payments received by the Adviser are in excess of
such expense limitation as promptly as practicable after the end of such fiscal
year, provided that the Adviser shall not be required to pay the Fund an amount
greater than the fee otherwise payable to the Adviser in respect of such year.
As used in this Section 4, "expenses" shall mean those expenses included in the
applicable expense limitation having the broadest specification thereof, and
"expense limitation" shall mean a limitation on the maximum annual expenses
which may be incurred by an investment company as determined by applicable law.
The words "lowest applicable expense limitation" shall be deemed to be that
which results in the largest reduction of the Adviser's compensation for any
fiscal year of the Fund; provided, however, that nothing in this Agreement shall
limit the Adviser's fees if not required by an applicable statute or regulation
referred to above in this Section 4.
5. Books and Records. The Adviser agrees to maintain such books and records
with respect to its services to the Fund as are required by Section 31 under the
1940 Act, and rules adopted thereunder, and by other applicable legal
provisions, and to preserve such records for the periods and in the manner
required by that Section, and those rules and legal provisions. The Adviser
also agrees that records it maintains and preserves pursuant to Rules 31a-1 and
Rule 31a-2 under the 1940 Act and otherwise in connection with its services
hereunder are the property of the Trust and will be surrendered promptly to the
Trust upon its request. And the Adviser further agrees that it will furnish to
regulatory authorities having the requisite authority any information or reports
in connection with its services hereunder which may be requested in order to
determine whether the operations of the Fund are being conducted in accordance
with applicable laws and regulations.
6. Standard of Care and Limitation of Liability. The Adviser shall exercise
its best judgment in rendering the services provided by it under this Agreement.
The Adviser shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Fund or the holders of the Fund's shares in
connection with the matters to which this Agreement relates, provided that
nothing in this Agreement shall be deemed to protect or purport to protect the
Adviser against any liability to the Trust, the Fund or to holders of the Fund's
shares to which the Adviser would otherwise be subject by reason or willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Adviser's reckless disregard of its obligations
and duties under this Agreement. As used in this section 6, the term "Adviser"
shall include any officers, directors, employees or other affiliates of the
Adviser performing services with respect to the Fund.
7. Services Not Exclusive. It is understood that the services of the
Adviser are not exclusive, and that nothing in this Agreement shall prevent the
Adviser from providing similar services to other investment companies or to
other series of investment companies, including the Trust (whether or not their
investment objectives and policies are similar to those of the Fund) or from
engaging in other activities, provided such other services and activities do
not, during the term of this Agreement, interfere in a material manner with the
Adviser's ability to meet its obligations to the Fund hereunder. When the
Adviser recommends the purchase or sale of a security for other investment
companies and other clients, and at the same time the Adviser recommends the
purchase or sale of the same security for the Fund, it is understood that in
light of its fiduciary duty to the Fund, such transactions will be executed on a
basis that is fair and equitable to the Fund. In connection with purchases or
sales of portfolio securities for the account of the Fund, neither the Adviser
nor any of its directors, officers or employees shall act as a principal or
agent or receive any commission. If the Adviser provides any advice to its
clients concerning the shares of the Fund, the Adviser shall act solely as
investment counsel for such clients and not in any way on behalf of the Trust or
the Fund.
8. Duration and Termination. This Agreement shall continue until March 10,
1997, and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (i) the
Trustees or (ii) a vote of a "majority" (as defined in the 1940 Act) of the
Fund's outstanding voting securities (as defined in the 1940 Act), provided that
in either event the continuance is also approved by a majority of the Trustees
who are not parties to this Agreement or "interested persons" (as defined by the
1940 Act) of any party to this Agreement, by vote cast in person at a meeting
called for the purpose of voting on such approval. Notwithstanding the
foregoing, this Agreement may be terminated: (a) at any time without penalty by
the Fund upon the vote of a majority of the Trustees or by vote of the majority
of the Fund's outstanding voting securities, upon sixty (60) days' written
notice to the adviser or (b) by the Adviser at any time without penalty, upon
sixty (60) days' written notice to the Trust. This Agreement will also
terminate automatically in the event of its assignment (as defined on the 1940
Act).
9. Amendments. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) a majority of the outstanding
voting securities of the Fund, and (ii) a majority of the Trustees, including a
majority of Trustees who are not interested persons of any party to this
agreement, cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
10. Proxies. Unless the Trust gives written instructions to the contrary,
the Adviser shall vote all proxies solicited by or with respect to the issuers
of securities in which assets of the Fund may be invested. The Adviser shall
use its best good faith judgment to vote such proxies in a manner which best
serves the interests of the Fund's shareholders.
