File No. 33-75138
As filed with the Securities and Exchange Commission on December 15, 1998
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. 8 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 10 / 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 Thomas White International, Ltd.
1775 Eye Street, N.W. 440 South LaSalle Street
Washington, D.C. 20006 Chicago, Illinois 60605-1028
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
on (date) pursuant to paragraph (a)(1)
x 75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
Prospectus
The Thomas White Funds Family
Capturing Value WorldwideSM
Thomas White American Growth Fund
Thomas White American Opportunities Fund
Thomas White World Fund
March 1, 1999
Thomas White American Growth Fund (the "American Fund") seeks long-term capital
growth by primarily investing in equity securities of United States companies.
Thomas White American Opportunities Fund (the "Opportunities Fund") seeks
long-term capital growth by primarily investing in equity securities of small to
mid-size United States companies.
Thomas White World Fund (the "World Fund") seeks long-term capital growth
through a flexible policy of investing worldwide.
The Funds are series of the Lord Asset Management Trust (the "Trust"), which can
be contacted at the following address and telephone number:
Lord Asset Management Trust
440 S. LaSalle Street
Suite 3900
Chicago, IL 60605
1-800-811-0535
The Securities and Exchange Commission has not approved or disapproved the
Funds' shares and has expressed no opinion as to the accuracy or adequacy of
this prospectus. It is a criminal offense to make a representation to the
contrary.
<PAGE>
Contents
Goals of the Funds and
Investment Strategies 3
What You Should Know About Risk 5
How the World Fund Has Performed 7
Expenses 8
The Advisor 9
Financial Information 12
Dividends, Distributions and 13
Taxes
Your Account
How to Buy Shares 15
How to Sell Shares 19
Shareholder Services and 21
Account Policies
Contacting the Thomas White
Funds Family 24
An Important Phone Number
All Shareholder Services: 1-800-811-0535
<PAGE>
Goals of the Funds The investment objective of the American, Opportunities and
World Funds is long-term capital growth.
Investment Strategy
Thomas White International, Ltd. (the "Advisor" or "TWI") buys equity securities
of companies at less than its research indicates to be their true worth. This is
intended to produce portfolios with lower price-to-earnings and price-to-book
ratios and higher yields than many comparable mutual funds. Companies considered
attractive will typically have the following characteristics:
o The market price of the equity is undervalued relative to earnings power,
break-up value and inherent profitability.
o The companies are, or may soon be, exhibiting improved financial
characteristics represented by rising cash flow, return on equity, operating
margins and book value.
o The price of its equities may have recently underperformed the general market
due to a low level of investor expectations regarding the earnings outlook.
o The companies should have the strength to operate successfully through adverse
business conditions.
This approach seeks out equities where current investor enthusiasm is low.
Positions are normally sold when the investment community's perceptions improve
and the securities approach fair valuation.
The Advisor adheres to a long-term investment approach, and it does not attempt
to project short-term changes in the general market. Each Fund intends to invest
in companies for holding periods greater than one year under normal market
conditions, so the frequency of its purchases and sales should be below many
comparable mutual funds. Lower portfolio turnover helps to reduce trading costs
and shareholders' taxes.
A high exposure to the equity market is normally maintained unless the Advisor
is unable to find undervalued securities that meet its criteria. Using this
investment management style, the Advisor seeks superior long-term performance,
below average return volatility and portfolio resilience in difficult market
environments.
<PAGE>
The American Fund
The American Fund primarily invests in equity securities of U.S. companies. The
American Fund is designed to benefit from the future economic growth of the U.S.
The American Fund may take advantage of opportunities that exist anywhere in the
U.S. equity market. It may also invest up to 35% of its assets in non-U.S.
equity securities. The Advisor may use American Depositary Receipts ("ADRs"),
which are depositary receipts, typically issued by a U.S. bank or trust company,
that allow indirect ownership of securities issued by foreign corporations.
The Advisor's research unit, the Global Capital Institute, looks for undervalued
securities in every U.S. industry.
The American Fund has the flexibility to engage in other investment techniques,
different from the principal strategies mentioned here.
The Opportunities Fund
The Opportunities Fund primarily invests in equity securities of mid-size and
small U.S. companies. The Advisor currently classifies a company as mid-size or
small if it has an approximate market capitalization (current price x shares
outstanding) of less than five billion dollars. The Advisor currently researches
over 1,600 issuers that it classifies as small or mid-size and generally will
use this pool of issuers to select stocks for the Opportunities Fund.
Equity securities of mid-size and small companies tend to have greater price
fluctuation than larger, established companies. The Advisor will attempt to
manage this risk by normally owning companies that represent a broad range of
industries. The Fund will compare itself to, and attempt to outperform, the
Russell 2500 and the Russell 2000. These unmanaged indices represent 2,500
companies that have a market capitalization of $1 to $5 billion.
While the Advisor will primarily invest the assets of the Opportunities Fund in
American companies, the Opportunities Fund can invest up to 35% of its assets in
non-U.S. equity securities.
The World Fund
The World Fund primarily invests in equity securities of companies located in
the world's developed countries, including the U.S. Generally, equity
investments will represent a diversified portfolio of predominantly larger
companies. There may also be a small portion of the World Fund's assets in
companies from emerging market countries.
The World Fund is designed to benefit from future growth in developed and
emerging market countries, including the U.S. The Advisor produces monthly
valuation research that covers forty-seven countries. It believes that the world
now offers excellent opportunities for growth and diversification. The Fund is
designed to complement domestic equity funds, like the American and
Opportunities Funds.
<PAGE>
What You Should Know About Risk
Those Who Should Invest in the Funds
The Funds are designed to be appropriate for prudent investors who are seeking
the long-term performance advantage of equities and who want growth of capital
rather than current income. They should appeal to investors who are interested
in low-cost mutual funds. Under normal conditions the Funds will try to limit
shareholders' taxes through relatively low portfolio turnover.
Individuals should consider improving the risk-return profile of their U.S.
mutual funds by having exposure to foreign investing. The World Fund is designed
for this purpose.
The Advisor discourages potential shareholders who are aggressive, short-term
investors from investing in the Funds.
Equities
The Funds will generally be fully-invested in equity securities, including
common and preferred stocks. Common stocks represent an equity (ownership)
interest in a corporation, while preferred stocks generally pay a higher
dividend but do not represent ownership.
Each Fund is subject to market risk, which is the risk that the value of a
security may move up and down, sometimes rapidly and unpredictably, in response
to economic or other conditions. In addition, changes in interest rates affect
the value of portfolio securities held by the Funds and the operations of the
issuers of the Funds' portfolio securities.
Investing in mid and small cap companies can involve more risk than investing in
larger companies. Normally, these companies have more limited markets, product
lines and often more limited trading in their stocks. This can cause the prices
of equity securities of these companies to be more volatile than those of large
cap issuers, or to decline more significantly during market downturns than the
market as a whole. The World and Opportunities Funds are more likely than the
American Fund to be affected by the risks of investing in small capitalization
companies.
History shows that over long periods, equities have outperformed bonds, cash
equivalents and inflation. Nevertheless, in the short term, equity performance
may be volatile and unpredictable, and may produce greater negative returns than
other asset classes.
Foreign Securities
Holding equity securities of foreign companies can entail taking more risk than
owning the securities of domestic companies. Equity securities of foreign
companies may be subject to additional risks such as changes in currency
exchange rates, political instability and inadequate or unreliable information
about the companies. These risks may be particularly acute with respect to
investments in emerging markets.
While all of the Funds may invest in foreign securities, the World Fund can be
expected to be particularly subject to the risks posed by foreign investing.
These risks and others are more fully discussed in the SAI.
<PAGE>
General Risks
Shareholders should understand that all investments involve risk. There can be
no guarantee against loss resulting from an investment in the Funds, nor can
there be any assurance that a Fund's investment objective will be attained.
The value of a Fund's investments and, therefore, investment performance will
vary from day to day. When you sell your shares, they may be worth more or less
than the price you paid for them, and you could lose money.
TWI recognizes the above risks and attempts in its management of the Funds to
moderate them. It believes that a professionally structured and carefully
monitored portfolio can reduce the risks associated with less diversified equity
portfolios.
The Advisor attempts to configure the Funds' portfolios to moderate the natural
volatility of equities by focusing each Fund's investments in equities that in
theory are underpriced. However, its success in doing so cannot be assured. Such
securities may never reach what the Advisor believes to be their full value, or
may even go down in price. In addition, this approach may produce returns below
aggressive equity funds, given the Advisor's efforts to limit risk.
Under adverse market conditions, the Funds could invest some or all of their
assets in money market securities and similar investments. Although the Funds
would do this only in seeking to avoid losses, it could have the effect of
reducing the benefit from any upswing in the market.
Euro
On January 1, 1999, eleven European countries began conversion to a common
currency. Investments traded in the financial markets in these countries are now
denominated in this new currency. The Advisor does not believe this conversion
to a common currency will have a material impact on the net asset value of the
World Fund or affect the long-term outlook of those equities.
<PAGE>
How the World Fund Has Performed
The tables to the right display the World Fund's annual returns and long-term
performance. The American Fund was launched November 1, 1998 and the
Opportunities Fund began operations on March 1, 1999. Therefore, neither of
these Funds have performance data to report.
The first table shows that returns fluctuate from year to year. The second table
compares the World Fund's performance to that of the MSCI World Index and the
MSCI All Country World Index, recognized unmanaged indices of global stock
performance. Both tables assume the reinvestment of income dividends and capital
gains distributions.
The World Fund has a return pattern intended to appeal to the prudent investor
who has moderate risk tolerance and a long-term (over five years) investment
outlook.
Year-by-year Total Return as of 12/31 each year [Bar Chart]
1995 - 19.03%
1996 - 16.50%
1997 - 11.70%
1998 - To be provided
Best Quarter: Quarter 2, 1997 10.19%
Worst Quarter: Quarter 4, 1997 -2.98%
Average Annual Return
as of 12/31/98 [To be provided]
Inception
1 Year 3 Year (6/28/94)
World Fund -% -% -%
MSCI World -% -% -%
MSCI All Country World -% -% -%
As with all mutual funds, past performance is not a prediction of future
results.
Expenses
Annual Fund operating expenses are charges paid when shareholders buy and hold
shares of a Fund. A Fund's expenses are subtracted daily and are therefore
factored into the share price as reported; expenses are not charged directly to
shareholder accounts.
Annual Fund Operating Expenses
(deducted from Fund assets)
AMERICAN FUND
Management fee 1.00%
Distribution/12b-1 fee None
Other expenses 0.35%
Total fund operating expenses 1.35%*
OPPORTUNITIES FUND
Management fee 1.00%
Distribution/12b-1 fee None
Other expenses 0.35%
Total fund operating expenses 1.35%**
WORLD FUND
Management fee 1.00%
Distribution/12b-1 fee None
Other expenses 0.42%
Total fund operating expenses 1.42%***
* The Advisor has agreed to reimburse the American Fund to the extent that the
Fund's total operating expenses exceed 1.35% of the Fund's average daily net
assets. Absent this contractual undertaking, the Fund's total operating
expenses, based on estimates for the current fiscal year, would be 1.63%.
** The Advisor has agreed to reimburse the Opportunities Fund to the extent that
the Fund's total operating expenses exceed 1.35% of the Fund's average daily net
assets. Absent this contractual undertaking, the Fund's total operating
expenses, based on estimates for the current fiscal year, would be 1.63%.
* * * The Advisor has agreed to reimburse the World Fund for 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.
Examples: These examples illustrate the effect of expenses and are intended to
help you compare the costs of investing in the Funds with the costs of investing
in other mutual funds. The examples are not meant to suggest actual or expected
cost or returns, all of which may vary.
Use of this assumed 5% return is required by the Securities and Exchange
Commission ("SEC"); it is not an illustration of past or future investment
results.
Assume that a Fund's annual return is 5%, and that its operating expenses are
exactly as shown. For every $10,000 invested, here's how much a shareholder
would have paid in total expenses if the account was closed after the number of
years indicated:
AMERICAN FUND
After 1 year $137
After 3 years $428
OPPORTUNITIES FUND
After 1 year $137
After 3 years $428
WORLD FUND
After 1 year $145
After 3 years $449
After 5 years $776
After 10 years $1702
The No-Load Advantage
The Funds are 100% no-load, which means that all your money is invested at a
Fund's net asset value. There are no sales charges, no 12b-1 fees and no
back-end load fees that reduce your investment in a Fund.
