File No. 33-75138
As filed with the Securities and Exchange Commission on February 27, 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. 5 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 7 / 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)
X on March 1, 1998 pursuant to paragraph (b)
on (date) pursuant to paragraph (a)
on (date) pursuant to paragraph (a) of Rule 485
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LORD ASSET MANAGEMENT TRUST
CROSS-REFERENCE SHEET
Item No. Caption
Part A
1 Cover Page
2 Fund Highlights; Expenses; Performance
3 Financial Information
4 Investment Approach; The Fund in Detail
5 The Fund in Detail
5A Not Applicable
6 Shareholder Services and Account Policies;
The Fund in Detail; Dividends,
Distributions and Taxes
7 Your Account at the Fund; Shareholder
Services and Account Policies
8 Your Account at the Fund; Shareholder
Services and Account Policies
9 Not Applicable
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Item No. Caption
Part B
10 Cover Page
11 Table of Contents
12 General Information and
History
13 Investment Objective and
Policies
14 Management of the Trust
15 Principal Shareholders
16 Investment Management and
Other Services
17 Brokerage Allocation
18 Description of Shares
19 Purchase, Redemption and
Pricing of Shares
20 Tax Status
21 Not Applicable
22 Performance Information
23 Financial Statements
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PROSPECTUS & APPLICATION
THOMAS WHITE WORLD FUND
CAPTURING VALUE WORLDWIDESM
March 1, 1998
Thomas White World Fund (the "Fund") seeks long-term capital growth through a
flexible policy of investing worldwide. It primarily invests in equity
securities, including common and preferred stocks, within developed markets,
including the United States, and to a lesser extent, within emerging markets.
The Fund is a series of the Lord Asset Management Trust (the "Trust").
Lord Asset Management Trust 440 S. LaSalle Street, Suite 3900, Chicago, IL 60605
Please read this prospectus before investing, and keep it on file for future
reference. It contains information that an investor ought to know before
investing, including how the Fund invests and the services available to
shareholders.
A Statement of Additional Information ("SAI") dated March 1, 1998 has been filed
with the Securities and Exchange Commission, and is incorporated herein by
reference (it is legally considered a part of this prospectus). The SAI is
available free upon request by calling:
1-800-811-0535
LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Contents
Fund Highlights 2 Fund Goal, Investment Strategy, Those Investors who may Find
the Fund Attractive, and Risks and Potential Rewards
Expenses 5 Expenses
Financial Information 6 Per Share Table
Investment Approach 7 The Advisor's
Investment Approach
9 Portfolio Diversification and Portfolio Turnover
Performance 10 Performance
Your Account 11 Doing Business with the
at the Fund Thomas White World Fund
11 How to Buy Shares
13 Choosing Your Account
Registration
17 How to Sell Shares
Shareholder Services 20 Statements and Reports
and Account Policies 20 Share Price
21 Purchases and Redemptions
22 Address Changes and
Telephone Transactions
23 Account Registration Charges
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Dividends, Distributions 24 Distribution Options and Taxes
and Taxes 25 Foreign Income Taxes
The Fund in Detail 26 Organization and Management
27 Custodian, Transfer Agent
and Expenses
27 Securities, Investment
Practices and Risks
Contacting the Fund 35 Addresses, Phone Number and Web-Site
AN IMPORTANT PHONE NUMBER
All Shareholder Services: 1-800-811-0535
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Fund Highlights
Fund Goal
The Thomas White World Fund seeks long-term capital growth.
Investment Strategy
The Fund primarily invests in equity securities, including common and preferred
stocks, although it may occasionally hold fixed-income or other securities.
Generally, equity investments will represent a diversified portfolio of
companies located in the world's developed countries, including the United
States. There will also be a small portion of the assets in a diversified
portfolio of companies from the emerging market countries. The Fund seeks to own
attractively-priced companies that Thomas White International, Ltd., the Fund's
investment advisor, thinks will benefit from favorable long-term economic,
social and political trends.
Management
Thomas White International, Ltd. (the "Advisor") chooses investments for the
Fund. Thomas S. White, Jr. is the Fund's portfolio manager and has been so since
its inception. The Advisor takes full advantage of the extensive resources of
the Global Capital Institute. This investment research organization is wholly
owned by the Advisor. It has numerous experienced security analysts that perform
ongoing investment valuation work on three thousand global companies in
forty-seven countries. The Institute's monthly global equity valuation
publications are produced for use by its clients, who are asset management
organizations worldwide.
Those Investors who may Find the Fund Attractive The Fund is designed for
individuals with long-term investment horizons who want growth of capital rather
than current income.
World, or global, funds characteristically obtain smoother performance than
foreign, or international, funds. This is because world funds have a portion of
their assets in U.S. securities. This exposure produces broader investment and
portfolio diversification.
Investing directly in foreign markets is impractical for most investors because
of the complexity of doing research and making transactions. Investors must deal
with brokers in different time zones, arrange for available foreign currency,
coordinate widely varying settlement dates, follow local regulations, account
for dividend tax withholding reclaims, etc. The Fund manages these areas for its
shareholders. The shareholders of the Fund have a diversified worldwide
investment portfolio that is actively managed by experienced professionals. The
Fund represents a practical, low cost, 100% no-load vehicle. It enables the
individual ownership of an extensive worldwide investment portfolio.
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Risks and Potential Rewards
Shareholders should understand that all investments involve risk. There can be
no guarantee against loss resulting from an investment in the Fund, nor can
there be any assurance that the Fund's investment objective will be attained.
The value of the Fund's investments, and therefore investment performance, will
vary from day to day. Borowing by the Fund, if any, may tend to exaggerate this
effect. Performance depends on the manager's skill in selecting stocks, as well
as general market and economic conditions. When you sell your shares, they may
be worth more or less than the price you paid for them.
Did you know?
The Fund's investment advisor, Thomas White International, Ltd., also manages
portfolios for institutional clients in Europe, the United Kingdom, the U.S. and
Japan. The portfolio manager, Thomas White, takes full advantage of the
extensive resources of the Global Capital Institute, a wholly owned investment
research organization. The Institute's professionals do ongoing valuation-based
security analysis on three thousand global companies in forty-seven countries.
Its monthly equity valuation publications are produced for clients who are asset
management organizations located around the world.
The Fund will generally be fully- invested in equity securities, including
common and preferred stocks. History shows that over long periods, equities have
outperformed bonds, cash equivalents and inflation. Nevertheless, in the short
term, stock performance may be volatile and unpredictable, and may produce more
negative annual returns than other asset classes. Moreover, holding foreign
companies can entail taking more risk than owning the stocks of domestic
companies.
Thomas White International recognizes the above risks and attempts in its
management of the Fund to moderate them. It believes that a professionally
structured and carefully monitored world portfolio can reduce the risks
associated with single-country, less-diversified equity portfolios. The Fund is
designed for investors who want to improve the return and risk profile of their
equity portfolios by having some exposure to foreign investing. Its objective is
to compliment, through diversification, single-country, domestic equity
investing. It considers itself in competition with other foreign equity funds.
The Fund attempts to configure its portfolio to moderate the natural volatility
of equities, but its success in doing so cannot be assured.
The Fund is managed with a goal of producing long-term capital gains so as to
minimize investor taxation. Current income is only a byproduct of the Advisor's
investment process, and is not a primary objective.
See "Your Account with the Fund" for how to buy and redeem shares.
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The Thomas White World Fund is designed to take advantage of the positive
changes occurring in the world today.
These forty-seven countries contain over 3,000 companies that are valued by our
analysts. Shareholders are partial owners of over 200 of the most undervalued of
these firms. Whether you realize it or not, the Fund's 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
EUROPE
Austria
Belgium
Denmark
Finland
France
Germany
Ireland
Italy
Netherlands
Norway
Spain
Sweden
Switzerland
United Kingdom
NORTH AMERICA
Canada
United States
PACIFIC
Australia
Hong Kong
Japan
New Zealand
Singapore
EMERGING MARKETS
GREATER EUROPE
Czech Republic
GreecePortugal
Hungary Russia
PolandTurkey
MIDDLE EAST
Israel
AFRICA
South Africa
LATIN AMERICA
Argentina Mexico
Brazil Peru
Chile Venezuela
Colombia
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INDIAN SUBCONTINENT
India
Pakistan
Sri Lanka
FAR EAST
China Philippines
Indonesia Taiwan
Korea Thailand
Malaysia
The Fund takes full advantage of the extensive resources of the Global Capital
Institute. This investment research organization is owned by Thomas White
International, the Fund's investment advisor. The Institute's professionals
perform ongoing valuation-based security analysis on over 3,000 global companies
in forty-seven countries. Its monthly equity valuation publications are produced
for clients who are asset management organizations located around the world.
Expenses
Shareholder Transaction Expenses are charges paid when you buy or sell shares of
the Fund.
Maximum sales charge
on purchases and reinvested
dividends None
Deferred sales charge None
Redemption fee None
Annual fund operating expenses. Expenses include investment advisory fees as
well as the costs of maintaining accounts, administering the Fund, providing
shareholder services and other activities. The Fund's expenses are subtracted
daily and are therefore factored into the share price as reported; expenses are
not charged directly to shareholder accounts.
The following are based on historical expenses, and are calculated as |a
percentage of average daily net assets
The Fund's total expense ratio is 1.47% compared to the average net expenses of
1.99% for the 131 world stock funds rated in the Morningstar Principia Database
on January 31, 1998.
THOMAS WHITE WORLD FUND
Annual Fund Operating Expenses
Management fee.................1.00%
12b-1 fee........................None
Other Expenses..................0.47%
Total fund
operating expenses.............1.47%*
Example: Assume that the Fund's annual return is 5%, and that its operating
expenses are exactly as shown in the column above. For every $1,000 you
invested, here's how much you would have paid in total expenses if you closed
your account after the number of years indicated:
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THOMAS WHITE WORLD FUND
After 1 year.....................$15
After 3 years....................$47
After 5 year.....................$81
After 10 years...................$176
The examples set forth above should not be considered a representation of future
aggregate expenses of the Fund, and actual expenses may be greater or less than
those shown. 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.
*The Advisor has agreed to reimburse the 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.
Financial Information
Thomas White World Fund
This table summarizes the Fund's financial history. The information has been
audited by McGladrey & Pullen, LLP, the Fund's independent auditors. Their audit
report covering each of the past three years and the period from June 28, 1994
(Inception) to October 31,1994, appears in the Fund's Annual Report to
Shareholders for the fiscal year ended October 31, 1997. The Annual Report to
Shareholders also includes more information about the Fund's performance. For a
free copy, please call 1-800-811-0535.
Period from
June 28,1994
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For a share outstanding throughout the period Year ended October 31(Inception) to
1997 1996 1995 Oct. 31, '94
Net Asset Value, beginning of period $12.33 $11.31 $10.50 $10.00
Income From Investment Operations
Net investment income 0.20 0.19 0.19 0.06
Net realized and unrealized gain 1.65 1.51 0.71 0.44
Total from investment operations 1.85 1.70 0.90 0.50
Less Distributions
From net investment income (0.19) (0.20) (0.09) -
From net realized gains (0.76) (0.48) - -
Total distributions (0.95) (0.68) (0.09) -
Change in net asset value for the period 0.90 1.02 0.81 0.50
Net Asset Value, end of period $13.23 $12.33 $11.31 $10.50
Total Return 15.80% 15.63% 8.65% 5.00%**
Ratios/Supplemental Data
Net assets at end of period (in thousands)$47,996$39,157 $32,979 $13,928
Ratio to average net assets:
Expenses (net of reimbursement) 1.47% 1.50 1.49% 1.50%*+
Net investment income 1.60% 1.63% 2.08% 1.79%*
Portfolio turnover rate 48.19% 51.22% 64.54% 1.01%
Average commission rate
paid (per share):++ $0.0055 $0.0337 $0.0303 $0.0618
* Annualized
** Not Annualized
+ In the absence of the expense reimbursement, expenses would have been 2.36% of
average net assets.
++ Required by regulations issued in 1995.
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Investment Approach
The Advisor's investment approach suggests that this Fund is appropriate for
conservative investors who believe that foreign equity exposure will, as it has
in the past, improve the return-risk profile of an equity portfolio.
This Fund is not for everyone. It has been designed by an experienced investment
advisor to be valuable to private investors who have long-term savings and
investment goals. It is best used by the person who recognizes the importance of
designing a lifetime investment plan and wants to save regularly and invest
those savings in a disciplined fashion. The Fund's shareholder communications
are addressed to this type of prudent investor in an attempt to assist their
particular needs and questions.
The Fund seeks to attract investors who will become increasingly comfortable
with the Advisor's investment approach and remain shareholders for the entire
life of their investment plans.
The Fund employs a valuation- based investment approach that Thomas White, the
portfolio manager, has used successfully over many years. The Advisor attempts
to obtain strong investment performance, but only within the context of
conservative investment management. The Advisor seeks below average portfolio
turnover, low portfolio volatility and superior returns in difficult market
environments.
The Advisor believes that this style of investing is more likely to sustain
superior returns over longer periods. This style may not be considered
aggressive enough by many who are willing to take greater risks for greater
rewards, despite the irregular returns and high volatility that go with such an
approach. The Thomas White World Fund is therefore not appropriate for
aggressive, short-term investors.
The Fund should be used by individuals who want to improve the return-risk
profile of their combined investments by having exposure to foreign investing.
It is designed for use as the international equity fund within a multi-fund
portfolio because it compliments domestic equity funds. Thomas White
International's private clients have between 15% and 35% of their equity
portfolios in world funds.
Investment Techniques
Thomas White International's preference for below average portfolio turnover and
stable portfolios is reflected in an emphasis on stock selection and extensive
country diversification.
Stocks typically are held for eighteen months to three years. Occasionally,
however, securities purchased on a long-term basis may be sold within eighteen
months after purchase due to a change in the circumstances of the company or
industry fundamentals, or in the general market or economic conditions.
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THE WORLD INDEX HAS A MORE STABLE RETURN
PATTERN THAN ANY OF ITS COMPONENT REGIONS
MSCI These Index Returns are in U.S. Dollars. Five-Year Regional
INDICES Performances Success is Ordered from #1 (Best) to #4 (Worst).
