File Nos. 33-75138
811-8348
As filed with the Securities and Exchange Commission on December 30, 1999
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. 10 / X /
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 11 / 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
Keith T. Robinson, Esq. Thomas S. White
Dechert Price & Rhoads Thomas White International, Ltd.
1775 Eye Street, N.W. 440 South LaSalle Street
Washington, D.C. 20006 Chicago, Illinois 60605-1028
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
on (date) pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1)
x on February 29, 2000 pursuant to paragraph (a)(1)
75 days after filing pursuant to paragraph (a)(2)
on (date) pursuant to paragraph (a)(2) of Rule 485.
<PAGE>
Prospectus
The Thomas White Funds Family
Capturing Value WorldwideSM
Thomas White American Growth Fund
Thomas White American Opportunities Fund
Thomas White International Fund
March 1, 2000
Thomas White American Growth Fund (the "American Growth Fund") seeks long-term
capital growth by primarily investing in equity securities of United States
companies.
Thomas White American Opportunities Fund (the "American Opportunities Fund")
seeks long-term capital growth by primarily investing in equity securities of
small to mid-size United States companies.
Thomas White International Fund (the "International Fund") seeks long-term
capital growth through a flexible policy of investing worldwide.
The Funds are series of the Lord Asset Management Trust (the "Trust"), which can
be contacted at the following address and telephone number:
Lord Asset Management Trust
440 S. LaSalle Street
Suite 3900
Chicago, IL 60605
1-800-811-0535
The Securities and Exchange Commission has not approved or disapproved the
Funds' shares and has expressed no opinion as to the accuracy or adequacy of
this prospectus. It is a criminal offense to make a representation to the
contrary.
<PAGE>
Contents
Goals of the Funds and Investment Strategies ............................... 3
What You Should Know About Risk ............................................ 5
How the Funds Have Performed ............................................... 7
Fee and Expenses ........................................................... 8
The Advisor ................................................................ 9
Financial Information ...................................................... 12
Dividends, Distributions and Taxes ......................................... 13
Your Account
How to Buy Shares ...................................................... 15
How to Sell Shares ..................................................... 19
Redemption Fee ......................................................... 20
Shareholder Services and Account Policies .................................. 21
Contacting the Thomas White Funds Family ................................... 24
An Important Phone Number
All Shareholder Services: 1-800-811-0535
<PAGE>
Goals of the Funds
The investment objective of the American Growth, American
Opportunities and International Funds is long-term capital growth.
Investment Strategies
For each of the Funds, Thomas White International, Ltd. (the "Advisor" or "TWI")
buys equity securities of companies at less than its research indicates to be
their true worth. This is intended to produce Fund portfolios with lower
price-to-earnings and price-to-book ratios than many comparable mutual funds.
Such portfolio characteristics are typical of what are commonly referred to as
"value" funds.
Companies considered attractive typically will have the following
characteristics:
o The market price of the equity is undervalued relative to earnings power,
break-up value and inherent profitability.
o The companies are, or may soon be, exhibiting improved financial
characteristics represented by rising cash flow, return on equity, operating
margins and book value.
o The price of its equities may have recently underperformed the general market
due to a low level of investor expectations regarding the earnings outlook.
o The companies should have the strength to operate successfully through adverse
business conditions.
This approach seeks out equities where current investor enthusiasm is low.
Positions are normally sold when the investment community's perceptions improve
and the securities approach fair valuation.
The Advisor adheres to a long-term investment approach, and it does not attempt
to project short-term changes in the general market. Each Fund intends to invest
in companies for holding periods greater than one year under normal market
conditions, so the frequency of its purchases and sales should be below many
comparable mutual funds. Lower portfolio turnover helps to reduce trading costs
and shareholders' taxes.
A high exposure to the equity market is normally maintained unless the Advisor
is unable to find undervalued securities that meet its criteria. Using this
investment management style, the Advisor seeks superior long-term performance,
below average return volatility and portfolio resilience in difficult market
environments.
<PAGE>
The American Growth Fund
The American Growth Fund primarily invests in equity securities of U.S.
companies. The Fund is designed to benefit from the future economic growth of
the U.S.
The American Growth Fund may take advantage of opportunities that exist anywhere
in the U.S. equity market without regard to the market capitalization of the
issuer, although it anticipates investing primarily in large companies. It may
also invest up to 35% of its assets in non-U.S. equity securities. The Advisor
may use American Depositary Receipts ("ADRs"), which are depositary receipts,
typically issued by a U.S. bank or trust company, that allow indirect ownership
of securities issued by foreign corporations.
The Advisor's research unit, the Global Capital Institute, looks for undervalued
securities in every U.S. industry.
The American Growth Fund has the flexibility to engage in other investment
techniques, different from the principal strategies mentioned here.
The American Opportunities Fund
The American Opportunities Fund primarily invests in equity securities of
mid-size and small U.S. companies. The Advisor currently classifies a company as
mid-size or small if it has an approximate market capitalization (current price
x shares outstanding) of less than ten billion dollars. The Advisor currently
researches over 1,600 issuers that it classifies as small or mid-size and
generally will use this pool of issuers to select stocks for the Opportunities
Fund.
Equity securities of mid-size and small companies tend to have greater price
fluctuation than larger, established companies. The Advisor will attempt to
manage this risk by normally owning companies that represent a broad range of
industries. The Fund will compare itself to, and attempt to outperform, the
Russell Midcap Value Index and the Russell Midcap Index. These unmanaged indices
represent up to 800 companies that have a market capitalization of $1 billion to
$10 billion.
While the Advisor will primarily invest the assets of the American Opportunities
Fund in U.S. companies, the American Opportunities Fund can invest up to 35% of
its assets in non-U.S. equity securities.
The International Fund
The International Fund primarily invests in equity securities of companies
located in the world's developed countries outside of the U.S. Under normal
market conditions, the Fund will invest in companies located in at least 10
countries outside of the U.S., and will invest less than 10% of its assets in
U.S. companies. Generally, equity investments will represent a diversified
portfolio of predominantly larger companies. There may also be a small portion
of the International Fund's assets in companies from emerging market countries.
The International Fund is designed to benefit from future growth in developed
and emerging market countries, including the U.S. The Advisor produces monthly
valuation research that covers forty-seven countries. It believes that the world
now offers excellent opportunities for growth and diversification. The Fund is
designed to complement domestic equity funds, like the American Growth and
American Opportunities Funds.
Prior to May 1, 1999, the International Fund was named the "Thomas White World
Fund" and generally invested a larger percentage of its assets in the equities
of U.S. companies.
<PAGE>
What You Should Know About Risk
Those Who Should Invest in the Funds
The Funds are designed to be appropriate for prudent investors who are seeking
the long-term performance advantage of equities and who want growth of capital
rather than current income. They should appeal to investors who are interested
in low-cost mutual funds. Under normal conditions the Funds will try to limit
shareholders' taxes through relatively low portfolio turnover.
Individuals should consider improving the risk-return profile of their U.S.
mutual funds by having exposure to foreign investing. The International Fund is
designed for this purpose.
The Advisor discourages potential shareholders who are aggressive, short-term
investors from investing in the Funds. As is described under "Fees and Expenses"
and, in more detail under "How to Sell Shares", a 2% redemption fee is imposed
on the sale of fund shares held less than sixty days. This is imposed in an
attempt to limit transaction costs and the disruption of the Funds' investment
strategies caused by investors such as those described above.
Equities
The Funds will generally be fully-invested in equity securities, including
common and preferred stocks. Common stocks represent an equity (ownership)
interest in a corporation, while preferred stocks generally pay a higher
dividend but do not represent ownership.
Each Fund is subject to market risk, which is the risk that the value of a
security may move up and down, sometimes rapidly and unpredictably, in response
to economic or other conditions. In addition, changes in interest rates affect
the value of portfolio securities held by the Funds and the operations of the
issuers of the Funds' portfolio securities.
Investing in mid and small cap companies can involve more risk than investing in
larger companies. Normally, these companies have more limited markets, product
lines and often more limited trading in their stocks. This can cause the prices
of equity securities of these companies to be more volatile than those of large
cap issuers, or to decline more significantly during market downturns than the
market as a whole. The International and American Opportunities Funds are more
likely than the American Growth Fund to be affected by the risks of investing in
small capitalization companies.
History shows that over long periods, equities have outperformed bonds, cash
equivalents and inflation. Nevertheless, in the short term, equity performance
may be volatile and unpredictable, and may produce greater negative returns than
other asset classes.
Foreign Securities
Holding equity securities of foreign companies can entail taking more risk than
owning the securities of domestic companies. Equity securities of foreign
companies may be subject to additional risks such as changes in currency
exchange rates, political instability and inadequate or unreliable information
about the companies. These risks may be particularly acute with respect to
investments in emerging markets.
While all of the Funds may invest in foreign securities, the International Fund
can be expected to be particularly subject to the risks posed by foreign
investing.
These risks and others are more fully discussed in the SAI.
<PAGE>
General Risks
Shareholders should understand that all investments involve risk. There can be
no guarantee against loss resulting from an investment in the Funds, nor can
there be any assurance that a Fund's investment objective will be attained.
The value of a Fund's investments and, therefore, investment performance will
vary from day to day. When you sell your shares, they may be worth more or less
than the price you paid for them, and you could lose money.
TWI recognizes the above risks and attempts in its management of the Funds to
moderate them. It believes that a professionally structured and carefully
monitored portfolio can reduce the risks associated with less diversified equity
portfolios.
The Advisor attempts to configure the Funds' portfolios to moderate the natural
volatility of equities by focusing each Fund's investments in equities that in
theory are underpriced. However, its success in doing so cannot be assured. Such
securities may never reach what the Advisor believes to be their full value, or
may even go down in price. In addition, this approach may produce returns below
aggressive equity funds, given the Advisor's efforts to limit risk.
Under adverse market conditions, the Funds could invest some or all of their
assets in money market securities and similar investments. Although the Funds
would do this only in seeking to avoid losses, it could have the effect of
reducing the benefit from any upswing in the market.
Euro
On January 1, 1999, eleven European countries began conversion to a common
currency. Investments traded in the financial markets in these countries are now
denominated in this new currency. The Advisor does not believe this conversion
to a common currency will have a material impact on the net asset value of the
International Fund or affect the long-term outlook of those equities.
<PAGE>
How the Funds Have Performed
The tables below represent the International and American Growth Funds' annual
returns as of December 31, 1999 and long-term performance. Because the American
Opportunities Fund did not have a full calendar year of performance to report as
of December 31, 1999, no performance information is presented for that Fund.
The bar chart for the International Fund demonstrates that returns will
fluctuate from year-to-year. The Growth Fund began operations on November 1,
1998 and therefore has only one full calendar year of performance to report. The
Funds can experience short-term performance swings, as shown by the best and
worst calendar quarter returns during the years depicted in the graphs.
The average annual total return table compares the International and American
Growth Funds' performance to that of comparative indices. All of the indices
listed are recognized unmanaged indices of U.S. and global stock market
performance or averages for comparable funds by a recognized mutual fund rating
company. The International Fund is compared to both global (includes US
securities) and international indices due to its May 1, 1999 change in
investment focus from a global array of issuers to companies located outside of
the U.S. Prior to May 1, 1999, the International Fund invested a larger portion
of its assets in U.S. securities.
The Funds have return patterns intended to appeal to the prudent investor who
has moderate risk tolerance and a long-term (over five years) investment
outlook.
Year-by-Year Total Return
as of 12/31 each year:
International Fund [Bar Chart] American Growth Fund [Bar Chart]
1999 - xx.xx%
1995 - 19.03%
1996 - 16.50% Best Quarter - Qtr 1 '99 - 10.00%
1997 - 11.70% Worst Quarter - Qtr 4 '99 - xx.xx%
1998 - 16.54%
1999 - xx.xx%
Best Quarter - Qtr 4 '98 - 17.74%
Worst Quarter - Qtr 3 '98 - -12.35%
Average Annual Total Returns
Periods ended December 31, 1999
<TABLE>
<S> <C> <C> <C> <C> <C>
Since Inception
1 Year 3 Year 5 Year Inception Date
6/28/94
International Fund
MSCI All Country World ex USA Index
MSCI All Country World Index
MSCI World Index
Morningstar International Funds Average
Morningstar Global Funds Average
American Growth Fund 11/01/98
Russell 1000 Value Index
Russell 1000 Index
S&P 500
Morningstar Large Cap Value Fund Average
</TABLE>
These figures include changes in principal value, reinvested dividends, and
capital gain distributions, if any. As with all mutual funds, past performance
is not a prediction of future results.
<PAGE>
Fees and Expenses
These fees and expenses are paid when shareholders buy and hold shares of a
Fund. The Funds are 100% no load, but impose a 2% redemption fee, payable to the
Funds, on shares purchased and held less than two months. This is intended to
benefit long-term shareholders of the Funds, as short term trading in the Funds
increases transaction costs and can have a negative impact on the Funds'
performance.
Shareholder Fees
(paid directly from an investment)
Redemption Fee*
(as a percentage of amount
redeemed, if applicable)
American Growth Fund 2%
American Opportunities Fund 2%
International Fund 2%
* On shares purchased and held for less than two months (details under
"Redemption Fees" in "How to Sell Shares").
Annual Fund Operating Expenses
(deducted from Fund assets)
<TABLE>
Management Other Total Fund Less Net Operating
Fees Expenses Operating Expenses Reimbursement* Expenses
<S> <C> <C> <C> <C> <C>
American Growth Fund 1.00% 0.35% 1.58% 0.23% 1.35%
American Opportunities Fund 1.00% 0.49% 1.70% 0.35% 1.35%
International Fund 1.00% 0.44% 1.44% - 1.44%
</TABLE>
* The Advisor has agreed to reimburse each of the American Growth and the
American Opportunities Funds to the extent that the Fund's total operating
expenses exceed 1.35% of the Fund's average daily net assets during the
current fiscal year. The Advisor has agreed to reimburse the International
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 during
its current fiscal year.
Examples: These examples illustrate the effect of expenses and are intended to
help you compare the costs of investing in the Funds with the costs of investing
in other mutual funds. The examples are not meant to suggest actual or expected
cost or returns, all of which may vary.
Assume that a Fund's annual return is 5%, and that its operating expenses are
exactly as 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. For every $10,000 invested, here's how much a shareholder
would have paid in total expenses if the account was closed after the number of
years indicated:
Fund 1 year 3 year 5 year 10 years
American Growth Fund $137 $428 $739 $1,624
American Opportunities Fund 137 457 800 1,768
International Fund 147 456 787 1,724
The No-Load Advantage
The Funds are 100% no-load, which means that all your money is invested at a
Fund's net asset value. There are no sales charges, no 12b-1 fees and no
back-end load fees that reduce your investment in a Fund.
Quick Fact: The International Fund's total expense ratio is 1.44% compared to
____% for the average of the 918 international equity funds in the Morningstar
Principia Database on December 31, 1999.
<PAGE>
The Advisor
The Funds are managed by Thomas White International, Ltd., 440 S. LaSalle
Street, Suite 3900, Chicago, Illinois 60605. TWI chooses each Fund's investments
and handles its affairs, under the direction of the Board of Trustees. TWI
provides the Funds with investment research, advice, supervision and certain
overhead items and facilities. In choosing brokers to execute portfolio
transactions for the Funds, TWI may take into account a broker's sales of Fund
shares. TWI may make payments to broker-dealers and others for certain services
to the Funds or their shareholders, including sub-administration, sub-transfer
agency and shareholder servicing. These payments are made out of TWI's own
resources and do not entail additional costs to the Funds or their shareholders.
TWI provides investment management and advisory services to both a domestic and
international client base, including trusts, endowments, corporations, employee
benefit plans, Taft-Hartley plans and individuals.
Thomas S. White, Jr., has been the portfolio manager of the Funds since their
inceptions and has been managing investments for more than thirty-three years.
He is Chairman of TWI, which he founded in 1992. Before that he was a Managing
Director of Morgan Stanley Asset Management and Chief Investment Officer of its
Chicago Group, which he began in 1982. Further information concerning TWI is
included under the heading "Investment Management and Other Services" in the
SAI.
The Global Capital Institute is TWI's fully-owned research division. Its
analysts provide the company valuations that Mr. White uses to select stocks in
the Fund's portfolio. The Institute produces monthly equity valuation
publications for research clients who are asset management organizations located
around the world.
Each Fund pays a management fee, equal to 1.00% of the Fund's average daily net
assets on an annual basis, to TWI for managing its investments and business
affairs. See "Fees and Expenses."
TWI feels that it is important for shareholders to thoroughly understand and
grow comfortable with its investment approach. The Funds' shareholder
communications are written with this goal in mind.
Year 2000
The Funds' operations depend heavily on computer technology and the computer
systems of their service providers. The Advisor has implemented and successfully
completed a testing program to address technological challenges posed by the
transition to the Year 2000. Management of the Trust is working with, and
monitoring the efforts of, other service providers to the Funds to make sure
that they take steps that are reasonably designed to address Year 2000 issues.
Of course, there is no guarantee that these efforts will completely address all
technology issues raised by the transition to Year 2000. An incomplete or
untimely resolution of Year 2000 issues could have negative effects on the
operations of the Funds and their service providers. In addition, if the value
of a Fund investment is adversely affected by a Year 2000 problem, the net asset
value of the Fund will be affected as well. The International Fund may be
particularly susceptible to this risk, as it primarily invests outside of the
U.S., and the governments and companies in many foreign countries have not
prepared as extensively as have most U.S. issuers for the arrival of the Year
2000.
<PAGE>
The American Growth and American Opportunities Funds are designed to benefit
from the Advisor's ability to discover attractive investment opportunities in
each of the major industries within the United States.
The United States has the largest and most diversified economy in the world. Its
stock market ranks number one by dollar value and number of common stocks.
The Advisor's research unit, the Global Capital Institute, has produced
investment valuations of U.S. companies within the following industries.
Advertising Engineering Newspaper
Aerospace Entertainment Office Equipment
Air Transport Food Processing Oilfield Services
Aluminum Forest Products Packaging & Container
Apparel/Textile Grocery Paper
Auto & Truck Home Furnishing Petroleum (Integrated)
Auto Parts Healthcare Petroleum (Producing)
Banks: National Home Appliance Precision Instrument
Banks: Regional Home Building Publishing
Beverages Hotel Railroads
Broadcasting Household Products Real Estate
Building Materials Industrial Services Recreation
Cable TV Insurance, Diversifed Restaurant
Cement & Aggregates Insurance, Life Retail: Specialty
Chemicals Internet Securities Brokerage
Cosmetics Retail Store Semiconductors
Computers & Peripherals Investment Advisors Steels
Computer Software Machinery Telecom Equipment
Drug Maritime Telecom Services
Drugstore Medical Services Tire & Rubber
Electrical Equipment Medical Supplies Toiletries
Electric Utilities Metal Fabricating Trucking
Electronics Metals & Mining
Natural Gas
The American Growth and American Opportunities Funds seek to obtain superior
long-term returns while attempting to limit investment risks. The Advisor
employs a valuation-oriented stock selection strategy and broad portfolio
diversification. History shows that careful industry, asset class and company
diversification can lower portfolio volatility and reduce risk during difficult
market environments.
<PAGE>
The International Fund is designed to take advantage of the positive changes
occurring in the world today.
These forty-seven countries contain over 3,600 companies that are valued by the
advisor's analysts. International Fund shareholders typically will be partial
owners of over 200 of these companies. 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 EMERGING MARKETS
EUROPE GREATER EUROPE
Austria Czech Republic
Belgium Greece Hungary
Denmark Russia Poland
Finland Turkey
France
Germany
Ireland MIDDLE EAST
Italy Israel
Netherlands
Norway AFRICA
Portugal South Africa
Spain
Sweden LATIN AMERICA
Switzerland Argentina Mexico
United Kingdom Brazil Peru
Chile Venezuela
NORTH AMERICA Columbia
Canada
United States INDIAN
SUBCONTINENT
PACIFIC India
Australia Pakistan
Hong Kong Sri Lanka
Japan
New Zealand FAR EAST
Singapore China Philippines
Indonesia Taiwan
Korea Thailand
Malaysia
The goal of the International Fund is to have a diversified portfolio of
predominantly foreign equity securities representing a broad mix of industries
and countries. By combining diversification with its proprietary research, TWI
seeks to produce superior long-term returns and volatility that is lower than
most comparable mutual funds.
<PAGE>
Financial Information
This table summarizes the Funds' financial histories and
performance. "Total Return" shows how much your investment in a Fund would have
increased (or decreased) during each period, assuming you held your shares for
the entire period and had reinvested all dividends and distributions. This
information has been audited by PricewaterhouseCoopers LLP for the fiscal year
ended October 31, 1999, and by other auditors for the fiscal years before
October 31, 1999. This information, along with the Funds' financial statements,
are included in the Funds' most recent shareholder report, which is available
upon request.