11. Name Reservation. The Trust acknowledges and agrees that the Adviser
has property rights relating to the use of the terms "Lord Asset Management" and
"Thomas White" and has permitted the use of such terms by the Trust and its
Funds. The Trust agrees that: (i) it will use the terms "Lord Asset Management"
and "Thomas White" only as a component of the names of the Trust and the Funds
and for no other purposes; (ii) it will not purport to grant to any third party
any rights in such name; (iii) at the request of the Advisor, the Trust will
take such actions as may be required to provide its consent to use of the terms
by the Adviser, or any affiliate of the Adviser to whom the Adviser shall have
granted the right to such use; and (iv) the Adviser may use or grant to others
the right to use the term, or any abbreviation thereof, as all or a portion of a
corporate or business name or for any commercial purpose, including a grant of
such right to any other investment company. Upon termination of this Agreement
as to the Trust or any Fund, the Trust shall, upon request of the Adviser, cease
to use the terms "Lord Asset Management" and "Thomas White" as part of the name
of the Trust and its Funds, or of any Fund as to which the Agreement is
is terminated, as applicable. In the event of any such request by the Adviser
that use of the terms "Lord Asset Management" and "Thomas White" shall cease,
the Trust shall cause its officers, trustees and stockholders to take any and
all such actions which the Adviser may request to effect such request and to
reconvey to the Adviser any and all rights to the terms "Lord Asset Management"
and "Thomas White."
12. Miscellaneous.
a. This Agreement shall be governed by the laws of the State of Illinois,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act, or rules or orders of the SEC thereunder.
b. The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
c. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected hereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
d. Nothing herein shall be construed as constituting the Adviser as an agent
of the Trust or the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as
LORD ASSET MANAGEMENT TRUST
by /s/ Thomas S. White, Jr.
President
LORD ASSET MANAGEMENT, INC.
By /s/ Thomas S. White, Jr.
Chairman
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated November 17, 1995, on the
financial statements of the Thomas White World Fund series of Lord Asset
Management Trust referred to therein, in Post-Effective Amendment No. 2 to the
Registration Statement of Form N-1A, File No. 33-75138 as filed with the
Securities and Exchange Commission.
We also consent to the reference to our Firm in the Prospectus under the caption
"Selected Fiancial Information" and in the Statement of Additional Information
under the caption "Independent Accountants."
McGladrey & Pullen, LLP
New York, New York
February 27, 1996
ANNUAL REPORT
THOMAS WHITE WORLD FUND
Thomas White World Fund
Officers and Trustees Investment Advisor and
Thomas S. White Jr. Administrator
Chairman of the Board and President Lord Asset Management Inc.
Jill F. Almeida 440 S. LaSalle Street, Suite 3900
Trustee Chicago. Illinois 60605-1028
Philip R. Haag Custodian
Trustee The Chase Manhattan Bank, N.A.
Nicholas G. Manos Metrotech Center
Trustee Brooklyn, New York 11245
Edward E. Mack III Legal Counsel
Trustee Dechert, Price & Rhoads
Michael R. Miller 1500 K Street, N.W.
Trustee Washington, DC 20005
John N. Venson, D.P.M. Independent Accountants
Trustee McGladrey & Pullen LLP
Peter A. Zaldivar 555 Fifth Avenue
Vice-President and Secretary New York, New York 10017
Roberta J. Johnson Transfer Agent
Vice-President and Treasurer Firstar Trust Company
615 East Michigan Street
Milwaukee, Wisconsin 53202
The Thomas White World Fund
Mr. White, the Fund's President and Portfolio
Manager, has been an active professional investor and
analyst of common stocks since joining Goldman Sachs
in 1966. His interests have always been global. As a
boy he grew up around the world, living in Naples,
Manila and ten other communities before graduating
from Duke University in 1965. Over his twenty-nine
years as an investment manager, he has been with
Lehman Brothers, Blyth Eastman Dillon and most
recently, fourteen years with Morgan Stanley. At
Morgan Stanley, he was a Managing Director and
Chief Investment Officer for the firm's valuation-oriented
equity investing.
Together with his team of Lord Asset Management
analysts, Mr. White manages a number of global and
country-specific investment portfolios. The group also
produces monthly publications which value global
securities. These are purchased by investment
organizations worldwide.
The Following Letter Was Written
By Mr. White While Traveling in the
Far East Researching The Fund's
Asian Holdings:
December 6, 1995
Dear Shareholder:
Vitality is the single word that repeatedly comes to mind
when I travel through the Orient. Singapore: steady,
strong, proud, 100% employment, construction everywhere
you look, clean-cut people, and a city with the cleanliness and
efficiency of Walt Disney World. Few Americans would
believe that such a place could exist outside of Orlando,
Florida.
Hong Kong: more energy, bustling, but people who
appear happy, not strained. The city looks like a handsome,
sixteen year-old boy, a bit awkward and already outgrowing
his new clothes, but smiling, proud and confident. Capitalism
has no better face than Hong Kong. It is obviously why
China is converting to this new religion. Shanghai: the past
and future financial center of China, is developing so quickly
that descriptions are not believable. There appears to be no
organization in China powerful enough to reverse this
momentum.
The bottom line is that free enterprise and democracy
is in the process of converting Asian countries into fully
developed, stable nations. There will be bumps along the
way, but countries like China and India, with their billion-strong
populations, are going to be mature industrial nations
within twenty-five years. Expanding world prosperity raises
the standard of living around the globe, as every country will
contribute and benefit. This will be led by the growth of new
and existing stock markets and their equities. These are the
means to finance the expansion. The world will continue to
be an exciting place with many positives for which to be
thankful.