<PAGE>
Quick Fact:
The World Fund's total expense ratio is 1.42% for the latest fiscal year,
compared to 1.88% for the average of the 265 world equity funds in the
Morningstar Principia Database on November 30, 1998.
The Advisor
The Funds are managed by Thomas White International, Ltd., 440 S. LaSalle
Street, Suite 3900, Chicago, Illinois 60605. TWI chooses each Fund's investments
and handles its affairs, under the direction of the Board of Trustees. TWI
provides the Funds with investment research, advice, supervision and certain
overhead items and facilities. TWI provides investment management and advisory
services to both a domestic and international client base, including trusts,
endowments, corporations, employee benefit plans, Taft-Hartley plans and
individuals.
Thomas S. White, Jr., has been the portfolio manager of the Funds since their
inceptions and has been managing investments for more than thirty years. He is
Chairman of TWI, which he founded in 1992. Before that he was a Managing
Director of Morgan Stanley Asset Management and Chief Investment Officer of its
Chicago Group, which he began in 1982. Further information concerning TWI is
included under the heading "Investment Management and Other Services" in the
SAI.
The Global Capital Institute is TWI's fully-owned research division. Its
analysts provide the company valuations that Mr. White uses to select stocks in
the Fund's portfolio. The Institute produces monthly equity valuation
publications for research clients who are asset management organizations located
around the world.
Each Fund pays a management fee, equal to 1.00% of the Fund's average daily net
assets on an annual basis, to TWI for managing its investments and business
affairs. See "Expenses."
TWI feels that it is important for shareholders to thoroughly understand and
grow comfortable with its investment approach. The Funds' shareholder
communications are written with this goal in mind.
Year 2000
The Funds' operations depend heavily on computer technology and the computer
systems of their service providers. The Advisor has implemented and successfully
completed a testing program to address technological challenges posed by the
transition to the Year 2000. Management of the Trust is working with, and
monitoring the efforts of, other service providers to the Funds to make sure
that they take steps that are reasonably designed to address Year 2000 issues.
Of course, there is no guarantee that these efforts will completely address all
technology issues raised by the transition to Year 2000. An incomplete or
untimely resolution of Year 2000 issues could have negative effects on the
operations of the Funds and their service providers. In addition, if the value
of a Fund investment is adversely affected by a Year 2000 problem, the net asset
value of the Fund will be affected as well.
The American and Opportunities Funds are designed to benefit from the Advisor's
ability to discover attractive investment opportunities in each of the major
industries within the United States.
The United States has the largest and most diversified economy in the world. Its
stock market ranks number one by dollar value and number of common stocks.
<PAGE>
The Advisor's research unit, the Global Capital Institute, has produced
investment valuations of U.S. companies within the following industries.
Advertising Engineering Newspaper
Aerospace Entertainment Office Equipment
Air Transport Food Processing Oilfield Services
Aluminum Foreign Packaging & Container
Apparel/Textile Forest Products Paper
Auto & Truck Home Furnishing Petroleum (Integrated)
Auto Parts Grocery Petroleum (Producing)
Banks: National Healthcare Precision Instrument
Banks: Regional Home Appliance Publishing
Beverages Home Building Railroads
Broadcasting Hotel Real Estate
Building Materials Household Products Recreation
Cable TV Industrial Services Restaurant
Cement & Aggregates Insurance Retail: Specialty
Chemicals Internet Retail Store
Cosmetics Investment Advisors Securities Brokerage
Computers & Peripherals Machinery Semiconductors
Computer Software Maritime Steels
Drug Medical Services Telecom Equipment
Drugstore Medical Supplies Telecom Services
Electrical Equipment Metal Fabricating Tire & Rubber
Electric Utilities Metals & Mining Toiletries
Electronics Natural Gas Trucking
The American and Opportunities Funds seek to obtain superior long-term returns
while attempting to limit investment risks. The Advisor employs a
valuation-oriented stock selection strategy and broad portfolio diversification.
History shows that careful industry, asset class and company diversification can
lower portfolio volatility and reduce risk during difficult market environments.
<PAGE>
The World Fund is designed to take advantage of the positive changes occurring
in the world today.
These forty-seven countries contain over 3,600 companies that are valued by the
advisor's analysts. World Fund shareholders are currently partial owners of over
200 of these companies. World Fund shareholders are at the very epicenter of
what is driving change in today's world: An unprecedented explosion of highly
beneficial global capitalism.
DEVELOPED MARKETS EMERGING MARKETS
EUROPE GREATER EUROPE
Austria Czech Republic
Belgium Greece Hungary
Denmark Russia Poland
Finland Turkey
France
Germany
Ireland MIDDLE EAST
Italy Israel
Netherlands
Norway AFRICA
Portugal South Africa
Spain
Sweden LATIN AMERICA
Switzerland Argentina Mexico
United Kingdom Brazil Peru
Chile Venezuela
NORTH AMERICA Columbia
Canada
United States INDIAN
SUBCONTINENT
PACIFIC India
Australia Pakistan
Hong Kong Sri Lanka
Japan
New Zealand FAR EAST
Singapore China Philippines
Indonesia Taiwan
Korea Thailand
Malaysia
The goal of the World Fund is to have a diversified portfolio of U.S. and
foreign equity securities representing a broad mix of industries and countries.
By combining broad diversification with its proprietary research, TWI seeks to
produce superior long-term returns and volatility that is lower than most
comparable mutual funds.
<PAGE>
Financial Information
Thomas White World Fund
This table summarizes the World Fund's financial history and performance. "Total
Return" shows how much your investment in the Fund would have increased (or
decreased) during each period, assuming you held your shares for the entire
period and had reinvested all dividends and distributions. The information, has
been audited by McGladrey & Pullen, LLP, the Fund's independent auditors. This
information, along with the World Fund's Financial Statements, are included in
the World Fund's most recent shareholder report, which is available upon
request.
<TABLE>
<S> <C> <C> <C>
Period from
For a share outstanding June 28,1994
throughout the period Year ended October 31 (Inception) to
1998 1997 1996 1995 Oct. 31,1994
- ------------------------------ ------ ----- ------ ------- ---------
Net Asset Value, beginning $13.23 $12.33 $11.31 $10.50 $10.00
Of period
Income From Investment Operations
Net investment income 0.15 0.20 0.19 0.19 0.06
Net realized and unrealized gain 0.93 1.65 1.51 0.71 0.44
- ------------------------------ ------ ------- ------ ------- --------
Total from investment operations 1.08 1.85 1.70 0.90 0.50
Less Distributions
From net investment income (0.19) (0.19) (0.20) (0.09) -
From net realized gains (0.54) (0.76) (0.48) - -
- ---------------------------------- ------ ------ -------- ------- ----------
Total distributions (0.73) (0.95) (0.68) (0.09) -
- ---------------------------------- ------ ------ -------- ------- ----------
Change in net asset value for the
period 0.35 0.90 1.02 .81 .50
- ---------------------------------- ------ ------ -------- ------- ----------
Net Asset Value, end of period $13.58 $13.23 $12.33 $11.31 $10.50
- ---------------------------------- ------ ------ -------- -------- ----------
Total Return 8.64% 15.80% 15.63% 8.65% 5.00%**
Ratios/Supplemental Data
Net assets at end of period (in $57,464 $47,996 $39,157 $32,979 $13,928
thousands)
Ratio to average net assets:
Expenses (net of reimbursement) 1.42% 1.47% 1.50% 1.49% 1.50%*+
Net investment income 1.13% 1.60% 1.63% 2.08% 1.79%*
Portfolio turnover rate 51.41% 48.19% 51.22% 64.54% 1.01%
*Annualized
**Not Annualized
+In the absence of the expense reimbursement, expenses would have been 2.36% of
average net assets.
</TABLE>
<PAGE>
Dividends, Distributions and Taxes
The Funds distribute all or substantially all of their net income and realized
gains to shareholders each year. Normally, dividends and capital gains are
distributed in December.
Your distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares.
Every January, the Funds will send you and the IRS a statement, called a Form
1099, to assist you with your tax preparation.
Distribution Options
When you open an account, specify on your application how you want to receive
your distributions. If you later want to change your distribution options, call
us at 1-800-811-0535.
The Funds offer four options:
Your income dividends and capital gain distributions will be automatically
reinvested in additional shares of the relevant Fund. If you do not indicate a
choice on your application, you will be assigned this option.
You will be sent a check for each income dividend and capital gain distribution.
Your capital gain distributions will be automatically reinvested, but you will
be sent a check for each income dividend.
Your income dividends will be automatically reinvested, but you will be sent a
check for each capital gain distribution.
Understanding Distributions:
As a Fund shareholder, you are entitled to your share of your Fund's net income
and any net gains realized on investments.
Your share of each Fund's income from dividends and interest, and any net
realized short-term capital gains, are paid to you as dividends, which are taxed
at the same rate as ordinary income.
Generally each Fund realizes capital gains whenever it sells securities for a
higher price than it paid for them. Net realized long-term gains are paid to you
as capital gain distributions. Currently, long-term capital gains result from
sales of securities held for greater than one year and are taxed at a rate of
20%.
Distributions are subject to these capital gains rates regardless of how long
you have held your shares.
<PAGE>
Taxes
As with any investment, you should consider how your investment in the
Funds will be taxed.
For IRA accounts, all distributions will be automatically reinvested because
payment of distributions in cash would be a taxable distribution from your IRA,
and might be subject to tax penalties.
Taxes on Transactions
Your redemptions - including exchanges between accounts - are subject to the
federal income tax on capital gains. A capital gain or loss is the difference
between the cost of your shares and the price you receive when you sell them.
Whenever you sell shares of the Fund, we will send you a confirmation statement
showing how many shares you sold and at what price. You will also receive a
year-end statement every January. It is up to you or your tax preparer to
determine whether any given sale resulted in a capital gain or loss, and if so,
the amount of tax to be paid.
Be sure to keep regular account statements; the information they contain will be
essential in calculating the amount of your dividends and capital gains.
Understanding Portfolio Turnover
Before investing in a mutual fund, investors should consider its portfolio
turnover rate. The portfolio turnover rate is an indication of how long the
manager holds securities in the portfolio. For example, if the portfolio
turnover rate is 100%, then the average holding period is one year. If the
portfolio turnover rate is 50%, then the average holding period would be two
years. Funds with low portfolio turnover rates have lower brokerage and other
transaction costs, and the tax rates attached to the capital gains they generate
may be lower. According to the Morningstar Principia Database, as of November
30, 1998, the average portfolio turnover rate for a global equity mutual fund
was 93% and 87% for a domestic equity fund. The World Fund had a 53% portfolio
turnover rate for the year ended November 30, 1998. The Advisor estimates that
the portfolio turnover rates for the American and Opportunities Funds will
average between 40% and 60%.
Your Account
How to Buy Shares
The Funds are 100% no-load and therefore have no sales charges of any kind. The
purchase price is a Fund's net asset value per share (NAV), which is generally
calculated as of the close of trading on the New York Stock Exchange ("NYSE")
(usually 4:00 p.m. Eastern time) every day the NYSE is open. Shares may not be
purchased on days the exchange is closed. Because some foreign exchanges are
open days when the NYSE is closed, the NAV of a Fund, and particularly the World
Fund, may change on a day when you cannot buy or sell shares of the Fund.
Options for purchasing shares of the Funds are listed on the table on page 16.
Shares of the Funds may be purchased or sold through fund supermarkets, certain
broker-dealers or financial institutions ("Processing Intermediaries").
Processing Intermediaries may use procedures and impose fees or restrictions in
addition to or different from those applicable to shareholders who invest
directly in the Funds. The Advisor may, out of its own resources and at no
additional costs to the Funds or shareholders, pay Processing Intermediaries for
providing services to the Funds or to shareholders.
The NAV of a Fund generally is determined on the basis of the market price of
its assets, minus its liabilities. A Fund's investment in 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 as of the close of trading on the foreign
exchange on which it is traded or as of 4:00 p.m. Eastern time, if that is
earlier. That value is then converted into the U.S. dollar equivalent using
foreign exchange rates in effect at noon that day. The exception to this policy
is Canadian and Latin American securities, which are converted into their U.S.
dollar equivalent at 4:00 p.m. Eastern time.