<TABLE>
<S> <C> <C> <C> <C>
For a share outstanding International Fund#
throughout the period Year ended October 31
1999 1998 1997 1996 1995
- ------------------------------ ------ ------ ----- ------ -------
Net Asset Value, beginning $13.58 $13.23 $12.33 $11.31 $10.50
Of period
- ------------------------------
Income From Investment Operations:
Net investment income 0.07 0.15 0.20 0.19 0.19
Net realized and unrealized gain 2.32 0.93 1.65 1.51 0.71
- ------------------------------ ------ ------ ------- ------ -------
Total from investment operations 2.39 1.08 1.85 1.70 0.90
Less Distributions:
From net investment income (0.13) (0.19) (0.19) (0.20) (0.09)
From net realized gains (2.54) (0.54) (0.76) (0.48) -
- ---------------------------------- ------ ------ ------ -------- -------
Total distributions (2.67) (0.73) (0.95) (0.68) (0.09)
- ---------------------------------- ------ ------ ------ -------- -------
Change in net asset value for the
period (0.28) 0.35 0.90 1.02 .81
- ---------------------------------- ------ ------ ------ -------- -------
Net Asset Value, end of period $13.30 $13.58 $13.23 $12.33 $11.31
- ---------------------------------- ------ ------ ------ -------- --------
Total Return 18.78% 8.64% 15.80% 15.63% 8.65%
Ratios/Supplemental Data
Net assets at end of period (in $41,665 $57,464 $47,996 $39,157 $32,979
thousands)
Ratio to average net assets:
Expenses 1.44% 1.42% 1.47% 1.50% 1.49%
Net investment income 0.46% 1.13% 1.60% 1.63% 2.08%
Portfolio turnover rate 67.48% 51.41% 48.19% 51.22% 64.54%
# Formerly the Thomas White World Fund.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
American Growth American Opportunities
Fund Fund
Period from
For a share outstanding Year Ended March 4, 1999
throughout the period October 31, 1999 (inception)
to October 31, 1999
- ------------------------------ ------ ------
Net Asset Value, beginning $10.00 $10.00
Of period
- ------------------------------
Income From Investment Operations:
Net investment income 0.01 0.02
Net realized and unrealized gain 2.06 0.71
- ------------------------------ ------ ------
Total from investment operations 2.07 0.73
Less Distributions:
From net investment income --- ---
From net realized gains --- ---
- ---------------------------------- ------ ------
Total distributions --- ---
- ---------------------------------- ------ ------
Change in net asset value for the
period 2.07 0.73
- ---------------------------------- ------ ------
Net Asset Value, end of period $12.07 $10.73
- ---------------------------------- ------ ------
Total Return 20.70% 7.30%**
Ratios/Supplemental Data
Net assets at end of period (in $22,114 $9,931
thousands)
Ratio to average net assets:
Expenses (net of reimbursement) 1.35%+ 1.35%*+
Net investment income 0.23% 0.22%*
Portfolio turnover rate 4.58% 3.53%**
*Annualized
**Not Annualized
+In the absence of the expense reimbursement, expenses for the American Growth
and American Opportunities Funds would have been 1.58% and 1.70%, respectively,
of average net assets.
</TABLE>
<PAGE>
Dividends, Distributions and Taxes
The Funds distribute all or substantially all of their net income and realized
gains to shareholders each year. Normally, dividends and capital gains are
distributed in December.
Your distributions are taxable when they are paid, whether you take them in cash
or reinvest them in additional shares. In addition to federal tax, distributions
may be subject to state and local taxes.
Every January, the Funds will send you and the IRS a statement, called a Form
1099, to assist you with your tax preparation.
Distribution Options
When you open an account, specify on your application how you want to receive
your distributions. If you later want to change your distribution options, call
us at 1-800-811-0535.
The Funds offer four options:
Your income dividends and capital gain distributions will be automatically
reinvested in additional shares of the relevant Fund. If you do not indicate a
choice on your application, you will be assigned this option.
You will be sent a check for each income dividend and capital gain distribution.
Your capital gain distributions will be automatically reinvested, but you will
be sent a check for each income dividend.
Your income dividends will be automatically reinvested, but you will be sent a
check for each capital gain distribution.
Understanding Distributions:
As a Fund shareholder, you are entitled to your share of your Fund's net income
and any net gains realized on investments.
Your share of a Fund's income from dividends and interest, and any net realized
short-term capital gains, are paid to you as dividends, which are taxed at the
same rate as ordinary income.
Generally each Fund realizes capital gains whenever it sells securities for a
higher price than it paid for them. Net realized long-term gains are paid to you
as capital gain distributions. Currently, long-term capital gains result from
sales of securities held for greater than one year and are taxed at a rate of
20%.
Distributions are subject to these capital gains rates regardless of how long
you have held your shares.
<PAGE>
Taxes
As with any investment, you should consider how your investment in the Funds
will be taxed.
For IRA accounts, all distributions will be automatically reinvested because
payment of distributions in cash would be a taxable distribution from your IRA,
and might be subject to tax penalties.
Taxes on Transactions
Your redemptions - including exchanges between accounts - are subject to the
federal income tax on capital gains. A capital gain or loss is the difference
between the cost of your shares and the price you receive when you sell them.
Whenever you sell shares of the Fund, we will send you a confirmation statement
showing how many shares you sold and at what price. You will also receive a
year-end statement every January. It is up to you or your tax preparer to
determine whether any given sale resulted in a capital gain or loss, and if so,
the amount of tax to be paid.
Be sure to keep regular account statements; the information they contain will be
essential in calculating the amount of your dividends and capital gains.
Backup Withholding
As with all mutual funds, a Fund may be required to withhold U.S. federal income
tax at the rate of 31% of all taxable distributions payable to you if you fail
to provide the Fund with your correct taxpayer identification number or to make
required certifications, or if you have been notified by the IRS that you are
subject to backup withholding. Backup withholding is not an additional tax;
rather, it is a way in which the IRS ensures it will collect taxes otherwise
due. Any amounts withheld may be credited against your U.S. federal income tax
liability.
Understanding Portfolio Turnover
Before investing in a mutual fund, investors should consider its portfolio
turnover rate. The portfolio turnover rate is an indication of how long the
manager holds securities in the portfolio. For example, if the portfolio
turnover rate is 100%, then the average holding period is one year. If the
portfolio turnover rate is 50%, then the average holding period would be two
years. Funds with low portfolio turnover rates have lower brokerage and other
transaction costs, and the tax rates attached to the capital gains they generate
may be lower. According to the Morningstar Principia Database, as of December
31, 1999, the average portfolio turnover rate for an international equity mutual
fund and a domestic equity fund was __% and __%, respectively. The International
Fund had a 67% portfolio turnover rate for the fiscal year ended October 31,
1999. The American Growth Fund completed its first full year on October 31,
1999, and over this period had a portfolio turnover rate of 5%. This low
turnover rate reflects the Advisor's buy and hold strategy. In the future, the
Advisor expects that the portfolio turnover rates for the American Growth and
the American Opportunities Funds typically will average between 40% and 60%.
Your Account
How to Buy Shares
The Funds are 100% no-load and therefore have no sales charges of any kind. The
purchase price is a Fund's net asset value per share (NAV), which is calculated
as of the close of trading on the New York Stock Exchange ("NYSE") (usually 4:00
p.m. Eastern time) every day the NYSE is open. Shares may not be purchased on
days the exchange is closed. Because some foreign exchanges are open on days
when the NYSE is closed, the NAV of a Fund, and particularly the International
Fund, may change on a day when you cannot buy or sell shares of the Fund.
Options for purchasing shares of the Funds are listed on the table on pages
17-18.
Shares of the Funds may be purchased or sold through certain fund supermarkets,
International broker-dealers or financial institutions ("Processing
Intermediaries"). Processing Intermediaries may use procedures and impose fees
or restrictions in addition to or different from those applicable to
shareholders who invest directly in the Funds. The Advisor may, out of its own
resources and at no additional costs to the Funds or shareholders, pay
Processing Intermediaries for providing services to the Funds or to
shareholders.
<PAGE>
The NAV of a Fund generally is determined on the basis of the market price of
its assets, minus its liabilities. A Fund's investment in a security listed or
traded on a recognized stock exchange or NASDAQ is valued at its last sale price
on the principal exchange on which the security is traded. The value of a
foreign security is determined as of the close of trading on the foreign
exchange on which it is traded or as of 4:00 p.m. Eastern time, if that is
earlier. That value is then converted into the U.S. dollar equivalent using
foreign exchange rates in effect at noon that day. The exception to this policy
is Canadian and Latin American securities, which are converted into their U.S.
dollar equivalent at and Latin American 4:00 p.m. Eastern time.
Securities for which market quotations are not readily available and other
assets are valued at fair value as determined in good faith under guidelines
established by the Board of Trustees.
An order will be priced at the next NAV calculated after it is accepted by the
Funds. All purchases must be made in U.S. dollars, and checks must be drawn on
U.S. banks. Accounts may not be opened with a third party check. The Funds do
not accept cash or credit cards. If payment for an order does not clear, the
purchase will be canceled and the shareholder will be liable for any losses or
fees the Funds or their Transfer Agent incur.
Minimum Investments
Initial Additional
Regular Account $2,500 $100
Automatic Invest $1,000 $100
Traditional IRA $1,000 $100
Roth IRA $1,000 $100
Spousal IRA $200 $100
<PAGE>
THE FOLLOWING ACCOUNT TYPES CAN BE OPENED USING THE ENCLOSED APPLICATION.
Individual or Joint Ownership- For your general investment needs
Individual accounts are owned by one person. Joint accounts can have two or more
owners.
Gift or Transfer to a Minor (UGMA, UTMA) - To invest for a minor's education or
other future needs
These custodial accounts provide ways to give money to a minor. The account
application must include the minor's social security number.
Trust or Established Employee Benefit or Profit-Sharing Plan - For money being
invested by a trust, employee benefit plan, or profit-sharing plan The trust or
plan must be established before an account can be opened.
Corporation or Other Entity - For investment needs of corporations,
associations, partnerships, institutions, or other groups You will need to send
a certified corporate resolution with your application.
TO ESTABLISH ONE OF THE FOLLOWING RETIREMENT
ACCOUNTS PLEASE CALL 1-800-811-0535 FOR COMPLETE IRA INFORMATION.
Traditional IRA: An individual retirement account. Contributions may or may not
be tax deductible depending on a shareholder's circumstances. Assets can grow
tax-free. When distributions are received they are taxable as income.
Roth IRA: An IRA with non-deductible contributions, tax-free growth of assets,
and tax-free distributions for qualified expenses.
Simplified Employee Pension Plans (SEP-IRAs): An IRA that allows small business
owners or those with self-employment income to make tax-deductible contributions
of up to $30,000 per year for themselves and any eligible employees.
Savings Incentive Match Plan for Employees (SIMPLE): Firms with 100 or fewer
employees who do not have a retirement plan can establish a SIMPLE Plan.
Employees can establish a SIMPLE plan in the form of either an IRA or a 401(k)
plan. Employers using IRAs must either match the first 3% of pay each employee
defers under the plan, or alternatively, make a non-elective contribution of 2%
of pay for each eligible employee.
<PAGE>
How to Buy Shares of the Funds
Mail
To open an account:
Complete and sign the application.
Make your check payable to the Fund in which you wish to invest. Mail to the
address on the application, or for overnight delivery:
Thomas White Funds Family
Shareholder Services Center
615 East Michigan Street
3rd Floor
Milwaukee, WI 5320
To add to an account:
Make your check payable to the Fund(s) in which you have an account and include
the stub from one of your statements with a letter containing your name and
account number. Remember to always put your account number on your check. Mail
to the address on your statement.
Phone 1-800-811-0535
To open an account:
You may only open a new account by phone if you wire your investment to our
Transfer Agent. See the section "Wire" below.
To add to an account:
Purchase shares by telephone. Call first to verify that this service is in place
on your account. (This service is not available for IRAs)
You must make your telephone purchases by 4:00 p.m. Eastern time.
Wire
To open an account:
If you make your initial investment by wire you must fill out an
application marked "follow-up" and send it to our Transfer Agent. The
application must be received before any of the purchased shares can be
redeemed. Prior to wiring your investment to the Transfer Agent, call and
establish an account to ensure the Transfer Agent correctly credits your
account.
To add to an account:
Wire to:
Firstar Bank Milwaukee, N.A.
ABA Number 07500-00022
Trust Funds, Acct Number 112-952-137
For further credit to:
(Fund name)
(Investment account number)
(Name or account registration)
<PAGE>
Automatic Investment Plan
To open an account:
You may open a new account with a $1,000 minimum initial investment if you sign
up for the Automatic Investment Plan. Fill out the Automatic Investment Plan
section on the application for monthly or quarterly transfers from your bank
account.
To add to an account:
If you would like to add this service to your account, or if you already have
this service, you can easily change the frequency or amount of your automatic
investments over the phone by calling 1-800-811-0535.
Guidelines
Your bank must be a member of Automatic Clearing House (ACH).
If the transfer is from a checking account, this application must be accompanied
by a voided check.
If the transfer is from a savings account, this application must be accompanied
by a withdrawal slip.
The application must be received, with initial investment, at least 15 business
days prior to the initial ACH transaction.
If the automatic purchase cannot be made due to insufficient funds, a $25 fee
will be assessed. Your Automatic Investment Plan will be terminated after two
such occurrences.
This plan will terminate upon redemption of all shares in your account.
Altering the bank information of this Plan must be in writing and received by
Firstar Mutual Fund Services, LLC. Please allow five business days for these
charges termination to become effective.
<PAGE>
How to Sell Shares
You can arrange to take money out of your Fund account at any time by selling
(redeeming) some or all of your shares. Your shares will be sold at the next NAV
calculated after your order is received and accepted.
A Fund may hold payment on redemptions until it is reasonably satisfied that it
has received payment for a recent purchase made by check, by the Automatic
Purchase Plan, or by the Telephone Purchase Plan, which can take up to fifteen
days.
To sell shares in a regular (non-IRA) account, you may use any of the methods
described here. To sell shares in an IRA, your request must be made in writing.
If you need an IRA Withdrawal Request form, call us at 1-800-811-0535.
Selling Shares in Writing
Please send a letter with:
* your name;
* your Fund account number;
* the dollar amount or number of shares to be redeemed; and
* any other applicable requirements listed in the table on the next page.
Mail your letter to:
Thomas White Funds Family
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Certain requests must include a signature guarantee, designed to protect
shareholders and the Funds from fraud. You should be able to obtain a signature
guarantee from a bank, broker-dealer, credit union (if authorized under state
law), securities exchange or savings association. A notary public cannot provide
a signature guarantee.
Your request must be made in writing and include a signature guarantee if any of
the following situations applies:
* you wish to redeem more than $50,000 worth of shares;
* your name has changed by marriage or divorce (send a letter indicating your
account number(s) and old and new names, signing the letter in both the old and
new names and having both signatures guaranteed);
* your address has changed within the last 30 days and you would like to redeem
shares;
* the check is being mailed to an address different from the one on your account
(record address);
* the check is being made payable to someone other than the account owner; or
* you are instructing us to wire the proceeds to a bank or brokerage account and
have not signed up for the Telephone Redemption by Wire plan.
<PAGE>
Redemption Fee
The Funds, especially the International Fund, can experience substantial price
fluctuation and are intended for long-term investors. Short-term "market timers"
who engage in frequent purchases and redemptions can disrupt the Funds'
investment programs and create additional transaction costs that are borne by
all shareholders. For these reasons, the Funds assess a 2% fee on redemptions
(including exchanges) of Fund shares held for less than two months.
Redemption fees are paid to each Fund to help offset transaction costs and to
protect the Fund's long-term shareholders. Each Fund will use the "first-in,
first-out" (FIFO) method to determine the two-month holding period. Under this
method, the date of the redemption or exchange will be compared to the earliest
purchase date of shares held in the account. If this holding period is less than
two months, the fee will be charged.
The fee does not apply to any shares purchased through reinvested distributions
(dividends and capital gains) or to shares held in retirement plans such as
SIMPLE IRA and SEP-IRA accounts. The fee does apply to shares held in
traditional and Roth IRA accounts and to shares purchased through Automatic
Investment Plans.
The Funds understand that the majority of purchases of Fund shares may be for a
long-term investment program, but due to unforseen circumstances, shares must be
sold within sixty days of purchase. In such cases, the Funds reserve the right
to waive the redemption fee.
<PAGE>
HOW TO SELL SHARES OF THE FUNDS
Phone 1-800-811-0535
All accounts except IRA
To verify that you may redeem shares by telephone call 1-800-811-0535.
This may be selected on the application.
You must make your telephone redemptions by 4:00 p.m. Eastern time.
As explained, the funds may impose a redemption fee of 0.5% to 2% on shares held
for less than two months.
Mail
Individuals, Joint Owners, Sole Proprietorships, UGMA, UTMA
o The letter of instruction must be signed by all persons required to sign for
transactions (usually, all owners of the account), exactly as their names appear
on the account.
IRAs
o The account owner should complete an IRA Withdrawal Request form. Call 1-
800-811-0535 to request one.
Trust
o The trustee must sign the letter indicating capacity as trustee. If the
account registration does not include the trustee's name, provide a copy of the
trust document certified within the last 30 days.
Business or Organization
o The person or persons authorized by corporate resolution to act on the account
must sign, in that person's official capacity, the redemption request on the
corporation's stationery.
o Include a corporate resolution certified within 30 days if the amount to be
redeemed exceeds $50,000.
Executor, Administrator, Conservator, Guardian
o Call 1-800-811-0535 for instructions.
<PAGE>
Shareholder Services and Account Policies
Doing Business with the Funds
For customer service call 1-800-811-0535. The Funds provide customers with
service Monday through Friday, except holidays, from 9:00 a.m. to 8:00 p.m.
Eastern time.
The Funds' automated phone system can also provide shareholder information 24
hours a day by dialing the above toll-free number.
At the discretion of the Funds, investors may be permitted to purchase Fund
shares by transferring securities to a Fund are compatible with that Fund's
investment objective and policies. See the SAI for further information.
Subject to limitations described in the SAI each Fund reserves the right to
redeem its shares in kind through payment of portfolio securities instead of
cash.
Investors who make excessive moves in and out of the Funds generate additional
costs that fall upon all of a Fund's shareholders. To minimize such costs, the
Funds reserve the right to reject any specific purchase order. In addition, such
orders may incur redemption fees, as described above. Purchase orders may also
be refused if, in the Advisor's opinion, they are of a size that would disrupt
the management of a Fund.
Redemptions may be suspended or payment dates postponed on days when the NYSE is
closed (other than weekends or holidays), when trading on the NYSE is
restricted, or as permitted by the SEC.
If the value of an account falls below $1,000 due to redemptions or exchanges, a
notice of liquidation will be sent to the investor's address of record. The
Funds reserve the right to close that account and send the proceeds to the
shareholder unless sufficient additional shares are purchased.
If checks representing redemption proceeds or dividend and capital gains
distributions are returned "undeliverable" or remain uncashed for six months,
the checks shall be canceled and the proceeds will be reinvested in the
appropriate Fund at the per share NAV on the date of cancellation. In addition,
after such six-month period, the cash election will automatically be changed and
future dividends and distributions will be reinvested at the per share NAV
determined on the date of payment of such distributions.
If a Fund does not grow to a size to permit it to be economically viable, the
Fund may cease operations. In such an event, investors may be required to
liquidate or transfer their investments at an inopportune time.
Address Changes
An address may be changed by calling 1-800-811-0535. The Funds will send a
written confirmation of the change to both the old and new addresses. No
telephone redemptions may be made for 30 days after a change of address by
phone. During those 30 days, a signature guarantee will be required for any
written redemption request unless the change of address was made in writing with
a signature guarantee.
<PAGE>
Telephone Transactions
(For your protection, all transactions are completed over a recorded line.) Many
transactions may be initiated by telephone:
* Change of address;
* Request duplicate statements to be sent to someone designated by the
shareholder;
* Request a current account statement;
* Purchase shares through the Telephone Purchase Plan (plan must be
pre-established);
* Redeem shares (option must be pre-established, not available for IRA
accounts);
* Change the frequency or amount, or discontinue the Automatic Investment Plan
on your account(s);
* Discontinue the Telephone Redemption privilege to an account;
* Change distribution option (does not apply to IRA accounts);
* Redeem shares, with a check sent to the address of record (does not apply to
IRA accounts, and address of record must not have changed in the last 30 days);
* Exchange an investment from an individual account to an existing IRA account
with an identical registration;
* Change the contribution year on an IRA account to the previous year up until
April 15 of the current year.
The Funds will not be responsible for any losses resulting from unauthorized
telephone transactions if they follow procedures reasonably designed to verify
the identity of the caller. Those procedures may include recording the call,
requesting additional information, and sending written confirmation of telephone
transactions.
You should verify the accuracy of telephone transactions immediately upon
receipt of your confirmation statement. If you do not want to be able to
initiate purchase or redemption transactions by telephone, you should decline
these privileges on your account application or call the Funds for instructions
at 1-800-811-0535.
If you are unable to reach the Funds by phone (for example during periods of
unusual market activity), you should consider placing their order by mail.
<PAGE>
Telephone Exchange Plan
The Funds' telephone exchange plan permits you to exchange your investment
between one Fund and another, or between a Fund and one of the Firstar Money
Market Funds. The Firstar Money Market Funds are:
* Money Market Fund;
* U.S. Treasury Money Market Fund;
* U.S. Government Money Market Fund;
* Tax-Exempt Money Market Fund.
Before exchanging with one of the available money market funds please call and
request a prospectus. You will be asked if you have read the prospectus, and an
exchange cannot be accepted unless you indicate that you have done so. Each of
the money market funds is a no-load fund managed by FIRMCO, a Wisconsin limited
liability company and subsidiary of Firstar Corporation, a bank holding company.
The price at which shares are exchanged is determined by the time of day that we
receive the request. To get today's price, call before 4:00 p.m. Eastern time.
Exchange Plan Restrictions
Exchanges will be limited to four round-trip exchanges per year (a round-trip is
the exchange out of one fund into another fund, and then back into the original
fund).
Shares of the fund being exchanged into must be available for sale in the your
state. The International Fund and the Firstar Money Market Funds are available
in all 50 states. The American Growth and American Opportunities Funds will have
a limited availability during the first two years of operation. You can call
800-811-0535 to verify the availability in your state.
You may only exchange between accounts that are registered in the same name,
address, and taxpayer identification number.
To establish a new account through an exchange, the exchange must be for at
least the minimum initial deposit of $2,500. For exchanges between established
accounts the minimum exchange value must be at least $1,000.
The exchange plan is not available for shares of a fund for which certificates
have been issued.
Because excessive trading can hurt the Funds' performance and shareholders, the
Funds reserve the right to temporarily or permanently terminate the exchange
privilege of any investor who makes excessive use of the exchange plan.
The Funds also reserve the right to refuse exchange purchases by any person or
group, if TWI believes that the purchase will be harmful to existing
shareholders.
Please remember that exchanges between taxable/non-retirement accounts will have
tax consequences.
The Funds reserve the right to terminate or modify the exchange plan at any
time, but will try to give prior notice whenever they are able to reasonably do
so.