FIVE-YEAR
PERIOD WORLD EUROPE USA JAPAN PACIFIC
RETURNS EX JAPAN
1970-1974 -1.3% -0.9%(#2) -3.4%(#3) 16.0%(#1) -6.2%(#4)
1975-1979 16.0% 18.9%(#2) 13.3%(#4) 18.8%(#3) 27.5%(#1)
1980-1984 12.4% 6.1%(#3) 14.5%(#2) 17.0(#1) 4.1%(#4)
1985-1989 28.0% 32.3%(#2) 19.8%(#4) 41.4%(#1) 22.4%(#3)
1990-1994 4.2% 7.0%(#3) 9.2%(#2) -3.4%(#4) 15.3%(#1)
1995-1997 17.1% 22.6%(#2) 32.0(#1) -13.3%(#3) -15.0%(#4)
1970-1997 12.2% 13.3% 12.5% 14.4% 11.6%
*Source:Global Capital Institute
The table above presents the performance of the global stock markets from
January 1, 1970, to December 31, 1997.
Returns are shown in a series of five-year periods, except for the current
three-year period. The world's returns are followed by those of its four
component regions.
Regional performance is highlighted using ranks from #1 (best) to #4 (worst) to
indicate the winners and losers in each five-year period. History shows regional
returns are random in their timing, with no area holding a permanent monopoly on
performance. that the world and its regions all have quite similar long-term
records. But observe that the world index has a more stable return pattern than
any of its components. This is because regional bull and bear markets tend to
offset one another.
The Fund's design reflects the Advisor's belief that shareholders will benefit
from smoother world performance. A more stable portfolio encourages investors to
stay the course in falling market environments. This promotes success in
reaching long-term investment goals.
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The Fund invests primarily in equity securities, including common and preferred
stocks, warrants or other similar rights, and convertible securities. These
equity securities may be of any nation. The Fund may purchase foreign securities
in the form of American Depository Receipts (ADRs), European Depository Receipts
(EDRs), or other securities representing underlying shares of foreign issuers.
The Fund may also invest in any other type of security, including debt
securities.
Under normal market conditions, the Fund will invest in at least ten countries.
If investments in foreign securities appear to be relatively unattractive
because of current or anticipated adverse political or economic conditions, the
Fund may hold cash or cash equivalents, or invest any portion of its assets in
securities of the U.S. government and equity and debt securities of U.S.
companies, as a temporary defensive strategy.
Though not a standard procedure, the Fund may use various techniques to increase
or decrease its exposure to the effects of possible changes in security prices,
currency exchange rates, or other factors that affect the value of the Fund's
portfolio. These techniques include borrowing securities, buying and selling
options, futures contracts, or options on futures contracts, or entering into
forward foreign currency exchange contracts. Borrowing may tend to exaggerate
the effect on net asset value of any increase or decrease in the market value of
the Fund's portfolio.
Portfolio Diversification
In general, the more diversified a fund's portfolio of stocks, the less likely
that a specific stock's poor performance will hurt the fund. One measure of a
fund's level of diversification is the percentage of assets represented by its
ten largest holdings. According to the Morningstar Principia Database, as of
January 31, 1998, the average world stock mutual fund had 22.8% of its assets
invested in its ten largest holdings. At the same time, the Fund had only 11.6%
of its assets invested in its ten largest holdings.
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 high (for example, 100% or more), 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, the average portfolio turnover rate for a world stock mutual fund is
94% as of January 31, 1998. The Fund had a 52% portfolio turnover rate for the
year ended January 31, 1998.
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Performance
Mutual fund performance is commonly measured as total return. Total return is
the change in value of an investment in the Fund over a given period, assuming
reinvestment of any dividends and capital gains. Total return reflects actual
performance over a stated period of time. Average annual total return is a
hypothetical rate of return that, if achieved annually, would have produced the
same total return if performance had been constant over the entire period.
Average annual returns smooth out variations in performance; they are not the
same as actual year-by-year results.
Total returns are based on past results and are not a prediction of future
performance. They do not include the effect of income taxes.
The Fund sometimes shows its performance compared to stock indexes (described in
the statement of additional information), or gives its ratings or rankings
determined by an unrelated organization.
Information about the performance of the Fund is contained in the Annual Report
to Shareholders, which may be obtained free of charge by calling 1-800-811-0535.
The No-Load Advantage
o Thomas White World Fund is 100% no-load, which means that all of your money
goes to work for you immediately. There are no sales charges, no 12b-1 fees and
no back-end load fees, so all of your dollars are invested at net asset value.
The Fund typically invests in companies for longer holding periods, so the
frequency of its purchases and sales is below average. Lower portfolio turnover
helps to reduce trading costs and shareholders' taxes.
Fund Facts
o The Fund was opened to investors on June 28, 1994.
o The professionals at the Fund's advisor maintain a strong ethics policy that
restricts them from buying all common stocks. Ethics policies are in place
to assure Fund shareholders that potential conflicts of interest are
minimized and monitored.
o Thomas White International, Ltd., the advisor to the Fund, sells research to
institutional money managers worldwide.
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Your Account with the Fund
Doing Business with the Thomas White World Fund
The Fund provides customers with service Monday through Friday, except holidays,
from 8:00 a.m. to 7:00 p.m. Chicago (central) time.
Call 1-800-811-0535:
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o For help in setting up your account, prices, literature, or Fund
information;
o For help with existing Individual Retirement Accounts ("IRAs");
o To add to your existing account or to redeem shares by phone or call our
transfer agent by 3:00 p.m. Chicago (central) time;
o For your last 5 transactions, current net asset value ("NAV"), current
account value and dividend distribution. Our automated phone system can
provide information 24 hours a day.
How to Buy Shares
You can open a new account by mailing in an application with your check or money
order.
After your account is open, you may add to it by:
o mailing a check or money order with the stub from one of your account
statements or a letter containing your name and account number.
o enrolling in the Automatic Investment Plan, which enables automatic monthly
or quarterly purchases directly from your bank account;
o moving money from your bank by telephone if you participate in the
Telephone Purchase Plan;
o wiring money from your bank;
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You must make your telephone purchases by 3:00 p.m. Chicago (central) time.
If you are investing through an IRA for the first time, you will need a special
application. Call 1-800-811- 0535 to receive information and an application for
an IRA. For both initial and subsequent IRA investments, please indicate the
year for which the investment is being made.
MINIMUM INVESTMENTS
To open an account $2,500
To open an IRA $1,000
To open an Automatic
Investment Account $1,000
To open a spousal IRA $ 200
To add to an account $ 100
If you sign up for the Automatic Investment Plan and later wish to change the
amount or frequency of your automatic investments, or stop future investments,
you may do so by simply calling us at 1-800-811-0535 at least one week prior to
your next scheduled investment date.
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Shares of the Fund may be purchased or sold through certain broker-dealers,
financial institutions or other service providers ("Processing Intermediaries").
When shares of the Fund are purchased in this manner, the Processing
Intermediary, rather than its customer, may be the shareholder of record of the
shares. Processing Intermediaries may use procedures and impose restrictions in
addition to or different from those applicable to shareholders who invest
directly in the Fund.
Investors may be charged a fee if they effect transactions in Fund shares
through a broker, agent, or other Processing Intermediary. In addition, the
Advisor may, from time to time, make payments to Processing Intermediaries for
certain services to the Fund and/or its shareholders, including
sub-administration, sub-transfer agency and Shareholder servicing. Such payments
are made out of the Advisor's own resources and do not involve additional costs
to the Fund or its shareholders.
CHOOSING YOUR ACCOUNT
REGISTRATION
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.
RETIREMENT
To shelter your retirement savings from taxes
Retirement plans allow individuals to shelter investment income and capital
gains from current taxes. Contributions to these accounts may be tax deductible.
IRAs require a special application (call 1-800-811-0535); lower minimum
investments apply.
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o Individual Retirement Accounts (IRAs), including Roth IRAs, allow anyone of
legal age and under 701 1/42 with earned income to save up to $2,000 per
tax year. If your spouse has (or elects to be treated as having) earned
income of less than $250 your spouse may invest in a "Spousal IRA." Each
account is subject to the $2,000 maximum; the maximum for your combined
accounts is $4,000.
o Rollover IRAs retain special tax advantages for certain distributions from
employer-sponsored retirement plans.
o Simplified Employee Pension Plans (SEP-IRAs) 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.
o 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.
Other retirement plans- The Fund may be used as an investment in other
kinds of retirement plans, including Keogh or corporate profit sharing and
money purchase plans, 403(b) plans, and 401(k) plans. All of these accounts
need to be established by the trustee of the plan. The Fund does not offer
prototypes of these plans.
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HOW TO BUY SHARES OF THE FUND
Mail
To open an account:
o Complete and sign the application. Make your check payable
to "Thomas White World Fund." Mail to the address on the application,
or for overnight delivery:
Thomas White World Fund
Shareholder Services Center
615 East Michigan Street
3rd Floor
Milwaukee, WI 53202
To add to an account:
o Make your check payable to "Thomas White World Fund" 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:
o You may only open a new account by phone if you wire your investment to the
Fund. See the section "Wire" on the next page.
To add to an account:
o 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 3:00 p.m. Chicago (central) time.
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Automatic Investment Plan
To open an account:
o 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:
o 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
o Your bank must be a member of Automatic Clearing House (ACH).
o If the transfer is from a checking account, this application must be
accompanied by a voided check.
o If the transfer is from a savings account, this application must be
accompanied by a withdrawal slip.
o Application must be received, with initial investment, at least 15 business
days prior to initial ACH transaction.
o 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.
o This plan will terminate upon redemption of all shares in your account.
Wire
To open an account:
o 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 Fund, call and establish an account to ensure the
Transfer Agent correctly credits your account.
To add to an account:
o Wire to:
Firstar Bank Milwaukee, N.A
ABA Number 07500-0002
Trust Funds,
Acct Number 112-952-137
For further credit to Thomas White World Fund
(Investment account number)
(name or account registration)
<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 redemption request is received in good order. Good order
may include, among other items, verification of any recent address or bank
account changes and conformation of payment for recent purchases. See
"Shareholder and Account Policies" for more information about share price.
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.
The Telephone Redemption Plan
lets you redeem shares by phone. You must make your telephone redemptions by
3:00 p.m. Chicago (central) time. You must have selected this option on your
application. The proceeds will be sent to your bank account via the ACHnetwork.
This generally takes 2-3 business days. If you have changed the address on your
account by telephone within 30 days of the request, this service is not
available.
For a $12 fee the proceeds can be wired to your bank. If the proceeds are wired,
your bank account will be credited the following business day. You must
designate a bank account on your purchase application, or in writing with a
signature guarantee, to have the the proceeds of a redemption wired.
Selling Shares in Writing
Please send a letter with:
o your name;
o your Fund account number;
o the dollar amount or number of shares to be redeemed; o any other applicable
requirements listed in the table on the page 19.
Mail your letter to:
Thomas White World Fund c/o Firstar Trust Co.
P.O. Box 701
Milwaukee, WI 53201-0701
If you are using overnight mail:
Thomas White World Fund
Mutual Fund Services
615 E. Michigan St.
3rd Floor
Milwaukee, WI 53202
Certain requests must include a signature guarantee, designed to protect you and
the Fund 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:
o you wish to redeem more than $50,000 worth of shares;
<PAGE>
o 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);
o your address has changed within the last 30 days and you would like to
redeem shares;
o the check is being mailed to an address different from the one on your
account (record address);
o the check is being made payable to someone other than the account owner; or
o you are instructing the Fund to wire the proceeds to a bank or brokerage
account and have not signed up for the Telephone Redemption Plan.
The 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.
The price at which your shares will be redeemed is determined by the time of day
our transfer agent receives your redemption request. The price per share is
always the next NAV per share calculated after your redemption request,
including any required signature guarantee or supporting documents, is received.
The Fund calculates the NAV as of Closing Time on each day the New York Stock
Exchange (NYSE) is open for trading. Closing Time is the close of regular
session trading on the NYSE, which is usually 3:00 p.m. Chicago (central) time,
but is sometimes earlier.
To redeem at today's price:
o Use the Telephone Redemption Plan to call your redemption request in before
Closing Time.
o Have your written redemption request, with a signature guarantee, if
required, and any supporting documents, delivered to our transfer agent
before Closing Time.
<PAGE>
HOW TO SELL SHARES OF THE FUND
Phone 1-800-811-0535
All accounts except IRAs
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 Closing Time, which usually is 3:00
p.m. Chicago (central) 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 the last 30 days if the
amount to be redeemed exceeds $50,000.
Executor, Administrator, Conservator, Guardiantion
o Call 1-800-811-0535 for instructions.
Wire
All account types except IRAs
o You must sign up for payment of redemptions by wire before using this
feature. Call to verify that this service is in place - 1-800-811-0535.
o There is a $12 fee for this service.
You must make your telephone redemptions by Closing Time, which usually is 3:00
p.m. Chicago (central) time.
Note: Some redemptions require signature guarantees. Please see page 17.
Shareholder Services and Account Policies
Statements and reports that the Fund sends to you include:
o Confirmation statements (after every transaction in your account or change
in your account registration)
o Year-end account statements
o Quarterly statements
o Annual and Semi-annual Reports
o Prospectus updates
If you would like us to send duplicate statements to someone, simply call us at
1-800-811-0535, and we can take your request over the phone.
If you need copies of your historical account information, please call
1-800-811-0535. There is a $15 fee per account charged for transcripts going
back more than three years from the date the request is received by the Fund.
Share Price
The Fund is open for business each day the New York Stock Exchange (NYSE) is
open. The offering price (price to buy one share) and redemption price (price to
sell one share) are the Fund's NAV calculated at the next Closing Time after
receipt of your order.
<PAGE>
The Fund's Net Asset Value is the value of a single share. The NAV is computed
by adding up the value of the Fund's investments, cash, and other assets,
subtracting its liabilities, and then dividing the result by the number of
shares outstanding.
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 3:00 p.m. Chicago
(central) time, if that is earlier. That value is then converted into the U.S.
dollar equivalent using foreign exchange rates in effect at noon of that day.