Securities for which market quotations are not readily available and other
assets are valued at fair value as determined in good faith under guidelines
established by the Board of Trustees.
An order will be priced at the next NAV calculated after it is accepted by the
Funds. All purchases must be made in U.S. dollars and checks must be drawn on
U.S. banks. Accounts may not be opened with a third party check. The Funds do
not accept cash or credit cards. If payment for a check or telephone order does
not clear, the purchase will be canceled and the shareholder will be liable for
any losses or fees the Funds or their Transfer Agent incur.
Minimum Investments
Initial Additional
Regular Account $2,500 $100
Automatic Invest $1,000 $100
Traditional IRA $1,000 $100
Roth IRA $1,000 $100
Spousal IRA $200 $100
<PAGE>
THE FOLLOWING ACCOUNT TYPES CAN BE OPENED USING THE ENCLOSED APPLICATION.
Individual or Joint Ownership- For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or more
owners.
Gift or Transfer to a Minor (UGMA, UTMA) - To invest for a minor's education or
other future needs
These custodial accounts provide ways to give money to a minor. The account
application must include the minor's social security number.
Trust or Established Employee Benefit or Profit-Sharing Plan - For money being
invested by a trust, employee benefit plan, or profit-sharing plan The trust or
plan must be established before an account can be opened.
Corporation or Other Entity - For investment needs of corporations,
associations, partnerships, institutions, or other groups You will need to send
a certified corporate resolution with your application.
TO ESTABLISH ONE OF THE FOLLOWING RETIREMENT
ACCOUNTS PLEASE CALL 1-800-811-0535 FOR COMPLETE IRA INFORMATION.
Traditional IRA: An individual retirement account. Contributions may or may not
be tax deductible depending on a shareholder's circumstances. Assets can grow
tax-free. When distributions are received they are taxable as income.
Spousal IRA: An IRA funded by a working spouse in the name of a non-working
spouse.
Roth IRA: An IRA with non-deductible contributions, tax-free growth of assets,
and tax-free distributions for qualified expenses.
Simplified Employee Pension Plans (SEP-IRAs): An IRA that allow small business
owners or those with self-employment income to make tax-deductible contributions
of up to $30,000 per year for themselves and any eligible employees.
Savings Incentive Match Plan for Employees (SIMPLE): Firms with 100 or fewer
employees who do not have a retirement plan can establish a SIMPLE Plan.
Employees can establish a SIMPLE plan in the form of either an IRA or a 401(k)
plan. Employers using IRAs must either match the first 3% of pay each employee
defers under the plan, or alternatively, make a non-elective contribution of 2%
of pay for each eligible employee.
<PAGE>
How to Buy Shares of the Funds
Mail
To open an account:
Complete and sign the application.
Make your check payable to the Fund in which you wish to invest. Mail to the
address on the application, or for overnight delivery:
Thomas White Funds Family
Shareholder Services Center
615 East Michigan Street
3rd Floor
Milwaukee, WI 5320
To add to an account:
Make your check payable to the Fund(s) in which you have an account and include
the stub from one of your statements with a letter containing your name and
account number. Remember to always put your account number on your check. Mail
to the address on your statement.
Phone 1-800-811-0535
To open an account:
You may only open a new account by phone if you wire your investment to our
Transfer Agent. See the section "Wire" below.
To add to an account:
Use the telephone purchase plan to transfer funds from your bank account. Call
first to verify that this service is in place on your account. (This service is
not available for IRAs)
You must make your telephone purchases by 4:00 p.m. Eastern time.
Wire
To open an account:
If you make your initial investment by wire you must fill out an
application marked "follow-up" and send it to our Transfer Agent. The
application must be received before any of the purchased shares can be
redeemed. Prior to wiring your investment to the Transfer Agent, call and
establish an account to ensure the Transfer Agent correctly credits your
account. There is a $10 wire fee.
To add to an account:
Wire to:
Firstar Bank Milwaukee, N.A.
ABA Number 07500-00022
Trust Funds, Acct Number 112-952-137
For further credit to:
(Fund name)
(Investment account number)
(name or account registration)
<PAGE>
Automatic Investment Plan
To open an account:
You may open a new account with a $1,000 minimum initial investment if you sign
up for the Automatic Investment Plan. Fill out the Automatic Investment Plan
section on the application for monthly or quarterly transfers from your bank
account.
To add to an account:
If you would like to add this service to your account, or if you already have
this service, you can easily change the frequency or amount of your automatic
investments over the phone by calling 1-800-811-0535.
Guidelines
Your bank must be a member of Automatic Clearing House (ACH).
If the transfer is from a checking account, this application must be accompanied
by a voided check.
If the transfer is from a savings account, this application must be accompanied
by a withdrawal slip.
Application must be received, with initial investment, at least 15 business days
prior to initial ACH transaction.
If the automatic purchase cannot be made due to insufficient funds, a $15 fee
will be assessed. Your Automatic Investment Plan will be terminated after two
such occurrences.
This plan will terminate upon redemption of all shares in your account.
Termination of this Plan must be in writing and received by Firstar Mutual Fund
Services, LLC. Please allow five business days for the termination to become
effective.
<PAGE>
How to Sell Shares
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next NAV
calculated after your order is received and accepted.
A Fund may hold payment on redemptions until it is reasonably satisfied that it
has received payment for a recent purchase made by check, by the Automatic
Purchase Plan, or by the Telephone Purchase Plan, which can take up to fifteen
days.
To sell shares in a regular (non-IRA) account, you may use any of the methods
described here. To sell shares in an IRA, your request must be made in writing.
If you need an IRA Withdrawal Request form, call us at 1-800-811-0535.
Selling Shares in Writing
Please send a letter with:
* your name;
* your Fund account number;
* the dollar amount or number of shares to be redeemed; and
* any other applicable requirements listed in the table on the next page.
Mail your letter to:
Thomas White Funds Family
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Certain requests must include a signature guarantee, designed to protect
shareholders and the Funds from fraud. You should be able to obtain a signature
guarantee from a bank, broker-dealer, credit union (if authorized under state
law), securities exchange or savings association. A notary public cannot provide
a signature guarantee.
Your request must be made in writing and include a signature guarantee if any of
the following situations applies:
* you wish to redeem more than $50,000 worth of shares;
* your name has changed by marriage or divorce (send a letter indicating your
account number(s) and old and new names, signing the letter in both the old and
new names and having both signatures guaranteed);
* your address has changed within the last 30 days and you would like to redeem
shares;
* the check is being mailed to an address different from the one on your account
(record address);
* the check is being made payable to someone other than the account owner; or
* you are instructing us to wire the proceeds to a bank or brokerage account and
have not signed up for the Telephone Redemption by Wire plan.
<PAGE>
HOW TO SELL SHARES OF THE FUNDS
Phone 1-800-811-0535
All accounts except IRA
To verify that the telephone redemption plan is in place, call 1-800-811-0535.
This may be selected on the application.
You must make your telephone redemptions by 4:00 p.m. Eastern time.
Mail
Individuals, Joint Owners, Sole Proprietorships, UGMA, UTMA
o The letter of instruction must be signed by all persons required to sign for
transactions (usually, all owners of the account), exactly as their names appear
on the account.
IRAs
o The account owner should complete an IRA Withdrawal Request form. Call 1-
800-811-0535 to request one.
Trust
o The trustee must sign the letter indicating capacity as trustee. If the
account registration does not include the trustee's name, provide a copy of the
trust document certified within the last 30 days.
Business or Organization
o The person or persons authorized by corporate resolution to act on the account
must sign, in that person's official capacity, the redemption request on the
corporation's stationery.
o Include a corporate resolution certified within 30 days if the amount to be
redeemed exceeds $50,000.
Executor, Administrator, Conservator, Guardian
o Call 1-800-811-0535 for instructions.
<PAGE>
Shareholder Services and Account Policies
Doing Business with the Funds
For customer service call 1-800-811-0535. The Funds provide customers with
service Monday through Friday, except holidays, from 9:00 a.m. to 8:00 p.m.
Eastern time.
The Funds' automated phone system can also provide shareholder information 24
hours a day by dialing the above toll-free number.
At the discretion of the Funds, investors may be permitted to purchase Fund
shares by transferring securities to a Fund that meet that Fund's investment
objective and policies. See the SAI for further information.
Subject to limitations described in the SAI each Fund reserves the right to
redeem its shares in kind through payment of portfolio securities instead of
cash.
Investors who make excessive moves in and out of the Funds generate additional
costs that fall upon all of a Fund's shareholders. To minimize such costs, the
Funds reserve the right to reject any specific purchase order. Purchase orders
may also be refused if, in the Advisor's opinion, they are of a size that would
disrupt the management of a Fund.
Redemptions may be suspended or payment dates postponed on days when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
If the value of an account falls below $1,000 due to redemptions or exchanges, a
notice of liquidation will be sent to the investor's address of record. The
Funds reserve the right to close that account and send the proceeds to the
shareholder unless sufficient additional shares are purchased.
If checks representing redemption proceeds or dividend and capital gains
distributions are returned "undeliverable" or remain uncashed for six months,
the checks shall be canceled and the proceeds will be reinvested in the
appropriate Fund at the per share NAV on the date of cancellation. In addition,
after such six-month period, the cash election will automatically be changed and
future dividends and distributions will be reinvested at the per share NAV
determined on the date of payment of such distributions.
Address Changes
An address may be changed by calling 1-800-811-0535. The Funds will send a
written confirmation of the change to both the old and new addresses. No
telephone redemptions may be made for 30 days after a change of address by
phone. During those 30 days, a signature guarantee will be required for any
written redemption request unless the change of address was made in writing with
a signature guarantee.
<PAGE>
Telephone Transactions
(For your protection, all transactions are completed over a recorded line.) Many
transactions may be initiated by telephone:
* Change of address;
* Request duplicate statements to be sent to someone designated by the
shareholder;
* Request a current account statement;
* Purchase shares through the Telephone Purchase Plan (plan must be
pre-established);
* Redeem shares and have proceeds wired to a bank checking account (bank wire
redemption plan must be pre-established, not available for IRA accounts);
* Change the frequency or amount, or discontinue the Automatic Investment Plan
on your account(s);
* Add or discontinue the Telephone Redemption privilege to an account;
* Change distribution option (does not apply to IRA accounts);
* Redeem shares, with a check sent to the address of record (does not apply to
IRA accounts, and address of record must not have changed in the last 30 days);
* Exchange money from an individual account to an existing IRA account with an
identical registration;
* Change the contribution year on an IRA account to the previous year up until
April 15 of the current year.
The Funds will not be responsible for any losses resulting from unauthorized
telephone transactions if they follow reasonable procedures designed to verify
the identity of the caller. Those procedures may include recording the call,
requesting additional information, and sending written confirmation of telephone
transactions.
You should verify the accuracy of telephone transactions immediately upon
receipt of your confirmation statement. If you do not want to be able to
initiate purchase or redemption transactions by telephone, you should decline
these privileges on your account application or call the Funds for instructions
at 1-800-811-0535.
If you are unable to reach the Funds by phone (for example during periods of
unusual market activity), you should consider placing their order by mail.
<PAGE>
Telephone Exchange Plan
The Funds' telephone exchange plan permits you to exchange your investment
between one Fund and another, or between a Fund and one of the Firstar Money
Market Funds. The Firstar Money Market Funds are:
* Money Market Fund
* U.S. Treasury Money Market Fund
* U.S. Government Money Market Fund
* Tax-Exempt Money Market Fund
Before exchanging with one of the available money market funds please call and
request a prospectus. You will be asked if you have read the prospectus, and an
exchange cannot be accepted unless you indicate that you have done so. Each of
the money market funds is a no-load fund managed by FIRMCO, a Wisconsin limited
liability company and subsidiary of Firstar Corporation, a bank holding company.
The price at which shares are exchanged is determined by the time of day that we
receive the request. To get today's price call before 3:00 p.m. Central time.
Exchange Plan Restrictions
Exchanges will be limited to four round-trip exchanges per year (a round-trip is
the exchange out of one fund into another fund, and then back into the original
fund).