<PAGE>
Contacting the Thomas White Funds Family
Phone 1-800-811-0535
The following documents are available for free and provide further information
on the Funds:
Annual/Semi-Annual Reports to Shareholders
In the annual report, you will find a letter to shareholders from the Fund
manager and a discussion of the events that impacted the Funds' performance
during the period covered, as well as a list of the Funds' investments.
Statement of Additional Information (SAI)
The SAI contains additional information about the Funds. A current SAI has been
filed with the SEC and is incorporated into this Prospectus by reference.
E-mail
Send your request to [email protected]
On the Internet
Fund documents can be viewed online or downloaded from two Internet websites:
The Securities and Exchange Commission: http://www.sec.gov
Thomas White Funds Family: http://www.thomaswhite.com
By Mail
Thomas White Funds Family
440 South LaSalle Street,
Suite 3900
Chicago, IL 60605
You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC (phone 1-800-SEC-0330 for more information) or by sending your
request and a duplicating fee to the SEC's Public Reference Section, Washington,
DC 20549-6009.
SEC file number: 811-8348
<PAGE>
LORD ASSET MANAGEMENT TRUST
THIS STATEMENT OF ADDITIONAL INFORMATION DATED
MARCH 1, 2000 IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS OF THE
THOMAS WHITE INTERNATIONAL FUND, THE THOMAS WHITE AMERICAN GROWTH FUND
AND THE THOMAS WHITE AMERICAN OPPORTUNITIES FUND
DATED MARCH 1, 2000
WHICH MAY BE OBTAINED
WITHOUT CHARGE UPON REQUEST TO
THE THOMAS WHITE FUNDS FAMILY
440 SOUTH LASALLE STREET, SUITE 3900
CHICAGO, ILLINOIS 60605-1028
TELEPHONE: 1-800-811-0535
TELECOPY: (312) 663-8323
This Statement of Additional Information incorporates by reference financial
statements of the Funds that are included in the Funds' most recent annual
report to shareholders. You can obtain copies of this report by calling
1-800-811-0535.
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY ..................................3
INVESTMENT OBJECTIVES AND POLICIES ...............................3
Investment Policies ..............................................3
Repurchase Agreements ............................................3
Loans of Portfolio Securities ....................................3
Temporary Investments and Cash Management.........................4
Debt Securities ..................................................4
Futures Contracts ................................................5
Options on Securities, Indices and Futures .......................6
Foreign Currency Hedging Transactions.............................8
Depository Receipts...............................................9
Foreign Market Risks..............................................9
Brady Bonds......................................................11
Illiquid and Restricted Securities...............................11
Other Investment Companies.......................................12
Borrowing........................................................12
Investment Restrictions .........................................12
Additional Restrictions .........................................13
Risk Factors ....................................................14
Trading Policies ................................................15
MANAGEMENT OF THE TRUST .........................................16
PRINCIPAL SHAREHOLDERS ..........................................18
INVESTMENT MANAGEMENT AND OTHER SERVICES ........................18
Investment Management Agreement .................................18
Management Fees .................................................19
The Advisor .....................................................19
Transfer Agent ..................................................20
The Advisor .....................................................20
Custodians.......................................................20
Legal Counsel ...................................................20
Independent Accountants .........................................20
Reports to Shareholders..........................................20
BROKERAGE ALLOCATION ............................................20
PURCHASE, REDEMPTION AND PRICING OF SHARES ......................22
TAX STATUS ......................................................24
DESCRIPTION OF SHARES ...........................................29
PERFORMANCE INFORMATION .........................................29
FINANCIAL STATEMENTS ............................................31
<PAGE>
GENERAL INFORMATION AND HISTORY
The Thomas White American Growth Fund, the Thomas White American
Opportunities Fund and the Thomas White International Fund are diversified
series of Lord Asset Management Trust (the "Trust"), an open-end, management
investment company registered under the Investment Company Act of 1940 (the
"1940 Act"). The three Funds are the Trust's only series of shares. The Trust is
a Delaware business trust organized on February 9, 1994. Prior to May 1, 1999,
the Thomas White International Fund was named the "Thomas White World Fund."
INVESTMENT OBJECTIVES AND POLICIES
Investment Policies. The investment objective and policies of the Funds are
described in the Funds' Prospectus.
Repurchase Agreements. Repurchase agreements are contracts under which the
buyer of a security simultaneously commits to resell the security to the seller
at an agreed-upon price and date. The repurchase price will reflect an agreed
upon rate of interest not tied to the coupon rate of the underlying security.
Under the 1940 Act, repurchase agreements are considered to be loans
collateralized by the underlying security. Under a repurchase agreement, the
seller is required to maintain the value of the securities subject to the
repurchase agreement at not less than their repurchase price. Thomas White
International, Ltd. (the "Advisor" or "TWI") will monitor the value of such
securities daily to determine that the value equals or exceeds the repurchase
price. However, if the seller should default on its obligation to repurchase the
underlying security, the Funds may experience delay or difficulty in exercising
their rights to realize upon the security and might incur a loss if the value of
the security declines, as well as costs in liquidating the security. The Funds
will enter into repurchase agreements only with parties who meet
creditworthiness standards approved by the Board of Trustees, i.e., banks or
broker-dealers which have been determined by the Advisor to present no serious
risk of becoming involved in bankruptcy proceedings within the time frame
contemplated by the repurchase transaction. Although the Funds may enter into
repurchase agreements, they have no present intention of doing so.
Loans of Portfolio Securities. Each Fund may lend to banks and broker-dealers
portfolio securities with an aggregate market value of up to one-third of its
total assets. Such loans must be secured by collateral (consisting of any
combination of cash, U.S. Government securities or irrevocable letters of
credit) in an amount at least equal (on a daily marked-to-market basis) to the
current market value of the securities loaned. The Funds retain all or a portion
of the interest received on investment of the cash collateral or receive a fee
from the borrower. The Funds may terminate the loans at any time and obtain the
return of the securities loaned within five business days. The Funds will
continue to receive any interest or dividends paid on the loaned securities and
will continue to have voting rights with respect to the securities. In the event
that the borrower defaults on its obligations to return borrowed securities,
because of insolvency or otherwise, a Fund could experience delays and costs in
gaining access to the collateral and could suffer a loss to the extent that the
value of the collateral falls below the market value of the borrowed securities.
Temporary Investments and Cash Management. The Funds may, because of adverse
market conditions, decide to take a temporary defensive position. Each Fund may
invest up to 100% of its total assets in the following instruments:
1. Short-term (less than 12 months to maturity) and medium-term (not greater
than 5 years to maturity) obligations issued or guaranteed by either the
U.S. government or the governments of foreign countries or their agencies;
2. Finance company and corporate commercial paper;
3. Demand notes;
4. Other short-term corporate obligations;
5. Obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks;
6. Repurchase agreements with banks and broker-dealers with respect to the
above listed securities; or
7. Cash.
The Funds may also invest in such instruments for purposes of cash management.
Debt Securities. Bonds and other debt instruments are methods for an issuer
to borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest, and must repay the amount borrowed at maturity. Debt
securities have varying degrees of quality and varying levels of sensitivity to
changes in interest rates.
<PAGE>
The Funds may invest in debt securities which are rated in any rating
category by Moody's Investors Service, Inc. ("Moody's") or by Standard & Poor's
Ratings Services ("S&P"), or which are not rated by Moody's or S&P. As an
operating policy, which may be changed without shareholder approval, each Fund
will not invest or hold more than 5% of its net assets in debt securities rated
Baa or lower by Moody's or BBB or lower by S&P or, if unrated, are of equivalent
investment quality as determined by the Advisor. Such securities are not
considered to be "investment grade" and are sometimes referred to as "junk
bonds." The Board may consider a change in this operating policy if, in its
judgment, economic conditions change such that a higher level of investment in
high risk, lower-quality debt securities would be consistent with the interests
of a Fund and its shareholders. High risk, lower-quality debt securities are
considered to be speculative with respect to the issuer's ability to pay
interest and repay principal.
The market value of debt securities generally varies in response to changes
in interest rates and the financial condition of each issuer. During periods of
declining interest rates, the value of debt securities generally increases.
Conversely, during periods of rising interest rates, the value of such
securities generally declines. These changes in market value will be reflected
in the Funds' net asset values.
Although they may offer higher yields than do higher rated securities, low
rated and unrated debt securities generally involve greater volatility of price
and risk of principal and income, including the possibility of default by, or
bankruptcy of, the issuers of the securities. In addition, the markets in which
low rated and unrated debt securities are traded are more limited than those in
which higher rated securities are traded. The existence of limited markets for
particular securities may diminish the Funds' ability to sell the securities at
fair value either to meet redemption requests or to respond to changes in the
economy or in the financial markets and could adversely affect and cause
fluctuations in the daily net asset value of the Funds' shares.
Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of low rated debt
securities, especially in a thinly traded market. Analysis of the
creditworthiness of issuers of low rated debt securities may be more complex
than for issuers of higher rated securities, and the ability of the Funds to
achieve their investment objectives may, to the extent of investment in low
rated debt securities, be more dependent upon such creditworthiness analysis
than would be the case if the Funds were investing in higher rated securities.
Low rated debt securities may be more susceptible to real or perceived
adverse economic and competitive industry conditions than investment grade
securities. The prices of low rated debt securities have been found to be less
sensitive to interest rate changes than higher rated investments, but more
sensitive to adverse economic downturns or individual corporate developments. A
projection of an economic downturn or of a period of rising interest rates, for
example, could cause a decline in low rated debt securities prices because the
advent of a recession could lessen the ability of a highly leveraged company to
make principal and interest payments on its debt securities. If the issuer of
low rated debt securities defaults, the Funds may incur additional expenses to
seek recovery. The low rated bond market is relatively new, and many of the
outstanding low rated bonds have not endured a major business recession.
The Funds may accrue and report interest on bonds structured as zero coupon
bonds or pay-in-kind securities as income even though it receives no cash
interest until the security's maturity or payment date. In order to qualify for
beneficial tax treatment afforded regulated investment companies, the Funds must
distribute substantially all of their net income to shareholders (see "Tax
Status"). Thus, the Funds may have to dispose of their portfolio securities
under disadvantageous circumstances to generate cash in order to satisfy the
distribution requirement.
<PAGE>
Futures Contracts. The Funds may buy and sell financial futures contracts,
stock and bond index futures contracts, foreign currency futures contracts and
options on any of these for hedging purposes only. A financial futures contract
is an agreement between two parties to buy or sell a specified debt security at
a set price on a future date. An index futures contract is an agreement to take
or make delivery of an amount of cash based on the difference between the value
of the index at the beginning and at the end of the contract period. A futures
contract on a foreign currency is an agreement to buy or sell a specified amount
of a currency for a set price on a future date.
Although some financial futures contracts call for making or taking delivery
of the underlying securities, in most cases these obligations are closed out
before the settlement date. The closing of a contractual obligation is
accomplished by purchasing or selling an identical offsetting futures contract.
Other financial futures contracts by their terms call for cash settlements.
The Funds may buy and sell index futures contracts with respect to any stock
or bond index traded on a recognized stock exchange or board of trade. An index
futures contract is a contract to buy or sell units of an index at a specified
future date at a price agreed upon when the contract is made. The index futures
contract specifies that no delivery of the actual securities making up the index
will take place. Instead, settlement in cash must occur upon the termination of
the contract, with the settlement being the difference between the contract
price and the actual level of the index at the expiration of the contract.
When a Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin", as a partial guarantee of its performance under the
contract. As the value of the security, index or currency fluctuates, either
party to the contract is required to make additional margin payments, known as
"variation margin," to cover any additional obligation it may have under the
contract. In addition, at the time a Fund purchases a futures contract, an
amount of cash, U.S. Government securities, or other highly liquid securities
equal to the market value of the contract will be deposited in a segregated
account with the Funds' Custodian. When selling a futures contract, the Funds
will maintain with their Custodian liquid assets that, when added to the amounts
deposited with a futures commission merchant or broker as margin, are equal to
the market value of the instruments underlying the contract. Alternatively, a
Fund may "cover" its position by owning the instruments underlying the contract
or, in the case of an index futures contract, owning a portfolio with a
volatility substantially similar to that of the index on which the futures
contract is based, or holding a call option permitting the Fund to purchase the
same futures contract at a price no higher than the price of the contract
written by the Fund (or at a higher price if the difference is maintained in
liquid assets with the Fund's Custodian).
Each Fund will limit its use of futures contracts so that no more than 5% of
the Fund's total assets would be committed to initial margin deposits or
premiums on such contracts. The value of the underlying securities on which
futures contracts will be written at any one time will not exceed 25% of the
total assets of a Fund.
Options on Securities, Indices and Futures. The Funds may write (i.e., sell)
covered put and call options and purchase put and call options on securities,
securities indices and futures contracts that are traded on United States and
foreign exchanges and in the over-the-counter markets.
An option on a security or a futures contract is a contract that gives the
purchaser of the option, in return for the premium paid, the right to buy a
specified security or futures contract (in the case of a call option) or to sell
a specified security or futures contract (in the case of a put option) from or
to the writer of the option at a designated price during the term of the option.
An option on a securities index gives the purchaser of the option, in return for
the premium paid, the right to receive from the seller cash equal to the
difference between the closing price of the index and the exercise price of the
option.
The Funds may write a call or put option only if the option is "covered." A
call option on a security or futures contract written by a Fund is "covered" if
the Fund owns the underlying security or futures contract covered by the call or
has an absolute and immediate right to acquire that security without additional
cash consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other securities held
in its portfolios. A call option on a security or futures contract is also
covered if a Funds hold a call on the same security or futures contract and in
the same principal amount as the call written where the exercise price of the
call held (a) is equal to or less than the exercise price of the call written or
(b) is greater than the exercise price of the call written if the difference is
maintained by a Fund in cash or liquid securities in a segregated account with
its custodian. A put option on a security or futures contract written by a Fund
is "covered" if a Fund maintains cash or fixed income securities with a value
equal to the exercise price in a segregated account with its custodian, or else
holds a put on the same security or futures contract and in the same principal
amount as the put written where the exercise price of the put held is equal to
or greater than the exercise price of the put written.
<PAGE>
Each Fund will cover call options on securities indices that it writes by
owning securities whose price changes, in the opinion of the Advisor, are
expected to be similar to those of the index, or in such other manner as may be
in accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations. Nevertheless, where a Fund covers a call option
on a securities index through ownership of securities, such securities may not
match the composition of the index. In that event, the Fund will not be fully
covered and could be subject to risk of loss in the event of adverse changes in
the value of the index. Each Fund will cover put options on securities indices
that it writes by segregating assets equal to the option's exercise price, or in
such other manner as may be in accordance with the rules of the exchange on
which the option is traded and applicable laws and regulations.
A Fund will receive a premium from writing a put or call option, which
increases its gross income in the event the option expires unexercised or is
closed out at a profit. If the value of a security, index or futures contract on
which a Fund has written a call option falls or remains the same, that Fund will
realize a profit in the form of the premium received (less transaction costs)
that could offset all or a portion of any decline in the value of the portfolio
securities being hedged. If the value of the underlying security, index or
futures contract rises, however, that Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation in
its investments. By writing a put option, a Fund assumes the risk of a decline
in the underlying security, index or futures contract. To the extent that the
price changes of the portfolio securities being hedged correlate with changes in
the value of the underlying security, index or futures contract, writing covered
put options will increase a Fund's losses in the event of a market decline,
although such losses will be offset in part by the premium received for writing
the option.
The Funds may also purchase put options to hedge their investments against a
decline in value. By purchasing a put option, the Funds will seek to offset a
decline in the value of the portfolio securities being hedged through
appreciation of the put option. If the value of the Funds' investments does not
decline as anticipated, or if the value of the option does not increase, their
loss will be limited to the premium paid for the option plus related transaction
costs. The success of this strategy will depend, in part, on the accuracy of the
correlation between the changes in value of the underlying security, index or
futures contract and the changes in value of the Funds' security holdings being
hedged.
The Funds may purchase call options on individual securities or futures
contracts to hedge against an increase in the price of securities or futures
contracts that they anticipates purchasing in the future. Similarly, the Funds
may purchase call options on a securities index to attempt to reduce the risk of
missing a broad market advance, or an advance in an industry or market segment,
at a time when the Funds hold uninvested cash or short-term debt securities
awaiting investment. When purchasing call options, the Funds will bear the risk
of losing all or a portion of the premium paid if the value of the underlying
security, index or futures contract does not rise.
There can be no assurance that a liquid market will exist when the Funds seek
to close out an option position. Trading could be interrupted, for example,
because of supply and demand imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading after the price has risen
or fallen more than the maximum specified by the exchange. Although the Funds
may be able to offset to some extent any adverse effects of being unable to
liquidate an option position, they may experience losses in some cases as a
result of such inability. The value of over-the-counter options purchased by
each Fund, as well as the cover for options written by each Fund are considered
not readily marketable and are subject to each Fund's limitation on investments
in securities that are not readily marketable. See "Investment Objectives and
Policies - Investment Restrictions."
The value of the underlying securities and securities indices on which
options may be written at any one time will not exceed 15% of the total assets
of a Fund. A Fund will not purchase put or call options if the aggregate premium
paid for such options would exceed 5% of its total assets.
Foreign Currency Hedging Transactions. In order to hedge against foreign
currency exchange rate risks, the Funds may enter into forward foreign currency
exchange contracts and foreign currency futures contracts, as well as purchase
put or call options on foreign currencies, as described below. The Funds may
also conduct their foreign currency exchange transactions on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market. Some
price spread on currency exchange (to cover service charges) will be incurred
when a Fund converts assets from one currency to another.
<PAGE>
The Funds may enter into forward foreign currency exchange contracts
("forward contracts") to attempt to minimize the risk to the Funds from adverse
changes in the relationship between the U.S. dollar and foreign currencies. A
forward contract is an obligation to purchase or sell a specific currency for an
agreed price at a future date, which is individually negotiated and privately
traded by currency traders and their customers. A Fund generally will not enter
into a forward contract with a term of greater than one year. A Fund may enter
into a forward contract, for example, when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency in order to
"lock in" the U.S. dollar price of the security. In addition, for example, when
a Fund believes that a foreign currency may suffer or enjoy a substantial
movement against another currency, it may enter into a forward contract to sell
an amount of the former foreign currency approximating the value of some or all
of its portfolio securities denominated in such foreign currency. This second
investment practice is generally referred to as "cross-hedging." A Fund may
cross-hedge with respect to the currency of a particular country in amounts
approximating actual or anticipated positions in securities denominated in that
currency. When a Fund owns or anticipates owning securities in countries whose
currencies are linked, the Advisor may aggregate those positions as to the
currency being hedged. Because in connection with each Fund's forward foreign
currency transactions, an amount of its assets equal to the amount of the
purchase will be held aside or segregated to be used to pay for the commitment,
each Fund will always have cash, cash equivalents or high quality debt
securities available in an amount sufficient to cover any commitments under
these contracts or to limit any potential risk. The segregated account will be
marked-to-market on a daily basis. While these contracts are not presently
regulated by the Commodity Futures Trading Commission ("CFTC"), the CFTC may in
the future assert authority to regulate forward contracts. In such event, the
Funds' ability to utilize forward contracts in the manner set forth above may be
restricted. Forward contracts may limit potential gain from a positive change in
the relationship between the U.S. dollar and foreign currencies. Unanticipated
changes in currency prices may result in poorer overall performance for the
Funds than if they had not engaged in such contracts.
A Fund has no limitation on the percentage of assets it may commit to forward
contracts, subject to its stated investment objective and policies, as long as
the amount of assets set aside to cover forward contracts would not impede
portfolio management or the Fund's ability to meet redemption requests. Although
forward contracts will be used primarily to protect the Funds from adverse
currency movements, they also involve the risk that anticipated currency
movements will not be accurately predicted.
The Funds may purchase and write put and call options on foreign currencies
for the purpose of protecting against declines in the dollar value of foreign
portfolio securities and against increases in the dollar cost of foreign
securities to be acquired. As is the case with other kinds of options, however,
the writing of an option on foreign currency will constitute only a partial
hedge up to the amount of the premium received, and a Fund could be required to
purchase or sell foreign currencies at disadvantageous exchange rates, thereby
incurring losses. The purchase of an option on foreign currency may constitute
an effective hedge against fluctuation in exchange rates, although, in the event
of rate movements adverse to its position, a Fund may forfeit the entire amount
of the premium plus related transaction costs. Options on foreign currencies to
be written or purchased by the Funds will be traded on U.S. and foreign
exchanges or over-the-counter.
The Funds may enter into exchange-traded contracts for the purchase or sale
for future delivery of foreign currencies ("foreign currency futures"). This
investment technique will be used only to hedge against anticipated future
changes in exchange rates which otherwise might adversely affect the value of
the Funds' portfolio securities or adversely affect the prices of securities
that the Funds intend to purchase at a later date. The successful use of foreign
currency futures will usually depend on the ability of the Advisor to forecast
currency exchange rate movements correctly. Should exchange rates move in an
unexpected manner, the Funds may not achieve the anticipated benefits of foreign
currency futures or may realize losses.
<PAGE>
Depositary Receipts. American Depositary Receipts ("ADRs") are Depositary
Receipts typically issued by a U.S. bank or trust company which allow indirect
ownership of securities issued by foreign corporations. Receipts are generally
composed of one or more shares of an underlying security. European Depositary
Receipts and Global Depositary Receipts are typically issued by foreign banks or
trust companies, although they also may be issued by U.S. banks or trust
companies, and evidence ownership of underlying securities issued by either a
foreign or a United States corporation.
Depositary Receipts may involve many of the risks of other investments in
foreign securities. For purposes of the Funds' investment policies, the Funds'
investments in Depositary Receipts (other than ADRs) will be deemed to be
investments in the underlying securities.