The exception to this policy is Canadian securities, which are converted into
their U.S. dollar equivalent at the close of the Canadian market (3:00 p.m.
Chicago (central) time under normal conditions).
Securities for which market quotations are not readily available and other
assets are valued at fair value as determined by Thomas White International
using methods approved by the Board of Trustees and subsequently ratified in
good faith by the Board of Trustees.
Your purchase or redemption of Fund shares will be priced at the next NAV
calculated after your investment (including the application, if for a new
account, and the money) or redemption request is received and your account is in
good order. An order received before Closing Time will get that day's price. All
orders received after Closing Time will receive the next day's NAV.
<PAGE>
Purchases
o All of your purchases must be made in U.S. dollars and checks must be drawn
on U.S. banks. You may not open an account with a third party check.
o The Fund does not accept cash or credit cards.
o If payment for your check or telephone order does not clear, your purchase
will be canceled and you will be liable for any losses or fees the Fund or
its transfer agent incurs.
o Your Automatic Investment Plan and Telephone Purchase Plan may be
immediately terminated in the event that any item is unpaid by your
financial institution.
o When you make a purchase by telephone, the money is ordinarily drawn from
your bank account the day after you call and the Fund shares purchased are
at the NAV calculated after the money is transferred.
At the discretion of the Fund, investors may be permitted to purchase Fund
shares by transferring securities to the Fund that meet the Fund's investment
objective and policies. See the SAI for further information.
Investors who make excessive moves in and out of the Fund generate additional
costs that fall upon all the Fund's shareholders. To minimize such costs, the
Fund reserves 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 the Fund.
Redemptions
o Normally, redemption proceeds will be mailed within seven days after the
transfer agent receives a request for redemption.
o The 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.
o If you elected to participate in the Telephone Redemption Plan, payment
will be sent to your bank with the ACHnetwork. It generally takes 2-3
business days for the proceeds to be credited to your bank account. If you
would like the proceeds to be wired to your bank account, there is a $12
fee for this service. In addition, your bank may impose a fee for the
incoming wire. Payment by wire is usually credited to your bank account on
the next business day after your call.
o 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.
<PAGE>
o Certain accounts (such as trust accounts, corporate accounts and custodial
accounts) may require documentation in addition to the redemption request.
Call 1-800-811-0535 for more information.
If the value of your account falls below $2,500, due to redemptions, the Fund
reserves the right to close your account and send the proceeds to you. In
addition, the Fund may involuntarily redeem the shares of any investor who has
failed to provide the Fund with a certified taxpayer identification number or
such other tax-related certifications as the Fund may require. A notice of
redemption will be sent to the investor's address of record. A date at least 30
days after the mailing date will be set and shares will be redeemed at net asset
value at the close of business on that date, unless sufficient additional shares
are purchased to bring the account value up to $2,500 or more, or unless a
certified taxpayer identification number (or such other information as the Fund
has requested) has been provided, as the case may be. A check for the redemption
proceeds will be mailed to the investor at the address of record.
If checks representing redemption proceeds or dividend and capital gains
distributions are returned "undeliverable" or remained uncashed for six months,
the checks shall be canceled and the proceeds will be reinvested in the Fund at
the per share NAV on the date of cancellation. In addition, after such six-month
period, your 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
You may change your address by calling 1-800-811-0535. The Fund will send a
written confirmation of the change to both your 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 your change of address was made in writing
with a signature guarantee.
Telephone Transactions
(For your protection, all transactions are completed over a recorded line.) You
may initiate the following transactions by telephone:
o Change your address;
o Request duplicate statements to be sent to someone you designate;
o Request a current account statement;
o Purchase shares through the Telephone Purchase Plan (plan must be
pre-established);
o Redeem shares, with a check sent to the address of record (does not apply to
IRA accounts, and your address of record must not have changed in the last 30
days);
<PAGE>
o Redeem shares and have proceeds credited to your bank account if enrolled
in the Telephone Redemption Plan (not available for IRA accounts);
o Change the frequency or amount, or discontinue the Automatic Investment
Plan on your account(s);
o Add or discontinue the Telephone Redemption privilege to your account;
o Change your distribution option (does not apply to IRA accounts);
o Exchange money from an individual account to an existing IRA account with
an identical registration;
o Change the contribution year on an IRA account to the previous year up
until April 15 of the current year.
The Fund will not be responsible for any losses resulting from unauthorized or
fraudulent transactions if it follows 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, decline these
privileges on your account application or call the Fund for instructions at
1-800-811-0535.
If you are unable to reach the Fund by phone (for example during periods of
unusual market activity), consider placing your order by mail.
Account Registration Changes
From time to time you may find it necessary to make changes to your account
privileges or registration. The following easy-to-use shareholder forms are
available upon request by calling 1-800-811-0535:
To accomplish this:
For changes to account privileges
For re-registering your current account
For changes to your IRA beneficiary designations
For transferring money from an IRA account with another institution to the Fund
For redeeming shares from your IRA account
Please request this form:
o Application
o Application
o Change of Beneficiary
o IRA Transfer Form
o IRA Withdrawal Form
<PAGE>
Dividends, Distributions, and Taxes
The Fund distributes substantially all of its net income and realized capital
gains to shareholders each year. Normally, dividends and capital gains are
distributed in December.
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 option, call
us at 1-800-811-0535.
The Fund offers four options:
o Your income dividends and capital gain distributions will be automatically
reinvested in additional shares of the Fund. If you do not indicate a
choice on your application, you will be assigned this option.
o You will be sent a check for each income dividend and capital gain
distribution.
o Your capital gain distributions will be automatically reinvested, but you
will be sent a check for each income dividend.
o Your income dividends will be automatically reinvested, but you will be
sent a check for capital gain distributions.
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 income tax penalties if you are under 591 1/42 years
old. After you are 591 1/42, you may request payment of distributions in cash.
When you reinvest, the reinvestment price is the Fund's NAV at Closing Time on
the reinvestment date.
Taxes
As with any investment, you should consider how your investment in the Fund will
be taxed. If your account is a tax-deferred account, for example, an IRA or an
employee benefit plan account, the following tax discussion does not apply. If
your account is not a tax-deferred account, however, you should be aware of the
following tax rules.
Taxes on Distributions
Each year, the Fund intends to elect and qualify for treatment as a regulated
investment company under the Internal Revenue Code. As such, the Fund intends to
distribute to shareholders substantially all of its net investment income and
realized capital gains, which generally will be subject to federal income tax
and may also be subject to state or local taxes. If you live outside the United
States, your distributions could also be taxed by the country in which you
reside.
Your distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares. However, distributions declared in
October, November or December and paid in January are taxable as if they were
received by you on December 31.
For federal tax purposes, the Fund's income and short-term capital gain
distributions are taxed as dividends; long-term capital gain distributions are
taxed as capital gains, but the rate of tax will vary depending upon the Fund's
holding period of the assets whose sale gives rise to the gain. Every January,
the Fund will send you and the IRS a statement, called a Form 1099, showing the
amount of each taxable distribution you received in the previous year.
Taxes on Transactions
Your redemptions - including exchanges between accounts - are subject to capital
gains tax. 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, and if so, the
amount of tax to be paid.
<PAGE>
Understanding Distributions:
As a Fund shareholder, you are entitled to your share of the Fund's net income
and any net gains realized on investments.
The Fund's income from dividends and interest, and any net realized short-term
capital gains, are paid to you as dividends. The 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.
All dividends and distributions, whether received as cash or reinvested in the
Fund, are subject to tax.
Be sure to keep your regular account statements; the information they contain
will be essential in calculating the amount of your capital gains.
Foreign Income Taxes
Investment income received by the Fund from sources within foreign countries may
by subject to foreign income taxes withheld at the source.
If the Fund pays non-refundable taxes to foreign governments during the year,
the taxes will reduce the Fund's dividends but will still be included in your
taxable income. You may be able to claim an offsetting credit or deduction on
your tax return for your share of foreign taxes paid by the Fund; this
information will be sent to you as part of your annual Form 1099.
When you sign your account application, you will be asked to certify that:
o your Social Security or taxpayer identification number is correct, and
o that you are not subject to 31% backup withholding for failing to report
income to the IRS.
If you violate IRS regulations, the IRS can require the Fund to withhold 31% of
your taxable distributions and redemptions.
<PAGE>
The Fund in Detail
Organization
Thomas White World Fund is a diversified series of Lord Asset Management Trust,
an open-end, management investment company registered under the Investment
Company Act of 1940 (the "1940 Act"). The Trust currently has one series of
Shares, which is a mutual fund: the Thomas White World Fund. The Trust is a
Delaware business trust organized on February 9, 1994.
Each share of the Fund is entitled to participate pro rata in any dividends and
other distributions declared by the Board of Trustees, and all shares of the
Fund have equal rights in the event of liquidation of the Fund.
The Trust is governed by a Board of Trustees, who are responsible for protecting
the interests of the shareholders of the Fund. The Trustees are experienced
executives and professionals who normally meet each quarter to oversee the
activities of the Trust and the Fund. A majority of Trustees are not otherwise
affiliated with the Fund or Thomas White International.
The Fund may hold special meetings of shareholders to elect or remove Trustees,
change fundamental policies, approve a management contract, or for other
purposes. The Fund will mail proxy materials in advance, including a voting card
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.
As of January 31, 1998, John W. Galbraith owned a controlling interest of the
Fund.
Management
The Fund is managed by Thomas White International, Ltd., 440 S. LaSalle Street,
Suite 3900, Chicago, Illinois 60605. The Advisor chooses the Fund's investments
and handles its affairs, under the direction of the Board of Trustees. The
Advisor provides the Fund with investment research, advice, supervision and
certain overhead items and facilities. Thomas White International 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., the Fund's portfolio manager and Chairman of Thomas White
International, has been managing investments over the past thirty-one years. Mr.
White founded Thomas White International in June of 1992. Before that he was a
Managing Director of Morgan Stanley Asset Management and Chief Investment
Officer of its Chicago Group, which he founded in 1982. Further information
concerning the Advisor is included under the heading "Investment
<PAGE>
Management and Other Services" in the SAI.
Custodian
State Street Bank and Trust Company is the Fund's custodian.
Transfer Agent
Firstar Trust Company, 615 East Michigan Street, Milwaukee, WI 53202, serves as
transfer agent and monitors compliance with state laws.
Expenses
Like all mutual funds, the Fund pays expenses related to its daily operations.
Expenses paid out of the Fund's assets are reflected in its share price and
dividends.
The Fund pays a management fee, equal to 1.00% of the fund's average daily net
assets on an annual basis, to Thomas White International for managing its
investments and business affairs. See "Expenses and Performance."
The Fund pays the management fee to the Advisor and the fees of its custodian,
transfer agent, auditors, and lawyers. It also pays other expenses such as 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 Fund or Thomas White International.
Brokerage Commissions
The receipt of research services from a broker and the sale of Fund shares by a
broker are factors that may be taken into account in allocating securities
transactions, so long as the prices and execution provided by the broker equal
the best available within the scope of the Fund's brokerage policies.
Securities, Investment Practices, and Risks
The following pages contain more detailed information about types of investments
the Fund may make, and strategies Thomas White International may employ in
pursuit of the Fund's investment objective, including information about the
associated risks and restrictions. The Fund's investment objective and certain
investment restrictions set forth under "Investment Objective and Policies -
Investment Restrictions" in the SAI are fundamental and may not be changed
without shareholder approval. All other investment policies and practices
described in this Prospectus are not fundamental, and may be changed by the
Board of Trustees without shareholder approval.
Thomas White International may not buy all of these instruments or use all of
these techniques to the full extent permitted, unless it believes that doing so
will help the Fund achieve its goal.
Equities
Common stocks represent an equity (ownership) interest in a corporation. This
ownership interest often gives the Fund the right to vote on measures affecting
the company's organization and operations. Although common stocks have a history
of long-term growth in value, their prices tend to be unpredictable in the short
term.
Foreign Securities
International investing allows you to achieve greater diversification and to
take advantages of changes in foreign economies and market conditions. From time
to time, many foreign economies have grown faster than the U.S. economy, and the
returns on investments in these countries have exceeded those of similar U.S.
investments, although there can be no assurance that these conditions will
continue.
<PAGE>
Investments in foreign securities provide opportunities different from those in
the U.S., and risks which may in some ways be greater than in U.S. investments,
including:
o fluctuations in exchange rates of foreign currencies;
o less public information with respect to issuers of securities;
o less governmental supervision of stock exchanges, securities brokers, and
issuers of securities;
o different accounting, auditing, and financial reporting standards;
o different settlement periods and trading practices;
o less liquidity, frequently greater price volatility, and higher transaction
costs;
o imposition of foreign taxes; and
o sometimes less advantageous legal, operational, and financial protections
applicable to foreign sub-custodial arrangements.
Investing in countries outside the U.S. also involves political risk. A foreign
government might:
o restrict investments by foreigners;
o expropriate assets;
o seize or nationalize foreign bank deposits or other assets;
o establish exchange controls; or
o enact other policies that could affect investment in these nations.
Economies in individual markets may differ favorably or unfavorably from the
U.S. economy in such respects as:
o growth of gross domestic product;
o rates of inflation;
o currency depreciation;
o capital reinvestment;
o resource self-sufficiency; and
o balance of payments positions.
Many emerging market countries have experienced extremely high rates of
inflation for many years. That has had and may continue to have very negative
effects on the economies and securities marketsof those countries.
The securities markets of emerging countries are substantially smaller, less
developed, less liquid, and more volatile than the securities markets of the
United States and other more developed countries. Disclosure and regulatory
standards in many respects are less stringent than in the U.S. There also may be
a lower level of monitoring and regulation in emerging markets of traders,
insiders, and investors. Enforcement of existing regulations has been extremely
limited.
Under normal market conditions the Fund will hold no more than fifteen percent
of its net assets in emerging market securities.
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.
EDRs and GDRs are typically issued by foreign banks or trust companies, although
they also may be issued by U.S. banks or trust companies, and evidence ownership
of underlying securities issued by either a foreign or a United States
corporation.