How does your manager plan to take advantage of the
worldwide opportunities that our future holds? The answer
is in the same professional, thorough manner that we have
always approached investing. Our investment process is a
team effort. Each of our six regional analysts make important
contributions to the fund's success.
As the the Fund's Chief Investment Officer, my experience
has shaped our investment philosophy over the years. A
Scottish ancestry may explain that fact that we tend to
watch the downside first and the upside second. Can one
get superior, long-term equity performance while using an
approach stressing milder declines in down markets?
Absolutely! We have accomplished this successfully in the
past.
This manager's approach is to purchase a security when it
is priced as a bargain relative to other stocks. Lord's analysts
are skilled in determining the accurate valuation of companies.
Our investment strategy buys stocks at discounts and then
sells them when they are fully priced. The turnaround from
unpopular and undervalued to in vogue and overvalued takes
several years to complete.
Our goal is to assist you in becoming a successful, long-term investor.
We have every confidence that our investment philosophy will work well in
the exciting future we have before us.
Thomas S. White, Jr.
President and Portfolio Manager
<TABLE>
THE WORLD HAS CHANGED. A GLOBAL
PORTFOLIO IS NOW BOTH LOGICAL
AND INCREASINGLY INVITING.
<S> <C> <C> <C>
1960 1970 1995
US & Canada 75% 70% 40%
Europe 22% 22% 23%
Asia Pacific 3% 8% 37%
100% 100% 100%
Global Market
Value (Billions) $500 $2000 $9200
</TABLE>
<TABLE>
The World Equity Market and its Major Regonal Components
Jan 1, 1970-Dec 31, 1994 Returns in US Dollars with Regional
Performance Ranked #1 to #4
<S> <C> <C> <C> <C> <C>
Five-Year World Europe USA Japan Pacific
Periods Ex-Japan
1970-1974 -1.3% -0.9%(#2) -3.4%(#1) 16.0(#1) -6.2%(#4)
1975-1979 16.0% 18.9%(#2) 13.3%(#3) 18.8(#3) 27.5%(#1)
1980-1984 12.4% 6.1%(#3) 14.5%(#1) 17.0(#1) 4.1%(#4)
1985-1989 28.0% 32.3%(#2) 19.8%(#1) 41.4(#1) 22.4%(#3)
1990-1994 4.2% 7.0%(#3) 9.2%(#4) -3.4(#4) 15.3%(#1)
US Dollar Return 11.6% 12.4% 11.0% 16.3% 12.0%
Return Components:
Currency Return +1.4% +0.8% 0.0% +5.8% -0.7%
Local Mkt Return 10.0% 11.5% 11.0% 9.9% 12.8%
</TABLE>
YOUR FUND'S OBJECTIVE
The Thomas White World Fund seeks long-term capital growth through a
flexible policy of investing in stocks and debt obligations of companies and
governments of any nation, including underdeveloped countries.
YOUR FUND'S INVESTMENT PHILOSOPHY
I. Superior returns can come from properly harnessing the
high potential inherent within undervalued global companies.
II. A value-oriented investment style can capture this potential
while maintaining a lower risk profile and high dividend
income.
III. We emphasize owning bargain-priced companies with solid cash
flows, attractive growth potentials and appropriately conservative
balance sheets.
IV. Currency projections are not a stong factor in our valuations.
Management Discussion December 27, 1995
This publication represents the second annual report of the
Thomas White World Fund. The period started on November
1, 1994 and ended on October 31, 1995. Our Fund will
celebrate its second birthday next year on June 28th. As of this
writing, we have $33 million of shareholder money in the
Fund. We at the Firm are appreciative and thankful for your
confidence in our organization.
On October 31, the Fund's portfolio of equities included
151 companies from seventeen countries around the world.
These represent 83.7% of the Fund's total value, with the rest
in cash equivalents or other assets.
The Fund's performance versus the Morgan Stanley World
Index is presented below. Current price and return data now
appear daily in most domestic newspapers. This can be found
in the Mutual Fund Section listed alphabetically under the
"T"s as Thom White. Many papers also regularly show the
year-to-date 1995 performance. We are pleased with the
portfolio's progress this year. Returns have been competitive,
both in an absolute sense and in comparison to other global
mutual funds.
<TABLE>
<S> <C> <C>
Performance Period T. White MSCI
Ending 10-31-95 World World
Since Inception (6-28-94) 14.09% 15.29%
Last Twelve Months 8.65% 9.47%
Year-To-Date 13.33% 13.40%
</TABLE>
Your Manager's Strength: Stock Selection
One of the keys to personal happiness is knowing one's
strengths and weaknesses and arranging your life accordingly.
The same is true in portfolio management. Lord Asset Management's
greatest skill is the precise valuation of corporations worldwide.
Our expertise in equity valuations is well recognized by the global
investment management community. We sell valuation research to asset
management firms around the world. Mr. White has been the featured
speaker to security analysts on the subject in Vancouver and Singapore
this year.