Foreign Market Risks. Each Fund has the right to purchase securities in any
foreign country, developed or underdeveloped. Investors should consider
carefully the substantial risks involved in investing in securities issued by
companies and governments of foreign nations, which are in addition to the usual
risks inherent in domestic investments. There is the possibility of
expropriation, nationalization or confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments in
foreign nations, foreign exchange controls (which may include suspension of the
ability to transfer currency from a given country), default in foreign
government securities, political or social instability or diplomatic
developments which could affect investments in securities of issuers in foreign
nations. Some countries may withhold portions of interest and dividends at the
source. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
United States. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to United States
companies. Further, the Funds may encounter difficulties or be unable to pursue
legal remedies and obtain judgments in foreign courts. Commission rates in
foreign countries, which are sometimes fixed rather than subject to negotiation
as in the United States, are likely to be higher. Further, the settlement period
of securities transactions in foreign markets may be longer than in domestic
markets, which may affect the timing of the Funds' receipt of proceeds from its
portfolio securities transactions. In many foreign countries, there is less
government supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the United States. The foreign
securities markets of many of the countries in which the Funds may invest may
also be smaller, less liquid, and subject to greater price volatility than those
in the United States.
Investments in companies domiciled in developing countries may be subject to
potentially higher risks than investments in developed countries. These risks
include (i) less social, political and economic stability; (ii) the small
current size of the markets for such securities and the currently low or
nonexistent volume of trading, which result in a lack of liquidity and in
greater price volatility; (iii) certain national policies which may restrict the
Funds' investment opportunities, including restrictions on investment in issuers
or industries deemed sensitive to national interests; (iv) foreign taxation; (v)
the absence of developed legal structures governing private or foreign
investment or allowing for judicial redress for injury to private property; (vi)
the absence, until recently in certain Eastern European countries, of a capital
market structure or market-oriented economy; and (vii) the possibility that
recent favorable economic developments in Eastern Europe may be slowed or
reversed by unanticipated political or social events in such countries.
Investments in Eastern European countries may involve risks of
nationalization, expropriation and confiscatory taxation. The communist
governments of a number of Eastern European countries expropriated large amounts
of private property in the past, in many cases without adequate compensation,
and there can be no assurance that such expropriation will not occur in the
future. In the event of such expropriation, the Funds could lose a substantial
portion of any investments they have made in the affected countries. Further, no
accounting standards exist in Eastern European countries. Finally, even though
certain Eastern European currencies may be convertible into United States
dollars, the conversion rates may be artificial to the actual market values and
may be adverse to the Funds' Shareholders.
<PAGE>
Brady Bonds. The Funds may invest a portion of their assets in certain debt
obligations customarily referred to as "Brady Bonds," which are created through
the exchange of existing commercial bank loans to sovereign entities for new
obligations in connection with debt restructuring under a plan introduced by
former U.S. Secretary of the Treasury, Nicholas F. Brady. They may be
collateralized or uncollateralized and issued in various currencies (although
most are U.S. dollar-denominated), and they are actively traded in the
over-the-counter secondary market.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate
par bonds or floating rate discount bonds, are generally collateralized in full
as to principal by U.S. Treasury zero coupon bonds which have the same maturity
as the Brady Bonds. Interest payments on these Brady Bonds generally are
collateralized on a one-year or longer rolling-forward basis by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least one year of interest payments or, in the case of floating rate bonds,
initially is equal to at least one year's interest payments based on the
applicable interest rate at that time and is adjusted at regular intervals
thereafter. Certain Brady Bonds are entitled to "value recovery payments" in
certain circumstances, which in effect constitute supplemental interest
payments, but generally are not collateralized. Brady Bonds are often viewed as
having three or four valuation components: (i) the collateralized repayment of
principal at final maturity; (ii) the collateralized interest payments; (iii)
the uncollateralized interest payments; and (iv) any uncollateralized repayment
of principal at maturity (these uncollateralized amounts constitute the
"residual risk"). In light of the residual risk of Brady Bonds and, among other
factors, the history of defaults with respect to commercial bank loans by public
and private entities of countries issuing Brady Bonds, investments in Brady
Bonds are considered speculative.
Illiquid and Restricted Securities. Each Fund may invest up to 15% of its net
assets in illiquid securities, for which there is a limited trading market and
for which a low trading volume of a particular security may result in abrupt and
erratic price movements. A Fund may be unable to dispose of its holdings in
illiquid securities at then current market prices and may have to dispose of
such securities over extended periods of time.
Each Fund may also invest up to 10% of its total assets in securities that
are subject to contractual or legal restrictions on subsequent transfer because
they were sold (i) in private placement transactions between their issuers and
their purchasers, or (ii) in transactions between qualified institutional buyers
pursuant to Rule 144A under the U.S. Securities Act of 1933, as amended. As a
result of the absence of a public trading market, such restricted securities may
be less liquid and more difficult to value than publicly traded securities.
Although restricted securities may be resold in privately negotiated
transactions, the prices realized from the sales could, due to illiquidity, be
less than those originally paid by the Funds or less than their fair value. In
addition, issuers whose securities are not publicly traded may not be subject to
the disclosure and other investor protection requirements that may be applicable
if their securities were publicly traded. If any privately placed or Rule 144A
securities held by the Funds are required to be registered under the securities
laws of one or more jurisdictions before being resold, the Funds may be required
to bear the expenses of registration. Investment in Rule 144A securities could
have the effect of increasing the level of the Funds' illiquidity to the extent
that qualified institutional buyers become, for a time, uninterested in
purchasing such securities. Rule 144A securities determined by the Board of
Trustees to be liquid are not subject to the 15% limitation on investments in
illiquid securities.
Other Investment Companies. Certain markets are closed in whole or in part to
equity investments by foreigners. A Fund may be able to invest in such markets
solely or primarily through governmentally-authorized investment companies.
Investment in another investment company may involve the payment of a premium
above the value of the issuer's portfolio securities, and is subject to market
availability. In the case of a purchase of shares of such a company in a public
offering, the purchase price may include an underwriting spread. The Funds do
not intend to invest in such circumstances unless, in the judgment of TWI, the
potential benefits of such investment justify the payment of any applicable
premium or sales charge. As a shareholder in an investment company, a Fund would
bear its ratable share of that investment company's expenses, including its
advisory and administration fees. At the same time a Fund would continue to pay
its own management fees and other expenses.
<PAGE>
Each Fund may invest in shares of closed-end investment companies. Generally,
this would not exceed 10% of the Fund's net assets.
Borrowing. Each Fund may borrow up to one-third of the value of its total
assets from banks to increase its holdings of portfolio securities. Borrowing is
a form of leverage, which generally will exaggerate the effect of any increase
or decrease in the value of portfolio securities on a Fund's net asset value. As
a nonfundamental operating policy, a Fund will not purchase additional
securities if its aggregate borrowings exceed 5% of the Fund's assets at the
proposed time of purchase. Borrowings will be subject to interest and other
costs.
Investment Restrictions. Each Fund has imposed upon itself certain investment
restrictions which, together with their investment objective, are fundamental
policies except as otherwise indicated. No changes in a Fund's investment
objective or these investment restrictions can be made without the approval of
the Fund's shareholders. For this purpose, the provisions of the 1940 Act
require the affirmative vote of the lesser of either (1) 67% or more of the
shares of the Fund present at a shareholders' meeting at which more than 50% of
the outstanding shares of the Fund are present or represented by proxy or (2)
more than 50% of the outstanding shares of the Fund.
In accordance with these restrictions, a Fund will not:
1. Invest in real estate or mortgages on real estate (although the Fund may
invest in marketable securities secured by real estate or interests therein
or issued by companies or investment trusts which invest in real estate or
interests therein); invest in other open-end investment companies (except
in connection with a merger, consolidation, acquisition or reorganization);
invest in interests (other than debentures or equity stock interests) in
oil, gas or other mineral exploration or development programs; or purchase
or sell commodity contracts (except futures contracts as described in the
Fund's prospectus).
2. Purchase any security (other than obligations of the U.S. Government, its
agencies or instrumentalities) if, as a result, as to 75% of the Fund's
total assets (i) more than 5% of the Fund's total assets would then be
invested in securities of any single issuer, or (ii) the Fund would then
own more than 10% of the voting securities of any single issuer.
3. Act as an underwriter; issue senior securities except as set forth in
investment restrictions 5 and 6 below; or purchase on margin or sell short,
except that the Fund may make margin payments in connection with futures,
options and currency transactions.
4. Loan money, except that the Fund may (i) purchase a portion of an issue of
publicly distributed bonds, debentures, notes and other evidences of
indebtedness, (ii) enter into repurchase agreements and (iii) lend its
portfolio securities.
5. Borrow money, except that the Fund may borrow money from banks in an amount
not exceeding one-third of the value of its total assets (including the
amount borrowed).
6. Mortgage, pledge or hypothecate its assets (except as may be necessary in
connection with permitted borrowings); provided, however, this does not
prohibit escrow, collateral or margin arrangements in connection with its
use of options, futures contracts and options on future contracts.
7. Invest 25% or more of its total assets in a single industry. For purposes
of this restriction, a foreign government is deemed to be an "industry"
with respect to securities issued by it.
8. Participate on a joint or a joint and several basis in any trading account
in securities. (See "Investment Objectives and Policies - Trading Policies"
as to transactions in the same securities for the Funds and/or other
clients with the same adviser.)
9. Invest in physical commodities.
If a Fund receives from an issuer of securities held by that Fund
subscription rights to purchase securities of that issuer, and if that Fund
exercises such subscription rights at a time when that Fund's portfolio holdings
of securities of that issuer would otherwise exceed the limits set forth in
Investment Restrictions 2 or 7 above, it will not constitute a violation if,
prior to receipt of securities upon exercise of such rights, and after
announcement of such rights, that Fund has sold at least as many securities of
the same class and value as it would receive on exercise of such rights.
<PAGE>
Additional Restrictions. The Funds have adopted the following additional
restrictions which are not fundamental and which may be changed without
shareholder approval, to the extent permitted by applicable law, regulation or
regulatory policy. Under these restrictions, each Fund may not:
1. Purchase more than 10% of a company's outstanding voting securities.
2. Invest more than 15% of the Fund's net assets in securities that are not
readily marketable (including repurchase agreements maturing in more than
seven days and over-the-counter options purchased by the Funds), including
no more than 10% of their total assets in restricted securities. Rule 144A
securities determined by the Board of Trustees to be liquid are not subject
to the limitation on investment in illiquid securities.
Whenever any investment policy or investment restriction states a maximum
percentage of a Fund's assets which may be invested in any security or other
property, it is intended that such maximum percentage limitation be determined
immediately after and as a result of that Funds' acquisition of such security or
property. Any change in the percentage of a Fund's assets committed to certain
securities or investment techniques resulting from market fluctuations or other
changes in the Fund's total assets may warrant corrective action by the Advisor,
such as selling or closing out the investment in a manner intended to minimize
market or tax consequences to the Fund. The value of the Funds' assets are
calculated as described in its Prospectus.
Risk Factors. The Funds have the right to purchase securities in any foreign
country, developed or underdeveloped. Investors should consider carefully the
substantial risks involved in securities of companies and governments of foreign
nations, which are in addition to the usual risks inherent in domestic
investments.
There may be less publicly available information about foreign companies
comparable to the reports and ratings published about companies in the United
States. Foreign companies are not generally subject to uniform accounting,
auditing and financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to United States
companies. Foreign markets have substantially less volume than the New York
Stock Exchange and securities of some foreign companies are less liquid and more
volatile than securities of comparable United States companies. Commission rates
in foreign countries, which are generally fixed rather than subject to
negotiation as in the United States, are likely to be higher. In many foreign
countries there is less government supervision and regulation of stock
exchanges, brokers and listed companies than in the United States.
The Funds endeavor to buy and sell foreign currencies on as favorable a basis
as practicable. Some price spread in currency exchange (to cover service
charges) will be incurred, particularly when the Funds change investments from
one country to another or when proceeds of the sale of shares in U.S. dollars
are used for the purchase of securities in foreign countries. Also, some
countries may adopt policies which would prevent the Funds from transferring
cash out of the country or withhold portions of interest and dividends at the
source. There is the possibility of expropriation, nationalization or
confiscatory taxation, withholding and other foreign taxes on income or other
amounts, foreign exchange controls (which may include suspension of the ability
to transfer currency from a given country), default in foreign government
securities, political or social instability, or diplomatic developments which
could affect investments in securities of issuers in foreign nations.
The Funds may be affected either unfavorably or favorably by fluctuations in
the relative rates of exchange between the currencies of different nations, by
exchange control regulations and by indigenous economic and political
developments. Through the flexible policies of the Funds, the Advisor endeavors
to avoid unfavorable consequences and to take advantage of favorable
developments in particular nations where from time to time it places the
investments of the Funds.
<PAGE>
The exercise of these flexible policies may include decisions to purchase
securities with substantial risk characteristics and other decisions such as
changing the emphasis on investments from one nation to another and from one
type of security to another. Some of these decisions may later prove profitable
and others may not. No assurance can be given that profits, if any, will exceed
losses.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of the Advisor, any losses resulting from the holding of the Funds'
portfolio securities in foreign countries and/or with securities depositories
will be at the risk of the shareholders. The Trustees will take such measures,
which may from time to time include expropriation insurance or depository
account insurance, to the extent that, in their good faith judgment, they deem
advisable under prevailing conditions. No assurance can be given that the
Trustees' appraisal of the risks will always be correct.
There are additional risks involved in futures transactions. These risks
relate to a Fund's ability to reduce or eliminate its futures positions, which
will depend upon the liquidity of the secondary markets for such futures. The
Funds intend to purchase or sell futures only on exchanges or boards of trade
where there appears to be an active secondary market, but there is no assurance
that a liquid secondary market will exist for any particular contract at any
particular time. Use of futures for hedging may involve risks because of
imperfect correlations between movements in the prices of the futures on the one
hand and movements in the prices of the securities being hedged or of the
underlying security, currency or index on the other. Successful use of futures
by the Funds for hedging purposes also depends upon the Advisor's ability to
predict correctly movements in the direction of the market, as to which no
assurance can be given.
There are several risks associated with transactions in options. For example,
there are significant differences between the securities and options markets
that could result in an imperfect correlation between these markets, causing a
given transaction not to achieve its objectives. A decision as to whether, when
and how to use options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events. There can be no assurance that a liquid market
will exist when a Fund seeks to close out an option position. If a Fund was
unable to close out an option that it had purchased on a security or a
securities index, it would have to exercise the option in order to realize any
profit or the option may expire worthless. If trading were suspended in an
option purchased by a Fund, it would not be able to close out the option. If
restrictions on exercise were imposed, that Fund might be unable to exercise an
option it has purchased. Except to the extent that a call option on a security
or securities index written by a Fund is covered by an option on the same
security or index purchased by that Fund, movements in the security or index may
result in a loss to that Fund. However, such losses may be mitigated by changes
in the value of that Fund's securities during the period the option was
outstanding.
Trading Policies. The Advisor serves as investment adviser to other clients.
Accordingly, the respective portfolios of the Funds and such clients may contain
many or some of the same securities. When the Funds and other clients of the
Advisor are engaged simultaneously in the purchase or sale of the same security,
the transactions will be placed for execution in a manner designed to be
equitable to all parties. The larger size of the transaction may affect the
price of the security and/or the quantity which may be bought or sold for the
Funds. If the transaction is large enough, brokerage commissions in certain
countries may be negotiated below those otherwise chargeable.
<PAGE>
MANAGEMENT OF THE TRUST
The Trust is governed by a Board of Trustees, who are responsible for
protecting the interests of the shareholders of each Fund. The Trustees are
experienced executives and professionals who normally meet each quarter to
oversee the activities of the Trust and the Funds. A majority of Trustees are
not otherwise affiliated with the Funds or TWI.
The name, address, principal occupation during the past five years and other
information with respect to each of the Trustees and Executive Officers of the
Trust are as follows:
<TABLE>
<S>
<C> <C>
Name, Address and Principal Occupation
Offices with Trust Age During Past Five Years
Thomas S. White, Jr.* 55 Chairman of Thomas White International,
440 S. LaSalle St. Ltd.; former Managing Director, Morgan
Suite 3900 Stanley Asset Management
Chicago, IL 60605
Trustee, President
Brandon S. Joel 30 Mutual Fund Administrative
440 S. LaSalle St. Manager of Thomas White International,
Suite 3900 Ltd.; former Senior Mutual Fund
Chicago, IL 60605 Accountant, John Nuveen & Co.
Vice President and
Treasurer
Douglas M. Jackman 32 Analyst and Vice President of Thomas
440 S. LaSalle St. White International.; formerly with
Suite 3900 Morgan Stanley, involved with equity
Chicago, IL 60605 analysis and foreign exchange
Vice President and
Secretary
Jill F. Almeida 49 Retired; former Vice President,
1448 N. Lake Shore Dr. Security Pacific Bank
Chicago, IL 60610
Trustee
Philip R. Haag 36 President, The Monroe Group, Inc.
535 Balsam (Principal Business - Manufacturing
Palatine, IL 60045 Management-Automotive)
Trustee
Nicholas G. Manos* 75 Attorney (of counsel), Gesas, Pilati &
53 W. Jackson Blvd. Gesas
Suite 528
Chicago, IL 60604
Trustee
Edward E. Mack III 55 President, Mack & Parker
55 East Jackson Street (Principal Business - Insurance)
Chicago, IL 60604
Trustee
John N. Venson 51 Medical Doctor (podiatry)
310 Meadowlake Lane
Lake Forest, IL 60045
Trustee
</TABLE>
<PAGE>
* Messrs. White and Manos are "interested persons" of the Trust as that term is
defined in the 1940 Act. Mr. Manos is the father-in-law of Mr. White.
For the fiscal year ended October 31, 1999, the Trust paid each Trustee who
is not an "interested person" of the Trust, as that term is defined in the 1940
Act, an annual fee of $5,000. For the fiscal year ended October 31, 1999, the
Trust paid the following compensation to all Trustees of the Trust:
<TABLE>
<S> <C> <C> <C> <C>
Pension or Retirement Estimated Annual
Aggregate Benefits Accrued Benefits upon Total
Compensation as Fund Expenses Retirement Compensation
Thomas S. White, Jr. $0 $0 $0 $0
Jill F. Almeida $5,000 $0 $0 $5,000
Philip R. Haag $5,000 $0 $0 $5,000
Nicholas G. Manos $0 $0 $0 $0
Edward E. Mack, III $5,000 $0 $0 $5,000
John N. Venson $5,000 $0 $0 $5,000
</TABLE>
PRINCIPAL SHAREHOLDERS
As of November 30, 1999, there were 3,124,963 Shares of the International Fund
outstanding, of which 71,987 Shares (2.30%) were owned beneficially, directly or
indirectly, by all the Trustees and officers of the Trust as a group. As of
November 30, 1999, John Wm. Galbraith, P.O. Box 33030, St. Petersburg, FL 33733,
owned beneficially, directly or indirectly, 1,799,948 Shares (57.60%) of the
International Fund and on that basis may be able to control the resolution of
any matter submitted for a Shareholder vote. As of November 30, 1999, there were
1,837,442 Shares of the American Growth Fund outstanding, of which 114,378
Shares (6.22%) were owned beneficially, directly or indirectly, by all the
Trustees and officers of the Trust as a group. As of November 30, 1999, John Wm.
Galbraith, P.O. Box 33030, St. Petersburg, FL 33733, owned beneficially,
directly or indirectly, 1,151,316 Shares (62.66%) of the American Growth Fund
and on that basis may be able to control the resolution of any matter submitted
for a Shareholder vote. As of November 30, 1999, there were 925,764 shares of
the American Opportunities Fund outstanding, of which 33,293 Shares (3.60%) were
owned beneficially, directly or indirectly, by all the Trustees and officers of
the Trust as a group. As of November 30, 1999, John Wm. Galbraith, P.O. Box
33030, St. Petersburg, FL 33733, owned beneficially, directly or indirectly,
600,000 Shares (64.81%) of the American Opportunities Fund and on that basis may
be able to control the resolution of any matter submitted for a Shareholder
vote.
INVESTMENT MANAGEMENT AND OTHER SERVICES
Investment Management Agreement. The Advisor of the Funds is Thomas White
International, Ltd., (the "Advisor" or "TWI"), an Illinois corporation with
offices in Chicago, Illinois. The Investment Management Agreement between the
Advisor and the Trust on behalf of a Fund, after an initial two-year term, will
continue from year to year, subject to approval annually by the Board of
Trustees or by vote of a majority of the outstanding shares of the Fund (as
defined in the 1940 Act) and also, in either event, with the approval of a
majority of those Trustees who are not parties to the Agreement or interested
persons of any such party in person at a meeting called for the purpose of
voting on such approval.
The Investment Management Agreement requires the Advisor to furnish the Funds
with investment research and advice. In so doing, without cost to the Funds, the
Advisor may receive certain research services described below. The Advisor is
not required to furnish any personnel, overhead items or facilities for the
Funds, including daily pricing or trading desk facilities, although such
expenses are paid by investment advisers of some other investment companies. It
is currently expected that these expenses will be borne by the Funds, although
certain of these expenses may be borne by the Advisor. In addition, the Advisor
may pay, out of its own assets and at no cost to the Funds, amounts to certain
broker-dealers in connection with the provision of administrative services
and/or with the distribution of the Funds' shares.
The Investment Management Agreement provides that the Advisor will select
brokers and dealers for execution of the Funds' portfolio transactions
consistent with the Trust's brokerage policies (see "Brokerage Allocation").
Although the services provided by broker-dealers in accordance with the
brokerage policies incidentally may help reduce the expenses of or otherwise
benefit the Advisor and other investment advisory clients of the Advisor, as
well as the Funds, the value of such services is indeterminable and the
Advisor's fee is not reduced by any offset arrangement by reason thereof.
<PAGE>
When the Advisor determines to buy or sell the same securities for the Funds
that the Advisor has selected for one or more of its other clients, the orders
for all such securities transactions are placed for execution by methods
determined by the Advisor, with approval by the Trust's Board of Trustees, to be
impartial and fair, in order to seek good results for all parties (see
"Investment Objective and Policies--Trading Policies"). Records of securities
transactions of persons who know when orders are placed by the Funds are
available for inspection at least four times annually by the Compliance Officer
of the Trust so that the Independent Trustees can be satisfied that the
procedures are generally fair and equitable for all parties.