Shares of the fund being exchanged into must be available for sale in the your
state. The World Fund and the Firstar Money Market Funds are available in all 50
states. The American Fund and the Opportunities Fund will have a limited
availability during the first two years of operation. You can call 800-811-0535
to verify the availability in your state.
You may only exchange between accounts that are registered in the same name,
address, and taxpayer identification number.
To establish a new account through an exchange, the exchange must be equal to
the minimum initial deposit of $2,500. For exchanges between established
accounts the minimum exchange value must be at least $1,000.
The exchange plan is not available for shares of a fund for which certificates
have been issued.
Because excessive trading can hurt the Funds performance and shareholders, the
Funds reserve the right to temporarily or permanently terminate the exchange
privilege of any investor who makes excessive use of the exchange plan.
The Funds also reserve the right to refuse exchange purchases by any person or
group, if TWI believes that the purchase will be harmful to existing
shareholders.
Please remember that exchanges between taxable/non-retirement accounts will have
tax consequences.
The Funds reserve the right to terminate or modify the exchange plan at any
time, but will try to give prior notice whenever they are able to reasonably do
so.
<PAGE>
Contacting the Thomas White Funds Family
Phone 1-800-811-0535
The following documents are available for free and provide further information
on the Funds:
Annual/Semi-Annual Reports to Shareholders In the annual report, you will
find a letter to shareholders from the Fund manager and a discussion of the
events that impacted the World Fund's performance during the period covered, as
well as a list of the World Fund's investment. As new funds, the American and
Opportunities Funds do not yet have any performance to report to shareholders.
Statement of Additional Information (SAI)
The SAI contains additional information about the Funds. A current SAI has been
filed with the SEC and is incorporated into this Prospectus by reference.
E-mail
Send your request to [email protected]
On the Internet
Fund Documents can be viewed online or downloaded from two Internet websites:
The Securities and Exchange Commission: http://www.sec.gov
Thomas White Funds Family: http://www.thomaswhite.com
By Mail
Thomas White Funds Family
440 South LaSalle Street,
Suite 3900
Chicago, IL 60605
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330 for more information) or by sending your
request and a duplicating fee to the SEC's Public Reference Section, Washington,
DC 20549-6009.
SEC file number: 811-8348
<PAGE>
LORD ASSET MANAGEMENT TRUST
THIS STATEMENT OF ADDITIONAL INFORMATION DATED
MARCH 1, 1999 IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
THOMAS WHITE WORLD FUND AND THE THOMAS WHITE AMERICAN GROWTH FUND
DATED MARCH 1, 1999
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
This Statement of Additional Information contains financial statements of the
Thomas White World Fund that are included in the Fund's most recent annual
report to shareholders. You can obtain copies of this report by calling
1-800-811-0535.
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY ..................................3
INVESTMENT OBJECTIVES AND POLICIES ...............................3
Investment Policies ..............................................3
Repurchase Agreements ............................................3
Loans of Portfolio Securities ....................................3
Temporary Investments and Cash Management.........................4
Debt Securities ..................................................4
Futures Contracts ................................................5
Options on Securities, Indices and Futures .......................6
Foreign Currency Hedging Transactions.............................8
Depository Receipts...............................................9
Foreign Market Risks..............................................9
Brady Bonds......................................................11
Illiquid and Restricted Securities...............................11
Other Investment Companies.......................................12
Borrowing........................................................12
Investment Restrictions .........................................12
Additional Restrictions .........................................13
Risk Factors ....................................................14
Trading Policies ................................................15
MANAGEMENT OF THE TRUST .........................................16
PRINCIPAL SHAREHOLDERS ..........................................18
INVESTMENT MANAGEMENT AND OTHER SERVICES ........................18
Investment Management Agreement .................................18
Management Fees .................................................19
The Advisor .....................................................19
Transfer Agent ..................................................20
The Advisor .....................................................20
Custodians.......................................................20
Legal Counsel ...................................................20
Independent Accountants .........................................20
Reports to Shareholders..........................................20
BROKERAGE ALLOCATION ............................................20
PURCHASE, REDEMPTION AND PRICING OF SHARES ......................22
TAX STATUS ......................................................24
DESCRIPTION OF SHARES ...........................................29
PERFORMANCE INFORMATION .........................................29
FINANCIAL STATEMENTS ............................................31
<PAGE>
GENERAL INFORMATION AND HISTORY
The Thomas White American Growth Fund, the Thomas White American
Opportunities Fund and the Thomas White World Fund are both diversified series
of Lord Asset Management Trust (the "Trust"), an open-end, management investment
company registered under the Investment Company Act of 1940 (the "1940 Act").
The three Funds are the Trust's only series of shares. The Trust is a Delaware
business trust organized on February 9, 1994.
INVESTMENT OBJECTIVES AND POLICIES
Investment Policies. The investment objective and policies of the Funds are
described in the Funds' Prospectus.
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. The repurchase price will reflect an agreed
upon rate of interest 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. 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. Thomas White
International, Ltd. (the "Advisor" or "TWI") will monitor the value of such
securities daily to determine that the value equals or exceeds the repurchase
price. However, if the seller should default on its obligation to repurchase the
underlying security, the Funds may experience delay or difficulty in exercising
their 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. The Funds
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 Advisor to present no serious
risk of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction. Although the Funds may enter into
repurchase agreements, they have no present intention of doing so.
Loans of Portfolio Securities. Each 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 Funds retain all or a portion
of the interest received on investment of the cash collateral or receive a fee
from the borrower. The Funds may terminate the loans at any time and obtain the
return of the securities loaned within five business days. The Funds 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. In the event
that the borrower defaults on its obligations to return borrowed securities,
because of insolvency or otherwise, a 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.
Temporary Investments and Cash Management. The Funds may, because of adverse
market conditions, decide to take a temporary defensive position. Each Fund may
invest up to 100% of its total assets in the following instruments:
1. Short-term (less than 12 months to maturity) and medium-term (not greater
than 5 years to maturity) obligations issued or guaranteed by either the
U.S. government or the governments of foreign countries or their agencies;
2. Finance company and corporate commercial paper;
3. Demand notes;
4. Other short-term corporate obligations;
5. Obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks;
6. Repurchase agreements with banks and broker-dealers with respect to the
above listed securities; or
7. Cash.
The Funds may also invest in such instruments for purposes of cash management.
Debt Securities. Bonds and other debt instruments are methods for an issuer
to borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest, and must repay the amount borrowed at maturity. Debt
securities have varying degrees of quality and varying levels of sensitivity to
changes in interest rates.
<PAGE>
The Funds 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
Ratings Services ("S&P"), or which are not rated by Moody's or S&P. As an
operating policy, which may be changed without shareholder approval, each 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 Advisor. Such securities are not
considered to be "investment grade" and are sometimes referred to as "junk
bonds." 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 a Fund and its shareholders. High risk, lower-quality debt securities are
considered to be speculative with respect to the issuer's ability to pay
interest and repay principal.
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 Funds' net asset values.
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 Funds' 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 Funds' 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 Funds to
achieve their investment objectives 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 Funds 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, the Funds 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 Funds may accrue and report interest on 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 Funds must
distribute substantially all of their net income to shareholders (see "Tax
Status"). Thus, the Funds may have to dispose of their portfolio securities
under disadvantageous circumstances to generate cash in order to satisfy the
distribution requirement.
<PAGE>
Futures Contracts. The Funds may buy and sell financial futures contracts,
stock and bond index futures contracts, foreign currency futures contracts and
options on any of these 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.
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 Funds may 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.
When a 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, at the time a Fund purchases a futures contract, an
amount of cash, U.S. Government securities, or other highly liquid securities
equal to the market value of the contract will be deposited in a segregated
account with the Funds' Custodian. When selling a futures contract, the Funds
will maintain with their 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, a
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).
Each Fund will limit its use of futures contracts so that no more than 5% of
the Fund's total assets would be committed to initial margin deposits or
premiums on such contracts. 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 a Fund.
Options on Securities, Indices and Futures. The Funds may write (i.e., sell)
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 Funds may write a call or put option only if the option is "covered." A
call option on a security or futures contract written by a 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 portfolios. A call option on a security or futures contract is also
covered if a Funds hold 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 a Fund in cash or liquid securities in a segregated account with
its custodian. A put option on a security or futures contract written by a Fund
is "covered" if a 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.
<PAGE>
Each Fund will cover call options on securities indices that it writes by
owning securities whose price changes, in the opinion of the Advisor, 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 a 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. Each 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.
A 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 a Fund has written a call option falls or remains the same, that 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, that 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, a 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 a 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 Funds may also purchase put options to hedge their investments against a
decline in value. By purchasing a put option, the Funds 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 Funds' investments does not
decline as anticipated, or if the value of the option does not increase, their
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 Funds' security holdings being
hedged.
The Funds may purchase call options on individual securities or futures
contracts to hedge against an increase in the price of securities or futures
contracts that they anticipates purchasing in the future. Similarly, the Funds
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 Funds hold uninvested cash or short-term debt securities
awaiting investment. When purchasing call options, the Funds 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 Funds seek
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 Funds
may be able to offset to some extent any adverse effects of being unable to
liquidate an option position, they may experience losses in some cases as a
result of such inability. The value of over-the-counter options purchased by
each Fund, as well as the cover for options written by each Fund are considered
not readily marketable and are subject to each Fund's limitation on investments
in securities that are not readily marketable. See "Investment Objectives and
Policies - Investment Restrictions."
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 a Fund. A Fund will not purchase put or call options if the aggregate premium
paid for such options would exceed 5% of its total assets.
Foreign Currency Hedging Transactions. In order to hedge against foreign
currency exchange rate risks, the Funds 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 Funds may
also conduct their foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market. Some
price spread on currency exchange (to cover service charges) will be incurred
when a Fund converts assets from one currency to another.
<PAGE>
The Funds may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Funds 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. A Fund generally will not enter
into a forward contract with a term of greater than one year. A 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
a 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." A Fund may
cross-hedge with respect to the currency of a particular country in amounts
approximating actual or anticipated positions in securities denominated in that
currency. When a Fund owns or anticipates owning securities in countries whose
currencies are linked, the Advisor may aggregate those positions as to the
currency being hedged. Because in connection with each 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,
each 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
Funds' 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
Funds than if they had not engaged in such contracts.
A Fund has no limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objective and policies, as long as
the amount of assets set aside to cover forward contracts would not impede
portfolio management or the Fund's ability to meet redemption requests. Although
forward contracts will be used primarily to protect the Funds from adverse
currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted.
The Funds 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 a 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, a Fund may forfeit the entire amount
of the premium plus related transaction costs. Options on foreign currencies to
be written or purchased by the Funds will be traded on U.S. and foreign
exchanges or over-the-counter.
The Funds 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 Funds' portfolio securities or adversely affect the prices of securities
that the Funds intend to purchase at a later date. The successful use of foreign
currency futures will usually depend on the ability of the Advisor to forecast
currency exchange rate movements correctly. Should exchange rates move in an
unexpected manner, the Funds may not achieve the anticipated benefits of foreign
currency futures or may realize losses.
<PAGE>
Depositary Receipts. American Depositary Receipts ("ADRs") are Depositary
Receipts typically issued by a U.S. bank or trust company which allow indirect
ownership of securities issued by foreign corporations. Receipts are generally
composed of one or more shares of an underlying security. European Depositary
Receipts and Global Depositary Receipts 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.
Depositary Receipts may involve many of the risks of other investments in
foreign securities. For purposes of the Funds' investment policies, the Funds'
investments in Depositary Receipts (other than ADRs) will be deemed to be
investments in the underlying securities.
Foreign Market Risks. Each 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 Funds 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 Funds' 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 Funds 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
Funds' 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 Funds could lose a substantial
portion of any investments they have 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 Funds' Shareholders.
<PAGE>
Brady Bonds. The Funds may invest a portion of their 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. 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.
Illiquid and Restricted Securities. Each 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. A 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.
Each 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 Funds 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 Funds are required to be registered under the securities
laws of one or more jurisdictions before being resold, the Funds may be required
to bear the expenses of registration. Investment in Rule 144A securities could
have the effect of increasing the level of the Funds' 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.
Other Investment Companies. Certain markets are closed in whole or in part to
equity investments by foreigners. A Fund may be able to invest in such markets
solely or primarily through governmentally-authorized investment companies.