The Fund's portfolio reflects a management decision to
take full advantage of its ability to properly value companies. We
buy those that are undervalued and diversify worldwide. Other
managers emphasize trying to add value by selecting the country or
currency that will outperform. They claim an expertise in forecasting
economic and political events, like the business cycle, monetary
authority actions, election results, etc. Your Fund managers have no
illusions about their precision in the area of economic forecasting.
Utilizing our organization's strength, the Fund's portfolio
chooses to have broad exposure to each country where we find
undervalued companies. We are currently buying more equities
in Japan, where prices have fallen and remained depressed over the
last six years. Funds for these purchases are coming from the United
States, whose stock market was exceptionally strong this year. The
marvelous diversity of global market conditions, supply us with a
never ending flow of new undervalued stocks as candidates to purchase.
I hope this review helps you to understand the disciplines
and activities of your portfolio manager and the six global
securities analysts that assist him. Our performance will only
be superior if our research and discipline is superior. We
have this in mind daily as we strive to make you a successful
investor.
<TABLE>
The Thomas White World Fund
Geographic distribution on October 31, 1995
Based on Long-Term Securities
<S> <C>
Continental Europe 26.5%
United Kingdom 8.5%
North America 41.4%
Latin America 0.7%
Japan 9.8%
Far East 7.4%
Australia and New 5.7%
Zealand
</TABLE>
<TABLE>
The Thomas White World Fund
Top Ten Holdings on October 31, 1995
Based on Total Net Assets
<S> <C>
Company % of Total
Industry, Country Net Assets
New World Development Co. 1.5%
Industrial, Hong Kong
Jardine Strategic Holdings 1.4%
Industrial, Hong Kong
International Nederland Groep NV 1.4%
Insurance, Netherlands
Eridania Beghin-Say 1.3%
Staples, France
Hitachi Ltd ADR 1.3%
Technology, Japan
ITT 1.1%
Industrial, Japan
National Australia Bank 1.1%
Banking, Australia
Rhone-Poulenc Rorer 1.1%
Healthcare, United States
American Home Products 1.0%
Healthcare, United States
Boatmens Bancshares 1.0%
Banking, United States
</TABLE>
Performance Summary
This Fund's performance period since inception was one
year, four months and two days in length. Over this period the
Fund's return, with dividends reinvested, was 14.1%. This
included dividends of $0.086522 (income) and $0.000804
(capital gains). These were paid on December 29, 1994. In the
same period the MSCI World Index, with net dividends,
returned 15.3%. The graph below shows the monthly value of
$10,000 initially invested in the Fund and the MSCI World
Index.
<TABLE>
Pursuant to Rule 304(a) of Regulation S-T, the following table replaces
a graph showing growth of an initial $10,000 investment, assuming all
dividends reinvested, and the MSCI World Index (see footnote 1). The return
since inception(June 28, 1994) was 14.1% for the Fund and 15.3% for the World
Index (see footnote 2). The average total return since inception was 10.3%.
<S> <C> <C>
Fund MSCI World
Composite Index
6/30/94 $10,010 $10,028
7/31/94 10,440 10,217
8/31/94 10,690 10,522
9/30/94 10,380 10,243
10/31/94 10,500 10,532
11/30/94 10,130 10,073
12/31/94 10,067 10,168
1/31/95 9,966 10,012
2/28/95 10,259 10,156
3/31/95 10,531 10,643
4/30/95 10,803 11,011
5/31/95 11,035 11,103
6/30/95 11,106 11,097
7/31/95 11,550 11,650
8/31/95 11,389 11,388
9/30/95 11,570 11,717
10/31/95 11,409 11,529
Note: 1. MSCI World Index is with net dividends
2. Past performance should not be construed as a quarantee of
future performance.
</TABLE>
Dividend Information
On December 12, 1995, the Board of Directors declared a
dividend of $0.194880 per share from net investment income
and a distribution from net realized long-term gain of
$0.136889 and $0.346858 from net realized short-term gains
per share. These are payable December 29, 1995 to
shareholders of record December 26, 1995.
In accordance with current Internal Revenue Service
requirements, these distributions comprise substantially all
earnings of the Fund from net investment income through
December 31, 1995, and net realized gains through the fiscal
year ending October 31, 1995.
Information regarding the taxability of the above-mentioned
dividends and distributions will be sent to shareholders following
the close of the calendar year.