The Investment Management Agreement further provides that the Advisor shall
have no liability to the Trust, the Funds or any shareholder of the Funds for
any error of judgment, mistake of law, or any loss arising out of any investment
or other act or omission in the performance by the Advisor of its duties under
the Agreement or for any loss or damage resulting from the imposition by any
government of exchange control restrictions which might affect the liquidity of
the Funds' assets, or from acts or omissions of custodians or securities
depositories, or from any wars or political acts of any foreign governments to
which such assets might be exposed, except for any liability, loss or damage
resulting from willful misfeasance, bad faith or gross negligence on the
Advisor's part or reckless disregard of its duties under the Investment
Management Agreement. The Investment Management Agreement will terminate
automatically in the event of its assignment, and may be terminated by the Trust
on behalf of the Funds at any time without payment of any penalty on 60 days'
written notice, with the approval of a majority of the Trustees of the Trust in
office at the time or by vote of a majority of the outstanding Shares of the
Funds (as defined by the 1940 Act).
The Trust uses the names "Lord Asset Management" and "Thomas White" in the
names of the Trust and the Funds, respectively, by license from the Advisor and
would be required to stop using those names if Thomas White International, Ltd.,
ceased to be the Advisor of the Fund. The Advisor has the right to use those
names in connection with other enterprises, including other investment
companies.
Management Fees. For its services, each Fund pays the Advisor a monthly fee
at the rate of 1.00% annually of the Fund's average daily net assets. For the
fiscal years ended October 31, 1999, 1998, and 1997, the International Fund paid
the Advisor aggregate investment advisory fees equal to $517,223, 534,735, and
$451,010, respectively. For the fiscal year ended October 31, 1999, the American
Growth Fund and the American Opportunities Fund paid the Adviser aggregate
investment advisory fees equal to $108,109 and $61,740, respectively. The
Advisor has agreed to reimburse the Funds for the current fiscal year to the
extent that the American Growth Fund's or the American Opportunities Fund's
total operating expenses exceed 1.35% of its average daily net assets or the
International Fund's total operating expenses exceed 1.50% of its average daily
net assets.
<PAGE>
Each Fund also pays other expenses such as the fees of its custodian,
transfer agent, auditors and lawyers, the cost of compliance with federal and
state laws, proxy solicitations, shareholder reports, taxes, insurance premiums,
and the fees of Trustees who are not otherwise affiliated with the Funds or the
Advisor.
The Advisor. The Advisor is wholly owned by Thomas S. White, Jr., who may be
deemed to control the Advisor. Mr. White and other officers of the Advisor also
serve as Trustees or officers of the Trust, as indicated above, and are
therefore affiliated persons of the Advisor and the Funds.
Transfer Agent. Firstar Mutual Fund Services, LLC ("Firstar") serves as the
transfer and dividend disbursing agent for each Fund pursuant to the transfer
agency agreement (the "Transfer Agent Agreement"), under which Firstar (I)
issues and redeems shares, (ii) prepares and transmits payments for dividends
and distributions declared by each Fund, (iii) prepares shareholder meeting
lists and, if applicable, mail, receive and tabulate proxies, and (iv) provides
a Blue Sky System which will enable each Fund to monitor the total number of
shares sold in each state. Firstar is located at 615 East Michigan Street,
Milwaukee, WI 53202. Compensation for the services of the Transfer Agent is
based on a schedule of charges agrees on from time to time.
Custodians. The Northern Trust Company, 50 South LaSalle Street, Chicago,
Illinois 60675, serves as Custodian of the International Fund's assets, and
Firstar Bank Milwaukee, 615 East Michigan Street, Milwaukee, WI 53202, serves as
Custodian of the American Growth Fund's and the American Opportunities Fund's
assets. The Custodians, and the branches and sub-custodians of each, generally
do not hold certificates for the securities in their custody, but instead have
book records with domestic and foreign securities depositories, which in turn
have book records with the transfer agents of the issuers of the securities.
Compensation for the services of the Custodians is based on a schedule of
charges agreed on from time to time.
Legal Counsel. Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington,
D.C. 20006, is legal counsel for the Trust.
Independent Accountants. The firm of PricewaterhouseCoopers LLP, 1177
Avenue of the Americas, New York, New York 10036, serves as independent
accountants for the Trust. Its audit services comprise examination of each
Fund's financial statements and review of each Fund's filings with the
Securities and Exchange Commission and the Internal Revenue Service.
Reports to Shareholders. The Trust's fiscal year ends on October 31.
Shareholders will be provided at least semiannually with reports showing the
portfolio of the each Fund and other information, including an annual report
with financial statements audited by the independent accountants.
BROKERAGE ALLOCATION
The Investment Management Agreement provides that the Advisor is responsible
for selecting members of securities exchanges, brokers and dealers (such
members, brokers and dealers being hereinafter referred to as "brokers") for the
execution of the Trust's portfolio transactions and, when applicable, the
negotiation of commissions in connection therewith. All decisions and placements
are made in accordance with the following principles:
1. Purchase and sale orders will usually be placed with brokers who are selected
by the Advisor as able to achieve "best execution" of such orders. "Best
execution" means prompt and reliable execution at the most favorable securities
price, taking into account the other provisions hereinafter set forth. The
determination of what may constitute best execution and price in the execution
of a securities transaction by a broker involves a number of considerations,
including without limitation, the overall direct net economic result to the
Funds (involving both price paid or received and any commissions and other costs
paid), the efficiency with which the transaction is effected, the ability to
effect the transaction at all where a large block is involved, availability of
the broker to stand ready to execute possibly difficult transactions in the
future, and the financial strength and stability of the broker. Such
considerations are judgmental and are weighed by the Advisor in determining the
overall reasonableness of brokerage commissions.
<PAGE>
2. In selecting brokers for portfolio transactions, the Advisor takes into
account its past experience as to brokers qualified to achieve "best execution,"
including brokers who specialize in any foreign securities held by the Funds.
3. The Advisor is authorized to allocate brokerage business to brokers who have
provided brokerage and research services, as such services are defined in
Section 28 (e) of the Securities Exchange Act of 1934 (the "1934 Act"), for the
company and/or other accounts, if any, for which the Advisor exercises
investment discretion (as defined in Section 3(a)(35) of the 1934 Act) and, as
to transactions as to which fixed minimum commission rates are not applicable,
to cause the Funds to pay a commission for effecting a securities transaction in
excess of the amount another broker would have charged for effecting that
transaction, if the Advisor determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker, viewed in terms of either that particular
transaction or the Advisor's overall responsibilities with respect to the
company and the other accounts, if any, as to which it exercises investment
discretion. In reaching such determination, the Advisor is not required to place
or attempt to place a specific dollar value on the research or execution
services of a broker or on the portion of any commission reflecting either of
said services. In demonstrating that such determinations were made in good
faith, the Advisor shall be prepared to show that all commissions were allocated
and paid for purposes contemplated by the Trust's brokerage policy; that
commissions were paid only for products or services which provide lawful and
appropriate assistance to the Advisor in the performance of its investment
decision-making responsibilities; and that the commissions paid were within a
reasonable range. The determination that commissions were within a reasonable
range shall be based on any available information as to the level of commissions
known to be charged by other brokers on comparable transactions, but there shall
be taken into account the Trust's policies that (I) obtaining a low commission
is deemed secondary to obtaining a favorable securities price, since it is
recognized that usually it is more beneficial to the Funds to obtain a favorable
price than to pay the lowest commission; and (ii) the quality, comprehensiveness
and frequency of research studies which are provided for the Trust and the
Advisor are useful to the Advisor in performing its advisory services under its
Investment Management Agreement with the Trust. Research services provided by
brokers to the Advisor are considered to be in addition to, and not in lieu of,
services required to be performed by the Advisor under its Investment Management
Agreement. Research furnished by brokers through whom the Trust effects
securities transactions may be used by the Advisor for any of its accounts, and
not all such research may be used by the Advisor for the Trust. When execution
of portfolio transactions is allocated to brokers trading on exchanges with
fixed brokerage commission rates, account may be taken of various services
provided by the broker, including quotations outside the United States for daily
pricing of foreign securities held in a Fund's portfolio.
4. Purchases and sales of portfolio securities within the United States other
than on a securities exchange shall be executed with primary market makers
acting as principal except where, in the judgment of the Advisor, better prices
and execution may be obtained on a commission basis or from other sources.
5. Sales of each Fund's Shares (which shall be deemed to include also shares of
other investment companies registered under the 1940 Act which have the same
investment adviser) made by a broker are one factor among others to be taken
into account in deciding to allocate portfolio transactions (including agency
transactions, principal transactions, purchases in under writings or tenders in
response to tender offers) for the account of each Fund to that broker; provided
that the broker shall furnish "best execution" as defined in paragraph 1 above,
and that such allocation shall be within the scope of each Fund's policies as
stated above; and provided further, that in every allocation made to a broker in
which the sale of Shares is taken into account there shall be no increase in the
amount of the commissions or other compensation paid to such broker beyond a
reasonable commission or other compensation determined, as set forth in
paragraph 3 above, on the basis of best execution alone or best execution plus
research services, without taking account of or placing any value upon such sale
of Shares.
<PAGE>
Insofar as known to management, no Trustee or officer of the Trust, nor the
Advisor or any person affiliated with any of them, has any material direct or
indirect interest in any broker employed by or on behalf of the Trust for the
Funds. All portfolio transactions will be allocated to broker-dealers only when
their prices and execution, in the good faith judgment of the Advisor, are equal
to the best available within the scope of the Trust's policies. There is no
fixed method used in determining which broker-dealers receive which order or how
many orders.
For the fiscal year ended October 31, 1997, the International Fund paid
brokerage commissions in the amount of $93,412, of which $79,609, representing
$29,926,932 of securities transactions, was paid to broker-dealers that provided
research services to the Advisor. For the fiscal year ended October 31, 1998,
the International Fund paid brokerage commissions in the amount of $100,998, of
which $75,679, representing $52,360,047 of securities transactions, was paid to
broker-dealers that provided research services to the Advisor. For the fiscal
year ended October 31, 1999, the International Fund paid brokerage commissions
in the amount of $133,627, of which $127,672, representing $78,300,453 of
securities transactions, was paid to broker-dealers that provided research
services to the Advisor, the American Growth Fund paid brokerage commissions in
the amount of $19,663, of which $18,331, representing $17,865,516 of securities
transactions, was paid to broker-dealers that provided research services to the
Advisor, and the American Opportunities Fund paid brokerage commissions in the
amount of $16,435, of which $16,303, representing $9,712,322 of securities
transactions, was paid to broker-dealers that provided research services to the
Advisor.
PURCHASE, REDEMPTION AND PRICING OF SHARES
The Prospectus describes the manner in which the Funds' shares may be
purchased and redeemed. See "How to Buy Shares" and "How to Sell Shares." Shares
of each Fund are offered directly to the public by the Funds. The Funds employ
no Distributor.
Each Fund is obligated to redeem shares solely in cash up to the lesser of
$250,000 or 1% if its net assets during any 90 day period for any one
shareholder. Subject to the above, each Fund reserves the right to pay
redemption proceeds in whole or in part by a distribution in kind of securities
from the portfolio of the Fund. If shares are redeemed in kind, the redeeming
shareholder might incur transaction costs in converting the assets into cash.
At the discretion of each Fund, investors may be permitted to purchase shares
by transferring securities to a Fund that meet the respective Fund's investment
objective and policies. Securities transferred to the Funds will be valued in
accordance with the same procedures used to determine the Funds' net asset value
at the time of the next determination of net asset value after such acceptance.
Shares issued by the Funds in exchange for securities will be issued at net
asset value determined as of the same time. All dividends, interest,
subscription, or other rights pertaining to such securities shall become the
property of the respective Fund and must be delivered to that Fund by the
investor upon receipt from the issuer. Investors who are permitted to transfer
such securities will be required to recognize a gain or loss on such transfer,
and pay tax thereon, if applicable, measured by the difference between the fair
market value of the securities and investor's basis therein. Securities will not
be accepted in exchange for shares of the Funds unless: (1) such securities are,
at the time of the exchange, eligible to be included in the respective Fund and
current market quotations are readily available for such securities; (2) the
investor represents and warrants that all securities offered to be exchanged are
not subject to any restrictions upon their sale by the respective Fund under the
Securities Act of 1933 or under the laws of the country in which the principal
market for such securities exists, or otherwise; and (3) the value of any such
security (except U.S. government securities) being exchanged together with other
securities of the same issuer owned by the respective Fund, will not exceed 5%
of the respective Fund's net assets immediately after the transaction.
<PAGE>
Net asset value per Share is determined as of the close of business on the
New York Stock Exchange, which currently is 4:00 p.m. (Eastern time) every
Monday through Friday (exclusive of national business holidays), under normal
market conditions. The Trust's offices will be closed, and net asset value will
not be calculated, on those days on which the New York Stock Exchange is closed,
which currently are: New Year's Day, Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
Trading in securities on European and Far Eastern securities exchanges and
over-the-counter markets is normally completed well before the close of business
in New York on each day on which the New York Stock Exchange is open. Trading of
European or Far Eastern securities generally, or in a particular country or
countries, may not take place on every New York business day. Furthermore,
trading takes place in various foreign markets on days which are not business
days in New York and on which a Fund's net asset value is not calculated. Each
Fund calculates net asset value per Share, and therefore effects sales,
redemptions and repurchases of its Shares, as of the close of the New York Stock
Exchange once on each day on which that Exchange is open. Such calculation does
not take place contemporaneously with the determination of the prices of many of
the portfolio securities used in such calculation and if events occur which
materially affect the value of those foreign securities, they will be valued at
fair market value as determined by the management using methods approved by the
Board of Trustees and subsequently ratified in good faith by the Board of
Trustees.
The Board of Trustees may establish procedures under which each Fund may
suspend the determination of net asset value for the whole or any part of any
period during which (1) the New York Stock Exchange is closed other than for
customary weekend and holiday closings, (2) trading on the New York Stock
Exchange is restricted, (3) an emergency exists as a result of which disposal of
securities owned by each Fund is not reasonably practicable or it is not
reasonably practicable for each Fund fairly to determine the value of its net
assets, or (4) for such other period as the Securities and Exchange Commission
may by order permit for the protection of the holders of the Funds' Shares.
TAX STATUS
Set forth below is a discussion of certain U.S. federal income tax issues
concerning the Funds and the purchases, ownership, and disposition of Shares.
This discussion does not purport to be complete or to deal with all aspects of
federal income taxation that might be relevant to Shareholders in light of their
particular circumstances. This discussion is based upon present provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder, and judicial and administrative ruling authorities, all
of which are subject to change, which change may be retrospective. Prospective
investors should consult their own tax advisors with regard to the federal tax
consequences of the purchase, ownership, or disposition of Shares, as well as
the tax consequences arising under the laws of any state, foreign country, or
other taxing jurisdiction.
<PAGE>
Each Fund intends normally to pay a dividend at least once annually
representing all or substantially all of its net investment income (which
includes, among other items, dividends and interest) and to distribute at least
annually any realized capital gains. By so doing and meeting certain
diversification of assets and other requirements of the Code, each Fund intends
to elect and qualify annually for treatment as a regulated investment company
under the Code. The status of each Fund as a regulated investment company does
not involve government supervision of management or of its investment practices
or policies. As a regulated investment company, a Fund generally will be
relieved of liability for U.S. federal income tax on that portion of its net
investment income and net realized capital gains, which it distributes to its
shareholders. Amounts not distributed on a timely basis in accordance with a
calendar year distribution requirement also are subject to a non deductible 4%
excise tax. To prevent application of the excise tax, each Fund intends to make
distributions in accordance with the calendar year distribution requirement.
Dividends of net investment income and net short-term capital gains generally
are taxable to shareholders as ordinary income. Distributions of net investment
income may be eligible for the corporate dividends-received deduction to the
extent attributable to each Fund's qualifying dividend income. However, the
alternative minimum tax applicable to corporations may reduce the benefit of the
dividends-received deduction. Distribution of net capital gains (the excess of
net long-term capital gains over net short-term capital losses) will generally
be taxable to shareholders at the rate of 20%. Short-term capital gains
distributions, gains representing the sale of securities held for not more than
one year in the portfolio, will continue to be taxed at the same rate as
ordinary income. Distributions will be subject to these capital gains rates
regardless of how long a shareholder has held Fund shares, and are not eligible
for the dividends-received deduction. All dividends and distributions are
taxable to shareholders, whether or not reinvested in shares of a Fund.
Shareholders will be notified annually as to the Federal tax status of dividends
and distributions they receive and any tax withheld thereon.
Distributions by a Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, the distribution nevertheless would be taxable to the shareholder as
ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implication of
buying shares just prior to a distribution by the Funds. The price of shares
purchased at that time includes the amount of the forthcoming distribution, but
the distribution will generally be taxable to them.
Certain of the debt securities acquired by the Funds may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Funds, original issue discount on a taxable debt
security earned in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code.
<PAGE>
Some of the debt securities may be purchased by the Funds at a discount,
which exceeds the original issue discount on such debt securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any taxable debt security having market
discount will be treated as ordinary income to the extent it does not exceed the
accrued market discount on such debt security. Generally, market discount
accrues on a daily basis for each day the debt security is held by the
respective Fund at a constant rate over the time remaining to the debt
security's maturity or, at the election of the respective Fund, at a constant
yield to maturity which takes into account the semi-annual compounding of
interest.
The Funds may invest in stocks of foreign companies that are classified under
the Code as passive foreign investment companies ("PFICs"). In general, a
foreign company is classified as a PFIC if at least one-half of its assets
constitute investment-type assets or 75% or more of its gross income is
investment-type income. Under the PFIC rules, an "excess distribution" received
with respect to PFIC stock is treated as having been realized ratably over the
period during which the Funds held the PFIC stock. A Fund itself will be subject
to tax on the portion, if any, of the excess distribution that is allocated to
that Fund's holding period in prior taxable years (and an interest factor will
be added to the tax, as if the tax had actually been payable in such prior
taxable years) even though that Fund distributes the corresponding income to
shareholders. Excess distributions include any gain from the sale of PFIC stock
as well as certain distributions from a PFIC. All excess distributions are
taxable as ordinary income.
The Funds may be able to elect alternative tax treatment with respect to PFIC
stock. Under an election that currently may be available, each Fund generally
would be required to include in its gross income its share of the earnings of a
PFIC on a current basis, regardless of whether any distributions are received
from the PFIC. If this election is made, the special rules, discussed above,
relating to the taxation of excess distributions, would not apply.
Alternatively, each Fund may be able to elect to mark to market its PFIC stock,
resulting in the stock being treated as sold at fair market value on the last
business day of each taxable year. Any resulting gain would be reported as
ordinary income, and mark-to-market losses and any loss from an actual
disposition of a Fund's shares would be deductible as ordinary losses to the
extent of any net mark-to-market gains included in income in prior years.
Because the application of the PFIC rules may affect, among other things, the
character of gains, the amount of gain or loss and the timing of the recognition
of income with respect to PFIC stock, as well as subject each Fund itself to tax
on certain income from PFIC stock, the amount that must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a fund that did not invest in PFIC stock.
Income received by the Funds from sources within foreign countries may be
subject to withholding and other income or similar taxes imposed by such
countries. If more than 50% of the value of a Fund's total assets at the close
of its taxable year consists of securities of foreign corporations, that Fund
will be eligible and intends to elect to "pass through" to that Fund's
shareholders the amount of foreign taxes paid by the Fund. Pursuant to this
election, a shareholder will be required to include in gross income (in addition
to taxable dividends actually received) his pro rata share of the foreign taxes
paid by a Fund, and will be entitled either to deduct (as an itemized deduction)
his pro rata share of foreign income and similar taxes in computing his taxable
income or to use it as a foreign tax credit against his U.S. Federal income tax
liability, subject to limitations. No deduction for foreign taxes may be claimed
by a shareholder who does not itemize deductions, but such a shareholder may be
eligible to claim the foreign tax credit (see below). Each shareholder will be
notified within 60 days after the close of a Fund's taxable year whether the
foreign taxes paid by the Fund will "pass through" for that year.
<PAGE>
Generally, a credit for foreign taxes is subject to the limitation that it
may not exceed the shareholder's U.S. tax attributable to his foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of a Fund's income flows through to its shareholders. With respect to
each Fund, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuation gains including fluctuation gains
from foreign currency denominated debt securities, receivables and payables,
will be treated as ordinary income derived from U.S. sources. The limitation on
foreign tax credit is applied separately to foreign source passive income (as
defined for purposes of the foreign tax credit), including the foreign source
passive income passed through by a Fund. Shareholders may be unable to claim a
credit for the full amount of their proportionate share of the foreign taxes
paid by a Fund. Foreign taxes may not be deducted in computing alternative
minimum taxable income and the foreign tax credit can be used to offset only 90%
of the alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If a Fund is not eligible
to make the election to "pass through" to its shareholders its foreign taxes,
the foreign income taxes it pays generally will reduce investment company
taxable income and the distributions by a Fund will be treated as United States
source income.
Certain options and futures and foreign currency forward contracts in which
the Funds may invest may be "section 1256 contracts." Gains or losses on section
1256 contracts generally are considered 60% long-term and 40% short-term capital
gains or losses ("60/40") however, foreign currency gains or losses (as
discussed below) arising from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts held by a Fund at the end
of each taxable year (and on certain other dates as prescribed under the Code)
are "marked-to-market" with the result that unrealized gains or losses are
treated as though they were realized.
Generally, the hedging transactions undertaken by a Fund may result in
"straddles" for U.S. Federal income tax purposes. The straddle rules may affect
the character of gains (or losses) realized by each Fund. In addition, losses
realized by each Fund on positions that are part of the straddle may be deferred
under the straddle rules, rather than being taken into account in calculating
the taxable income for the taxable year in which the losses are realized.
Because only a few regulations implementing the straddle rules have been
promulgated, the tax consequences to a Fund of hedging transactions are not
entirely clear. The hedging transactions may increase the amount of short-term
capital gain realized by each Fund, which is taxed as ordinary income when
distributed to shareholders.