Depositary Receipts may involve many of the risks of other investments in
foreign securities, as discussed above. For purposes of the Fund's investment
policies, the Fund's investments in Depositary Receipts (other than ADRs) will
be deemed to be investments in the underlying securities.
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 Fund is authorized to invest in medium quality or high risk, lower quality
debt securities that are rated in any rating category by Standard & Poor's
Rating Services ("S&P") or Moody's Investors Service, Inc. ("Moody's"), or which
are not rated by S&P or Moody's. Securities rated below "investment grade," i.e.
rated below Baa by Moody's or BBB by S&P are described as "speculative" by both
Moody's and S&P. Such securities, as well as unrated securities determined to be
of comparable quality, are sometimes referred to as "junk bonds" and may be
subject to greater market fluctuations, less liquidity and greater risks. As an
operating policy, which may be changed by the Board of Trustees without
shareholder approval, the Fund will not invest or hold more than 5% of its net
assets in debt securities rated BBB or lower by S&P or Baa or lower by Moody's
or, if unrated, of equivalent investment quality as determined by Thomas White
International.
The Board may consider a change in this operating policy if, in its judgment,
economic conditions change such that a higher level of investment in high risk,
lower-quality debt securities would be consistent with the interests of the Fund
and its shareholders. High risk, lower-quality debt securities are considered to
be speculative with respect to the issuer's ability to pay interest and repay
principal.
The Fund may also invest in "Brady Bonds," which are debt obligations created
through the exchange of existing commercial bank loans to sovereign entities for
new obligations in connection with restructuring the debt of these entities. For
more information about Brady Bonds, see the SAI.
Futures Contracts
The Fund may buy and sell financial futures contracts, stock and bond index
futures contracts, foreign currency futures contracts and options on any of
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.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, when the Fund enters into a futures contract, it will
segregate assets or "cover" its position in accordance with the 1940 Act. See
"Investment Objective and Policies -Futures Contracts" in the SAI. The Fund will
limit its use of futures contracts so that no more than 5% of that 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 the
Fund.
Temporary Investments
The Fund may, because of adverse market conditions, decide to take a temporary
defensive position, subject to the restrictions explained in the SAI. The Fund
may invest up to 100% of its total assets in the following instruments:
o Cash;
o 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;
o Finance company and corporate commercial paper;
o Other short-term corporate obligations;
<PAGE>
o Obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks;
o Repurchase agreements with banks and broker-dealers with respect to the
above listed securities.
Repurchase Agreements
When the Fund purchases a security from a U.S. bank or registered broker-dealer,
it may simultaneously enter into a repurchase agreement. This means the seller
agrees to repurchase the security at a specified time and price. 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. All repurchase
agreements entered into by the Fund will be fully collateralized. However, if
the seller should default on its obligation to repurchase the underlying
security, the Fund may experience delay or difficulty in exercising its rights
to realize upon the security and might incur a loss if the value of the security
declines, as well as costs in liquidating the security. Although the Fund may
enter into repurchase agreements, it has no present intention of doing so.
Options on Securities or Indices
The Fund may write (i.e., sell) covered put and call options and purchase put
and call options on securities or securities indices that are traded on United
States and foreign exchanges or in the over-the-counter markets. An option on a
security is a contract that permits the purchaser of the option, in return for
the premium paid, the right to buy a specified security (in the case of a call
option) or to sell a specified security (in the case of a put option) from or to
the writer of the option at a designated price during the term of the option. An
option on a securities index permits the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option. The Fund may write a put or call option only if the option is "covered."
This means that so long as the Fund is obligated as the writer of a call option,
it will own the underlying securities subject to the call, or hold a call at the
same or lower exercise price, for the same exercise period, and on the same
securities as the written call. A put is covered if the Fund maintains liquid
assets with a value equal to the exercise price in a segregated account, or
holds a put on the same underlying securities at an equal or greater exercise
price.
The value of the underlying securities and securities indices on which options
may be written at any one time will not exceed 15% of the total assets of the
Fund. The Fund will not purchase put or call options if the aggregate premium
paid for such options would exceed 5% of its total assets.
<PAGE>
Forward Foreign Currency Contracts and Options on Foreign Currencies
The Fund will normally conduct its foreign currency exchange transactions either
on a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market, or through entering into forward currency exchange contracts. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund generally will not
enter into a forward contract with a term of greater than one year.
The Fund generally will enter into forward contracts only under two
circumstances. When the Fund enters into a contract for the purchase or sale of
a security denominated in a foreign currency, it may desire to "lock in" the
U.S. dollar price of the security in relation to another currency by entering
into forward contract.
The Fund also may use a forward contract with respect to an actual or
anticipated portfolio security position denominated or quoted in a particular
currency. This second investment practice is generally referred to as
"cross-hedging." The 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 the Fund owns or anticipates
owning securities in countries whose currencies are linked, Thomas White
International may aggregate those positions as to the currency being hedged.
The 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 Fund from adverse
currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted.
The Fund may purchase put and call options and write covered put and call
options on foreign currencies for the purpose of protecting against declines in
the U.S. dollar value of foreign currency denominated portfolio securities and
against increases in the U.S. dollar cost of such securities to be acquired.
Like other kinds of options, however, the writing of an option on a foreign
currency creates only a partial hedge, up to the amount of the premium received,
and the Fund could be required to purchase or sell foreign currencies at
disadvantageous exchange rates, thereby incurring losses. The purchase of an
option on a foreign currency may constitute an effective hedge against
fluctuations in exchange rates. If, however, the rate moves adversely to the
Fund's position, it may forfeit the entire amount of the premium plus related
transaction costs. Options on foreign currencies to be written or purchased by
the Fund are traded on U.S. and foreign exchanges or over-the-counter.
Some price spread on currency exchange (to cover service charges) will be
incurred when the Fund converts assets from one currency to another.
<PAGE>
Other Investment Companies
Certain markets are closed in whole or in part to equity investments by
foreigners. The 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 Fund does
not intend to invest in such circumstances unless, in the judgment of Thomas
White International, the potential benefits of such investment justify the
payment of any applicable premium or sales charge. As a shareholder in an
investment company, the Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. At the same
time the Fund would continue to pay its own management fees and other expenses.
The Fund may invest in shares of closed-end investment companies. Generally,
this would not exceed 10% of the Fund's net assets.
Borrowing
The Fund may borrow up to one-third of the value of its total assets from banks
to increase its holdings of portfolio securities. Borrowing is a form of
leverage, which generally will exaggerate the effect of any increase or decrease
in the value of portfolio securities on the Fund's NAV. Borrowings will be
subject to interest and other costs. For further details see the SAI.
Loans of Portfolio Securities
The Fund may lend to banks and broker-dealers portfolio securities with an
aggregate market value of up to one-third of its total assets. Such loans must
be secured by collateral (consisting of any combination of cash, U.S. Government
securities or irrevocable letters of credit) in an amount at least equal (on a
daily marked-to-market basis) to the current market value of the securities
loaned. The Fund may terminate the loans at any time and obtain the return of
the securities loaned within five business days. The Fund will continue to
receive any interest or dividends paid on the loaned securities and will
continue to retain any voting rights with respect to the securities. In the
event that the borrower defaults on its obligation to return borrowed
securities, because of insolvency or otherwise, the Fund could experience delays
and costs in gaining access to the collateral and could suffer a loss to the
extent that the value of the collateral falls below the market value of the
borrowed securities.
Illiquid Securities
The Fund may invest up to 15% of its net assets in illiquid securities, for
which there is a limited trading market and which may be subject to abrupt and
erratic price movements. This policy does not limit the acquisition of
securities eligible for resale to qualified institutional buyers pursuent to
Rule 144A under the Securities Act of 1933 that the Advisor determines to be
liquid in accordance with guidelines established by the Board of Trustees. The
Fund has a separate policy that no more than 10% of its net assets may be
invested in restricted securities which are securities restricted as to resale,
including Rule 144A securities. Investing in Rule 144A securities could have the
effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutions might become, for a time, uninterested in purchasing
these securities.
There are further risk considerations, including possible losses through the
holding of securities in domestic and foreign custodial banks and depositories,
described in the SAI.
<PAGE>
CONTACTING THE FUND
Mail
Thomas White World Fund
c/o Firstar Trust Co.
P.O. Box 701
Milwaukee, WI 53201-0701
Thomas White World Fund
Shareholder Services Center
615 East Michigan Street, 3rd Floor
Milwaukee, WI 53202
Thomas White International, Ltd.
440 S. LaSalle Street, Suite 3900
Chicago, IL 60605
o for regular mail delivery, including purchases, redemptions, and IRA
contributions
o for overnight deliveries of purchase, redemptions, or IRA contributions
o the Fund's Investment Advisor
Phone
1-800-811-0535
o for Fund information, account balances, literature, prices, and performance
information
o for telephone purchases and redemptions, and for IRA information
Customer service is available on business days from 8:00 a.m. to 7:00 p.m.
Chicago (central) time. Telephone requests for purchase and redemptions from the
Fund generally must be made by 3:00 p.m. Chicago (central) time.
Web-Site
Please visit our Web-Site to learn more about the Thomas White World Fund and
Thomas White International Ltd.
http://www.thomaswhite.com
<PAGE>
THOMAS WHITE FUNDS FAMILY
THIS STATEMENT OF ADDITIONAL INFORMATION DATED
MARCH 1, 1998 IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
THOMAS WHITE WORLD FUND DATED MARCH 1, 1998
WHICH MAY BE OBTAINED
WITHOUT CHARGE UPON REQUEST TO
THE THOMAS WHITE FUNDS FAMILY
440 SOUTH LASALLE STREET, SUITE 3900
CHICAGO, ILLINOIS 60605-1028
TELEPHONE: 1-800-811-0535
TELECOPY: (312) 663-8323
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY...........................................2
INVESTMENT OBJECTIVES AND POLICIES........................................2
Investment Policies....................................................2
Repurchase Agreements..................................................2
Loans of Portfolio Securities..........................................2
Debt Securities........................................................2
Futures Contracts......................................................3
Options on Securities, Indices and Futures.............................4
Foreign Currency Hedging Transactions..................................6
Foreign Market Risks...................................................7
Brady Bonds............................................................8
Illiquid and Restricted Securities.....................................8
Investment Restrictions................................................9
Additional Restrictions...............................................10
Risk Factors..........................................................11
Trading Policies......................................................12
MANAGEMENT OF THE TRUST..................................................12
PRINCIPAL SHAREHOLDERS...................................................14
INVESTMENT MANAGEMENT AND OTHER SERVICES.................................15
Investment Management Agreement.......................................15
Management Fees.......................................................16
Transfer Agent........................................................16
The Investment Manager................................................16
Custodian.............................................................17
Legal Counsel.........................................................17
Independent Accountants...............................................17
Reports to Shareholders...............................................17
BROKERAGE ALLOCATION.....................................................17
PURCHASE, REDEMPTION AND PRICING OF SHARES...............................19
TAX STATUS...............................................................21
DESCRIPTION OF SHARES....................................................25
PERFORMANCE INFORMATION..................................................26
FINANCIAL STATEMENTS.....................................................27
<PAGE>
GENERAL INFORMATION AND HISTORY
Lord Asset Management Trust (the "Trust") is organized as a business
trust under the laws of Delaware and is registered under the Investment Company
Act of 1940 (the "1940 Act"). The Trust has one series of Shares: The Thomas
White World Fund (the "Fund").
INVESTMENT OBJECTIVES AND POLICIES
Investment Policies. The investment objective and policies of the Fund are
described in the Fund's Prospectus under the heading "General Description -
Investment Objective and Policies."
Repurchase Agreements. Repurchase agreements are contracts under which the
buyer of a security simultaneously commits to resell the security to the seller
at an agreed-upon price and date. Under a repurchase agreement, the seller is
required to maintain the value of the securities subject to the repurchase
agreement at not less than their repurchase price. Thomas White International,
Ltd., (the "Investment Manager") will monitor the value of such securities daily
to determine that the value equals or exceeds the repurchase price. Repurchase
agreements may involve risks in the event of default or insolvency of the
seller, including possible delays or restrictions upon a Fund's ability to
dispose of the underlying securities. The Fund will enter into repurchase
agreements only with parties who meet creditworthiness standards approved by the
Board of Trustees, i.e., banks or broker-dealers which have been determined by
the Investment Manager to present no serious risk of becoming involved in
bankruptcy proceedings within the time frame contemplated by the repurchase
transaction.
Loans of Portfolio Securities. The Fund may lend to banks and
broker-dealers portfolio securities with an aggregate market value of up to
one-third of its total assets. Such loans must be secured by collateral
(consisting of any combination of cash, U.S. Government securities or
irrevocable letters of credit) in an amount at least equal (on a daily
marked-to-market basis) to the current market value of the securities loaned.
The Fund retains all or a portion of the interest received on investment of the
cash collateral or receives a fee from the borrower. The Fund may terminate the
loans at any time and obtain the return of the securities loaned within five
business days. The Fund will continue to receive any interest or dividends paid
on the loaned securities and will continue to have voting rights with respect to
the securities. However, as with other extensions of credit, there are risks of
delay in recovery or even loss of rights in collateral should the borrower fail.
Debt Securities. The Fund may invest in debt securities which are rated in
any rating category by Moody's Investors Service, Inc. ("Moody's") or by
Standard & Poor's Ratings Services ("S&P") or which are not rated by Moody's or
S&P. As an operating policy, the Fund will not invest or hold more than 5% of
its net assets in debt securities rated Baa or lower by Moody's or BBB or lower
by S&P or, if unrated, are of equivalent investment quality as determined by the
Investment Manager. The market value of debt securities generally varies in
response to changes in interest rates and the financial condition of each
issuer. During periods of declining interest rates, the value of debt securities
generally increases. Conversely, during periods of rising interest rates, the
value of such securities generally declines. These changes in market value will
be reflected in the Fund's net asset value.