<TABLE>
THOMAS WHITE WORLD FUND
Portfolio of Investments
Issue Industry Shares Value
<S> <C> <C> <C> <C>
COMMON STOCKS: 83.7%
AUSTRALIA: 4.4%
Email Ltd. Industrial 73,900 $185,570
Goodman Fielder Ltd Consumer Staples 236,300 237,363
National Australia Bank Ltd. Banking 20,760 177,562
National Australia Bank Ltd. ADR Banking 4,300 185,975
Pacific Dunlop Ltd Industrial 93,700 226,735
Rothmans Holdings Ltd. Consumer Staples 56,000 208,807
Santos Ltd. Energy 79,500 214,761
1,436,773
BELGIUM: 1.2%
G.I.B. Holdings Consumer Staples 4,300 168,060
Tractabel Invest Inter BV Utility 600 219,587
387,647
CANADA: 2.4%
BCE Inc. Communication 4,900 164,457
Canfor Corporation Building 11,200 116,622
Methanex Corporation * Chemicals 16,300 109,111
Royal Bank of Canada Banking 6,200 138,917
Quebecor Incorporated Class B Services 9,300 140,070
Transalta Corporation Utilities 12,900 139,121
808,298
FINLAND: 1.7%
Huhtamaki OY Consumer Staples 6,500 192,983
Kesko OY Services 16,000 200,570
Metsa-Serla OY Forest & Paper 4,400 163,812
557,365
FRANCE: 5.0%
Alcatel Alsthom Industrial 2,000 170,972
Bouygues Building 2,000 212,897
CGIP Industrial 800 151,484
Eridania Beghin-Say Consumer Staples 2,600 437,503
Esso (Francaise) Energy 1,500 164,585
Peugot SA Consumer Durables 1,300 169,519
Saint Louis SA Services 500 143,910
Union Assurance de Paris Insurance 7,500 194,985
1,645,855
GERMANY: 3.3%
AGIV AG Industrial 5,000 105,072
AVA Allgemeine Handels Consumer Retail 500 189,557
Bayer AG Chemicals 700 186,064
Douglas Holding AG Services 5,000 182,812
Hoechst AG Chemicals 800 209,975
Volkswagen AG Consumer Durables 700 220,404
1,093,884
HONG KONG: 5.1%
Amoy Properties Financial Diversified 149,500 144,073
Hopewell Holdings Building 337,000 212,748
Jardine Strategic Holdings Services 177,000 476,130
New World Development Co. Industrial 124,000 482,806
New World Infrastructure Building 206 362
Semi-Tech (Global) Industrial 90,000 140,868
Wheelock & Company Consumer Retail 140,000 230,902
1,687,889
ITALY: 2.6%
Banca Commerciale Italiana SPA Banking 93,600 182,670
Benetton SPA Consumer Retail 19,500 202,018
Instituto Mobilare Italiano SPA Banking 34,300 187,487
Stet Risp NON CV Communication 130,300 284,575
856,750
JAPAN: 8.2%
Bank of Iwate Banking 1,700 91,577
Brothers Industries Capital Goods 18,000 90,441
Chiba Kogyo Bank Banking 1,500 57,003
Dainippon Ink & Chemicals, Inc. Chemicals 20,000 85,210
East Japan Railway Transportation 22 104,074
Fuji Photo Film Company Consumer Retail 12,000 297,355
Hisamitsu Pharmaceutical
Company Inc. Healthcare 10,000 69,344
Hitachi Ltd. ADR Technology 4,100 428,963
Hokkaido Electric Power Co., Inc. Utilities 3,060 71,030
Juroku Bank Banking 11,000 54,407
Kyushu Electric Power Co., Inc. Utilities 3,030 71,818
Marudai Food Company Consumer Staples 38,000 256,808
Matsushita Electric Industries Co. Consumer Durables 6,000 85,211
Nichimen Corporation Industrial 21,000 74,661
Nintendo Company Consumer Retail 4,000 294,613
Oita Bank Banking 8,000 64,250
San-In-Godo Bank Banking 7,000 58,208
Seiyu Consumer Retail 6,000 69,931
Sekisui House Building 19,000 219,589
Shionogi & Company Healthcare 10,000 83,839
Shiseido Company Healthcare 7,000 70,617
2,698,949
MALYASIA: 1.1%
Aokam Perdana Berhad Building 43,000 72,102
Oriental Holdings Berhad Services 22,000 101,319
Perlis Plantation Berhad Consumer Staples 35,000 104,017
Rashid Hussain Berhad Financial Diversified 35,000 86,793
364,231
MEXICO: 0.6%
Telefonos de Mexico Series L ADR Communication 7,400 203,500
203,500
NETHERLANDS: 3.9%
ABN-AMRO Holdings NV Banking 7,500 314,815
Aegon Insurance 4,750 180,136
Koninklijke Hoogovens NV Metals 4,300 147,008
International Nederlanden Groep NV Insurance 7,517 447,831
Philips Electronics NV Industrial 5,100 196,961
1,286,751
NEW ZEALAND: 0.4%
Brierley Investments Ltd. Industrial 89,600 69,780
Fletcher Challenge Ltd. Forest & Paper 23,200 61,401
Fletcher Challenger Ltd.