Each Fund may make one or more of the elections available under the Code
which are applicable to straddles. If a Fund makes any of the elections, the
amount, character, and timing of the recognition of gains or losses from the
affected straddle positions will be determined under rules that vary according
to the election(s) made. The rules applicable under certain of the elections may
operate to accelerate the recognition of gains or losses from the affected
straddle positions.
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders and which will be taxed to shareholders as ordinary income or
long-term capital gain may be increased or decreased as compared to a fund that
did not engage in such hedging transactions.
Requirements relating to each Fund's tax status as a regulated investment
company may limit the extent to which a Fund will be able to engage in
transactions in options and futures and foreign currency forward contracts.
Recently enacted rules may affect the timing and character of gain if a Fund
engages in transactions that reduce or eliminate its risk of loss with respect
to appreciated financial positions. If a Fund enters into certain transactions
in property while holding substantially identical property, that Fund would be
treated as if it had sold and immediately repurchased the property and would be
taxed on any gain (but not loss) from the constructive sale. The character of
gain from a constructive sale would depend upon that Fund's holding period in
the property. Loss from a constructive sale would be recognized when the
property was subsequently disposed of, and its character would depend on that
Fund's holding period and the application of various loss deferral provisions of
the Code.
<PAGE>
Under the Code, gains or losses attributable to fluctuations in foreign
currency exchange rates which occur between the time a Fund accrues income or
other receivables or accrues expenses or other liabilities denominated in a
foreign currency and the time the Fund actually collects such receivables or
pays such liabilities generally are treated as ordinary income or ordinary loss.
Similarly, on disposition of some investments, including debt securities
denominated in a foreign currency and certain futures contracts and options,
gains or losses attributable to fluctuations in the value of foreign currency
between the date of acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss. These gains and losses,
referred to under the Code as "section 988" gains and losses, may increase or
decrease the amount of a Fund's net investment income to be distributed to its
shareholders as ordinary income. For example, fluctuations in exchange rates may
increase the amount of income that each Fund must distribute in order to qualify
for treatment as a regulated investment company and to prevent application of an
excise tax on undistributed income. Alternatively, fluctuations in exchange
rates may decrease or eliminate income available for distribution. If section
988 losses exceed other net investment income during a taxable year, a Fund
would not be able to make ordinary dividend distributions, or distributions made
before the losses were realized would be recharacterized as return of capital to
shareholders for Federal income tax purposes, rather than as an ordinary
dividend, reducing each shareholder's basis in his or her Fund shares.
Upon the sale or exchange of his or her shares, a shareholder will realize a
taxable gain or loss depending upon his basis in the shares. Such gain or loss
will be treated as capital gain or loss if the shares are capital assets in the
shareholder's hands; gain will generally be subject to a maximum tax rate of 20%
if the shareholder's period for the shares is more than 12 months. Gain from the
disposition of shares held not more than one year will be taxed as short-term
capital gains. Any loss realized on a sale or exchange will be disallowed to the
extent that the shares disposed of are replaced (including replacement through
the reinvesting of dividends and capital gain distributions in a Fund) within a
period of 61 days beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss. Any loss realized by a shareholder
on the sale of a Fund's shares held by the shareholder for six months or less
will be treated for Federal income tax purposes as a long-term capital loss to
the extent of any distributions of long-term capital gains received by the
shareholder with respect to such shares.
Each Fund generally will be required to withhold Federal income tax at a rate
of 31% ("backup withholding") from dividends paid, capital gain distributions,
and redemption proceeds to shareholders if (1) the shareholder fails to furnish
the respective Fund with the shareholder's correct taxpayer identification
number or social security number and to make such certifications as the Fund may
require, (2) the Internal Revenue Service notifies the shareholder or the
respective Fund that the shareholder has failed to report properly certain
interest and dividend income to the Internal Revenue Service and to respond to
notices to that effect, or (3) when required to do so, the shareholder fails to
certify that he is not subject to backup withholding. Any amounts withheld may
be credited against the shareholder's Federal income tax liability.
Ordinary dividends and taxable capital gain distributions declared in
October, November, or December with a record date in such month and paid during
the following January will be treated as having been paid by a Fund and received
by shareholders on December 31 of the calendar year in which declared, rather
than the calendar year in which the dividends are actually received.
Distributions and redemptions also may be subject to state, local and foreign
taxes. U.S. tax rules applicable to foreign investors may differ significantly
from those outlined above. This discussion does not purport to deal with all of
the tax consequences relating to an investment in the Funds. Shareholders are
advised to consult their own tax advisers for details with respect to the
particular tax consequences to them of an investment in the Funds.
<PAGE>
DESCRIPTION OF SHARES
The shares of each Fund have the same preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications and terms and conditions of redemption, except as follows: all
consideration received from the sale of shares of a Fund, together with all
income, earnings, profits and proceeds thereof, belongs to that Fund and is
charged with liabilities in respect of the general liabilities of that Fund. The
net asset value of a share of a Fund is based on the assets belonging to the
Fund less the liabilities charged to the Fund, and dividends are paid on shares
of a Fund only out of lawfully available assets belonging to that Fund. Shares
of a Fund are entitled to participate pro rata in any dividends and other
distributions declared by the Board of Trustees for the Fund and all shares of a
Fund have equal rights in the event of liquidation of that Fund. In the event of
liquidation or dissolution of the Trust, the shareholder of a Fund will be
entitled to the assets belonging to that Fund out of assets of the Trust
available for distribution.
The Funds may hold special meetings of shareholders to elect or remove
Trustees, change fundamental policies, approve a management contract, or for
other purposes. The Funds will mail proxy materials in advance of a shareholder
meeting, including a proxy and information about the proposals to be voted on.
You are entitled to one vote for each share of the Fund that you own.
Shareholders not attending these meetings are encouraged to vote by proxy.
Shares have non-cumulative voting rights so that the holders of a plurality of
the shares voting for the election of Trustees at a meeting at which 50% of the
outstanding shares are present can elect all the Trustees and in such event, the
holders of the remaining shares voting for the election of Trustees will not be
able to elect any person or persons to the Board of Trustees.
PERFORMANCE INFORMATION
Each Fund may, from time to time, include its total return in advertisements
or reports to Shareholders or prospective investors. Quotations of average
annual total return for the Funds will be expressed in terms of the average
annual compounded rate of return of a hypothetical investment in the respective
Fund over periods of one, five, or ten years (up to the life of the respective
Fund) calculated pursuant to the following formula: P(1+T)n = ERV (where P = a
hypothetical initial payment of $10,000, T= the average annual total return, n =
the number of years, and ERV = the ending redeemable value of a hypothetical
$10,000 payment made at the beginning of the period). Total return for a period
is the percentage change in value during the period of an investment in Fund
shares. All total return figures reflect the deduction of a proportional share
of the respective Fund's expenses on an annual basis, and assume that all
dividends and distributions are reinvested when paid. The average annual total
return of the International Fund for the one-year and five-year periods ended
October 31, 1999 was 18.78% and 13.43%, respectively. The average annual total
return of the International Fund from June 28, 1994 (commencement of operations)
through October 31, 1999, was 13.55%. Cumulative total return of the
International Fund for the same period was 97.12%. Total return of the American
Growth Fund for the year ended October 31, 1999 was 20.70%. Total return for the
American Opportunities Fund from March 4, 1999 (commencement of operations)
through October 31, 1999 was 7.30%.
<PAGE>
Performance information for the each Fund may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare
each Fund's results with those of a group of unmanaged securities widely
regarded by investors as representative of the securities market in general;
(ii) other groups of mutual funds tracked by Lipper Analytical Services, a
widely used independent research firm which ranks mutual funds by overall
performance, investment objectives and assets, or tracked by other services,
companies, publications, or persons who rank mutual funds on overall performance
or other criteria; and (iii) the Consumer Price Index (measure for inflation) to
assess the real rate of return from an investment in a Fund. Unmanaged indices
may assume the reinvestment of dividends but generally do not reflect deductions
for administrative and management costs and expenses.
Performance information for each Fund reflects only the performance of a
hypothetical investment in the respective Fund during the particular time period
on which the calculations are based. Performance information should be
considered in light of the respective Fund's investment objective and policies,
characteristics and quality of the portfolio and the market conditions during
the given time period, and should not be considered as a representation of what
may be achieved in the future. From time to time, the Funds and the Advisor may
also refer to the following information:
(1) The Advisor's and its affiliates' market share of international equities
managed in mutual funds prepared or published by Strategic Insight or a similar
statistical organization.
(2) The performance of U.S. equity and debt markets relative to foreign markets
prepared or published by Morgan Stanley Capital International or a similar
financial organization.
(3) The capitalization of U.S. and foreign stock markets as prepared or
published by the International Finance Corp., Morgan Stanley Capital
International or a similar financial organization.
(4) The geographic distribution of each Fund's portfolio.
(5) The gross national product and populations, including age characteristics,
of various countries as published by various statistical organizations.
(6) To assist investors in understanding the different returns and risk
characteristics of various investments, a Fund may show historical returns of
various investments and published indices (e.g., Ibbotson Associates, Inc.
Charts and Morgan Stanley EAFE -Index).
(7) The major industries located in various jurisdictions as published by the
Morgan Stanley Index.
In addition, the Funds and the Advisor may also refer to the number of
shareholders in each Fund or the dollar amount of fund and private account
assets under management in advertising materials.
FINANCIAL STATEMENTS
Financial statements for the Funds as of October 31, 1999 for the fiscal
periods then ended, including notes thereto, and the report of
PricewaterhouseCoopers LLP thereon, are incorporated by reference from the
Trust's 1999 Annual Report. A copy of the report delivered with this Statement
of Additional Information should be retained for future reference.
<PAGE>
PART C
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<S> <C>
(a) Trust Instrument(2)
(b) By-Laws(2)
(c) Not Applicable
(d) (1) Form of investment management agreement for the
Thomas White International Fund (1)
(2) Form of investment management agreement for the
Thomas White American Growth Fund (3)
(3) Form of investment management agreement for the
Thomas White American Opportunities Fund (5)
(e) Not Applicable
(f) Not Applicable
(g) (1) Form of custody agreement for Thomas White International Fund
(2) Form of custody agreement for Thomas White American Growth Fund
and Thomas White American Opportunities Fund (4)
(h) (1) Form of transfer agent agreement (1)
(2) Form of blue sky compliance servicing
agreement (1)
(3) Form of servicing agreement with respect to Firstar Money Market Funds (4)
<PAGE>
(i) Opinion and consent of counsel(2)
(j) Consents of independent public accountants
(k) Not Applicable
(l) Initial capital agreement (2)
(m) Not Applicable
(n) Not Applicable
(o) Codes of Ethics*
(p) (1) Powers of attorney for Messrs. White,
Haag, Manos, and Mack, and for Ms. Almeida (2)
(2) Powers of attorney for Messrs. Joel and Venson (1)
(q) Secretary's certificate pursuant to Rule
483(b)(2)
-------------------
</TABLE>
(1) Filed with Post-Effective Amendment No. 2 to Registrant's
Registration Statement on February 28, 1996.
(2) Filed with Post-Effective Amendment No. 4 to Registrant's
Registration Statement on December 31, 1997.
(3) Filed with Post-Effective Amendment No. 6 to Registrant's
Registration Statement on August 13, 1998.
(4) Filed with Post-Effective Amendment No. 7 to Registrant's
Registration Statement on October 30, 1998.
(5) Filed with Post-Effective Amendment No. 8 to Registrant's
Registration Statement on December 15, 1998.
* To be filed by amendment.
Item 24. Persons Controlled by or Under Common Control with
Registrant
Not Applicable.
<PAGE>
Item 25. Indemnification
Reference is made to Article X, Section 10.02 of the
Registrant's Trust Instrument, which is filed herewith.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to trustees,
officers and controlling persons of the Registrant by the
Registrant pursuant to the Trust Instrument or otherwise,
the Registrant is aware that in the opinion of the
Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by
trustees, officers or controlling persons of the Registrant
in connection with the successful defense of any act, suit
or proceeding) is asserted by such trustees, officers or
controlling persons in connection with the shares being
registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issues.
Item 26. Business and Other Connections of the Investment Adviser
The business and other connections of Thomas White
International, Ltd. are described in Parts A and B.
For information relating to the investment adviser's
officers and directors, reference is made to Form ADV filed
under the Investment Advisers Act of 1940 by Thomas White
International, Ltd.
Item 27. Principal Underwriters
Not Applicable.
<PAGE>
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be
maintained by Registrant pursuant to Section 31(a) of the
Investment Company Act of 1940 and rules promulgated
thereunder are in the possession of Thomas White
International, Ltd., 440 South LaSalle Street, Chicago,
Illinois 60605-1028.
Item 29. Management Services
Not Applicable.
Item 30. Undertakings
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment
Company Act, the Registrant has duly caused this Post-Effective Amendment No. 10
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 30th day of
December, 1999.
Lord Asset Management Trust
By: *
Thomas S. White, Jr.
President
Pursuant to the requirements of the Securities Act, this Post-Effective
Amendment No. 10 to the Registration Statement has been signed below by the
following persons on behalf of Lord Asset Management Trust in the capacities and
on the date indicated:
<TABLE>
<S> <C> <C>
Signature Title Date
* Trustee and President December 30, 1999
Thomas S. White, Jr. (Principal Executive
Officer)
* Treasurer (Principal December 30, 1999
Brandon S. Joel Financial and
Accounting Officer)
* Trustee December 30, 1999
Jill F. Almeida
* Trustee December 30, 1999
Philip R. Haag
* Trustee December 30, 1999
Nicholas G. Manos
* Trustee December 30, 1999
Edward E. Mack, III
* Trustee December 30, 1999
John N. Venson
</TABLE>
*By: /s/ Allan S. Mostoff
Allan S. Mostoff
as attorney-in-fact
* Powers of Attorney are included as exhibits in Post-Effective
Amendment No. 2 filed February 28, 1996 and Post-Effective
Amendment No. 4 filed December 31, 1997.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
FILED
WITH
REGISTRATION STATEMENT
ON
FORM N-1A
LORD ASSET MANAGEMENT TRUST
Exhibit Description
g(1) (Filed as Exhibit 8(g)(1)) Form of Custody Agreement
j (Filed as Exhibit 11 (j)) Consents of independent public accountants
CUSTODY AGREEMENT
AGREEMENT dated as of ____________________, _____, between
_____________________________, a [corporation][business trust] organized under
the laws of the State of _________________, having its principal office and
place of business at_____________________________ (the "Fund"), and THE NORTHERN
TRUST COMPANY (the "Custodian"), an Illinois company with its principal place of
business at 50 South LaSalle Street, Chicago, Illinois 60675.
W I T N E S S E T H:
That for and in consideration of the mutual promises hereinafter set
forth, the Fund and the Custodian agree as follows:
1. Definitions.
Whenever used in this Agreement or in any Schedules to this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the following meanings:
(a) "Articles of Incorporation " shall mean the [Articles of
Incorporation] [Declaration of Trust] of the Fund, including all
amendments thereto.
(b) "Authorized Person" shall be deemed to include the Chairman of the
Board of Directors, the President, and any Vice President, the
Secretary, the Treasurer or any other person, whether or not any such
person is an officer or employee of the Fund, duly authorized by the
Board of Directors to give Instructions on behalf of the Fund and
listed in the certification annexed hereto as Schedule A or such other
certification as may be received by the Custodian from time to time
pursuant to Section 18(a).
(c) "Board of Directors" shall mean the Board of Directors or Trustees
of the Fund.
(d) "Book-Entry System" shall mean the Federal Reserve/Treasury
book-entry system for United States and federal agency securities, its
successor or successors and its nominee or nominees.
(e) "Delegate of the Fund" shall mean and include any entity to whom
the Board of Directors of the Fund has delegated responsibility under
Rule 17f-5 of the 1940 Act.
(f) "Depository" shall mean The Depository Trust Company, a clearing
agency registered with the Securities and Exchange Commission under
Section 17(a) of the Securities Exchange Act of 1934, as amended, its
successor or successors and its nominee or nominees, the use of which
is hereby specifically authorized. The term "Depository" shall further
mean and include any other person named in an Instruction and approved
by the Fund to act as a depository in the manner required by Rule 17f-4
of the 1940 Act, its successor or successors and its nominee or
nominees.
(g) "Instruction" shall mean written (including telecopied, telexed, or
electronically transmitted in a form that can be converted to print) or
oral instructions actually received by the Custodian which the
Custodian reasonably believes were given by an Authorized Person. An
Instruction shall also include any instrument in writing actually
received by the Custodian which the Custodian reasonably believes to be
genuine and to be signed by any two officers of the Fund, whether or
not such officers are Authorized Persons. Except as otherwise provided
in this Agreement, "Instructions" may include instructions given on a
standing basis.
(h) "1940 Act" shall mean the Investment Company Act of 1940, and the
Rules and Regulations thereunder, all as amended from time to time.
(i) "Portfolio" refers to each of the separate and distinct investment
portfolios of the Fund which the Fund and the Custodian shall have
agreed in writing shall be subject to this Agreement, as identified in
Schedule B hereto.
(j) "Prospectus" shall include each current prospectus and statement of
additional information of the Fund with respect to a Portfolio.
(k) "Rule 17f-5" shall mean Rule 17f-5 under the 1940 Act.
(l) "Shares" refers to the shares of the Fund.
(m) "Security" or "Securities" shall be deemed to include bonds,
debentures, notes, stocks, shares, evidences of indebtedness, and other
securities, commodity interests and investments from time to time owned
by the Fund and held in a Portfolio.
(n) "Sub-Custodian" shall mean and include (i) any branch of the
Custodian, (ii) any "eligible foreign custodian," as that term is
defined in Rule 17f-5 under the 1940 Act, approved by the Fund or a
Delegate of the Fund in the manner required by Rule 17f-5, and (iii)
any securities depository or clearing agency, incorporated or organized
under the laws of a country other than the United States, which
securities depository or clearing agency has been approved by the Fund
or a Delegate of the Fund in the manner required by Rule 17f-5;
provided, that the Custodian or a Sub-Custodian has entered into an
agreement with such securities depository or clearing agency.
(o) "Transfer Agent" shall mean the person which performs as the
transfer agent, dividend disbursing agent and shareholder servicing
agent for the Fund.
<PAGE>
2. Appointment of Custodian.
(a) The Fund hereby constitutes and appoints the Custodian as custodian
of all the Securities and moneys owned by or in the possession of a
Portfolio during the period of this Agreement.
(b) The Custodian hereby accepts appointment as such custodian and
agrees to perform the duties thereof as hereinafter set forth.
3. Appointment and Removal of Sub-Custodians.
(a) The Custodian may appoint one or more Sub-Custodians to act as
Depository or Depositories or as sub-custodian or sub-custodians of
Securities and moneys at any time held in any Portfolio, upon the terms
and conditions specified in this Agreement. The Custodian shall oversee
the maintenance by any Sub-Custodian of any Securities or moneys of any
Portfolio.
(b) The Agreement between the Custodian and each Sub-Custodian
described in clause (ii) or (iii) of Section 1(n) and acting hereunder
shall contain any provisions necessary to comply with Rule 17f-5 under
the 1940 Act.
(c) Prior to the Custodian's use of any Sub-Custodian described in
clause (ii) or (iii) of Paragraph 1(n), the Fund or a Delegate of the
Fund must approve such Sub-Custodian in the manner required by Rule
17f-5 and provide the Custodian with satisfactory evidence of such
approval.
(d) The Custodian shall promptly take such steps as may be required to
remove any Sub-Custodian that has ceased to be an "eligible foreign
custodian" or has otherwise ceased to meet the requirements under Rule
17f-5. If the Custodian intends to remove any Sub-Custodian previously
approved by the Fund or a Delegate of the Fund pursuant to paragraph
3(c), and the Custodian proposes to replace such Sub-Custodian with a
Sub-Custodian that has not yet been approved by the Fund or a Delegate
of the Fund, it will so notify the Fund or a Delegate of the Fund and
provide it with information reasonably necessary to determine such
proposed Sub-Custodian's eligibility under Rule 17f-5, including a copy
of the proposed agreement with such Sub-Custodian. The Fund shall at
the meeting of the Board of Directors next following receipt of such
notice and information, or a Delegate of the Fund shall promptly after
receipt of such notice and information, determine whether to approve
the proposed Sub-Custodian and will promptly thereafter give written
notice of the approval or disapproval of the proposed action.
(e) The Custodian hereby warrants to the Fund that in its opinion,
after due inquiry, the established procedures to be followed by each
Sub-Custodian (that is not a foreign securities depository or clearing
agency) in connection with the safekeeping of property of a Portfolio
pursuant to this Agreement afford reasonable care for the safekeeping
of such property based on the standards applicable in the relevant
market.
{If mutual fund wishes to delegate its responsibility for monitoring
foreign custody arrangements insert the following Section 3A:
"3A. Delegation of Foreign Custody Management.
(a) The Fund hereby delegates to Custodian the
responsibilities set forth in subparagraph (b) below of this Section 3A, in
accordance with Rule 17f-5 with respect to foreign custody arrangements for the
Fund's existing and future investment portfolios, except that the Custodian
shall not have such responsibility with respect to central depositories and
clearing agencies or with respect to custody arrangements in the countries
listed on Schedule I, attached hereto, as that Schedule may be amended from time
to time by notice to the Fund.
(b) With respect to each arrangement with any foreign
custodian regarding the assets of any investment portfolio of the Fund for which
Custodian has responsibility under this Section 3A (a"Foreign Custodian"),
Custodian shall:
(i) determine that the Fund's assets will be subject to
reasonable care, based on the standards applicable to custodians in the
relevant market, if maintained with the Foreign Custodian, after
considering all factors relevant to the safekeeping of such assets;
(ii) determine that the written contract with such
Foreign Custodian governing the foreign custody arrangements complies
with the requirements of Rule 17f-5 and will provide reasonable care
for the Fund's assets;
(iii) establish a system to monitor the appropriateness
of maintaining the Fund's assets with such Foreign Custodian and the
contract governing the Fund's foreign custody arrangements;
(iv) provide to the Fund's Board of Directors, at least
annually, written reports notifying the Board of the placement of the
Fund's assets with a particular Foreign Custodian and periodic reports
of any material changes to the Fund's foreign custodian arrangements;
and
(v) withdraw the Fund's assets from any Foreign Custodian
as soon as reasonably practicable, if the foreign custody arrangement
no longer meets the requirement of Rule 17f-5.