Investment in another investment company may involve the payment of a premium
above the value of the issuer's portfolio securities, and is subject to market
availability. In the case of a purchase of shares of such a company in a public
offering, the purchase price may include an underwriting spread. The Funds do
not intend to invest in such circumstances unless, in the judgment of TWI, the
potential benefits of such investment justify the payment of any applicable
premium or sales charge. As a shareholder in an investment company, a Fund would
bear its ratable share of that investment company's expenses, including its
advisory and administration fees. At the same time a Fund would continue to pay
its own management fees and other expenses.
<PAGE>
Each Fund may invest in shares of closed-end investment companies. Generally,
this would not exceed 10% of the Fund's net assets.
Borrowing. Each Fund may borrow up to one-third of the value of its total
assets from banks to increase its holdings of portfolio securities. Borrowing is
a form of leverage, which generally will exaggerate the effect of any increase
or decrease in the value of portfolio securities on a Fund's net asset value. As
a nonfundamental operating policy, a Fund will not purchase additional
securities if its aggregate borrowings exceed 5% of the Fund's assets at the
proposed time of purchase. Borrowings will be subject to interest and other
costs.
Investment Restrictions. Each Fund has imposed upon itself certain investment
restrictions which, together with their investment objective, are fundamental
policies except as otherwise indicated. No changes in a 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, a 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 the 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 Funds and/or other
clients with the same adviser.)
9. Invest in physical commodities.
If a Fund receives from an issuer of securities held by that Fund
subscription rights to purchase securities of that issuer, and if that Fund
exercises such subscription rights at a time when that 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, that Fund has sold at least as many securities of
the same class and value as it would receive on exercise of such rights.
<PAGE>
Additional Restrictions. The Funds have 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, each Fund may not:
1. Purchase more than 10% of a company's outstanding voting securities.
2. Invest more than 15% of the Fund's net 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 Funds), including
no more than 10% of their 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 a 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 Funds' acquisition of such security or
property. Any change in the percentage of a Fund's assets committed to certain
securities or investment techniques resulting from market fluctuations or other
changes in the Fund's total assets may warrant corrective action by the Advisor,
such as selling or closing out the investment in a manner intended to minimize
market or tax consequences to the Fund. The value of the Funds' assets are
calculated as described in its Prospectus.
Risk Factors. The Funds have 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 Funds endeavor 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 Funds change 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 Funds 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 Funds 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 policies of the Funds, the Advisor 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 Funds.
<PAGE>
The exercise of these flexible policies 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.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Advisor, any losses resulting from the holding of the Funds'
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.
There are additional risks involved in futures transactions. These risks
relate to a Fund's ability to reduce or eliminate its futures positions, which
will depend upon the liquidity of the secondary markets for such futures. The
Funds intend 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 Funds for hedging purposes also depends upon the Advisor'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 a Fund seeks to close out an option position. If a Fund was
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 a Fund, it would not be able to close out the option. If
restrictions on exercise were imposed, that 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 a Fund is covered by an option on the same
security or index purchased by that Fund, movements in the security or index may
result in a loss to that Fund. However, such losses may be mitigated by changes
in the value of that Fund's securities during the period the option was
outstanding.
Trading Policies. The Advisor serves as investment adviser to other clients.
Accordingly, the respective portfolios of the Funds and such clients may contain
many or some of the same securities. When the Funds and other clients of the
Advisor 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
Funds. If the transaction is large enough, brokerage commissions in certain
countries may be negotiated below those otherwise chargeable.
<PAGE>
MANAGEMENT OF THE TRUST
The Trust is governed by a Board of Trustees, who are responsible for
protecting the interests of the shareholders of each Fund. The Trustees are
experienced executives and professionals who normally meet each quarter to
oversee the activities of the Trust and the Funds. A majority of Trustees are
not otherwise affiliated with the Funds or TWI.
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:
<TABLE>
<S>
<C> <C>
Name, Address and Principal Occupation
Offices with Trust Age During Past Five Years
Thomas S. White, Jr.* 54 Chairman of Thomas White International,
440 S. LaSalle St. Ltd.; former Managing Director, Morgan
Suite 3900 Stanley Asset Management
Chicago, IL 60605
Trustee, President
Brandon S. Joel 29 Mutual Fund Administrative
440 S. LaSalle St. Manager of Thomas White International,
Suite 3900 Ltd.; former Senior Mutual Fund
Chicago, IL 60605 Accountant, John Nuveen & Co.
Treasurer
Douglas M. Jackman 30 Analyst and Vice President of Thomas
440 S. LaSalle St. White International.; formerly with
Suite 3900 Morgan Stanley, involved with equity
Chicago, IL 60605 analysis and foreign exchange
Vice President and
Secretary
Jill F. Almeida 48 Retired; former Vice President,
1448 N. Lake Shore Dr. Security Pacific Bank
Chicago, IL 60610
Trustee
Philip R. Haag 35 President, The Monroe Group, Inc.
535 Balsam (Principal Business - Manufacturing
Palatine, IL 60045 Management-Automotive)
Trustee
Nicholas G. Manos* 74 Attorney (of counsel), Gesas, Pilati &
53 W. Jackson Blvd. Gesas
Suite 528
Chicago, IL 60604
Trustee
Edward E. Mack III 54 President, Mack & Parker
55 East Jackson Street (Principal Business - Insurance)
Chicago, IL 60604
Trustee
John N. Venson 50 Medical Doctor (podiatry)
310 Meadowlake Lane
Lake Forest, IL 60045
Trustee
</TABLE>
<PAGE>
* 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.
For the fiscal year ended October 31, 1998, the Trust paid 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 ending October 31, 1999, the
Trust will pay each such Trustee an annual fee of $5,000. For the fiscal year
ended October 31, 1998, the Trust paid the following compensation to all
Trustees of the Trust:
<TABLE>
<S> <C> <C> <C> <C>
Pension or Retirement Estimated 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
John N. Venson $3,000 $0 $0 $3,000
</TABLE>
PRINCIPAL SHAREHOLDERS
As of November 30, 1998, there were 4,261,428 shares of the Fund
outstanding, of which 63,733 Shares (1.50%) were owned beneficially, directly or
indirectly, by all the Trustees and officers of the Trust as a group. As of
September 30, 1998, John Wm. Galbraith, P.O. Box 33030, St. Petersburg, FL
33733, owned beneficially, directly or indirectly, 2,786,533 Shares (65.39%) 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 Advisor of the Funds is Thomas White
International, Ltd., (the "Advisor" or "TWI"), an Illinois corporation with
offices in Chicago, Illinois. The Investment Management Agreement between the
Advisor and the Trust on behalf of a Fund, after an initial two-year term, will
continue from year to year, 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 Advisor to furnish the Funds
with investment research and advice. In so doing, without cost to the Funds, the
Advisor may receive certain research services described below. The Advisor is
not required to furnish any personnel, overhead items or facilities for the
Funds, 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 Funds, although
certain of these expenses may be borne by the Advisor. In addition, the Advisor
may pay, out of its own assets and at no cost to the Funds, amounts to certain
broker-dealers in connection with the provision of administrative services
and/or with the distribution of the Funds' shares.
The Investment Management Agreement provides that the Advisor will select
brokers and dealers for execution of the Funds' 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 Advisor and other investment advisory clients of the Advisor, as
well as the Funds, the value of such services is indeterminable and the
Advisor's fee is not reduced by any offset arrangement by reason thereof.
<PAGE>
When the Advisor determines to buy or sell the same securities for the Funds
that the Advisor 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 Advisor, 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 Funds 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 Advisor shall
have no liability to the Trust, the Funds or any shareholder of the Funds 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 Advisor 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 Funds' 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
Advisor'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 Funds 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
Funds (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 Funds, respectively, by license from the Advisor and
would be required to stop using those names if Thomas White International, Ltd.,
ceased to be the Advisor of the Fund. The Advisor has the right to use those
names in connection with other enterprises, including other investment
companies.
Management Fees. For its services, each Fund pays the Advisor a monthly fee
at the rate of 1.00% annually of the Fund's average daily net assets. For the
fiscal years ended October 31, 1998, 1997, and 1996, the World Fund paid the
Advisor aggregate investment advisory fees equal to $534,735, $451,010 and
$371,850, respectively. The Advisor has agreed to reimburse the Funds for the
current fiscal year to the extent that the American Fund's or Opportunities Fund
total operating expenses exceed 1.35% of its average daily net assets or the
World Fund's total operating expenses exceed 1.50% of its average daily net
assets.
<PAGE>
Each Fund also pays other expenses such as the fees of its custodian,
transfer agent, auditors and lawyers, the cost of compliance with federal and
state laws, proxy solicitations, shareholder reports, taxes, insurance premiums,
and the fees of Trustees who are not otherwise affiliated with the Funds or the
Advisor.
The Advisor. The Advisor is wholly owned by Thomas S. White, Jr., who may be
deemed to control the Advisor. Mr. White and other officers of the Advisor also
serve as Trustees or officers of the Trust, as indicated above, and are
therefore affiliated persons of the Advisor and the Funds.
Transfer Agent. Firstar Mutual Fund Services, LLC ("Firstar") serves as the
transfer and dividend disbursing agent for each 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 each Fund, (iii) prepares shareholder meeting
lists and, if applicable, mail, receive and tabulate proxies, and (iv) provides
a Blue Sky System which will enable each 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.
Custodians. State Street Bank and Trust Company, 1776 Heritage Drive, North
Quincy, Massachusetts 02171, serves as Custodian of the World Fund's assets, and
Firstar Bank Milwaukee, 615 East Michigan Street, Milwaukee, WI 53202, serves as
Custodian of the American Fund's and Opportunities Fund's assets. The
Custodians, and the branches and sub-custodians of each, 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 Custodians is based on a schedule of charges agreed on
from time to time.
Legal Counsel. Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, D.C.
20006, 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 each Fund's financial
statements and review of each 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 each 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 Advisor 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 Advisor 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
Funds (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 Advisor in determining the
overall reasonableness of brokerage commissions.
<PAGE>
2. In selecting brokers for portfolio transactions, the Advisor 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 Funds.
3. The Advisor 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 Advisor 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 Funds 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 Advisor 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 Advisor'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 Advisor 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 Advisor 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 Advisor 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 Funds 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
Advisor are useful to the Advisor in performing its advisory services under its
Investment Management Agreement with the Trust. Research services provided by
brokers to the Advisor are considered to be in addition to, and not in lieu of,
services required to be performed by the Advisor under its Investment Management
Agreement. Research furnished by brokers through whom the Trust effects
securities transactions may be used by the Advisor for any of its accounts, and
not all such research may be used by the Advisor 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 Advisor, better prices
and execution may be obtained on a commission basis or from other sources.
5. Sales of each 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 under writings or tenders in
response to tender offers) for the account of each 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 each 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.
<PAGE>
Insofar as known to management, no Trustee or officer of the Trust, nor the
Advisor 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
Funds. All portfolio transactions will be allocated to broker-dealers only when
their prices and execution, in the good faith judgment of the Advisor, 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 fiscal year ended October 31, 1996, the World Fund paid brokerage
commissions in the amount of $89,686, of which $65,964, representing $24,647,997
of securities transactions, was paid to broker-dealers that provided research
services to the Advisor. For the fiscal year ended October 31, 1997, the World
Fund paid brokerage commissions in the amount of $93,412, of which $79,609,
representing $29,926,932 of securities transactions, was paid to broker-dealers
that provided research services to the Advisor. For the fiscal year ended
October 31, 1998, the World Fund paid brokerage commissions in the amount of
$100,998, of which $75,679, representing $52,360,047 of securities transactions,
was paid to broker-dealers that provided research services to the Advisor.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus describes the manner in which the Funds' shares may be
purchased and redeemed. See "How to Buy Shares" and "How to Sell Shares." Shares
of each Fund are offered directly to the public by the Funds. The Funds employ
no Distributor.
Each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% if its net assets during any 90 day period for any one
shareholder. Subject to the above, each Fund reserves the right to pay
redemption proceeds in whole or in part by a distribution in kind of securities
from the portfolio of the Fund. If shares are redeemed in kind, the redeeming
shareholder might incur transaction costs in converting the assets into cash.