- Forest Division Forest & Paper 3,291 4,540
135,721
SPAIN: 1.5%
Argentaria Corp. Bancaria de Espana Banking 6,200 218,827
Iberdrola SA Utility 35,600 268,207
487,034
SWEDEN: 0.9%
Svenska Handelsbanken AF Banking 16,500 289,813
289,813
SWITZERLAND: 2.1%
Elektrowatt Inhaber Utility 700 210,984
Sulzer AG Capital Goods 200 298,770
Winterthur Schweiz Insurance 300 200,615
710,369
UNITED KINGDOM: 7.1%
Abbey National PLC Banking 17,600 148,588
Arjo Wiggins Appleton PLC Forest & Paper 32,400 119,864
BAA PLC Services 17,600 136,624
Bass PLC Consumer Staples 15,400 161,834
British Airways Transportation 29,300 210,770
British Petroleum Co. Energy 18,500 137,255
Burton Group PLC Consumer Retail 106,600 170,219
Coats Viyella Consumer Retail 42,600 126,616
Daily Mail & General Trust Services 6,000 121,895
Harrison & Crosfield PLC Industrial 55,300 125,896
Hillsdown Holdings Consumer Staples 45,400 120,224
Ladbroke Group Services 48,800 127,300
Mercury Asset Management Financial Diversified 6,516 95,137
National Westminster Bank PLC Banking 15,500 154,630
NFC PLC Transportation 50,000 122,525
Northern Foods Consumer Staples 42,900 126,152
Severn Trent Utility 13,500 136,812
2,342,341
UNITED STATES: 32.2%
Amerada Hess Corporation Energy 4,300 194,038
American Brands Inc. Consumer Staples 6,400 274,400
American Home Products Corporation Healthcare 3,900 345,638
American National Insurance Co. Insurance 3,400 193,800
Anheuser Busch Cos. Inc. Consumer Staples 2,600 171,600
Archer Daniels Midland Corporation Consumer Staples 13,335 215,027
Boatmens Bancshares Incorporated Banking 8,900 338,200
Bristol Myers Squibb Co. Healthcare 4,300 327,875
Chase Manhattan Corporation Banking 4,500 256,500
Comsat Corporation Series 1 Communication 9,800 194,775
Consolidated Natural Gas Co. Energy 5,600 212,800
Detroit Edison Co. Utility 6,700 226,125
Dial Corporation Ariz Services 11,600 282,750
Digital Equipment Corp. * Technology 1,000 54,125
Dow Chemical Co. Chemicals 2,700 185,287
First Chicago Corporation Banking 900 61,087
Ford Motor Company Consumer Durables 8,100 232,875
General Dynamics Corporation Aerospace 3,900 215,962
General Motors Corp. Class H Consumer Durables 5,200 218,400
Goodyear Tire & Rubber Company Consumer Durables 6,100 231,800
Harris Corporation Technology 5,300 305,412
International Business
Machines Corp. Technology 500 48,625
ITT Corporation Industrial 3,000 367,500
JC Penny, Inc. Consumer Retail 2,300 96,887
Kroger Company * Consumer Staples 7,100 236,962
McDonnell Douglas Corporation Aerospace 2,500 204,375
Mellon Bank Corporation Banking 1,350 67,669
Midlantic Corporation Banking 4,900 259,700
National Service Industries Industrial 6,700 199,325
Norfolk Southern Corporation Transportation 2,700 208,575
Nynex Corporation Communication 6,100 286,700
Ogden Corporation Services 11,000 250,250
Pacific Telesis Group Communication 5,100 154,912
Panhandle Eastern Corporation Energy 10,100 255,025
Phillip Morris Cos., Inc. Consumer Staples 2,600 219,700
Reebok International Ltd. Consumer Retail 4,200 142,800
Rhone Poulenc Rorer, Inc. Healthcare 7,400 348,725
SCE Corporation Utility 10,000 170,000
Snap-On Inc. Services 1,200 50,850
Southern New England
Telecommunications Corp Communication 1,900 68,637
Sprint Corp. Communication 5,700 219,450
SuperValu Incorporated Consumer Staples 6,200 190,650
Textron Incorporated Industrial 2,300 158,125
Transamerica Corporation Insurance 2,300 155,825
Unicom Corporation Utility 2,000 65,500
United Technologies Corporation Industrial 3,000 266,250
USLife Corporation Insurance 7,650 218,025
USX Marathon Corporation Energy 11,800 209,450
VF Corporation Consumer Retail 2,600 124,475
Williams Company Incorporated Energy 4,200 162,225
Witco Corporation Services 6,200 175,150
Xerox Corporation Services 2,300 298,425
10,619,243
Total Common Stocks (Cost $26,159,937) 27,612,413
US GOVERNMENT 5.8%
BONDS
Principal
Amount
U.S. Treasury Bill, 08/22/96 2,000,000 $1,913,143
Total U.S. Government (Cost $1,913,143) 1,913,143
Bonds
Total Investments: 89.5% (Cost$28,073,080) 29,525,556
Other Assets, Less
Liabilities: 10.5% 3,453,045
Total Net Assets: 100% $32,978,601
* Non-income Producing Security
See Notes to Financial Statements.