<PAGE>
Although they may offer higher yields than do higher rated securities,
low rated and unrated debt securities generally involve greater volatility of
price and risk of principal and income, including the possibility of default by,
or bankruptcy of, the issuers of the securities. In addition, the markets in
which low rated and unrated debt securities are traded are more limited than
those in which higher rated securities are traded. The existence of limited
markets for particular securities may diminish the Fund's ability to sell the
securities at fair value either to meet redemption requests or to respond to
changes in the economy or in the financial markets and could adversely affect
and cause fluctuations in the daily net asset value of the Fund's Shares.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Fund to
achieve its investment objective may, to the extent of investment in low rated
debt securities, be more dependent upon such creditworthiness analysis than
would be the case if the Fund were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in low rated debt securities prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt securities. If the issuer of
low rated debt securities defaults, a Fund may incur additional expenses to seek
recovery. The low rated bond market is relatively new, and many of the
outstanding low rated bonds have not endured a major business recession.
The Fund may accrue and report interest on high yield bonds structured as
zero coupon bonds or pay-in-kind securities as income even though it receives no
cash interest until the security's maturity or payment date. In order to qualify
for beneficial tax treatment afforded regulated investment companies, the Fund
must distribute substantially all of its net income to Shareholders (see "Tax
Status"). Thus, the Fund may have to dispose of its portfolio securities under
disadvantageous circumstances to generate cash in order to satisfy the
distribution requirement.
Recent legislation, which requires federally-insured savings and loan
associations to divest their investments in low rated debt securities, may have
a material adverse effect on the Fund's net asset values and investment
practices.
Futures Contracts. The Fund may purchase and sell financial futures
contracts. Although some financial futures contracts call for making or taking
delivery of the underlying securities, in most cases these obligations are
closed out before the settlement date. The closing of a contractual obligation
is accomplished by purchasing or selling an identical offsetting futures
contract. Other financial futures contracts by their terms call for cash
settlements.
<PAGE>
The Fund may also buy and sell index futures contracts with respect to any
stock or bond index traded on a recognized stock exchange or board of trade. An
index futures contract is a contract to buy or sell units of an index at a
specified future date at a price agreed upon when the contract is made. The
index futures contract specifies that no delivery of the actual securities
making up the index will take place. Instead, settlement in cash must occur upon
the termination of the contract, with the settlement being the difference
between the contract price and the actual level of the index at the expiration
of the contract.
At the time the Fund purchases a futures contract, an amount of cash, U.S.
Government securities, or other highly liquid, high grade debt securities equal
to the market value of the contract will be deposited in a segregated account
with the Fund's Custodian. When selling a futures contract, the Fund will
maintain with its Custodian liquid assets that, when added to the amounts
deposited with a futures commission merchant or broker as margin, are equal to
the market value of the instruments underlying the contract. Alternatively, the
Fund may "cover" its position by owning the instruments underlying the contract
or, in the case of an index futures contract, owning a portfolio with a
volatility substantially similar to that of the index on which the futures
contract is based, or holding a call option permitting the Fund to purchase the
same futures contract at a price no higher than the price of the contract
written by the Fund (or at a higher price if the difference is maintained in
liquid assets with the Fund's Custodian).
Options on Securities, Indices and Futures. The Fund may write covered put
and call options and purchase put and call options on securities, securities
indices and futures contracts that are traded on United States and foreign
exchanges and in the over-the-counter markets.
An option on a security or a futures contract is a contract that gives the
purchaser of the option, in return for the premium paid, the right to buy a
specified security or futures contract (in the case of a call option) or to sell
a specified security or futures contract (in the case of a put option) from or
to the writer of the option at a designated price during the term of the option.
An option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option.
The Fund may write a call or put option only if the option is "covered." A
call option on a security or futures contract written by the Fund is "covered"
if the Fund owns the underlying security or futures contract covered by the call
or has an absolute and immediate right to acquire that security without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option on a security or futures
contract is also covered if the Fund holds a call on the same security or
futures contract and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or high grade U.S.
Government securities in a segregated account with its custodian. A put option
on a security or futures contract written by the Fund is "covered" if the Fund
maintains cash or fixed income securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security or futures contract and in the same principal amount as the put
written where the exercise price of the put held is equal to or greater than the
exercise price of the put written.
<PAGE>
The Fund will cover call options on securities indices that it writes by
owning securities whose price changes, in the opinion of the Investment Manager,
are expected to be similar to those of the index, or in such other manner as may
be in accordance with the rules of the exchange on which the option is traded
and applicable laws and regulations. Nevertheless, where the Fund covers a call
option on a securities index through ownership of securities, such securities
may not match the composition of the index. In that event, the Fund will not be
fully covered and could be subject to risk of loss in the event of adverse
changes in the value of the index. The Fund will cover put options on securities
indices that it writes by segregating assets equal to the option's exercise
price, or in such other manner as may be in accordance with the rules of the
exchange on which the option is traded and applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases its gross income in the event the option expires unexercised or is
closed out at a profit. If the value of a security, index or futures contract on
which the Fund has written a call option falls or remains the same, the Fund
will realize a profit in the form of the premium received (less transaction
costs) that could offset all or a portion of any decline in the value of the
portfolio securities being hedged. If the value of the underlying security,
index or futures contract rises, however, the Fund will realize a loss in its
call option position, which will reduce the benefit of any unrealized
appreciation in its investments. By writing a put option, the Fund assumes the
risk of a decline in the underlying security, index or futures contract. To the
extent that the price changes of the portfolio securities being hedged correlate
with changes in the value of the underlying security, index or futures contract,
writing covered put options will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.
The Fund may also purchase put options to hedge its investments against a
decline in value. By purchasing a put option, the Fund will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Fund's investments does not
decline as anticipated, or if the value of the option does not increase, its
loss will be limited to the premium paid for the option plus related transaction
costs. The success of this strategy will depend, in part, on the accuracy of the
correlation between the changes in value of the underlying security, index or
futures contract and the changes in value of the Fund's security holdings being
hedged.
<PAGE>
The Fund may purchase call options on individual securities or futures
contracts to hedge against an increase in the price of securities or futures
contracts that it anticipates purchasing in the future. Similarly, the Fund may
purchase call options on a securities index to attempt to reduce the risk of
missing a broad market advance, or an advance in an industry or market segment,
at a time when the Fund holds uninvested cash or short-term debt securities
awaiting investment. When purchasing call options, the Fund will bear the risk
of losing all or a portion of the premium paid if the value of the underlying
security, index or futures contract does not rise.
There can be no assurance that a liquid market will exist when the Fund
seeks to close out an option position. Trading could be interrupted, for
example, because of supply and demand imbalances arising from a lack of either
buyers or sellers, or the options exchange could suspend trading after the price
has risen or fallen more than the maximum specified by the exchange. Although
the Fund may be able to offset to some extent any adverse effects of being
unable to liquidate an option position, it may experience losses in some cases
as a result of such inability. The value of over-the-counter options purchased
by the Fund, as well as the cover for options written by the Fund are considered
not readily marketable and are subject to the Trust's limitation on investments
in securities that are not readily marketable. See "Investment Objectives and
Policies - Investment Restrictions."
Foreign Currency Hedging Transactions. In order to hedge against foreign
currency exchange rate risks, the Fund may enter into forward foreign currency
exchange contracts and foreign currency futures contracts, as well as purchase
put or call options on foreign currencies, as described below. The Fund may also
conduct its foreign currency exchange transactions on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign currency exchange market.
The Fund may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Fund from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date which is individually negotiated and privately
traded by currency traders and their customers. The Fund may enter into a
forward contract, for example, when it enters into a contract for the purchase
or sale of a security denominated in a foreign currency in order to "lock in"
the U.S. dollar price of the security. In addition, for example, when the Fund
believes that a foreign currency may suffer or enjoy a substantial movement
against another currency, it may enter into a forward contract to sell an amount
of the former foreign currency approximating the value of some or all of its
portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." Because in
connection with the Fund's forward foreign currency transactions, an amount of
its assets equal to the amount of the purchase will be held aside or segregated
to be used to pay for the commitment, the Fund will always have cash, cash
equivalents or high quality debt securities available in an amount sufficient to
cover any commitments under these contracts or to limit any potential risk. The
segregated account will be marked-to-market on a daily basis. While these
contracts are not presently regulated by the Commodity Futures Trading
Commission ("CFTC"), the CFTC may in the future assert authority to regulate
forward contracts. In such event, the Fund's ability to utilize forward
contracts in the manner set forth above may be restricted. Forward contracts may
limit potential gain from a positive change in the relationship between the U.S.
dollar and foreign currencies. Unanticipated changes in currency prices may
result in poorer overall performance for the Fund than if it had not engaged in
such contracts.
The Fund may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and the Fund could be required
to purchase or sell foreign currencies at disadvantageous exchange rates,
thereby incurring losses. The purchase of an option on foreign currency may
constitute an effective hedge against fluctuation in exchange rates, although,
in the event of rate movements adverse to its position, the Fund may forfeit the
entire amount of the premium plus related transaction costs. Options on foreign
currencies to be written or purchased by the Fund will be traded on U.S. and
foreign exchanges or over-the-counter.
<PAGE>
The Fund may enter into exchange-traded contracts for the purchase or sale
for future delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Fund's portfolio securities or adversely affect the prices of securities
that the Fund intends to purchase at a later date. The successful use of foreign
currency futures will usually depend on the ability of the Investment Manager to
forecast currency exchange rate movements correctly. Should exchange rates move
in an unexpected manner, the Fund may not achieve the anticipated benefits of
foreign currency futures or may realize losses.
Foreign Market Risks. The Fund has the right to purchase securities in any
foreign country, developed or underdeveloped. Investors should consider
carefully the possibly substantial risks involved in investing in securities
issued by companies and governments of foreign nations, which are in addition to
the usual risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments in
foreign nations, foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in foreign
nations. Some countries may withhold portions of interest and dividends at the
source. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Further, the Fund may encounter difficulties or be unable to pursue
legal remedies and obtain judgments in foreign courts. Commission rates in
foreign countries, which are sometimes fixed rather than subject to negotiation
as in the United States, are likely to be higher. Further, the settlement period
of securities transactions in foreign markets may be longer than in domestic
markets, which may affect the timing of the Fund's receipt of proceeds from its
portfolio securities transactions. In many foreign countries, there is less
government supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the United States. The foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid, and subject to greater price volatility than those
in the United States.
Investments in companies domiciled in developing countries may be subject
to potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which may result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Fund's investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented economy; and (vii) the possibility that
recent favorable economic developments in Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries.
<PAGE>
Investments in Eastern European countries may involve increased risks of
nationalization, expropriation and confiscatory taxation. The communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, the Fund could lose a substantial
portion of any investments it has made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into United States
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to the Fund's Shareholders.
Brady Bonds. The Fund may invest a portion of its assets in certain debt
obligations customarily referred to as "Brady Bonds," which are created through
the exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady. Brady Bonds have been
issued only recently, and, accordingly, do not have a long payment history. They
may be collateralized or uncollateralized and issued in various currencies
(although most are U.S. dollar-denominated), and they are actively traded in the
over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are generally collateralized in
full as to principal by U.S. Treasury zero coupon bonds which have the same
maturity as the Brady Bonds. Interest payments on these Brady Bonds generally
are collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments, but generally are not collateralized. Brady Bonds may be 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 may be considered speculative.
<PAGE>
Illiquid and Restricted Securities. The Fund may invest up to 15% of its
net assets in illiquid securities, for which there is a limited trading market
and for which a low trading volume of a particular security may result in abrupt
and erratic price movements. The Fund may be unable to dispose of its holdings
in illiquid securities at then current market prices and may have to dispose of
such securities over extended periods of time.
The Fund may also invest up to 10% of its total assets in securities that
are subject to contractual or legal restrictions on subsequent transfer because
they were sold (i) in private placement transactions between their issuers and
their purchasers, or (ii) in transactions between qualified institutional buyers
pursuant to Rule 144A under the Securities Act of 1933. As a result of the
absence of a public trading market, such restricted securities may be less
liquid and more difficult to value than publicly traded securities. Although
restricted securities may be resold in privately negotiated transactions, the
prices realized from the sales could, due to illiquidity, be less than those
originally paid by the Fund or less than their fair value. In addition, issuers
whose securities are not publicly traded may not be subject to the disclosure
and other investor protection requirements that may be applicable if their
securities were publicly traded. If any privately placed or Rule 144A securities
held by the Fund are required to be registered under the securities laws of one
or more jurisdictions before being resold, the Fund may be required to bear the
expenses of registration. Investment in Rule 144A securities could have the
effect of increasing the level of the Fund's illiquidity to the extent that
qualified institutional buyers become, for a time, uninterested in purchasing
such securities. Rule 144A securities determined by the Board of Trustees to be
liquid are not subject to the 15% limitation on investments in illiquid
securities.
Investment Restrictions. The Fund has imposed upon itself certain
investment restrictions which, together with its investment objective, are
fundamental policies except as otherwise indicated. No changes in the Fund's
investment objective or these investment restrictions can be made without the
approval of the Fund's Shareholders. For this purpose, the provisions of the
1940 Act require the affirmative vote of the lesser of either (1) 67% or more of
the Shares of the Fund present at a Shareholders' meeting at which more than 50%
of the outstanding Shares of the Fund are present or represented by proxy or (2)
more than 50% of the outstanding Shares of the Fund.
In accordance with these restrictions, the Fund will not:
1. Invest in real estate or mortgages on real estate (although the Fund
may invest in marketable securities secured by real estate or
interests therein or issued by companies or investment trusts which
invest in real estate or interests therein); invest in other open-end
investment companies (except in connection with a merger,
consolidation, acquisition or reorganization); invest in interests
(other than debentures or equity stock interests) in oil, gas or other
mineral exploration or development programs; or purchase or sell
commodity contracts (except futures contracts as described in the
Fund's prospectus).
<PAGE>
2. Purchase any security (other than obligations of the U.S. Government,
its agencies or instrumentalities) if, as a result, as to 75% of the
Fund's total assets (i) more than 5% of the Fund's total assets would
then be invested in securities of any single issuer, or (ii) the Fund
would then own more than 10% of the voting securities of any single
issuer.