<PAGE>
4. Use of Sub-Custodians.
With respect to property of a Portfolio which is maintained by the
Custodian in the custody of a Sub-Custodian pursuant to Section 3:
(a) The Custodian will identify on its books as belonging to the
particular Portfolio any property held by such Sub-Custodian.
(b) In the event that a Sub-Custodian permits any of the Securities
placed in its care to be held in an eligible foreign securities
depository, such Sub-Custodian will be required by its agreement with
the Custodian to identify on its books such Securities as being held
for the account of the Custodian as a custodian for its customers.
(c) Any Securities held by a Sub-Custodian will be subject only to the
instructions of the Custodian or its agents; and any Securities held in
an eligible foreign securities depository for the account of a
Sub-Custodian will be subject only to the instructions of such
Sub-Custodian.
(d) The Custodian will only deposit property of a Portfolio in an
account with a Sub-Custodian which includes exclusively the assets held
by the Custodian for its customers, and will cause such account to be
designated by such Sub-Custodian as a special custody account for the
exclusive benefit of customers of the Custodian.
5. Compensation.
(a) The Fund will compensate the Custodian for its services rendered
under this Agreement in accordance with the fees set forth in the Fee
Schedule annexed hereto as Schedule C and incorporated herein. Such Fee
Schedule does not include out-of-pocket disbursements of the Custodian
for which the Custodian shall be entitled to bill separately; provided
that out-of-pocket disbursements may include only the items specified
in Schedule C.
(b) If the Fund requests that the Custodian act as Custodian for any
Portfolio hereafter established, at the time the Custodian commences
serving as such for said Portfolio, the compensation for such services
shall be reflected in a fee schedule for that Portfolio, dated and
signed by an officer of each party hereto, which shall be attached to
or otherwise reflected in Schedule C of this Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule C, or replacing Schedule C with, a
revised Fee Schedule, dated and signed by an officer of each party
hereto.
(d) The Custodian will bill the Fund for its services to each Portfolio
hereunder as soon as practicable after the end of each calendar
quarter, and said billings will be detailed in accordance with the Fee
Schedule for the Fund. The Fund will promptly pay to the Custodian the
amount of such billing. The Custodian shall have a claim of payment
against the property in each Portfolio for any compensation or expense
amount owing to the Custodian in connection with such Portfolio from
time to time under this Agreement.
(e) The Custodian (not the Fund) will be responsible for the payment of
the compensation of each Sub-Custodian.
6. Custody of Cash and Securities
(a) Receipt and Holding of Assets. The Fund will deliver or cause to be
delivered to the Custodian and any Sub-Custodians all Securities and
moneys of any Portfolio at any time during the period of this Agreement
and shall specify the Portfolio to which the Securities and moneys are
to be specifically allocated. The Custodian will not be responsible for
such Securities and moneys until actually received by it or by a
Sub-Custodian. The Fund may, from time to time in its sole discretion,
provide the Custodian with Instructions as to the manner in which and
in what amounts Securities, and moneys of a Portfolio are to be held on
behalf of such Portfolio in the Book-Entry System or a Depository.
Securities and moneys of a Portfolio held in the Book-Entry System or a
Depository will be held in accounts which include only assets of
Custodian that are held for its customers.
(b) Accounts and Disbursements. The Custodian shall establish and
maintain a separate account for each Portfolio and shall credit to the
separate account all moneys received by it or a Sub-Custodian for the
account of such Portfolio and shall disburse, or cause a Sub-Custodian
to disburse, the same only:
1. In payment for Securities purchased for the Portfolio, as
provided in Section 7 hereof;
2. In payment of dividends or distributions with respect to
the Shares of such Portfolio, as provided in Section 11
hereof;
3. In payment of original issue or other taxes with respect to
the Shares of such Portfolio, as provided in Section 12(c)
hereof;
4. In payment for Shares which have been redeemed by such
Portfolio, as provided in Section 12 hereof;
5. In payment of fees and in reimbursement of the expenses and
liabilities of the Custodian attributable to the Fund, as
provided in Sections 5 and 16(h) hereof;
6. Pursuant to Instructions setting forth the name of the
Portfolio and the name and address of the person to whom the
payment is to be made, the amount to be paid and the purpose
for which payment is to be made.
(c) Fail Float. In the event that any payment made for a Portfolio
under this Section 6 exceeds the funds available in that Portfolio's
account, the Custodian or relevant Sub-Custodian, as the case may be,
may, in its discretion, advance the Fund on behalf of that Portfolio an
amount equal to such excess and such advance shall be deemed an
overdraft from the Custodian or such Sub-Custodian to that Portfolio
payable on demand, bearing interest at the rate of interest customarily
charged by the Custodian or such Sub-Custodian on similar overdrafts.
(d) Confirmation and Statements. At least monthly, the Custodian shall
furnish the Fund with a detailed statement of the Securities and moneys
held by it and all Sub-Custodians for each Portfolio. Where securities
purchased for a Portfolio are in a fungible bulk of securities
registered in the name of the Custodian (or its nominee) or shown on
the Custodian's account on the books of a Depository, the Book-Entry
System or a Sub-Custodian, the Custodian shall maintain such records as
are necessary to enable it to identify the quantity of those securities
held for such Portfolio. In the absence of the filing in writing with
the Custodian by the Fund of exceptions or objections to any such
statement within 60 days after the date that a material defect is
reasonably discoverable, the Fund shall be deemed to have approved such
statement; and in such case or upon written approval of the Fund of any
such statement the Custodian shall, to the extent permitted by law and
provided the Custodian has met the standard of care in Section 16
hereof, be released, relieved and discharged with respect to all
matters and things set forth in such statement as though such statement
had been settled by the decree of a court of competent jurisdiction in
an action in which the Fund and all persons having any equity interest
in the Fund were parties.
(e) Registration of Securities and Physical Separation. All Securities
held for a Portfolio which are issued or issuable only in bearer form,
except such Securities as are held in the Book-Entry System, shall be
held by the Custodian or a Sub-Custodian in that form; all other
Securities held for a Portfolio may be registered in the name of that
Portfolio, in the name of any duly appointed registered nominee of the
Custodian or a Sub-Custodian as the Custodian or such Sub-Custodian may
from time to time determine, or in the name of the Book-Entry System or
a Depository or their successor or successors, or their nominee or
nominees. The Fund reserves the right to instruct the Custodian as to
the method of registration and safekeeping of the Securities. The Fund
agrees to furnish to the Custodian appropriate instruments to enable
the Custodian or any Sub-Custodian to hold or deliver in proper form
for transfer, or to register in the name of its registered nominee or
in the name of the Book-Entry System or a Depository, any Securities
which the Custodian of a Sub-Custodian may hold for the account of a
Portfolio and which may from time to time be registered in the name of
a Portfolio. The Custodian shall hold all such Securities specifically
allocated to a Portfolio which are not held in the Book-Entry System or
a Depository in a separate account for such Portfolio in the name of
such Portfolio physically segregated at all times from those of any
other person or persons.
(f) Segregated Accounts. Upon receipt of an Instruction, the Custodian
will establish segregated accounts on behalf of a Portfolio to hold
liquid or other assets as it shall be directed by such Instruction and
shall increase or decrease the assets in such segregated accounts only
as it shall be directed by subsequent Instruction.
(g) Collection of Income and Other Matters Affecting Securities. Except
as otherwise provided in an Instruction, the Custodian, by itself or
through the use of the Book-Entry System or a Depository with respect
to Securities therein maintained, shall, or shall instruct the relevant
Sub-Custodian to:
1. Collect all income due or payable with respect to
Securities in accordance with this
Agreement;
2. Present for payment and collect the amount payable upon all
Securities which may mature or be called, redeemed or retired,
or otherwise become payable;
3. Surrender Securities in temporary form for derivative
Securities;
4. Execute any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect; and
5. Hold directly, or through the Book-Entry System or a
Depository with respect to Securities therein deposited, for
the account of each Portfolio all rights and similar
Securities issued with respect to any Securities held by the
Custodian or relevant Sub-Custodian for each Portfolio.
(h) Delivery of Securities and Evidence of Authority. Upon receipt of
an Instruction, the Custodian, directly or through the use of the
Book-Entry System or a Depository, shall, or shall instruct the
relevant Sub-Custodian to:
1. Execute and deliver or cause to be executed and delivered
to such persons as may be designated in such Instructions,
proxies, consents, authorizations, and any other instruments
whereby the authority of the Fund as owner of any Securities
may be exercised;
2. Deliver or cause to be delivered any Securities held for a
Portfolio in exchange for other Securities or cash issued or
paid in connection with the liquidation, reorganization,
refinancing, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
3. Deliver or cause to be delivered any Securities held for a
Portfolio to any protective committee, reorganization
committee or other person in connection with the
reorganization, refinancing, merger, consolidation or
recapitalization or sale of assets of any corporation, and
receive and hold under the terms of this Agreement in the
separate account for each such Portfolio certificates of
deposit, interim receipts or other instruments or documents as
may be issued to it to evidence such delivery;
4. Make or cause to be made such transfers or exchanges of the
assets specifically allocated to the separate account of a
Portfolio and take such other steps as shall be stated in
Written Instructions to be for the purpose of effectuating any
duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
5. Deliver Securities upon sale of such Securities for the
account of a Portfolio pursuant to Section 7;
6. Deliver Securities upon the receipt of payment in
connection with any repurchase agreement related to such
Securities entered into on behalf of a Portfolio;
7. Deliver Securities of a Portfolio to the issuer thereof or
its agent when such Securities are called, redeemed, retired
or otherwise become payable; provided, however, that in any
such case the cash or other consideration is to be delivered
to the Custodian or Sub-Custodian, as the case may be;
8. Deliver Securities for delivery in connection with any
loans of securities made by a Portfolio but only against
receipt of adequate collateral as agreed upon from time to
time by the Custodian and the Fund which may be in the form of
cash or obligations issued by the United States Government,
its agencies or instrumentalities;
9. Deliver Securities for delivery as security in connection
with any borrowings by a Portfolio requiring a pledge of
Portfolio assets, but only against receipt of the amounts
borrowed;
10. Deliver Securities to the Transfer Agent or its designee
or to the holders of Shares in connection with distributions
in kind, in satisfaction of requests by holders of Shares for
repurchase or redemption;
11. Deliver Securities for any other proper business purpose,
but only upon receipt of, in addition to written Instructions,
a copy of a resolution or other authorization of the Fund
certified by the Secretary of the Fund, specifying the
Securities to be delivered, setting forth the purpose for
which such delivery is to be made, declaring such purpose to
be a proper business purpose, and naming the person or persons
to whom delivery of such Securities shall be made.
(i) Endorsement and Collection of Checks, Etc. The Custodian is hereby
authorized to endorse and collect all checks, drafts or other orders
for the payment of money received by the Custodian for the account of a
Portfolio.
(j) Execution of Required Documents. The Custodian is hereby authorized
to execute any and all applications or other documents required by a
regulatory agency or similar entity as a condition of making
investments in the foreign market under such entity's jurisdiction.
7. Purchase and Sale of Securities.
(a) Promptly after the purchase of Securities, the Fund or its designee
shall deliver to the Custodian an Instruction specifying with respect
to each such purchase: (1) the name of the Portfolio to which such
Securities are to be specifically allocated; (2) the name of the issuer
and the title of the Securities; (3) the number of shares or the
principal amount purchased and accrued interest, if any; (4) the date
of purchase and settlement; (5) the purchase price per unit; (6) the
total amount payable upon such purchase; and (7) the name of the person
from whom or the broker through whom the purchase was made, if any. The
Custodian or specified Sub-Custodian shall receive the Securities
purchased by or for a Portfolio and upon receipt thereof (or upon
receipt of advice from a Depository or the Book-Entry System that the
Securities have been transferred to the Custodian's account) shall pay
to the broker or other person specified by the Fund or its designee out
of the moneys held for the account of such Portfolio the total amount
payable upon such purchase, provided that the same conforms to the
total amount payable as set forth in such Instruction.
(b) Promptly after the sale of Securities, the Fund or its designee
shall deliver to the Custodian an Instruction specifying with respect
to each such sale: (1) the name of the Portfolio to which the
Securities sold were specifically allocated; (2) the name of the issuer
and the title of the Securities; (3) the number of shares or principal
amount sold, and accrued interest, if any; (4) the date of sale; (5)
the sale price per unit; (6) the total amount payable to the Portfolio
upon such sale; and (7) the name of the broker through whom or the
person to whom the sale was made. The Custodian or relevant
Sub-Custodian shall deliver or cause to be delivered the Securities to
the broker or other person designated by the Fund upon receipt of the
total amount payable to such Portfolio upon such sale, provided that
the same conforms to the total amount payable to such Portfolio as set
forth in such Instruction. Subject to the foregoing, the Custodian or
relevant Sub-Custodian may accept payment in such form as shall be
satisfactory to it, and may deliver Securities and arrange for payment
in accordance with the customs prevailing among dealers in Securities.
(c) Notwithstanding (a) and (b) above, cash in any of the Portfolios
may be invested by the Custodian for short term purposes pursuant to
standing Instructions from the Fund.
<PAGE>
8. Lending of Securities.
If the Fund and the Custodian enter into a separate written agreement
authorizing the Custodian to lend Securities, the Custodian may lend
Securities pursuant to such agreement. Such agreement must be approved
by the Fund in the manner required by any applicable law, regulation or
administrative pronouncement, and may provide for the payment of
additional reasonable compensation to the Custodian.
9. Investment in Futures and Options
The Custodian shall pursuant to Instructions (which may be standing
instructions) (i) transfer initial margin to a safekeeping bank or,
with respect to options, broker; (ii) pay or demand variation margin to
or from a designated futures commission merchant or other broker based
on daily marking to market calculations and in accordance with accepted
industry practices; and (iii) subject to the Custodian's consent, enter
into separate procedural, safekeeping or other agreements with
safekeeping banks, futures commission merchants and other brokers
pursuant to which such banks and, in the case of options, brokers, will
act as custodian for initial margin deposits in transactions involving
futures contracts and options. The Custodian shall have no custodial or
investment responsibility for any assets transferred to a safekeeping
bank, futures commission merchant or broker pursuant to this paragraph.
10. Provisional Credits and Debits.
(a) The Custodian is authorized, but shall not be obligated, to credit
the account of a Portfolio provisionally on payable date with interest,
dividends, distributions, redemptions or other amounts due. Otherwise,
such amounts will be credited to the Portfolio on the date such amounts
are actually received and reconciled to the Portfolio. In cases where
the Custodian has credited a Portfolio with such amounts prior to
actual collection and reconciliation, the Fund acknowledges that the
Custodian shall be entitled to recover any such credit on demand from
the Fund and further agrees that the Custodian may reverse such credit
if and to the extent that Custodian does not receive such amounts in
the ordinary course of business.
(b) [OPTIONAL PROVISION FOR CLIENTS PARTICIPATING IN NORTHERN TRUST'S
CONTRACTUAL SETTLEMENT SERVICE] If the Portfolio is maintained as a global
custody account it shall participate in the Custodian's contractual settlement
date processing service ("CSDP") unless the Custodian directs the Fund, or the
Fund informs the Custodian, otherwise. Pursuant to CSDP the Custodian shall be
authorized, but not obligated, to automatically credit or debit the Portfolio
provisionally on contractual settlement date with cash or securities in
connection with any sale, exchange or purchase of securities. Otherwise, such
cash or securities shall be credited to the Portfolio on the day such cash or
securities are actually received by the Custodian and reconciled to the
Portfolio. In cases where the Custodian credits or debits the Portfolio with
cash or securities prior to actual receipt and reconciliation, the Custodian may
reverse such credit or debit as of contractual settlement date if and to the
extent that any securities delivered by the Custodian are returned by the
recipient, or if the related transaction fails to settle (or fails, due to
market change or other reasons, to settle on terms which provide the Custodian
full reimbursement of any provisional credit the Custodian has granted) within a
period of time judged reasonable by the Custodian under the circumstances. The
Fund agrees that it will not make any claim or pursue any legal action against
the Custodian for loss or other detriment allegedly arising or resulting from
the C Custodian's good faith determination to effect, not effect or reverse any
provisional credit or debit to the Portfolio.
The Fund acknowledges and agrees that funds debited from the Portfolio
on contractual settlement date including, without limitation, funds provided for
the purchase of any securities under circumstances where settlement is delayed
or otherwise does not take place in a timely manner for any reason, shall be
held pending actual settlement of the related purchase transaction in a
non-interest bearing deposit at the Custodian's London Branch; that such funds
shall be available for use in the Custodian's general operations; and that the
Custodian's maintenance and use of such funds in such circumstances are, without
limitation, in consideration of the Custodian's providing CSDP.
(c) The Fund recognizes that any decision to effect a provisional
credit or an advancement of the Custodian's own funds under this agreement will
be an accommodation granted entirely at the Custodian's option and in light of
the particular circumstances, which circumstances may involve conditions in
different countries, markets and classes of assets at different times. The Fund
shall make the Custodian whole for any loss which it may incur from granting
such accommodations and acknowledges that the Custodian shall be entitled to
recover any relevant amounts from the Fund on demand. All amounts thus due to
the Custodian shall be paid by the Fund from the account of the relevant
Portfolio unless otherwise paid on a timely basis and in that connection the
Fund acknowledges that the Custodian has a continuing lien on all assets of such
Portfolio to secure such payments and agrees that the Custodian may apply or set
off against such amounts any amounts credited by or due from the Custodian to
the Fund. If funds in the Portfolio are insufficient to make any such payment
the Fund shall promptly deliver to the Custodian the amount of such deficiency
in immediately available funds when and as specified by the Custodian's written
or oral notification to the Fund.
(d) In connection with the Custodian's global custody service the Fund
will maintain deposits at the Custodian's London Branch. The Fund acknowledges
and agrees that such deposits are payable only in the currency in which an
applicable deposit is denominated; that such deposits are payable only on the
Fund's demand at the Custodian's London Branch; that such deposits are not
payable at any of the Custodian's offices in the United States; and that the
Custodian will not in any manner directly or indirectly promise or guarantee any
such payment in the United States.
The Fund further acknowledges and agrees that such deposits are subject
to cross-border risk, and therefore the Custodian will have no obligation to
make payment of deposits if and to the extent that the Custodian is prevented
from doing so by reason of applicable law or regulation or any Sovereign Risk
event affecting the London Branch or the currency in which the applicable
deposit is denominated. "Sovereign Risk" for this purpose means nationalization,
expropriation, devaluation, revaluation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de facto or de
jure; or enactment, promulgation, imposition or enforcement by any such
governmental authority of currency restrictions, exchange controls, taxes,
levies or other charges affecting the property rights of persons who are not
residents of the affected jurisdiction; or acts of war, terrorism, insurrection
or revolution; or any other act or event beyond the Custodian's control.
THE FUND ACKNOWLEDGES AND AGREES THAT DEPOSIT ACCOUNTS MAINTAINED AT
FOREIGN BRANCHES OF UNITED STATES BANKS (INCLUDING, IF APPLICABLE, ACCOUNTS IN
WHICH CUSTOMER FUNDS FOR THE PURCHASE OF SECURITIES ARE HELD ON AND AFTER
CONTRACTUAL SETTLEMENT DATE), ARE NOT INSURED BY THE U.S. FEDERAL DEPOSIT
INSURANCE CORPORATION; MAY NOT BE GUARANTEED BY ANY LOCAL OR FOREIGN
GOVERNMENTAL AUTHORITY; ARE UNSECURED; AND IN A LIQUIDATION MAY BE SUBORDINATED
IN PRIORITY OF PAYMENT TO DOMESTIC (U.S.- DOMICILED) DEPOSITS. THEREFORE,
BENEFICIAL OWNERS OF SUCH FOREIGN BRANCH DEPOSITS MAY BE UNSECURED CREDITORS OF
THE NORTHERN TRUST COMPANY.
Deposit account balances that are owned by United States residents are
expected to be maintained in an aggregate amount of at least $100,000 or the
equivalent in other currencies.
11. Payment of Dividends or Distributions.
(a) In the event that the Board of Directors of the Fund (or a
committee thereof) authorizes the declaration of dividends or
distributions with respect to a Portfolio, an Authorized Person shall
provide the Custodian with Instructions specifying the record date, the
date of payment of such distribution and the total amount payable to
the Transfer Agent or its designee on such payment date.
(b) Upon the payment date specified in such Instructions, the Custodian
shall pay the total amount payable to the Transfer Agent or its
designee out of the moneys specifically allocated to and held for the
account of the appropriate Portfolio.
12. Sale and Redemption of Shares.
(a) Whenever the Fund shall sell any Shares, the Fund shall deliver or
cause to be delivered to the Custodian an Instruction specifying the
name of the Portfolio whose Shares were sold and the amount to be
received by the Custodian for the sale of such Shares.
(b) Upon receipt of such amount from the Transfer Agent or its
designee, the Custodian shall credit such money to the separate account
of the Portfolio specified in the Instruction described in paragraph
(a) above.
(c) Upon issuance of any Shares in accordance with the foregoing
provisions of this Section 12, the Custodian shall pay all original
issue or other taxes required to be paid in connection with such
issuance upon the receipt of an Instruction specifying the amount to be
paid.
(d) Except as provided hereafter, whenever any Shares are redeemed, the
Fund shall deliver or cause to be delivered to the Custodian an
Instruction specifying the name of the Portfolio whose Shares were
redeemed and the total amount to be paid for the Shares redeemed.
(e) Upon receipt of an Instruction described in paragraph (d) above,
the Custodian shall pay to the Transfer Agent (or such other person as
the Transfer Agent directs) the total amount specified in such
Instruction. Such payment shall be made from the separate account of
the Portfolio specified in such Instruction.