At the discretion of each Fund, investors may be permitted to purchase shares
by transferring securities to a Fund that meet the respective Fund's investment
objective and policies. Securities transferred to the Funds will be valued in
accordance with the same procedures used to determine the Funds' net asset value
at the time of the next determination of net asset value after such acceptance.
Shares issued by the Funds 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 respective Fund and must be delivered to that 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 Funds unless: (1) such securities are,
at the time of the exchange, eligible to be included in the respective 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 respective 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 respective Fund, will not exceed 5%
of the respective Fund's net assets immediately after the transaction.
<PAGE>
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), under normal
market conditions. 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, Martin Luther King, Jr. 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 each 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 each Fund is not reasonably practicable or it is not
reasonably practicable for each 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 Funds' Shares.
TAX STATUS
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Funds and the purchases, ownership, and disposition of Shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that might be relevant to Shareholders in light of their
particular circumstances. This discussion is based upon present provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retrospective. Prospective
investors should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of Shares, as well as
the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
<PAGE>
Each Fund intends normally to pay a dividend at least once annually
representing all or 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 Code, each Fund intends
to elect and qualify annually for treatment as a regulated investment company
under the Code. The status of each Fund as a regulated investment company does
not involve government supervision of management or of its investment practices
or policies. As a regulated investment company, a 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, each Fund intends to make
distributions in accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains generally
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 each Fund's qualifying dividend income. However, the
alternative minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distribution of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) will generally
be taxable to shareholders at the rate of 20%. Short-term capital gains
distributions, gains representing the sale of securities held for not more than
one year in the portfolio, will continue to be taxed at the same rate as
ordinary income. Distributions will be subject to these capital gains rates
regardless of how long a shareholder has held Fund shares, and are not eligible
for the dividends-received deduction. All dividends and distributions are
taxable to shareholders, whether or not reinvested in shares of a 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 a Fund reduce the net asset value of the Fund's 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 Funds. 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 Funds 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 Funds, 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.
<PAGE>
Some of the debt securities may be purchased by the Funds 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
respective Fund at a constant rate over the time remaining to the debt
security's maturity or, at the election of the respective Fund, at a constant
yield to maturity which takes into account the semi-annual compounding of
interest.
The Funds 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 Funds held the PFIC stock. A 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 that 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 Funds may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, each 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, each 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 mark-to-market losses and any loss from an actual
disposition of a Fund's shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income in prior years.
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 each 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 the Funds 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 a Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, that Fund
will be eligible and intends to elect to "pass through" to that 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 a Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year.
<PAGE>
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 a Fund's income flows through to its shareholders. With respect to
each 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 a 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 Funds 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 a 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 a 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 each Fund. In addition, losses
realized by each 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 a Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by each Fund, which is taxed as ordinary income when
distributed to shareholders.
Each Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a 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 each Fund's tax status as a regulated investment
company may limit the extent to which a Fund will be able to engage in
transactions in options and futures and foreign currency forward contracts.
Recently enacted rules may affect the timing and character of gain if a Fund
engages in transactions that reduce or eliminate its risk of loss with respect
to appreciated financial positions. If a Fund enters into certain transactions
in property while holding substantially identical property, that Fund would be
treated as if it had sold and immediately repurchased the property and would be
taxed on any gain (but not loss) from the constructive sale. The character of
gain from a constructive sale would depend upon that Fund's holding period in
the property. Loss from a constructive sale would be recognized when the
property was subsequently disposed of, and its character would depend on that
Fund's holding period and the application of various loss deferral provisions of
the Code.
<PAGE>
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a 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 a 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 each 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, a 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 or her Fund shares.
Upon the sale or exchange of his or her 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; gain will generally be subject to a maximum tax rate of 20%
if the shareholder's period for the shares is more than 12 months. Gain from the
disposition of shares held not more than one year will be taxed as short-term
capital gains. 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 a 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 a 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.
Each 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 respective 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
respective 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 a 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 Funds. 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 Funds.
<PAGE>
DESCRIPTION OF SHARES
The shares of each 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 a Fund, together with all
income, earnings, profits and proceeds thereof, belongs to that Fund and is
charged with liabilities in respect of the general liabilities of that Fund. The
net asset value of a share of a Fund is based on the assets belonging to the
Fund less the liabilities charged to the Fund, and dividends are paid on shares
of a Fund only out of lawfully available assets belonging to that Fund. Shares
of a Fund are entitled to participate pro rata in any dividends and other
distributions declared by the Board of Trustees for the Fund and all shares of a
Fund have equal rights in the event of liquidation of that Fund. In the event of
liquidation or dissolution of the Trust, the shareholder of a Fund will be
entitled to the assets belonging to that Fund out of assets of the Trust
available for distribution.
The Funds may hold special meetings of shareholders to elect or remove
Trustees, change fundamental policies, approve a management contract, or for
other purposes. The Funds will mail proxy materials in advance of a shareholder
meeting, including a proxy and information about the proposals to be voted on.
You are entitled to one vote for each share of the Fund that you own.
Shareholders not attending these meetings are encouraged to vote by proxy.
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
Each 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 Funds will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in the respective
Fund over periods of one, five, or ten years (up to the life of the respective
Fund) calculated pursuant to the following formula: P(1+T)n = ERV (where P = a
hypothetical initial payment of $1,000, T = the average annual total return, n =
the number of years, and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period). Total return for a period
is the percentage change in value during the period of an investment in Fund
shares. All total return figures reflect the deduction of a proportional share
of the respective Fund's expenses on an annual basis, and assume that all
dividends and distributions are reinvested when paid. Total return of the World
Fund for the year ended October 31, 1998 was 8.64%. The average annual total
return of the World Fund from June 28, 1994 (commencement of operations) through
October 31, 1998, was 12.38%. Cumulative total return of the World Fund for the
same period was 65.96%.
<PAGE>
Performance information for the each 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 a 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 each Fund reflects only the performance of a
hypothetical investment in the respective Fund during the particular time period
on which the calculations are based. Performance information should be
considered in light of the respective 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 Funds and the Advisor may
also refer to the following information:
(1) The Advisor'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 each 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, a 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 Funds and the Advisor may also refer to the number of
shareholders in each Fund or the dollar amount of fund and private account
assets under management in advertising materials.
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C> <C> <C> <C>
THOMAS WHITE WORLD FUND
Investment Portfolio October 31, 1998
- ----------------------------------------------------------------------------------------------------------------------------------
Country Issue Industry Shares Value
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCKS: 89.6%
- -----------------------------------------------------------------------------------------------------------------------------------
ARGENTINA: 0.3%
Telecom Argentina Communications 16,500 $106,435
YPF Sociedad Energy 2,700 78,308
--------------
184,743
- -----------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA: 3.0%
National Australia Bank ADR Banking 4,300 286,488
National Australia Bank Banking 18,821 250,494
News Corporation Service 67,500 463,172
Santos Ltd. Energy 29,438 86,860
Telstra Corporation Communications 103,200 411,407
Woolworths Consumer Retail 66,700 235,751
--------------
1,734,172
- -----------------------------------------------------------------------------------------------------------------------------------
AUSTRIA: 0.1%
OMV AG Energy 800 74,943
--------------
74,943
- -----------------------------------------------------------------------------------------------------------------------------------
BELGIUM: 1.0%
Electrabel Utilities 1,000 368,313
Electrafina Financial Diversified 1,600 206,723
--------------
575,036
- -----------------------------------------------------------------------------------------------------------------------------------
BRAZIL: 1.0%
Eletrobras PNB Utilities 6,284,000 145,789
Gerasul Utilities 3,750,000 3,750
Ipiranga Petroleum PN Energy 7,288,000 39,355
Itausa PN Financial Diversified 125,000 66,113
Petrobras PN Energy 409,000 51,493
Telebras ADR Communications 2,400 182,250
Vale do Rio Doce PN Metals & Mining 4,600 69,492
--------------
558,242
- -----------------------------------------------------------------------------------------------------------------------------------
CANADA: 2.0%
BCE Inc. Communications 9,800 332,318
Canadian Pacific Ltd. Transportation 8,500 190,995
Quebecor Incorporated Class B Services 9,300 188,790
Royal Bank of Canada Banking 6,200 285,820
Shell Canada Energy 9,100 144,235
--------------
1,142,158
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
CZECH REPUBLIC: 0.2%
SPT Telecom* Communications 5,000 75,534
Tabak Consumer Staples 200 46,789
--------------
122,323
- -----------------------------------------------------------------------------------------------------------------------------------
FINLAND: 0.8%
Orion B Health Care 9,800 235,033
UPM-Kymmene Forest & Paper 9,600 228,333
--------------
463,366
- -----------------------------------------------------------------------------------------------------------------------------------
FRANCE: 3.8%
Altran Technology Technology 500 97,761
AXA-UAP Insurance 3,400 384,063
Bouygues Building 2,458 495,623
Cap Gemini Technology 800 120,155
Danone Consumer Staples 300 79,270
France Telecom Communications 3,100 216,072
L' Oreal Consumer Staples 200 114,219
Paribas Banking 3,1200 359,953
Pernod Ricard Consumer Staples 3,000 199,658
Scor Insurance 2,200 126,075
--------------
2,192,849
- -----------------------------------------------------------------------------------------------------------------------------------
GERMANY: 3.7%
Axel Springer Services 100 69,317
BASF Chemicals 7,200 303,354
Commerzbank Banking 10,300 309,176
Deutsche Telecom Communications 7,900 213,327