</TABLE>
<TABLE>
THOMAS WHITE WORLD FUND
Statement of Assets and Liabilities
October 31, 1995
<S> <C>
ASSETS
Investments in securities at value (cost $28,073,080) $29,525,556
Cash (including $2,829,645 at interest) 2,895,716
Receivables:
Investment securities sold 425,924
Dividends and interest 142,372
Deferred organization costs 21,928
Equipment 30,614
Total assets 33,042,110
LIABILITIES
Accrued expenses 63,509
Total liabilities 63,509
NET ASSETS
Source of Net Assets:
Net capital paid in on shares of beneficial interest $29,721,983
Undistributed net investment income 464,315
Accumulated net realized gain 1,339,827
Net unrealized appreciation 1,452,476
Net assets $32,978,601
Shares outstanding 2,915,190
Net asset value per share $11.31
See Notes to Financial Statements
</TABLE>
<TABLE>
THOMAS WHITE WORLD FUND
Statement of Operations
Year Ended October 31, 1995
INVESTMENT INCOME
<S> <C>
Income:
Dividends (net of foreign taxes withheld of $61,436) $690,545
Interest 183,907
Other 971
Total investment income 875,423
Expenses:
Investment management fees 245,788
Custodian fees 21,354
Audit fees and expenses 16,993
Trustees' fees and expenses 15,005
Legal fees and expenses 25,004
Organization costs 6,001
Registration Fees 7,812
Depreciation Expense 10,349
Other expenses 18,202
Total expenses 366,508
Net investment income 508,915
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain:
Investments 1,337,019
Foreign currency transactions 2,808
1,339,827
Unrealized appreciation on investments 979,253
Net gain on investments 2,319,080
Net increase in net assets from operations $2,827,995
</TABLE>
<TABLE>
THOMAS WHITE WORLD FUND
Statements of Changes in Net Assets
Period from
Year June 28, 1994
Ended (Inception) to
October 31, 1995 October 31, 1994
<S> <C> <C>
Change in net assets from operations:
Net investment income $ 508,915 $ 72,967
Net realized gain 1,339,827 1,093
Unrealized appreciation for the period 979,253 473,223
Net increase in net assets from operations 2,827,995 547,283
Distributions to shareholders:
From net investment income (117,567)
From net realized gain (1,093)
Fund share transactions 16,340,920 13,281,063
Total increase 19,050,255 13,828,346
Net assets:
Beginning of period 13,928,346 100,000
End of period $ 32,978,601 $ 13,928,346
See Notes to Financial Statements
</TABLE>
THOMAS WHITE WORLD FUND
Notes to Financial Statement
October 31, 1995
Note 1. Summary of Accounting Policies
Lord Asset Management Trust (the "Trust") was organized as a Delaware
business trust on February 9, 1994, as an open-end diversified management
investment company. The Trust currently has one series of Shares, the
Thomas White World Fund (the "Fund"). The following is a summary of
significant accounting policies followed in the preparation of its financial
statements.
(a) Valuation of securities. Securities listed or traded on a recognized
national or foreign stock exchange or NASDAQ are valued at the last
reported sales prices on the principal exchange on which the
securities are traded. Over-the-counter securities and listed
securities for which no sale is reported are valued at the mean between
the last current bid and asked prices. Securities for which market
quotations are not readily available are valued at fair value as
determined by management and approved in good faith by the Board of
Trustees.
(b) Foreign currency translation. Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells a foreign security it
will customarily enter into a foreign exchange contract to minimize
foreign exchange risk from the trade date to the settlement date of
such transaction.
The Fund does not isolate that portion of the results of operations
resulting from changes in foreign exchange rates on investments from
the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from
sales of foreign currencies, currency gains or losses realized
between the trade and settlement dates on securities transactions,
the differences between the amounts of dividends, and foreign
withholding taxes recorded on the Fund's books, and the U.S. dollar
equivalent of the amounts actually received or paid. Net unrealized
foreign exchange gains and losses arise from changes in the value of
assets and liabilities other than investments in securities at the end
of the fiscal period, resulting from changes in the exchange rates.
(c) Income taxes. It is the Fund's intention to comply with the provisions
of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its
shareholders. Therefore, no provision has been made for federal income
taxes. Distributions to shareholders are recorded on the ex-dividend
date. Income distributions and capital gain distributions are
determined in accordance with income tax regulations.
(d) Deferred organization costs. Organization costs have been deferred and
are being amortized over the period ending June 28, 1999.
(e) Other. Investment transactions are accounted for on a trade date basis.
Interest is accrued on a daily basis and dividend income is recorded on
the ex-dividend date, except that certain dividends from foreign
securities are recorded when the information is available to the Fund.
Note 2. Transactions in Shares of Beneficial Interest
As of October 31, 1995, there were an unlimited number of $.01 par value
shares of beneficial interest authorized. Transactions are summarized as
follows:
<TABLE>
Year Ended Period from June 28, 1994
October 31, 1995 (Inception) to October 31, 1994
Shares Amount Shares Amount
<S> <C> <C> <C> <C>
Shares sold 1,579,042 $16,248,265 1,316,638 $13,281,063
Shares issued on
reinvestment of
distributions 11,889 118,659
Shares redeemed (2,379) (26,004)
Net increase 1,588,552 $16,340,920 1,316,638 $13,281,063
</TABLE>
Note 3. Investment Management Fees and Other Transactions with Affiliates
The Fund pays monthly an investment management fee to Lord Asset
Management at the rate of 1% of the Fund's average daily net assets. Prior
to March 1, 1995, the Fund paid monthly an investment management fee to Lord
Asset Management at the rate of 1/12 of 1% of the Fund's net assets at the end
of each month. The fee is subject to reduction in any year to the extent that
expenses (exclusive of certain expenses) of the Fund exceed any applicable
state regulations. The strictest rule currently applicable to the Fund is
2.5% of the first $30 million of net assets, 2.0% of the next $70 million of
net assets, and 1.5% of the remainder. No reimbursement was required for the
year ended October 31, 1995.