13. Indebtedness.
(a) The Fund or its designee will cause to be delivered to the
Custodian by any bank (excluding the Custodian) from which the Fund
borrows money, using Securities as collateral, a notice or undertaking
in the form currently employed by any such bank setting forth the
amount which such bank will loan to the Fund against delivery of a
stated amount of collateral. The Fund shall promptly deliver to the
Custodian an Instruction stating with respect to each such borrowing:
(1) the name of the Portfolio for which the borrowing is to be made;
(2) the name of the bank; (3) the amount and terms of the borrowing,
which may be set forth by incorporating by reference an attached
promissory note, duly endorsed by the Fund, or other loan agreement;
(4) the time and date, if known, on which the loan is to be entered
into (the "borrowing date"); (5) the date on which the loan becomes due
and payable; (6) the total amount payable to the Fund for the separate
account of the Portfolio on the borrowing date; (7) the market value of
Securities to be delivered as collateral for such loan, including the
name of the issuer, the title and the number of shares or the principal
amount of any particular Securities; (8) whether the Custodian is to
deliver such collateral through the Book-Entry System or a Depository;
and (9) a statement that such loan is in conformance with the 1940 Act
and the Prospectus.
(b) Upon receipt of the Instruction referred to in paragraph (a) above,
the Custodian shall deliver on the borrowing date the specified
collateral and the executed promissory note, if any, against delivery
by the lending bank of the total amount of the loan payable, provided
that the same conforms to the total amount payable as set forth in the
Instruction. The Custodian may, at the option of the lending bank, keep
such collateral in its possession, but such collateral shall be subject
to all rights therein given the lending bank by virtue of any
promissory note or loan agreement. The Custodian shall deliver as
additional collateral in the manner directed by the Fund from time to
time such Securities specifically allocated to such Portfolio as may be
specified in the Instruction to collateralize further any transaction
described in this Section 13. The Fund shall cause all Securities
released from collateral status to be returned directly to the
Custodian, and the Custodian shall receive from time to time such
return of collateral as may be tendered to it. In the event that the
Fund fails to specify in such Instruction all of the information
required by this Section 13, the Custodian shall not be under any
obligation to deliver any Securities. Collateral returned to the
Custodian shall be held hereunder as it was prior to being used as
collateral.
14. Corporate Action.
Whenever the Custodian or any Sub-Custodian receives information
concerning Securities held for a Portfolio which requires discretionary
action by the beneficial owner of the Securities (other than a proxy),
such as subscription rights, bond issues, stock repurchase plans and
rights offerings, or legal notices or other material intended to be
transmitted to Securities holders ("Corporate Actions"), the Custodian
will give the Fund or its designee notice of such Corporate Actions to
the extent that the Custodian's central corporate actions department
has actual knowledge of a Corporate Action in time to notify the Fund.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action
which bears an expiration date is received, the Custodian will endeavor
to obtain an Instruction relating to such Corporate Action from an
Authorized Person, but if such Instruction is not received in time for
the Custodian to take timely action, or actual notice of such Corporate
Action was received too late to seek such an Instruction, the Custodian
is authorized to sell, or cause a Sub-Custodian to sell, such rights
entitlement or fractional interest and to credit the applicable account
with the proceeds and to take any other action it deems, in good faith,
to be appropriate, in which case, provided it has met the standard of
care in Section 16 hereof, it shall be held harmless by the particular
Portfolio involved for any such action.
The Custodian will deliver proxies to the Fund or its designated agent
pursuant to special arrangements which may have been agreed to in
writing between the parties hereto. Such proxies shall be executed in
the appropriate nominee name relating to Securities registered in the
name of such nominee but without indicating the manner in which such
proxies are to be voted; and where bearer Securities are involved,
proxies will be delivered in accordance with an applicable Instruction,
if any.
15. Persons Having Access to the Portfolios.
(a) Neither the Fund nor any officer, director, employee or agent of
the Fund, the Fund's investment adviser, or any sub-investment adviser,
shall have physical access to the assets of any Portfolio held by the
Custodian or any Sub-Custodian or be authorized or permitted to
withdraw any investments of a Portfolio, nor shall the Custodian or any
Sub-Custodian deliver any assets of a Portfolio to any such person. No
officer, director, employee or agent of the Custodian who holds any
similar position with the Fund's investment adviser, with any
sub-investment adviser of the Fund or with the Fund shall have access
to the assets of any Portfolio.
(b) Nothing in this Section 15 shall prohibit any Authorized Person
from giving Instructions to the Custodian so long as such Instructions
do not result in delivery of or access to assets of a Portfolio
prohibited by paragraph (a) of this Section 15.
(c) The Custodian represents that it maintains a system that is
reasonably designed to prevent unauthorized persons from having access
to the assets that it holds (by any means) for its customers.
16. Concerning the Custodian.
(a) Scope of Services. The Custodian shall be obligated to perform only
such services as are set forth in this Agreement or expressly contained
in an Instruction given to the Custodian which is not contrary to the
provisions of this Agreement.
(b) Standard of Care.
1. The Custodian will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
property of the Portfolios. The Custodian shall be liable to,
and shall indemnify and hold harmless the Fund from and
against any loss which shall occur as the result of the
failure of the Custodian or a Sub-Custodian (other than a
foreign securities depository or clearing agency) to exercise
reasonable care with respect to their respective obligations
under this Agreement and the safekeeping of such property. The
determination of whether the Custodian or Sub-Custodian has
exercised reasonable care in connection with their obligations
under this Agreement shall be made in light of prevailing
standards applicable to professional custodians in the
jurisdiction in which such custodial services are performed.
In the event of any loss to the Fund by reason of the failure
of the Custodian or a Sub-Custodian (other than a foreign
securities depository or clearing agency) to exercise
reasonable care, the Custodian shall be liable to the Fund
only to the extent of the Fund's direct damages and expenses,
which damages, for purposes of property only, shall be
determined based on the market value of the property which is
the subject of the loss at the date of discovery of such loss
and without reference to any special condition or
circumstances.
2. The Custodian will not be responsible for any act,
omission, or default of, or for the solvency of, any foreign
securities depository or clearing agency approved by the Board
of Directors or a Delegate of the Fund pursuant to Section
(1)(n) or Section 3 hereof.
3. The Custodian will not be responsible for any act,
omission, or default of, or for the solvency of, any broker or
agent (not referred to in paragraph (b)(2) above) which it or
a Sub-Custodian appoints and uses unless such appointment and
use is made or done negligently or in bad faith. In the event
such an appointment and use is made or done negligently or in
bad faith, the Custodian shall be liable to the Fund only for
direct damages and expenses (determined in the manner
described in paragraph (b)(1) above) resulting from such
appointment and use and, in the case of any loss due to an
act, omission or default of such agent or broker, only to the
extent that such loss occurs as a result of the failure of the
agent or broker to exercise reasonable care ("reasonable care"
for this purpose to be determined in light of the prevailing
standards applicable to agents or brokers, as appropriate, in
the jurisdiction where the services are performed).
4. The Custodian shall be entitled to rely, and may act, upon
the advice of counsel (who may be counsel for the Fund) on all
matters and shall be without liability for any action
reasonably taken or omitted in good faith and without
negligence pursuant to such advice.
5. The Custodian shall be entitled to rely upon any
Instruction it receives pursuant to the applicable Sections of
this Agreement that it reasonably believes to be genuine and
to be from an Authorized Person. In the event that the
Custodian receives oral Instructions, the Fund or its designee
shall cause to be delivered to the Custodian, by the close of
business on the same day that such oral Instructions were
given to the Custodian, written Instructions confirming such
oral Instructions, whether by hand delivery, telex or
otherwise. The Fund agrees that the fact that no such
confirming written Instructions are received by the Custodian
shall in no way affect the validity of the transactions or
enforceability of the transactions hereby authorized by the
Fund. The Fund agrees that the Custodian shall incur no
liability to the Fund in connection with (i) acting upon oral
Instructions given to the Custodian hereunder, provided such
instructions reasonably appear to have been received from an
Authorized Person or (ii) deciding not to act solely upon oral
Instructions, provided that the Custodian first contacts the
giver of such oral Instructions and requests written
confirmation immediately following any such decision not to
act.
6. The Custodian shall supply the Fund or its designee with
such daily information regarding the cash and Securities
positions and activity of each Portfolio as the Custodian and
the Fund or its designee shall from time to time agree. It is
understood that such information will not be audited by the
Custodian and the Custodian represents that such information
will be the best information then available to the Custodian.
The Custodian shall have no responsibility whatsoever for the
pricing of Securities, accruing for income, valuing the effect
of Corporate Actions, or for the failure of the Fund or its
designee to reconcile differences between the information
supplied by the Custodian and information obtained by the Fund
or its designee from other sources, including but not limited
to pricing vendors and the Fund's investment adviser. Subject
to the foregoing, to the extent that any miscalculation by the
Fund or its designee of a Portfolio's net asset value is
attributable to the willful misfeasance, bad faith or
negligence of the Custodian (including any Sub-Custodian other
than a foreign securities depository or clearing agency) in
supplying or omitting to supply the Fund or its designee with
information as aforesaid, the Custodian shall be liable to the
Fund for any resulting loss (subject to such de minimis rule
of change in value as the Board of Directors may from time to
time adopt).
(c) Limit of Duties. Without limiting the generality of the foregoing,
the Custodian shall be under no duty or obligation to inquire into, and
shall not be liable for:
1. The validity of the issue of any Securities purchased by
any Portfolio, the legality of the purchase thereof, or the
propriety of the amount specified by the Fund or its designee
for payment therefor;
2. The legality of the sale of any Securities by any Portfolio
or the propriety of the amount of consideration for which the
same are sold;
3. The legality of the issue or sale of any Shares, or the
sufficiency of the amount to be received therefor;
4. The legality of the redemption of any Shares, or the
propriety of the amount to be paid therefor;
5. The legality of the declaration or payment of any dividend
or distribution by the Fund; or
6. The legality of any borrowing.
(d) The Custodian need not maintain any insurance for the exclusive
benefit of the Fund, but hereby warrants that as of the date of this
Agreement it is maintaining a bankers Blanket Bond and hereby agrees to
notify the Fund in the event that such bond is canceled or otherwise
lapses.
(e) Consistent with and without limiting the language contained in
Section 16(a), it is specifically acknowledged that the Custodian shall
have no duty or responsibility to:
1. Question any Instruction or make any suggestions to the
Fund or an Authorized Person regarding any Instruction;
2. Supervise or make recommendations with respect to
investments or the retention of Securities;
3. Subject to Section 16(b)(3) hereof, evaluate or report to
the Fund or an Authorized Person regarding the financial
condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this
Agreement; or
4. Review or reconcile trade confirmations received from
brokers.
(f) Amounts Due from or to Transfer Agent. The Custodian shall not be
under any duty or obligation to take action to effect collection of any
amount due to any Portfolio from the Transfer Agent or its designee nor
to take any action to effect payment or distribution by the Transfer
Agent or its designee of any amount paid by the Custodian to the
Transfer Agent in accordance with this Agreement.
(g) No Duty to Ascertain Authority. The Custodian shall not be under
any duty or obligation to ascertain whether any Securities at any time
delivered to or held by it for the Fund and specifically allocated to a
Portfolio are such as may properly be held by the Fund under the
provisions of the Articles of Incorporation and the Prospectus.
(h) Indemnification. The Fund agrees to indemnify and hold the
Custodian harmless from all loss, cost, taxes, charges, assessments,
claims, and liabilities (including, without limitation, liabilities
arising under the Securities Act of 1933, the Securities Exchange Act
of 1934 and the 1940 Act and state or foreign securities laws) and
expenses (including reasonable attorneys fees and disbursements)
arising directly or indirectly from any action taken or omitted by the
Custodian (i) at the request or on the direction of or in reliance on
the advice of the Fund or in reasonable reliance upon the Prospectus or
(ii) upon an Instruction; provided, that the foregoing indemnity shall
not apply to any loss, cost, tax, charge, assessment, claim, liability
or expense to the extent the same is attributable to the Custodian's or
any Sub-Custodian's (other than a foreign securities depository or
clearing agency) negligence, willful misconduct, bad faith or reckless
disregard of duties and obligations under this Agreement or any other
agreement relating to the custody of Fund property.
(i) The Fund agrees to hold the Custodian harmless from any liability
or loss resulting from the imposition or assessment of any taxes or
other governmental charges on a Portfolio.
(j) Without limiting the foregoing, the Custodian shall not be liable
for any loss which results from:
1. the general risk of investing;
2. subject to Section 16(b) hereof, investing or holding
property in a particular country including, but not limited
to, losses resulting from nationalization, expropriation or
other governmental actions; regulation of the banking or
securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly
execution of securities transactions or affect the value of
property held pursuant to this Agreement; or
3. consequential, special or punitive damages for any act or
failure to act under any provision of this Agreement, even if
advised of the possibility thereof.
(k) Force Majeure. No party shall be liable to the other for any delay
in performance, or non-performance, of any obligation hereunder to the
extent that the same is due to forces beyond its reasonable control,
including but not limited to delays, errors or interruptions caused by
the other party or third parties, any industrial, juridical,
governmental, civil or military action, acts of terrorism, insurrection
or revolution, nuclear fusion, fission or radiation, failure or
fluctuation in electrical power, heat, light, air conditioning or
telecommunications equipment, or acts of God.
(1) Inspection of Books and Records. The Custodian shall create and
maintain all records relating to its activities and obligations under
this Agreement in such manner as will meet the obligations of the Fund
under the 1940 Act, with particular attention to Section 31 thereof and
Rules 31a-1 and 31a-2 thereunder, and under applicable federal and
state laws. All such records shall be the property of the Fund and
shall at all times during regular business hours of the Custodian be
open for inspection by duly authorized officers, employees and agents
of the Fund and by the appropriate employees of the Securities and
Exchange Commission. The Custodian shall, at the Fund's request, supply
the Fund with a tabulation of Securities and shall, when requested to
do so by the Fund and for such compensation as shall be agreed upon
between the Fund and the Custodian, include certificate numbers in such
tabulations.
(m) Accounting Control Reports. The Custodian shall provide the Fund
with any report obtained by the Custodian on the system of internal
accounting control of the Book-Entry System, each Depository, and each
Sub-Custodian and with an annual report on its own systems of internal
accounting control.
17. Term and Termination.
(a) This Agreement shall become effective on the date first set forth
above (the "Effective Date") and shall continue in effect thereafter
until terminated in accordance with Section 17(b).
(b) Either of the parties hereto may terminate this Agreement with
respect to any Portfolio by giving to the other party a notice in
writing specifying the date of such termination, which, in case the
Fund is the terminating party, shall be not less than 60 days after the
date of Custodian receives such notice or, in case the Custodian is the
terminating party, shall be not less than 90 days after the date the
Fund receives such notice. In the event such notice is given by the
Fund, it shall be accompanied by a certified resolution of the Board of
Directors, electing to terminate this Agreement with respect to any
Portfolio and designating a successor custodian or custodians.
In the event such notice is given by the Custodian, the Fund shall, on
or before the termination date, deliver to the Custodian a certified
resolution of the Board of Directors, designating a successor custodian
or custodians. In the absence of such designation by the Fund, the
Custodian may designate a successor custodian, which shall be a person
qualified to so act under the 1940 Act. If the Fund fails to designate
a successor custodian with respect to any Portfolio, the Fund shall
upon the date specified in the notice of termination of this Agreement
and upon the delivery by the Custodian of all Securities (other than
Securities held in the Book-Entry System which cannot be delivered to
the Fund) and moneys of such Portfolio, be deemed to be its own
custodian and the Custodian shall thereby be relieved of all duties and
responsibilities pursuant to this Agreement, other than the duty with
respect to Securities held in the Book-Entry System which cannot be
delivered to the Fund.
(c) Upon the date set forth in such notice under paragraph (b) of this
Section 17, this Agreement shall terminate to the extent specified in
such notice, and the Custodian shall upon receipt of a notice of
acceptance by the successor custodian on that date deliver directly to
the successor custodian all Securities and moneys then held by the
Custodian and specifically allocated to the Portfolio or Portfolios
specified, after deducting all fees, expenses and other amounts for the
payment or reimbursement of which it shall then be entitled with
respect to such Portfolio or Portfolios.
18. Miscellaneous.
(a) Annexed hereto as Schedule A is a certification signed by two of
the present officers of the Fund setting forth the names of the present
Authorized Persons. The Fund agrees to furnish to the Custodian a new
certification in similar form in the event that any such present
Authorized Person ceases to be such an Authorized Person or in the
event that other or additional Authorized Persons are elected or
appointed. Until such new certification is received by the Custodian,
the Custodian shall be fully protected in acting under the provisions
of this Agreement upon Instructions which Custodian reasonably believes
were given by an Authorized Person, as identified in the last delivered
certification. Unless such certification specifically limits the
authority of an Authorized Person to specific matters or requires that
the approval of another Authorized Person is required, Custodian shall
be under no duty to inquire into the right of such person, acting
alone, to give any instructions whatsoever under this Agreement.
(b) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Custodian, shall be sufficiently
given if addressed to the Custodian and mailed or delivered to it at
its offices at its address stated on the first page hereof or at such
other place as the Custodian may from time to time designate in
writing.
(c) Any notice or other instrument in writing, authorized or required
by this Agreement to be given to the Fund, shall be sufficiently given
if addressed to the Fund and mailed or delivered to it at its offices
at its address shown on the first page hereof or at such other place as
the Fund may from time to time designate in writing.
(d) Except as expressly provided herein, Agreement may not be amended
or modified in any manner except by a written agreement executed by
both parties with the same formality as this Agreement.
(e) This Agreement shall extend to and shall be binding upon the
parties hereto, and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable by the Fund
without the written consent of the Custodian, or by the Custodian
without the written consent of the Fund, and any attempted assignment
without such written consent shall be null and void.
(f) This Agreement shall be construed in accordance with the laws of
the State of Illinois.
(g) The captions of the Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.
(h) This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, but such counterparts
shall, together, constitute only one instrument.
[FOR MASS. BUSINESS TRUSTS:
(i) The Fund and the Custodian agree that the obligations of the Fund
under this Agreement shall not be binding upon or any member of the
Board of Directors or any shareholder, nominee, officer, employee or
agent, whether past, present or future, of the Fund individually, but
are binding only upon the assets and property of the Fund or of the
appropriate Portfolio(s) thereof. The execution and delivery of this
Agreement have been duly authorized by Fund and signed by an authorized
officer of the Fund, acting as such, but neither such authorization by
the Fund nor such execution and delivery by such officer shall be
deemed to have been made by any member of the Board of Directors or by
any officer or shareholder of the Fund individually or to impose any
liability on any of them personally, but shall bind only the assets and
property of the Fund or of the appropriate Portfolio(s) thereof.]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective representatives duly authorized as of the day
and year first above written.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
By: _______________________________________
Name:
Title:
The undersigned, _____________________, does hereby certify that he/she is the
duly elected, qualified and acting Secretary of _________________ Corporation
(the "Fund") and further certifies that the person whose signature appears above
is a duly elected, qualified and acting officer of the Fund with full power and
authority to execute this Custody Agreement on behalf of the Fund and to take
such other actions and execute such other documents as may be necessary to
effectuate this Agreement.
- -------------------------
Secretary
_____________ Corporation
THE NORTHERN TRUST COMPANY
By: ______________________________________
Name:
Title:
<PAGE>
SCHEDULE A
CERTIFICATION OF AUTHORIZED PERSONS
Pursuant to paragraphs 1(b) and 18(a) of the Agreement, the undersigned
officers of [Fund Name] hereby certify that the person(s) whose name(s) and
signature(s) appear below have been duly authorized by the Board of Directors to
give Instructions on behalf of the Fund.
NAME SIGNATURE
-------------------------- ---------------------------
-------------------------- ---------------------------
-------------------------- ---------------------------
-------------------------- ---------------------------
-------------------------- ---------------------------
-------------------------- ---------------------------
Certified as of the ____ day of _____________, 19__:
OFFICER: OFFICER:
- ------------------------------- --------------------------------
(Signature) (Signature)
- ------------------------------- --------------------------------
(Name) (Name)
- ------------------------------- --------------------------------
(Title) (Title)
<PAGE>
SCHEDULE I
(Countries for which Custodian shall not have
responsibility under Section 3A for managing
foreign custody arrangements)
Russia
Lithuania
Taiwan
Romania
Croatia
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form N-1A of our report dated November 18, 1999, relating to the
financial statements and financial highlights which appears in the October 31,
1999 Annual Report to Shareholders of Lord Asset Management Trust. which is also
incorporated by reference into the Registration Statement. We also consent to
the references to us under the headings "Financial Information", "Independent
Accountants" and "Financial Statements" in such Registration Statement.
PricewaterhouseCoopers LLP
New York, New York
December 29, 1999
<PAGE>
McGladrey & Pullen, L.L.P. Letterhead
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use of our report dated November 18, 1998, on the
financial statements of Thomas White International Fund series of Lord Asset
Management Trust (formerly Thomas White World Fund) included as an exhibit
therein, in Post-Effective Amendment No. 10 to the Registration Statement on
Form N-1A, File No. 33-75138 as filed with the Securities and Exchange
Commission.
/s/ McGladrey & Pullen, L.L.P.
McGladrey & Pullen, L.L.P.
New York, New York
December 29, 1999
<PAGE>
McGladrey & Pullen, LLP
Certified Public Accountants and Consultants
Independent Auditor's Report
The Board of Trustees
Thomas White International Fund
We have audited the statement of changes in net assets for the year ended
October 31, 1998, and the selected financial information for each of the four
years in the period then ended of Thomas White International Fund (formerly the
Thomas White World Fund), a series of Lord Asset Management Trust. This
financial statement and selected financial information are the responsibility of
the Fund's management. Our responsibility is to express an opinion on this
financial statement and selected financial information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and selected
financial information are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statement and selected financial information
referred to above present fairly, in all material respects, the changes in its
net assets, and the selected financial information of the Thomas White
International Fund for the periods indicated, in conformity with generally
accepted accounting principles.
McGladrey & Pullen
New York, New York
November 18, 1998