DT Lufthansa Transportation 11,200 246,068
Merck KGAA Health Care 6,700 272,596
SAP AG Technology 700 340,074
Volkswagen Consumer Durables 3,500 262,861
Wella Stamm AG Consumer Staples 150 111,660
--------------
2,128,433
- -----------------------------------------------------------------------------------------------------------------------------------
GREECE: 0.4%
Alpha Credit Bank Banking 777 62,014
Ergo Bank Banking 4,200 62,090
OTE Communications 3,555 80,723
--------------
204,827
- -----------------------------------------------------------------------------------------------------------------------------------
HONG KONG: 3.1%
Cheung Kong Financial Diversified 16,700 114,246
China Telecom* Communications 103,600 194,561
CITIC Pacific Services 20,000 49,178
CLP Holdings Utilities 25,900 145,423
HSBC Holdings Banking 18,000 412,404
Hong Kong & China Gas Utilities 97,900 138,998
Hong Kong Electric Utilities 44,800 164,228
Johnson Electric Industrial 60,000 139,405
New World Development Industrial 65,300 151,718
SHK Properties Financial Diversified 31,600 220,258
Smartone Telecom Communications 19,400 55,090
--------------
1,785,509
- -----------------------------------------------------------------------------------------------------------------------------------
HUNGARY: 0.2%
Matav ADR Communications 4,400 118,250
--------------
118,250
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
INDONESIA: 0.2%
Guadang Garam Consumer Staples 24,000 21,631
Indosat Communications 23,000 24,815
Tambang Timah Metals & Mining 53,000 29,113
Telkom Indonesia Communications 100,000 24,670
--------------
100,229
- -----------------------------------------------------------------------------------------------------------------------------------
ISRAEL: 0.1%
Bezeq Israel Telecom Communications 17,000 48,671
IDB Holding Corp. Financial Diversified 2,000 38,298
--------------
86,969
- -----------------------------------------------------------------------------------------------------------------------------------
ITALY: 4.0%
Autostrade Utilities 38,800 170,165
Banca Popolare di Bergamo Banking 19,200 396,768
Banca Commerciale Popolare Milano Banking 24,600 192,564
Benetton Group Consumer Retail 78,000 130,837
Edison Utilities 39,400 347,634
Fiat Spa Consumer Durables 71,610 202,835
Mediaset Services 28,700 181,815
Montedison Industrial 392,900 387,242
Telecom Italia spa Communications 41,411 299,017
--------------
2,308,877
- -----------------------------------------------------------------------------------------------------------------------------------
JAPAN: 5.1%
Bridgestone Consumer Durables 6,000 132,058
Canon Technology 6,000 113,523
Familymart Consumer Retail 4,000 202,849
Fuji Photo Film Services 5,000 183,199
Honda Motor Consumer Durables 5,000 150,163
KAO Corporation Consumer Staples 12,000 243,006
NGK Spark Plug Consumer Durables 23,000 214,132
Nintendo Services 2,400 203,878
Nippon Telephone & Telegraph Communications 20 156,513
Olympus Optical Technology 12,000 123,562
Ono Pharmaceutical Health Care 5,000 149,305
Pioneer Electric Technology 8,000 131,800
Promise Financial Diversified 3,000 135,662
Shiseido & Company Consumer Staples 12,000 131,388
Sony Corporation Technology 2,000 126,995
TDK Corporation Technology 2,000 131,800
Yamanouchi Pharmaceutical Health Care 7,000 200,616
Yasuda Fire & Marine Insurance Insurance 36,000 177,310
--------------
2,907,759
- -----------------------------------------------------------------------------------------------------------------------------------
MALAYSIA: 0.3%
Golden Hope Plantation Consumer Staples 39,000 23,911
Perlis Plantation Consumer Staples 43,750 43,059
Petronas Gas Utilities 30,000 54,081
Telekom Malaysia Communication 29,000 51,512
--------------
172,563
- -----------------------------------------------------------------------------------------------------------------------------------
MEXICO: 0.9%
Cemex CPO Building 30,400 72,346
Maseca B Consumer Staples 76,500 62,072
Telefonos de Mexico Series L ADR Communications 7,400 390,812
--------------
525,230
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
NETHERLANDS: 4.5%
ABN-AMRO Holdings Banking 17,500 327,521
Akzo Nobel Chemicals 5,900 229,046
DSM NV Chemicals 3,918 181,431
Hoogovens NV Metals & Mining 4,334 131,172
ING Groep NV Insurance 15,598 754,001
Laurus NV Utilities 3,048 76,578
Philips Electronics Industrial 2,800 148,826
Royal Dutch Energy 6,900 332,806
Vedior Consumer Retail 4,296 109,347
Vendex International Cert. Services 4,354 110,590
VNU Services 5,300 183,081
--------------
2,584,399
- -----------------------------------------------------------------------------------------------------------------------------------
NEW ZEALAND: 0.2%
Lion Nathan Limited Consumer Staples 33,000 86,509
--------------
86,509
- -----------------------------------------------------------------------------------------------------------------------------------
NORWAY: 0.5%
Den Norske Bank A Banking 87,300 306,798
--------------
306,798
- -----------------------------------------------------------------------------------------------------------------------------------
PAKISTAN: 0.1%
Pakistan Telephone Communications 650 20,800
--------------
20,800
- -----------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES: 0.3%
Manila Electric Utilities 18,000 53,084
Philippines Long Distance Communications 4,200 100,446
--------------
153,530
- -----------------------------------------------------------------------------------------------------------------------------------
POLAND: 0.2%
BPH Banking 1,900 123,672
--------------
123,672
- -----------------------------------------------------------------------------------------------------------------------------------
PORTUGAL: 0.2%
Banco Espir Santo Banking 2,385 70,396
Telecom Portugal Communications 1,200 56,799
--------------
127,195
- -----------------------------------------------------------------------------------------------------------------------------------
RUSSIA: 0.1%
Lukoil ADR Energy 800 13,000
Gazprom ADR Energy 3,500 31,855
---------
44,855
- -----------------------------------------------------------------------------------------------------------------------------------
SINGAPORE: 1.2%
City Development Financial Diversified 13,000 47,126
Development Bank of Singapore - Foreign Banking 14,800 92,755
Fraser & Neave Consumer Staples 7,800 24,921
Singapore Airlines - Foreign Transportation 21,400 131,488
Singapore Telecom Communications 202,100 348,926
UOL Ltd. Financial Diversified 66,000 36,491
--------------
681,707
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
SOUTH AFRICA: 0.4%
Anglo American Corp SA Industrial 1,100 35,916
De Beers Consumer Retail 1,400 19,526
Firstrand Insurance 15,525 20,153
Liberty Life Association Insurance 2,800 48,064
Nedcor Banking 700 14,019
Rembrandt Group Consumer Staples 7,200 48,021
South African Brewery Consumer Staples 1,800 35,018
Standard Bank Inv. Banking 7,000 21,154
--------------
241,871
- -----------------------------------------------------------------------------------------------------------------------------------
SOUTH KOREA: 0.5%
Pohang Iron & Steel Metals & Mining 2,200 122,813
SK Telecom Communications 206 142,976
--------------
265,789
- -----------------------------------------------------------------------------------------------------------------------------------
SPAIN: 1.1%
Iberdrola Utilities 17,000 274,309
Telefonica de Espana Communications 14,000 355,102
--------------
629,411
- -----------------------------------------------------------------------------------------------------------------------------------
SWEDEN: 0.5%
SE Banken A Banking 20,600 304,233
--------------
304,233
- -----------------------------------------------------------------------------------------------------------------------------------
SWITZERLAND: 3.4%
Fischer (Georg) AG Capital Goods 1,000 343,888
Nestle AG Consumer Staples 200 424,153
Novartis Reg Health Care 200 359,352
Roche GS Health Care 18 209,426
Swatch Group AG Services 1,800 245,545
Swiss Reinsurance Insurance 170 377,555
--------------
1,959,919
- -----------------------------------------------------------------------------------------------------------------------------------
THAILAND: 0.2%
Advanced Information Service Communications 11,900 82,259
Thai Airways International Transportation 35,300 46,112
--------------
128,371
- -----------------------------------------------------------------------------------------------------------------------------------
TURKEY: 0.2%
Akbank Banking 1,793,600 26,366
Arcelik Consumer Durables 1,320,000 30,228
Cukurova Elektri Utilities 17,900 20,195
KOC Holdings Consumer Durables 283,100 26,017
Netas* Technology 61,000 7,042
Petkim Chemicals 43,000 9,700
--------------
119,548
- -----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
UNITED KINGDOM: 9.9%
Abbey National Banking 20,700 401,311
Allied Domecq Consumer Staples 22,300 204,984
Bank of Scotland Banking 17,000 183,967
BG Plc Utilities 60,800 398,325
Boots Consumer Retail 8,527 127,975
British Airways Transportation 22,786 166,037
British Petroleum Energy 25,028 367,469
British Steel Metals & Mining 66,200 113,957
British Telecom Communications 32,400 419,933
CGU Plc Insurance 11,000 173,456
Guardian Royal Insurance 42,488 204,151
Halifax Banking 11,700 155,065
Ladbroke Group Services 63,996 233,694
Misys Technology 11,900 83,133
National Westminster Bank Banking 18,779 315,735
Pearson Services 11,300 197,922
P & O DFD Transportation 15,356 160,787
Powergen Utilities 18,500 262,038
Siebe Industrial 32,400 132,801
Smithkline Beecham Health Care 33,700 419,039
Somerfield Consumer Retail 14,100 90,843
Tate & Lyle Consumer Staples 23,900 143,797
Thames Water Utilities 14,300 264,328
Unilever Consumer Staples 27,200 271,619
WPP Group Services 46,100 227,862
--------------
5,720,228
- -----------------------------------------------------------------------------------------------------------------------------------
UNITED STATES: 35.9%
American International Group Insurance 1,900 161,975
American National Insurance Insurance 1,800 151,200
Amgen* Health Care 6,300 494,944
Amsouth Bancorp Banking 10,575 423,661
Bell Atlantic Communications 9,368 497,675
Berkshire Hathaway Class A Financial Diversified 15 967,500
Black & Decker Services 6,800 351,475
BMC Software* Technology 3,200 153,800
Brown Forman B Consumer Staples 7,700 523,119
Caterpillar Capital Goods 3,900 175,500
Chase Manhattan Banking 8,300 475,175
Citigroup Financial Diversified 6,750 317,672
Coastal Corporation Energy 6,700 236,175
Comerica Banking 4,050 261,225
Cooper Industries Industrial 4,300 189,738
Dell Computer* Technology 14,400 943,200
Donnelley & Sons Services 7,000 301,875
Dow Chemical Chemicals 2,900 271,513
Eastman Chemical Chemicals 3,000 176,250
EMC Corporation Technology 2,300 148,063
Exel Limited Insurance 1,800 137,588
Federal National Mortgage Association Financial Diversified 7,200 509,850
<PAGE>
FDX Corporation* Services 5,300 278,581
FMC Corporation* Industrial 2,500 127,656
Ford Motor Company Consumer Durables 8,100 439,425
General Dynamics Corporation Aerospace 7,800 461,663
General Electric Industrial 3,400 525,750
GPU Inc. Utilities 2,500 107,813
GTE Corporation Communication 1,900 111,506
Guidant Health Care 6,200 474,300
Harris Corporation Industrial 10,600 371,663
Intel Technology 1,400 124,863
K Mart* Consumer Retail 21,000 296,625
King World Productions* Services 5,600 147,000
Lucent Technologies Technology 3,100 248,581
Marshall & Ilsley Banking 8,400 409,500
McKesson Corporation Health Care 4,400 338,800
Mellon Bank Corporation Banking 5,200 312,650
Merck & Company Health Care 2,600 351,650
Mobil Corporation Energy 5,500 416,281
National Service Industries Industrial 6,700 240,363
Norfolk Southern Corporation Transportation 8,100 266,794
Pacificare B* Health Care 2,900 228,375
Peoplesoft Incorporated* Technology 2,800 59,325
PG & E Corporation Utilities 5,500 167,406
Phelps Dodge Corporation Metals & Mining 1,000 57,625
Phillips Petroleum Energy 6,300 384,925
Quaker Oats Consumer Staples 7,900 466,594
Raytheon A Industrial 2,924 163,744
Raytheon B Industrial 4,100 238,056
Rite Aid Corporation Consumer Staples 12,300 488,156
Rockwell International Industrial 5,700 234,056
Royal Dutch Petroleum Energy 5,200 256,100
Safeway Incorporation* Consumer Staples 10,900 521,156
SBC Communication Communication 9,135 423,065
Sempra Energy Utilities 10,500 273,000
St. Paul Companies Insurance 3,400 112,625
Tele-Communications Inc. A* Services 5,408 227,812
Tele-Communications TCI A* Services 6,184 115,177
Tellabs Incorporated* Technology 2,000 110,000
TJX Companies Consumer Retail 15,000 284,062
TRW Incorporated Industrial 5,800 330,237
Unilever NV Consumer Staples 2,400 180,600
US West Communication Communications 9,000 516,374
Vulcan Materials Building 1,800 213,524
Warner Lambert Health Care 3,700 289,987
Xerox Corporation Services 3,700 358,436
--------------
20,621,054
--------------
Total Common Stocks (Cost $44,376,546) 51,506,367
--------------
- -----------------------------------------------------------------------------------------------------------------------------------
TIME DEPOSIT: 11.6%
Par Value
State Street Bank and Trust Co. Eurodollar
Time Deposit 4.75%, due 11/02/98 (Cost $6,647,000) $6,647,000 6,647,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investments: 101.2% (Cost $51,023,546) 58,153,367
Other Assets, Less Liabilities: (1.2%) (688,952)
=========== ==============
Total Net Assets: 100% $57,464,415
=========== ==============
* Non-Income Producing Securities
See Notes to Financial Statements.
<PAGE>
THOMAS WHITE WORLD FUND
Statement of Assets and Liabilities
October 31, 1998
- ----------------------------------------------------------------------------------------------------------------
ASSETS
Investments in securities at value (cost $51,023,546) $ 58,153,367
Cash 2,019
Receivables:
Dividends and interest 131,629
Securities sold 130,320
Fund shares sold 4,255
Prepaid expenses 3,886
Equipment 3,398
------------------
Total assets 58,428,874
------------------
LIABILITIES
Accrued expenses 81,207
Payables:
Securities purchased 89,245
Fund shares redeemed 794,007
------------------
Total liabilities 964,459
------------------
NET ASSETS
Source of Net Assets:
Net capital paid in on shares of beneficial interest $ 45,875,443
Undistributed net investment income 538,467
Accumulated net realized gain 3,920,684
Net unrealized appreciation 7,129,821
------------------
Net assets $ 57,464,415
==================
Shares outstanding 4,231,192
Net asset value per share $ 13.58
==================
See Notes to Financial Statements.