Note 4. Investment Transactions
During the year ended October 31, 1995, the cost of purchases and the
proceeds from sales of investment securities, other than short-term
obligations, were $26,970,987 and $13,791,648, respectively. The cost of
securities for federal income tax purposes was $28,157,752. Realized gains
and losses are reported on an identified cost basis.
At October 31, 1995, the aggregate gross unrealized appreciation and
depreciation of portfolio securities, based upon cost for federal income tax
purposes, were as follows:
<TABLE>
<S> <C>
Unrealized appreciation $2,737,124
Unrealized depreciation (1,369,320)
Net unrealized appreciation $1,367,804
</TABLE>
<TABLE>
Note 5. Selected Financial Information
Period from
Year June 28, 1994
Ended (Inception) to
October 31, 1995 October 31, 1994
<S> <C> <C>
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of period $10.50 $10.00
Income from investment operations:
Net investment income 0.19 0.06
Net realized and unrealized gain 0.71 0.44
0.90 0.50
Distributions from net investment income (0.09)
Change in net asset value for the period 0.81 0.50
Net asset value, end of period $11.31 $10.50
Total Return 8.65% 5.00%
Ratios/supplemental data
Net assets, end of period (000) $32,979 $13,928
Ratio to average net assets:
Expenses (net of reimbursement) 1.49% 1.50%+
Net investment income 2.08% 1.79%*
Portfolio turnover rate 64.54% 0.01%
* Annualized
+ In the absence of the expense reimbursement, expenses would have been 2.36%
of average net assets.
</TABLE>
Independent Auditor's Report
The Board of Trustees
Thomas White World Fund
We have audited the accompanying statement of assets and
liabilities, including the investment portfolio, of Thomas White
World Fund as of October 31, 1995, and the related statement of
operations for the year then ended, the statement of changes in
net assets and the selected financial information for the year
then ended and for the period from June 28, 1994 (inception) to
October 31, 1995. These financial statements and selected
financial information are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these
financial statements and selected financial information based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements and selected financial information are
free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation
of securities owned as of October 31, 1995, by correspondence
with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and selected financial
information referred to above present fairly, in all material
respects, the financial position of Thomas White World Fund as
of October 31, 1995, the results of its operations, the changes
in its net assets, and the selected financial information for the
periods indicated, in conformity with generally accepted
accounting principles.
McGladrey & Pullen, LLP
New York, New York
November 17, 1995
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints Allan S. Mostof, William J. Kotapish, and Keith T.
Robinson and each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the undersigned in any and
all capacities to sign the Registration Statement of Lord Asset Management Trust
and any post-effective amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and conforming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to be done by virtue
hereof.
/s/ Brandon S. Joel
--------------------
Brandon S. Joel
Date: February 9, 1996
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that the person whose signature appears below
constitutes and appoints Allan S. Mostoff, William J. Kotapish, and Keith T.
Robinson and each of them, to act severally as attorneys-in-fact and agents,
with power of substitution and resubstitution, for the undersigned in any and
all capacities to sign the Registration Statement of Lord Asset Management Trust
and any post-effective amendments thereto, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and conforming all that said attorneys-in-
fact, or their substitute or substitutes, may do or cause to be done by virtue
hereof.
/s/John N. Venson
---------------------
John N. Venson
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-1-1994
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 28073
<INVESTMENTS-AT-VALUE> 29526
<RECEIVABLES> 568
<ASSETS-OTHER> 2948
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 33042
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 63
<TOTAL-LIABILITIES> 63
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29722
<SHARES-COMMON-STOCK> 2915
<SHARES-COMMON-PRIOR> 1327
<ACCUMULATED-NII-CURRENT> 464
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1340
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1452
<NET-ASSETS> 32979
<DIVIDEND-INCOME> 691
<INTEREST-INCOME> 184
<OTHER-INCOME> 1
<EXPENSES-NET> 367
<NET-INVESTMENT-INCOME> 509
<REALIZED-GAINS-CURRENT> 1340
<APPREC-INCREASE-CURRENT> 979
<NET-CHANGE-FROM-OPS> 2828
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 118
<DISTRIBUTIONS-OF-GAINS> 1
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1579
<NUMBER-OF-SHARES-REDEEMED> 2
<SHARES-REINVESTED> 12
<NET-CHANGE-IN-ASSETS> 19050
<ACCUMULATED-NII-PRIOR> 73
<ACCUMULATED-GAINS-PRIOR> 1
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 246
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 367
<AVERAGE-NET-ASSETS> 24525
<PER-SHARE-NAV-BEGIN> 10.5
<PER-SHARE-NII> .19
<PER-SHARE-GAIN-APPREC> .71
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .09
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.31
<EXPENSE-RATIO> 1.49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