3. Act as an underwriter; issue senior securities except as set forth in
investment restrictions 5 and 6 below; or purchase on margin or sell
short, except that the Fund may make margin payments in connection
with futures, options and currency transactions.
4. Loan money, except that a Fund may (i) purchase a portion of an issue
of publicly distributed bonds, debentures, notes and other evidences
of indebtedness, (ii) enter into repurchase agreements and (iii) lend
its portfolio securities.
5. Borrow money, except that the Fund may borrow money from banks in an
amount not exceeding one-third of the value of its total assets
(including the amount borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be necessary
in connection with permitted borrowings); provided, however, this does
not prohibit escrow, collateral or margin arrangements in connection
with its use of options, futures contracts and options on future
contracts.
7. Invest 25% or more of its total assets in a single industry. For
purposes of this restriction, a foreign government is deemed to be an
"industry" with respect to securities issued by it.
8. Participate on a joint or a joint and several basis in any trading
account in securities. (See "Investment Objectives and Policies -
Trading Policies" as to transactions in the same securities for the
Fund and/or other clients with the same adviser.)
9. Invest in physical commodities.
If the Fund receives from an issuer of securities held by the Fund
subscription rights to purchase securities of that issuer, and if the Fund
exercises such subscription rights at a time when the Fund's portfolio holdings
of securities of that issuer would otherwise exceed the limits set forth in
Investment Restrictions 2 or 7 above, it will not constitute a violation if,
prior to receipt of securities upon exercise of such rights, and after
announcement of such rights, the Fund has sold at least as many securities of
the same class and value as it would receive on exercise of such rights.
<PAGE>
Additional Restrictions. The Fund has adopted the following additional
restrictions which are not fundamental and which may be changed without
Shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, the Fund may not:
1. Purchase 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
Fund), including no more than 10% of its total assets in restricted
securities. Rule 144A securities determined by the Board of Trustees
to be liquid are not subject to the limitation on investment in
illiquid securities.
Whenever any investment policy or investment restriction states a maximum
percentage of the Fund's assets which may be invested in any security or other
property, it is intended that such maximum percentage limitation be determined
immediately after and as a result of that Fund's acquisition of such security or
property. Any change in the percentage of the Fund's assets committed to certain
securities or investment techniques resulting from market fluctuations or other
changes in the Fund's total assets way warrant corrective action by the
Investment Manager, such as selling or closing out the investment in a manner
intended to minimize market or tax consequences to the Fund. The value of a
Fund's assets is calculated as described in its Prospectus under the heading
"How to Buy Shares of the Fund."
Risk Factors. The Fund has the right to purchase securities in any foreign
country, developed or underdeveloped. Investors should consider carefully the
substantial risks involved in securities of companies and governments of foreign
nations, which are in addition to the usual risks inherent in domestic
investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Foreign markets have substantially less volume than the New York
Stock Exchange and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies. Commission rates
in foreign countries, which are generally fixed rather than subject to
negotiation as in the United States, are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States.
The Fund endeavors to buy and sell foreign currencies on as favorable a
basis as practicable. Some price spread in currency exchange (to cover service
charges) will be incurred, particularly when the Fund changes investments from
one country to another or when proceeds of the sale of Shares in U.S. dollars
are used for the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent the Fund from transferring cash
out of the country or withhold portions of interest and dividends at the source.
There is the possibility of expropriation, nationalization or confiscatory
taxation, withholding and other foreign taxes on income or other amounts,
foreign exchange controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign government
securities, political or social instability, or diplomatic developments which
could affect investments in securities of issuers in foreign nations.
The Fund may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Through the flexible policy of the Fund, the Investment Manager
endeavors to avoid unfavorable consequences and to take advantage of favorable
developments in particular nations where from time to time it places the
investments of the Fund.
The exercise of this flexible policy may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
<PAGE>
There are additional risks involved in futures transactions. These risks
relate to the Fund's ability to reduce or eliminate its futures positions, which
will depend upon the liquidity of the secondary markets for such futures. The
Fund intends to purchase or sell futures only on exchanges or boards of trade
where there appears to be an active secondary market, but there is no assurance
that a liquid secondary market will exist for any particular contract at any
particular time. Use of futures for hedging may involve risks because of
imperfect correlations between movements in the prices of the futures on the one
hand and movements in the prices of the securities being hedged or of the
underlying security, currency or index on the other. Successful use of futures
by the Fund for hedging purposes also depends upon the Investment Manager's
ability to predict correctly movements in the direction of the market, as to
which no assurance can be given.
There are several risks associated with transactions in options. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A decision as to
whether, when and how to use options involves the exercise of skill and
judgment, and even a well-conceived transaction may be unsuccessful to some
degree because of market behavior or unexpected events. There can be no
assurance that a liquid market will exist when the Fund seeks to close out an
option position. If the Fund were unable to close out an option that it had
purchased on a security or a securities index, it would have to exercise the
option in order to realize any profit or the option may expire worthless. If
trading were suspended in an option purchased by the Fund, it would not be able
to close out the option. If restrictions on exercise were imposed, the Fund
might be unable to exercise an option it has purchased. Except to the extent
that a call option on a security or securities index written by the Fund is
covered by an option on the same security or index purchased by the Fund,
movements in the security or index may result in a loss to the Fund. However,
such losses may be mitigated by changes in the value of the Fund's securities
during the period the option was outstanding.
<PAGE>
Trading Policies. The Investment Manager serves as investment adviser to
other clients. Accordingly, the respective portfolios of the Fund and such
clients may contain many or some of the same securities. When the Fund and other
clients of the Investment Manager are engaged simultaneously in the purchase or
sale of the same security, the transactions will be placed for execution in a
manner designed to be equitable to all parties. The larger size of the
transaction may affect the price of the security and/or the quantity which may
be bought or sold for the Fund. If the transaction is large enough, brokerage
commissions in certain countries may be negotiated below those otherwise
chargeable.
Sale or purchase of securities, without payment of brokerage commissions,
fees (except customary transfer fees) or other remuneration in connection
therewith, may be effected between the Fund and other clients of the Investment
Manager under procedures adopted pursuant to Rule 17a-7 under the 1940 Act.
MANAGEMENT OF THE TRUST
The name, address, principal occupation during the past five years and other
information with respect to each of the Trustees and Executive Officers of the
Trust are as follows:
<TABLE>
<S> <C>
Name, Address and Principal Occupation
Offices with Trust During Past Five Years
Thomas S. White, Jr.* Chairman of Thomas White International, Ltd.;
440 S. LaSalle St. former Managing Director, Morgan Stanley Asset Management
Suite 3900
Chicago, IL 60605
Trustee, President
Age: 54
Brandon S. Joel Mutual Fund Administrative Manager of Thomas White International,
440 S. LaSalle St. Ltd.; former Senior Mutual Fund Accountant, John Nuveen & Co.
Suite 3900
Chicago, IL 60605
Treasurer
Age: 28
Douglas M. Jackman Analyst and Vice President of Thomas White International, Ltd.;
440 S. LaSalle St. formerly with Morgan Stanley, involved with equity analysis and
Suite 3900 foreign exchange
Chicago, IL 60605
Vice President and
Secretary
Age: 30
<PAGE>
Jill F. Almeida Retired; former Vice President, Security
1448 N. Lake Shore Dr. Pacific Bank
Chicago, IL 60610
Trustee
Age: 48
Philip R. Haag President, The Monroe Group, Inc. (Manufacturing Management/Automotive)
535 Balsam
Palatine, IL 60045
Trustee
Age: 35
Nicholas G. Manos* Attorney (of counsel), Gesas, Pilati & Gesas,
53 W. Jackson Blvd.
Suite 528
Chicago, IL 60604
Trustee
Age: 74
Edward E. Mack III President, Mack & Parker (Insurance)
55 East Jackson Street
Chicago, IL 60604
Trustee
Age: 54
Michael R. Miller Self-employed business management consultant
22160 N. Pepper Road
Barrington, IL 60010
Trustee
Age: 57
John N. Venson Medical Doctor (podiatry)
310 Meadowlake Lane
Lake Forest, IL 60045
Trustee
Age: 50
</TABLE>
* 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.
<PAGE>
The Trust pays each Trustee who is not an "interested person" of the Trust,
as that term is defined in the 1940 Act, an annual fee of $3,000. For the fiscal
year ended October 31, 1997, the Trust paid the following compensation to all
Trustees of the Trust:
<TABLE>
<S> <C> <C> <C> <C>
Aggregate Pension or Retirement Estimated Annual Total Compensation
Compensation Benefits Accrued as Benefits Upon
Fund Expenses Retirement
- --------------------------------------------------------------------------------------------------------------------
Thomas S. White, Jr. $0 $0 $0 $0
Jill F. Almeida $3,000 $0 $0 $3,000
Philip R. Haag $3,000 $0 $0 $3,000
Nicholas G. Manos $0 $0 $0 $0
Edward E. Mack, III $3,000 $0 $0 $3,000
Michael R. Miller $3,000 $0 $0 $3,000
John N. Venson $3,000 $0 $0 $3,000
</TABLE>
PRINCIPAL SHAREHOLDERS
As of January 31, 1998, there were 3,853,798 Shares of the Fund
outstanding, of which 77,473 Shares (2.01%) were owned beneficially, directly or
indirectly, by all the Trustees and officers of the Fund as a group. As of
January 31, 1998, John Wm. Galbraith, P.O. Box 33030, St. Petersburg, FL 33733,
owned beneficially, directly or indirectly, 2,920,581 Shares (75.78%) 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 Manager Agreement. The Investment Manager of the Fund is Thomas
White International, Ltd., (the "Investment Manager"), an Illinois corporation
with offices in Chicago, Illinois. The Investment Management Agreement between
the Investment Manager and the Trust on behalf of the Fund, dated March 10,
1995, was approved by the Board of Trustees, including approval by a majority of
the Trustees who were not parties to the Investment Management Agreement or
interested persons of any such party, at a meeting on March 4, 1997 and will
continue through March 10, 1998. The Investment Management Agreement 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 Investment Manager to
furnish the Fund with investment research and advice. In so doing, without cost
to the Fund, the Investment Manager may receive certain research services
described below. The Investment Manager is not required to furnish any
personnel, overhead items or facilities for the Fund, including daily pricing or
trading desk facilities, although such expenses are paid by investment advisers
of some other investment companies. It is currently expected that these expenses
will be borne by the Fund, although certain of these expenses may be borne by
the Investment Manager. In addition, the Investment Manager may pay, out of its
own assets and at no cost to the Fund, amounts to certain broker-dealers in
connection with the provision of administrative services and/or with the
distribution of the Fund's Shares.
<PAGE>
The Investment Management Agreement provides that the Investment Manager
will select brokers and dealers for execution of the Fund's portfolio
transactions consistent with the Trust's brokerage policies (see "Brokerage
Allocation"). Although the services provided by broker-dealers in accordance
with the brokerage policies incidentally may help reduce the expenses of or
otherwise benefit the Investment Manager and other investment advisory clients
of the Investment Manager, as well as the Fund, the value of such services is
indeterminable and the Investment Manager's fee is not reduced by any offset
arrangement by reason thereof.
When the Investment Manager determines to buy or sell the same securities
for the Fund that the Investment Manager has selected for one or more of its
other clients, the orders for all such securities transactions are placed for
execution by methods determined by the Investment Manager, with approval by the
Trust's Board of Trustees, to be impartial and fair, in order to seek good
results for all parties (see "Investment Objective and Policies--Trading
Policies"). Records of securities transactions of persons who know when orders
are placed by the Fund are available for inspection at least four times annually
by the Compliance Officer of the Trust so that the Independent Trustees can be
satisfied that the procedures are generally fair and equitable for all parties.
The Investment Management Agreement further provides that the Investment
Manager shall have no liability to the Trust, the Fund or any Shareholder of the
Fund for any error of judgment, mistake of law, or any loss arising out of any
investment or other act or omission in the performance by the Investment Manager
of its duties under the Agreement or for any loss or damage resulting from the
imposition by any government of exchange control restrictions which might affect
the liquidity of the Fund's assets, or from acts or omissions of custodians or
securities depositories, or from any wars or political acts of any foreign
governments to which such assets might be exposed, except for any liability,
loss or damage resulting from willful misfeasance, bad faith or gross negligence
on the Investment Manager's part or reckless disregard of its duties under the
Investment Management Agreement. The Investment Management Agreement will
terminate automatically in the event of its assignment, and may be terminated by
the Trust on behalf of the Fund at any time without payment of any penalty on 60
days' written notice, with the approval of a majority of the Trustees of the
Trust in office at the time or by vote of a majority of the outstanding Shares
of the Fund (as defined by the 1940 Act).
The Trust uses the names "Lord Asset Management" and "Thomas White" in the
names of the Trust and the Fund, respectively, by license from the Investment
Manager and would be required to stop using those names if Thomas White
International, Ltd., ceased to be the Investment Manager of the Fund. The
Investment Manager has the right to use those names in connection with other
enterprises, including other investment companies.
<PAGE>
Management Fees. For its services, the Fund pays the Investment Manager a
monthly fee at the rate of 1.00% annually of the Fund's average daily net
assets. For the fiscal years ended October 31, 1997, 1996 and 1995, the Fund
paid the Investment Manager aggregate investment advisory fees equal to
$442,129, $366,749 and $239,761, respectively.
The amount of such fee would be reduced by the amount by which the Fund's
annual expenses for all purposes (including the investment management fee)
except taxes, brokerage fees and commissions, and extraordinary expenses such as
litigation, exceed any applicable state regulations.
Transfer Agent. Firstar Trust Company serves as the transfer and dividend
disbursing agent for the Fund pursuant to the transfer agency agreement (the
"Transfer Agent Agreement"), under which Firstar (I) issues and redeems shares,
(ii) prepares and transmits payments for dividends and distributions declared by
the Fund, (iii) prepares shareholder meeting lists and, if applicable, mail,
receive and tabulate proxies, and (iv) provides a Blue Sky System which will
enable the Fund to monitor the total number of shares sold in each state.
Firstar is located at 615 East Michigan Street, Milwaukee, WI 53202.
Compensation for the services of the Transfer Agent is based on a schedule of
charges agrees on from time to time.