<PAGE>
THOMAS WHITE WORLD FUND
Statement of Operations
Year Ended October 31, 1998
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Dividends (net of foreign taxes withheld of $96,192) $ 1,067,529
Interest 295,945
----------------------
Total investment income 1,363,474
----------------------
Expenses:
Investment management fees (note 3) 534,735
Custodian fees 65,187
Transfer Agent fees 21,310
Audit fees and expenses 25,232
Trustees' fees and expenses 15,940
Printing expenses 5,034
Legal fees and expenses 27,161
Organization costs 5,982
Registration fees 31,797
Depreciation expense 5,167
Other expenses 21,051
----------------------
Total expenses 758,596
Net investment income 604,878
----------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain on investments 3,965,958
Unrealized depreciation on investments (112,585)
----------------------
Net gain on investments 3,853,373
----------------------
Net increase in net assets from operations $ 4,458,251
======================
See Notes to Financial Statements.
<PAGE>
THOMAS WHITE WORLD FUND
Statements of Changes in Net Assets
Years Ended October 31, 1997 & 1998
- -----------------------------------------------------------------------------------------------------------------
Change in net assets from operations: 1998 1997
-----------------------------------------------
Net investment income $ 604,878 $ 723,140
Net realized gain 3,965,958 1,981,651
Unrealized appreciation (depreciation) for the year (112,585) 3,574,857
-----------------------------------------------
Net increase in net assets from operations 4,458,251 6,279,648
Distributions to shareholders:
From net investment income (696,401) (591,413)
From net realized gain (1,942,252) (2,434,679)
Fund share transactions 7,649,245 5,584,959
-----------------------------------------------
Total increase 9,468,843 8,838,515
Net assets:
Beginning of year 47,995,572 39,157,057
-----------------------------------------------
End of year $ 57,464,415 $ 47,995,572
===============================================
See Notes to Financial Statements.
</TABLE>
<PAGE>
THOMAS WHITE WORLD FUND
- --------------------------------------------------------------------------------
Notes to Financial Statements
Year Ended October 31, 1998
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. Effective November 1, 1998, the Trust is comprised of two series of
Shares, the Thomas White World Fund (the "Fund") and the Thomas White American
Growth Fund. The investment objective of the Fund is to seek long-term capital
growth by investing in stocks and debt obligations of companies and governments
of any nation. 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) Use of estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at the
date of the financial statements and the reported amounts of increases
and decreases in net assets from operations during the period. Actual
results could differ from these estimates.
(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.
<PAGE>
Note 2. Transactions in Shares of Beneficial Interest
As of October 31, 1998, there were an unlimited number of $.01 par value shares
of beneficial interest authorized. Transactions are summarized as follows:
<TABLE>
<S> <C> <C> <C> <C>
Year Ended Year Ended
October 31, 1998 October 31, 1997
-------------------------------------- ------------------------------------
Shares Amount Shares Amount
----------------- ------------------ --------------- ------------------
Shares sold 758,837 $ 10,174,935 242,690 $ 3,097,633
Shares issued on
reinvestment of
distributions 207,791 2,591,156 249,893 2,986,226
Shares redeemed (363,640) (5,116,846) (40,053) (498,900)
----------------- ------------------ --------------- ------------------
Net increase 602,988 $ 7,649,245 452,530 $ 5,584,959
----------------- ------------------ --------------- ------------------
</TABLE>
Note 3. Investment Management Fees and Other Transactions with Affiliates
The Fund pays monthly an investment management fee to Thomas White
International, Ltd. at the rate of 1% of the Fund's average daily net assets.
Note 4. Investment Transactions
During the year ended October 31, 1998, the cost of purchases and the proceeds
from sales of investment securities, other than short-term obligations, were
$30,120,825 and $24,342,898, respectively. The cost of securities for federal
income tax purposes was the same as that shown in the investment portfolio.
At October 31, 1998, the aggregate gross unrealized appreciation and
depreciation of portfolio securities, based upon cost for federal income tax
purposes, were as follows:
Unrealized appreciation $ 10,759,443
Unrealized depreciation (3,629,622)
------------------
Net unrealized appreciation $ 7,129,821
------------------
<PAGE>
Note 5. Selected Financial Information
<TABLE>
<S> <C> <C> <C> <C> <C>
Period from
Year Ended Year Ended Year Ended Year Ended June 28, 1994
October October 31, October 31, October 31, (Inception)
31, 1998 1997 1996 1995 to October
31, 1994
--- ------------ -- ------------- --- ------------- -- -------------- --- ---------------
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of $ 13.23 $ 12.33 $ 11.31 $ 10.50 $ 10.00
period
--- ------------ -- ------------- --- ------------- -- -------------- --- ---------------
Income from investment
operations:
Net investment income 0.15 0.20 0.19 0.19 0.06
Net realized and
unrealized gain 0.93 1.65 1.51 0.71 0.44
--- ------------ -- ------------- --- ------------- -- -------------- --- ---------------
1.08 1.85 1.70 0.90 0.50
Distributions:
From net investment income (0.19) (0.19) (0.20) (0.09) -
From net realized gains (0.54) (0.76) (0.48) - -
--- ------------ -- ------------- --- ------------- -- -------------- --- ---------------
(0.73) (0.95) (0.68) (0.09) -
Change in net asset value for
the period 0.35 0.90 1.02 0.81 0.50
=== ============ == ============= === ============= == ============== === ===============
Net asset value, end of period $ 13.58 $ 13.23 $ 12.33 $ 11.31 $ 10.50
=== ============ == ============= === ============= == ============== === ===============
Total Return 8.64% 15.80% 15.63% 8.65% 5.00% **
Ratios/supplemental data
Net assets. End of period (000) $ 57,464 $ 47,996 $ 39,157 $ 32,979 $ 13,928
Ratio to average net assets:
Expenses (net of 1.42% 1.47% 1.50% 1.49% 1.50% *+
reimbursement)
Net investment income 1.13% 1.60% 1.63% 2.08% 1.79% *
Portfolio turnover rate 51.41% 48.19% 51.22% 64.54% 1.01%
* Annualized
** Not annualized.
+ In the absence of the expense reimbursement, expenses would have been 2.36% of average net assets.
</TABLE>
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C>
(a) Trust Instrument(2)
(b) By-Laws(2)
(c) Not Applicable
(d) (1) Form of investment management agreement for the
Thomas White World Fund (1)
(2) Form of investment management agreement for the
Thomas White American Growth Fund (3)
(3) Form of investment management agreement for the
Thomas White American Opportunities Fund
(e) Not Applicable
(f) Not Applicable
(g) (1) Form of custody agreement for Thomas White World Fund
(2) Form of custody agreement for Thomas White American Growth Fund
and Thomas White American Opportunities Fund (4)
(h) (1) Form of transfer agent agreement (1)
(2) Form of blue sky compliance servicing
agreement (1)
(3) Form of servicing agreement with respect to Firstar Money Market Funds (4)
(i) Opinion and consent of counsel(2)
<PAGE>
(j) Consent of independent public accountants
(k) Not Applicable
(l) Initial capital agreement (2)
(m) Not Applicable
(n) Financial data schedules (Filed as Exhibit 27)
(o) Not Applicable
(p) (1) Powers of attorney for Messrs. White,
Haag, Manos, and Mack, and for Ms. Almeida (2)
(2) Powers of attorney for Messrs. Joel and Venson (1)
(q) Secretary's certificate pursuant to Rule
483(b)(2)
-------------------
</TABLE>
(1) Filed with Post-Effective Amendment No. 2 to Registrant's
Registration Statement on February 28, 1996.
(2) Filed with Post-Effective Amendment No. 4 to Registrant's
Registration Statement on December 31, 1997.
(3) Filed with Post-Effective Amendment No. 6 to Registrant's
Registration Statement on August 13, 1998.
(4) Filed with Post-Effective Amendment No. 7 to Registrant's
Registration Statement on October 30, 1998.
Item 24. Persons Controlled by or Under Common Control with
Registrant
Not Applicable.
<PAGE>
Item 25. 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 26. Business and Other Connections of the Investment Adviser
The business and other connections of Thomas White
International, Ltd. are described in Parts A and B.
For information relating to the investment adviser's
officers and directors, reference is made to Form ADV filed
under the Investment Advisers Act of 1940 by Thomas White
International, Ltd.
Item 27. Principal Underwriters
Not Applicable.
<PAGE>
Item 28. 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 promulgated
thereunder are in the possession of Thomas White
International, Ltd., 440 South LaSalle Street, Chicago,
Illinois 60605-1028.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Registrant has duly caused this Post-Effective Amendment No. 8
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 15th day of
December, 1998.
Lord Asset Management Trust
<PAGE>
By: *
Thomas S. White, Jr.
President
Pursuant to the requirements of the Securities Act, this
Post-Effective Amendment No. 8 to the Registration Statement has been
signed below by the following persons on behalf of Lord Asset
Management Trust in the capacities and on the date indicated:
<TABLE>
<S> <C> <C>
Signature Title Date
* Trustee and President December 15, 1998
Thomas S. White, Jr. (Principal Executive
Officer)
* Treasurer (Principal December 15, 1998
Brandon S. Joel Financial and
Accounting Officer)
* Trustee December 15, 1998
Jill F. Almeida
* Trustee December 15, 1998
Philip R. Haag
* Trustee December 15, 1998
Nicholas G. Manos
* Trustee December 15, 1998
Edward E. Mack, III
* Trustee December 15, 1998
John N. Venson
</TABLE>
*By: /s/ William J. Kotapish
William J. Kotapish
as attorney-in-fact
* Powers of Attorney are included as exhibits in Post-Effective
Amendment No. 2 filed February 28, 1996 and Post-Effective
Amendment No. 4 filed December 31, 1997.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
FILED
WITH
REGISTRATION STATEMENT
ON
FORM N-1A
LORD ASSET MANAGEMENT TRUST
Exhibit Description
d(2)(Filed as Exhibit 5(d(2)) Form of investment management agreement for
the Thomas White American Opportunities Fund
j (Filed as Exhibit 11 (j)) Consent of independent public accountants
n (Filed as Exhibit 27) Financial data schedules
THOMAS WHITE INTERNATIONAL, LTD.
on behalf of
THOMAS WHITE AMERICAN OPPORTUNITIES FUND
INVESTMENT ADVISORY AGREEMENT
AGREEMENT, effective commencing on March 1, 1999 between Thomas White
International, Ltd. (the "Adviser") and Lord Asset Management Trust (the
"Trust") on behalf of Thomas White American Opportunities 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 securities 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
Adviser will determine what portion of the Fund's portfolio shall be invested in
securities and other assets, and what portion, if any, should be held
uninvested.
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;
<PAGE>
(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 Adviser
respecting or relating to the Adviser that is not contained in 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 disbursing 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 Adviser; and travel expenses (or
an appropriate portion thereof) of officers or 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.
<PAGE>
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 specifications 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 of 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.
<PAGE>
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 in 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 in 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 Adviser,
the Trust will take such action 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 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 "Thomas White
International. Ltd." and "Thomas White."
<PAGE>
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 Thomas S. White, Jr.
President
THOMAS WHITE INTERNATIONAL, LTD.
By Thomas S. White, Jr.
Chairman
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated November 18, 1998, on the
financial statements of the Thomas White World Fund series of Lord Asset
Management Trust referred to therein, in Post-Effective Amendment No. 8 to the
Registration Statement on 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
"Financial Information" and in the Statement of Additional Information under the
caption "Independent Accountants."
/s/ McGladrey & Pullen, LLP
McGladrey & Pullen, LLP
New York, New York
December 14, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-1-1997
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 51024
<INVESTMENTS-AT-VALUE> 58153
<RECEIVABLES> 266
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58429
<PAYABLE-FOR-SECURITIES> 89
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 876
<TOTAL-LIABILITIES> 965
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45875
<SHARES-COMMON-STOCK> 4231
<SHARES-COMMON-PRIOR> 3628
<ACCUMULATED-NII-CURRENT> 539
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 3921
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7129
<NET-ASSETS> 57464
<DIVIDEND-INCOME> 1068
<INTEREST-INCOME> 296
<OTHER-INCOME> 0
<EXPENSES-NET> 759
<NET-INVESTMENT-INCOME> 605
<REALIZED-GAINS-CURRENT> 3966
<APPREC-INCREASE-CURRENT> (113)
<NET-CHANGE-FROM-OPS> 4458
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 696
<DISTRIBUTIONS-OF-GAINS> 1942
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 759
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<PER-SHARE-NAV-BEGIN> 13.23
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<EXPENSE-RATIO> 1.42
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