The Investment Manager is wholly owned by Thomas S. White, Jr.
Custodian. State Street Bank and Trust Company serves as Custodian of the
Fund's assets, which are maintained at the Custodian's principal office, 1776
Heritage Drive, North Quincy, Massachusetts 02171, and at the offices of its
branches and agencies throughout the world. The Custodian has entered into
agreements with foreign sub-custodians approved by the Trustees pursuant to Rule
17f-5 under the 1940 Act. The Custodian, its branches and sub-custodians
generally do not hold certificates for the securities in their custody, but
instead have book records with domestic and foreign securities depositories,
which in turn have book records with the transfer agents of the issuers of the
securities. Compensation for the services of the Custodian is based on a
schedule of charges agreed on from time to time.
Legal Counsel. Dechert Price & Rhoads, 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 the Fund's financial
statements and review of the Fund's filings with the Securities and Exchange
Commission and the Internal Revenue Service.
Reports to Shareholders. The Trust's fiscal year ends on October 31.
Shareholders will be provided at least semiannually with reports showing the
portfolio of the Fund and other information, including an annual report with
financial statements audited by the independent accountants.
<PAGE>
BROKERAGE ALLOCATION
The Investment Management Agreement provides that the Investment Manager is
responsible for selecting members of securities exchanges, brokers and dealers
(such members, brokers and dealers being hereinafter referred to as "brokers")
for the execution of the Trust's portfolio transactions and, when applicable,
the negotiation of commissions in connection therewith. All decisions and
placements are made in accordance with the following principles:
1. Purchase and sale orders will usually be placed with brokers who
are selected by the Investment Manager as able to achieve "best
execution" of such orders. "Best execution" means prompt and
reliable execution at the most favorable securities price, taking
into account the other provisions hereinafter set forth. The
determination of what may constitute best execution and price in
the execution of a securities transaction by a broker involves a
number of considerations, including without limitation, the
overall direct net economic result to the Fund (involving both
price paid or received and any commissions and other costs paid),
the efficiency with which the transaction is effected, the
ability to effect the transaction at all where a large block is
involved, availability of the broker to stand ready to execute
possibly difficult transactions in the future, and the financial
strength and stability of the broker. Such considerations are
judgmental and are weighed by the Investment Manager in
determining the overall reasonableness of brokerage commissions.
2. In selecting brokers for portfolio transactions, the Investment
Manager takes into account its past experience as to brokers
qualified to achieve "best execution," including brokers who
specialize in any foreign securities held by the Fund.
3. The Investment Manager is authorized to allocate brokerage
business to brokers who have provided brokerage and research
services, as such services are defined in Section 28 (e) of the
Securities Exchange Act of 1934 (the "1934 Act"), for the company
and/or other accounts, if any, for which the Investment Manager
exercises investment discretion (as defined in Section 3 (a) (35)
of the 1934 Act) and, as to transactions as to which fixed
minimum commission rates are not applicable, to cause the Fund to
pay a commission for effecting a securities transaction in excess
of the amount another broker would have charged for effecting
that transaction, if the Investment Manager determines in good
faith that such amount of commission is reasonable in relation to
the value of the brokerage and research services provided by such
broker, viewed in terms of either that particular transaction or
the Investment Manager's overall responsibilities with respect to
the company and the other accounts, if any, as to which it
exercises investment discretion. In reaching such determination,
the Investment Manager is not required to place or attempt to
place a specific dollar value on the research or execution
services of a broker or on the portion of any commission
reflecting either of said services. In demonstrating that such
determinations were made in good faith, the Investment Manager
shall be prepared to show that all commissions were allocated and
paid for purposes contemplated by the Trust's brokerage policy;
that commissions were paid only for products or services which
provide lawful and appropriate assistance to the Investment
Manager in the performance of its investment decision-making
responsibilities; and that the commissions paid were within a
reasonable range. The determination that commissions were within
a reasonable range shall be based on any available information as
to the level of commissions known to be charged by other brokers
on comparable transactions, but there shall be taken into account
the Trust's policies that (I) obtaining a low commission is
deemed secondary to obtaining a favorable securities price, since
<PAGE>
it is recognized that usually it is more beneficial to the Fund
to obtain a favorable price than to pay the lowest commission;
and (ii) the quality, comprehensiveness and frequency of research
studies which are provided for the Trust and the Investment
Manager are useful to the Investment Manager in performing its
advisory services under its Investment Management Agreement with
the Trust. Research services provided by brokers to the
Investment Manager are considered to be in addition to, and not
in lieu of, services required to be performed by the Investment
Manager under its Investment Management Agreement. Research
furnished by brokers through whom the Trust effects securities
transactions may be used by the Investment Manager for any of its
accounts, and not all such research may be used by the Investment
Manager for the Trust. When execution of portfolio transactions
is allocated to brokers trading on exchanges with fixed brokerage
commission rates, account may be taken of various services
provided by the broker, including quotations outside the United
States for daily pricing of foreign securities held in a Fund's
portfolio.
4. Purchases and sales of portfolio securities within the United
States other than on a securities exchange shall be executed with
primary market makers acting as principal except where, in the
judgment of the Investment Manager, better prices and execution
may be obtained on a commission basis or from other sources.
5. Sales of the Fund's Shares (which shall be deemed to include also
shares of other investment companies registered under the 1940
Act which have the same investment adviser) made by a broker are
one factor among others to be taken into account in deciding to
allocate portfolio transactions (including agency transactions,
principal transactions, purchases in under writings or tenders in
response to tender offers) for the account of the Fund to that
broker; provided that the broker shall furnish "best execution"
as defined in paragraph 1 above, and that such allocation shall
be within the scope of the Fund's policies as stated above; and
provided further, that in every allocation made to a broker in
which the sale of Shares is taken into account there shall be no
increase in the amount of the commissions or other compensation
paid to such broker beyond a reasonable commission or other
compensation determined, as set forth in paragraph 3 above, on
the basis of best execution alone or best execution plus research
services, without taking account of or placing any value upon
such sale of Shares.
Insofar as known to management, no Trustee or officer of the Trust, nor the
Investment Manager or any person affiliated with any of them, has any material
direct or indirect interest in any broker employed by or on behalf of the Trust
for the Fund. All portfolio transactions will be allocated to broker-dealers
only when their prices and execution, in the good faith judgment of the
Investment Manager, are equal to the best available within the scope of the
Trust's policies. There is no fixed method used in determining which
broker-dealers receive which order or how many orders.
For the fiscal year ended October 31, 1995, the Fund paid brokerage
commissions in the amount of $88,815, of which $28,289, representing $7,473,276
of securities purchases, was paid to broker-dealers that provided research
services to the Investment Manager. For the fiscal year ended October 31, 1996,
the 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 Investment Manager. For the fiscal year
ended October 31, 1997, the 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 Investment
Manager.
<PAGE>
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus describes the manner in which the Fund's Shares may be
purchased and redeemed. See "How to Buy Shares of the Fund" and "How to Sell
Shares of the Fund." Shares of the Fund are offered directly to the public by
the Fund. The Fund employs no Distributor.
At the discretion of the Fund, investors may be permitted to purchase Fund
Shares by transferring securities to the Fund that meet the Fund's investment
objective and policies. Securities transferred to the Fund will be valued in
accordance with the same procedures used to determine the Fund's net asset value
at the time of the next determination of net asset value after such acceptance.
Shares issued by the Fund in exchange for securities will be issued at net asset
value determined as of the same time. All dividends, interest, subscription, or
other rights pertaining to such securities shall become the property of the Fund
and must be delivered to the Fund by the investor upon receipt from the issuer.
Investors who are permitted to transfer such securities will be required to
recognize a gain or loss on such transfer, and pay tax thereon, if applicable,
measured by the difference between the fair market value of the securities and
investor's basis therein. Securities will not be accepted in exchange for shares
of the Fund unless: (1) such securities are, at the time of the exchange,
eligible to be included in the Fund and current market quotations are readily
available for such securities; (2) the investor represents and warrants that all
securities offered to be exchanged are not subject to any restrictions upon
their sale by the Fund under the Securities Act of 1933 or under the laws of the
country in which the principal market for such securities exists, or otherwise;
and (3) the value of any such security (except U.S. government securities) being
exchanged together with other securities of the same issuer owned by the Fund,
will not exceed 5% of the Fund's net assets immediately after the transaction.
Net asset value per Share is determined as of the close of business on the
New York Stock Exchange, which generally is 4:00 p.m. (Eastern time) every
Monday through Friday (exclusive of national business holidays). The Trust's
offices will be closed, and net asset value will not be calculated, on those
days on which the New York Stock Exchange is closed, which currently are: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
<PAGE>
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
in New York on each day on which the New York Stock Exchange is open. Trading of
European or Far Eastern securities generally, or in a particular country or
countries, may not take place on every New York business day. Furthermore,
trading takes place in various foreign markets on days which are not business
days in New York and on which a Fund's net asset value is not calculated. Each
Fund calculates net asset value per Share, and therefore effects sales,
redemptions and repurchases of its Shares, as of the close of the New York Stock
Exchange once on each day on which that Exchange is open. Such calculation does
not take place contemporaneously with the determination of the prices of many of
the portfolio securities used in such calculation and if events occur which
materially affect the value of those foreign securities, they will be valued at
fair market value as determined by the management using methods approved by the
Board of Trustees and subsequently ratified in good faith by the Board of
Trustees.
The Board of Trustees may establish procedures under which the Fund may
suspend the determination of net asset value for the whole or any part of any
period during which (1) the New York Stock Exchange is closed other than for
customary weekend and holiday closings, (2) trading on the New York Stock
Exchange is restricted, (3) an emergency exists as a result of which disposal of
securities owned by the Fund is not reasonably practicable or it is not
reasonably practicable for the Fund fairly to determine the value of its net
assets, or (4) for such other period as the Securities and Exchange Commission
may by order permit for the protection of the holders of the Fund's Shares.
TAX STATUS
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Fund and the purchase, ownership, and disposition of Fund Shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that may 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 retroactive. Prospective
investors should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of Fund Shares, as well
as the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
The Fund intends normally to pay a dividend at least once annually
representing substantially all of its net investment income (which includes,
among other items, dividends and interest) and to distribute at least annually
any realized capital gains. By so doing and meeting certain diversification of
assets and other requirements of the Code, the Fund intends to qualify annually
as a regulated investment company under the Code. The status of the Fund as a
regulated investment company does not involve government supervision of
management or of its investment practices or policies. As a regulated investment
company, the Fund generally will be relieved of liability for U.S. federal
income tax on that portion of its net investment income and net realized capital
gains which it distributes to its Shareholders. Amounts not distributed on a
timely basis in accordance with a calendar year distribution requirement also
are subject to a non deductible 4% excise tax. To prevent application of the
excise tax, the Fund intends to make distributions in accordance with the
calendar year distribution requirement.
<PAGE>
Dividends of net investment income and net short-term capital gains are
taxable to Shareholders as ordinary income. Distributions of net investment
income may be eligible for the corporate dividends-received deduction to the
extent attributable to the Fund's qualifying dividend income. However, the
alternative minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distributions of net capital gains (the excess of
net long-term capital gains over short-term capital losses) will generally be
taxable to Shareholders as either "20% Rate Gain" or "28% Rate Gain," depending
upon the Fund's holding period for the assets sold. "20% Rate Gains" arise from
sales of assets held by the Fund for more than 18 months and are subject to a
maximum tax rate of 20%; "28% Rate Gains" arise from sales of assets held by the
Fund for more than one year by not more than 18 months and are subject to a
maximum tax rate of 28%. 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 the Fund.
Shareholders will be notified annually as to the Federal tax status of dividends
and distributions they receive and any tax withheld thereon.
Distributions by the Fund reduce the net asset value of the Fund Shares.
Should a distribution reduce the net asset value below a Shareholder's cost
basis, the distribution nevertheless would be taxable to the Shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implication of
buying Shares just prior to a distribution by the Fund. The price of Shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
<PAGE>
Certain of the debt securities acquired by the Fund may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Fund, original issue discount on a taxable debt
security earned in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code.
Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does not exceed the
accrued market discount on such debt security. Generally, market discount
accrues on a daily basis for each day the debt security is held by the Fund at a
constant rate over the time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes into account
the semi-annual compounding of interest.
The Fund may invest in stocks of foreign companies that are classified
under the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Fund held the PFIC stock. The Fund itself will be
subject to tax on the portion, if any, of the excess distribution that is
allocated to that Fund's holding period in prior taxable years (and an interest
factor will be added to the tax, as if the tax had actually been payable in such
prior taxable years) even though the Fund distributes the corresponding income
to Shareholders. Excess distributions include any gain from the sale of PFIC
stock as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
The Fund may be able to elect alternative tax treatment with respect to
PFIC stock. Under an election that currently may be available, the Fund
generally would be required to include in its gross income its share of the
earnings of a PFIC on a current basis, regardless of whether any distributions
are received from the PFIC. If this election is made, the special rules,
discussed above, relating to the taxation of excess distributions, would not
apply. Alternatively, the Fund may be able to elect to mark to market its PFIC
stock, resulting in the stock being treated as sold at fair market value on the
last business day of each taxable year. Any resulting gain would be reported as
ordinary income, and any mark-to-market losses and any loss from an actual
disposition of Fund 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 the Fund
itself to tax on certain income from PFIC stock, the amount that must be
distributed to Shareholders, and which will be taxed to Shareholders as ordinary
income or long-term capital gain, may be increased or decreased substantially as
compared to a fund that did not invest in PFIC stock.
<PAGE>
Income received by the Fund from sources within foreign countries may be
subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of the Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, the Fund
will be eligible and intends to elect to "pass through" to the Fund's
Shareholders the amount of foreign taxes paid by the Fund. Pursuant to this
election, a Shareholder will be required to include in gross income (in addition
to taxable dividends actually received) his pro rata share of the foreign taxes
paid by a Fund, and will be entitled either to deduct (as an itemized deduction)
his pro rata share of foreign income and similar taxes in computing his taxable
income or to use it as a foreign tax credit against his U.S. Federal income tax
liability, subject to limitations. No deduction for foreign taxes may be claimed
by a Shareholder who does not itemize deductions, but such a Shareholder may be
eligible to claim the foreign tax credit (see below). Each Shareholder will be
notified within 60 days after the close of the Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the Shareholder's U.S. tax attributable to his foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Fund's income flows through to its Shareholders. With respect to
the Fund, gains from the sale of securities will be treated as derived from U.S.
sources and certain currency fluctuation gains including fluctuation gains from
foreign currency denominated debt securities, receivables and payables, will be
treated as ordinary income derived from U.S. sources. The limitation on foreign
tax credit is applied separately to foreign source passive income (as defined
for purposes of the foreign tax credit), including the foreign source passive
income passed through by the Fund. Shareholders may be unable to claim a credit
for the full amount of their proportionate share of the foreign taxes paid by a
Fund. Foreign taxes may not be deducted in computing alternative minimum taxable
income and the foreign tax credit can be used to offset only 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If a Fund is not eligible
to make the election to "pass through" to its Shareholders its foreign taxes,
the foreign income taxes it pays generally will reduce investment company
taxable income and the distributions by a Fund will be treated as United States
source income.
Certain options and futures and foreign currency forward contracts in which
the Fund may invest may be "section 1256 contracts." Gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40") however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by the Fund at the
end of each taxable year (and on certain other dates as prescribed under the
Code) are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by the Fund may result in
"straddles" for U.S. Federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by the Fund. In addition, losses
realized by the Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to the Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by the Fund which is taxed as ordinary income when
distributed to Shareholders.
<PAGE>
The Fund may make one or more of the elections available under the Code
which are applicable to straddles. If the Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
Shareholders and which will be taxed to Shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.
Requirements relating to the Fund's tax status as a regulated investment
company may limit the extent to which the Fund will be able to engage in
transactions in options and futures and foreign currency forward contracts.
Recently enacted rules may affect the timing and character of gain if the
Fund engages in transactions that reduce or eliminate its risk of loss with
respect to appreciated financial positions. If the Fund enters into certain
transactions in property while holding substantially identical property, the
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 the 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 the
Fund's holding period and the application of various loss deferral provisions of
the Code.
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time the Fund accrues income or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt securities
denominated in a foreign currency and certain futures contracts and options,
gains or losses attributable to fluctuations in the value of foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These gains and losses,
referred to under the Code as "section 988" gains and losses, may increase or
decrease the amount of the Fund's net investment income to be distributed to its
Shareholders as ordinary income. For example, fluctuations in exchange rates may
increase the amount of income that the Fund must distribute in order to qualify
for treatment as a regulated investment company and to prevent application of an
excise tax on undistributed income. Alternatively, fluctuations in exchange
rates may decrease or eliminate income available for distribution. If section
988 losses exceed other net investment income during a taxable year, the Fund
would not be able to make ordinary dividend distributions, or distributions made
before the losses were realized would be recharacterized as return of capital to
Shareholders for Federal income tax purposes, rather than as an ordinary
dividend, reducing each Shareholder's basis in his Fund Shares.
Upon the sale or exchange of his Shares, a Shareholder will realize a
taxable gain or loss depending upon his basis in the Shares. Such gain or loss
will be treated as capital gain or loss if the Shares are capital assets in the
Shareholder's hands; gain will generally be subject to a maximum tax rate of 20%
if the Shareholder's holding period for the Shares is more than 18 months, and a
maximum tax rate of 28% if the Shareholder's holding period for the Shares is
more than one year but not more than 18 months. Gain from the disposition of
Shares held not more than one year will be taxed as short-term capital gain. Any
loss realized on a sale or exchange will be disallowed to the extent that the
Shares disposed of are replaced (including replacement through the reinvesting
of dividends and capital gain distributions in the Fund) within a period of 61
days beginning 30 days before and ending 30 days after the disposition of the
Shares. In such a case, the basis of the Shares acquired will be adjusted to
reflect the disallowed loss. Any loss realized by a Shareholder on the sale of
the Fund's Shares held by the Shareholder for six months or less will be treated
for Federal income tax purposes as a long-term capital loss to the extent of any
distributions of long-term capital gains received by the Shareholder with
respect to such Shares.
<PAGE>
The Fund generally will be required to withhold Federal income tax at a
rate of 31% ("backup withholding") from dividends paid, capital gain
distributions, and redemption proceeds to shareholders if (1) the Shareholder
fails to furnish the Fund with the Shareholder's correct taxpayer identification
number or social security number and to make such certifications as the Fund may
require, (2) the Internal Revenue Service notifies the Shareholder or the Fund
that the Shareholder has failed to report properly certain interest and dividend
income to the Internal Revenue Service and to respond to notices to that effect,
or (3) when required to do so, the Shareholder fails to certify that he is not
subject to backup withholding. Any amounts withheld may be credited against the
Shareholder's Federal income tax liability.
Ordinary dividends and taxable capital gain distributions declared in
October, November, or December with a record date in such month and paid during
the following January will be treated as having been paid by the Fund and
received by Shareholders on December 31 of the calendar year in which declared,
rather than the calendar year in which the dividends are actually received.
Distributions and redemptions also may be subject to state, local and
foreign taxes. U.S. tax rules applicable to foreign investors may differ
significantly from those outlined above. This discussion does not purport to
deal with all of the tax consequences relating to an investment in the Fund.
Shareholders are advised to consult their own tax advisers for details with
respect to the particular tax consequences to them of an investment in the Fund.
DESCRIPTION OF SHARES
The Shares of the Fund have the same preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications and terms and conditions of redemption, except as follows: all
consideration received from the sale of Shares of the Fund, together with all
income, earnings, profits and proceeds thereof, belongs to the Fund and is
charged with liabilities in respect of the general liabilities of the Trust. The
net asset value of a Share of the Fund is based on the assets belonging to the
Fund less the liabilities charged to the Fund, and dividends are paid on Shares
of the Fund only out of lawfully available assets belonging to the Fund. In the
event of liquidation or dissolution of the Trust, the Shareholders of the Fund
will be entitled, to the assets belonging to the Fund out of assets of the Trust
available for distribution.
<PAGE>
The Shares have non-cumulative voting rights so that the holders of a
plurality of the Shares voting for the election of Trustees at a meeting at
which 50% of the outstanding Shares are present can elect all the Trustees and
in such event, the holders of the remaining Shares voting for the election of
Trustees will not be able to elect any person or persons to the Board of
Trustees.
PERFORMANCE INFORMATION
The Fund may, from time to time, include its total return in
advertisements or reports to Shareholders or prospective investors. Quotations
of average annual total return for the Fund will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in the
Fund over periods of one, five, or ten years (up to the life of the Fund)
calculated pursuant to the following formula: P(1+T)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 Fund's expenses on an annual basis, and assume that all dividends and
distributions are reinvested when paid. Total return for the fiscal year ended
October 31, 1997 was 15.80%. The average annual total return from June 28, 1994
(commencement of operations) through October 31, 1997 was 13.52%. Cumulative
total return for the same period was 52.77%.
Performance information for the Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare
each Fund's results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities market in general;
(ii) other groups of mutual funds tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in the Fund. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for the Fund reflects only the performance of a
hypothetical investment in the Fund during the particular time period on which
the calculations are based. Performance information should be considered in
light of the Fund's investment objective and policies, characteristics and
quality of the portfolio and the market conditions during the given time period,
and should not be considered as a representation of what may be achieved in the
future.
From time to time, the Fund and the Investment Manager may also refer to
the following information:
(1) The Investment Manager's and its affiliates' market share of
international equities managed in mutual funds prepared or published by
Strategic Insight or a similar statistical organization.
(2) The performance of U.S. equity and debt markets relative to foreign
markets prepared or published by Morgan Stanley Capital International or
a similar financial organization.
<PAGE>
(3) The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corp., Morgan Stanley Capital
International or a similar financial organization.
(4) The geographic distribution of the Fund's portfolio.
(5) The gross national product and populations, including age
characteristics, of various countries as published by various
statistical organizations.
(6) To assist investors in understanding the different returns and risk
characteristics of various investments, the Fund may show historical
returns of various investments and published indices (e.g., Ibbotson
Associates, Inc. Charts and Morgan Stanley EAFE -Index).
(7) The major industries located in various jurisdictions as published by
the Morgan Stanley Index.
In addition, the Fund and the Investment Manager may also refer to the
number of shareholders in the Fund or the dollar amount of fund and private
account assets under management in advertising materials.
FINANCIAL STATEMENTS
The Trust's audited financial statements for the Fund, including the
related notes thereto, dated October 31, 1997, are incorporated by reference in
the SAI from the Annual Report of the Trust dated as of October 31, 1997. A copy
of the report delivered with this SAI should be retained for future reference.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements: Audited financial statements as
of October 31, 1997 are incorporated by reference in
Part B of the Registration Statement from the Trust's
Annual Report dated as of October 31, 1997 and include
the following:
Independent Auditor's Report
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Notes to Financial Statements
Investment Portfolio
(b) Exhibits:
(1) Trust Instrument(2)
(2) By-Laws(2)
(3) Not Applicable
(4) Not Applicable
(5) Form of investment management agreement (1)
(6) Not Applicable
(7) Not Applicable
(8) Form of custody agreement (1)
(9) (a) Form of transfer agent agreement (1)
(b) Form of blue sky compliance servicing
agreement (1)
(10) Opinion and consent of counsel(2)
<PAGE>
(11) Consent of independent public accountants
(12) Not Applicable
(13) Initial capital agreement(2)
(14) Not Applicable
(15) Not Applicable
(16) Form of computation of performance
evaluations(2)
(18) Not Applicable
(19) (a) Powers of attorney for Messrs. White, Miller,
Haag, Manos, and Mack, and for Ms. Almeida(2)
(b) Powers of attorney for Messrs. Joel and Venson
(1)
(20) Secretary's certificate pursuant to Rule
483(b)(2)
(27) Financial data schedule
-------------------
(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.
Item 25. Persons Controlled by or Under Common Control with
Registrant
None.
Item 26. Number of Record Holders
Shares of Beneficial Interest, par value $0.01 per
share: 93 shareholders as of November 30, 1997.
<PAGE>
Item 27. Indemnification
Reference is made to Article X, Section 10.02 of the
Registrant's Trust Instrument, which is filed herewith.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of the Registrant by the
Registrant pursuant to the Trust Instrument or otherwise,
the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit
or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Advisers
and their Officers and Directors
The business and other connections of Thomas White
International, Ltd. are described in Parts A and B.
For information relating to the investment advisers'
officers and directors, reference is made to Form ADV filed
under the Investment Advisers Act of 1940 by Thomas
White International, Ltd.
Item 29. Principal Underwriters
Not Applicable.
<PAGE>
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Thomas White
International, Ltd., 440 South LaSalle Street, Chicago,
Illinois 60605-1028.
Item 31. Management Services
Not Applicable.
Item 32. Undertakings
(a) Not Applicable.
(b) Registrant undertakes to call a meeting of
Shareholders for the purpose of voting upon the
question of removal of a Trustee or Trustees when
requested to do so by the holders of at least 10%
of the Registrant's outstanding shares of
beneficial interest and in connection with such
meeting to comply with the shareholder
communications provisions of Section 16(c) of the
Investment Company Act of 1940.
(c) Registrant undertakes to furnish to each person to whom
a prospectus is delivered a copy of the Registrant's
latest Annual Report to Shareholders upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant certifies that
it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Post-Effective
Amendment No. 5 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 27th day of February, 1998.
Lord Asset Management Trust
<PAGE>
By: *
Thomas S. White, Jr.
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 5 to the Registration Statement on Form
N-1A has been signed below by the following persons on behalf of Lord
Asset Management Trust in the capacities and on the date indicated:
<TABLE>
<S> <C> <C>
Signature Title Date
* Trustee and President February 27, 1998
Thomas S. White, Jr. (Principal Executive
Officer)
* Treasurer (Principal February 27, 1998
Brandon S. Joel Financial and
Accounting Officer)
* Trustee February 27, 1998
Michael R. Miller
* Trustee February 27, 1998
Jill F. Almeida
Trustee February 27, 1998
*
Philip R. Haag
* Trustee February 27, 1998
Nicholas G. Manos
* Trustee February 27, 1998
Edward E. Mack, III
* Trustee February 27, 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 in 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 Number Description
11 Consent of independent public accountants
27 Financial data schedule
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated November 21, 1997, on the
financial statements of the Thomas White World Fund series of Lord Asset
Management Trust referred to therein, in Post-Effective Amendment No. 5 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
February 26, 1998
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-1-1996
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 40612
<INVESTMENTS-AT-VALUE> 47854
<RECEIVABLES> 195
<ASSETS-OTHER> 26
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48075
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 79
<TOTAL-LIABILITIES> 79
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 38226
<SHARES-COMMON-STOCK> 3628
<SHARES-COMMON-PRIOR> 3176
<ACCUMULATED-NII-CURRENT> 630
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1897
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7243
<NET-ASSETS> 47996
<DIVIDEND-INCOME> 1246
<INTEREST-INCOME> 142
<OTHER-INCOME> 0
<EXPENSES-NET> 665
<NET-INVESTMENT-INCOME> 723
<REALIZED-GAINS-CURRENT> 1982
<APPREC-INCREASE-CURRENT> 3575
<NET-CHANGE-FROM-OPS> 6280
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 591
<DISTRIBUTIONS-OF-GAINS> 2435
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 243
<NUMBER-OF-SHARES-REDEEMED> 40
<SHARES-REINVESTED> 250
<NET-CHANGE-IN-ASSETS> 8839
<ACCUMULATED-NII-PRIOR> 498
<ACCUMULATED-GAINS-PRIOR> 2350
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 451
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 665
<AVERAGE-NET-ASSETS> 45137
<PER-SHARE-NAV-BEGIN> 12.33
<PER-SHARE-NII> .20
<PER-SHARE-GAIN-APPREC> 1.65
<PER-SHARE-DIVIDEND> .19
<PER-SHARE-DISTRIBUTIONS> .76
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.23
<EXPENSE-RATIO> 1.47
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
