-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LrAZUgAnXL4v35h3WqOh+zU6AlWVaEUxWSa7gg0l0HvWX8aoriSf8jB55jN9Rwq4 w77+z2jYHI7MBYlF4OO5sw== 0000950134-01-000524.txt : 20010129 0000950134-01-000524.hdr.sgml : 20010129 ACCESSION NUMBER: 0000950134-01-000524 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 8 FILED AS OF DATE: 20010126 EFFECTIVENESS DATE: 20010129 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERGER OMNI INVESTMENT TRUST CENTRAL INDEX KEY: 0000765924 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 363344166 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-15867 FILM NUMBER: 1516791 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-04273 FILM NUMBER: 1516792 BUSINESS ADDRESS: STREET 1: 210 UNIVERSITY BLVD STREET 2: STE 800 CITY: DENVER STATE: CO ZIP: 80206 BUSINESS PHONE: 3033364563 MAIL ADDRESS: STREET 1: 210 UNIVERSITY BLVD STREET 2: STE 800 CITY: DENVER STATE: CO ZIP: 80206 FORMER COMPANY: FORMER CONFORMED NAME: OMNI INVESTMENT FUND DATE OF NAME CHANGE: 19920703 485BPOS 1 d83561de485bpos.txt POST EFFECTIVE AMENDMENT NO. 22 & AMENDMENT NO. 22 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 26, 2001 1933 Act File No. 33-15867 1940 Act File No. 811-4273 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment No. [X] Post-Effective Amendment No. 22 and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X] Amendment No. 22 (Check appropriate box or boxes) BERGER OMNI INVESTMENT TRUST - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) 210 University Boulevard, Suite 900, Denver, Colorado 80206 - ------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code: (303) 329-0200 ---------------------------- Jack R. Thompson, 210 University Boulevard, Suite 900, Denver, CO 80206 - ------------------------------------------------------------------------------- (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: As soon as practicable after this post-effective amendment becomes effective. It is proposed that this filing will become effective: (check appropriate box) immediately upon filing pursuant to paragraph (b) ---- XX on January 29, 2001 pursuant to paragraph (b) 60 days after filing pursuant to paragraph (a)(1) ---- on (date) pursuant to paragraph (a)(1) ---- 75 days after filing pursuant to paragraph (a)(2) ---- on (date) pursuant to paragraph (a)(2) of Rule 485 ---- If appropriate, check the following box: this post-effective amendment designates a new effective date ---- for a previously filed post-effective amendment. Title of Securities Being Registered: Shares of Beneficial Interest of the Berger Small Cap Value Fund - Investor Shares and the Berger Small Cap Value Fund - Institutional Shares 2 EXPLANATORY NOTE This amendment to the Registration Statement of Berger Omni Investment Trust contains the following: Two Prospectuses: One for the Berger Small Cap Value Fund - Investor Shares One for the Berger Small Cap Value Fund -- Institutional Shares Two Statements of Additional Information: One for the Berger Small Cap Value Fund - Investor Shares One for the Berger Small Cap Value Fund -- Institutional Shares One Part C 3 January 29, 2001 BERGER SMALL CAP VALUE FUND - INVESTOR SHARES PROSPECTUS [BERGER FUNDS LOGO] Due to Small Cap Value Fund's current size relative to the range of suitable investments available to the Fund, the Fund has discontinued public sale of its shares to new investors. Shareholders who have open Fund accounts may make additional investments and reinvest dividends and capital gains distributions. Under certain circumstances, current shareholders may also open additional accounts. If a Fund account is closed, however, additional investments in the Fund may not be possible. The Securities and Exchange Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is accurate or complete. Anyone who tells you otherwise is committing a crime. Like all mutual funds, an investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will meet its investment goal, and although you have the potential to make money, you could also lose money in the Fund. 4 BERGER SMALL CAP VALUE FUND Due to the Fund's size relative to the range of suitable investments available to the Fund, the Trustees have decided to restrict the Fund's growth. Therefore, the Berger Small Cap Value Fund (the "Fund") was closed to new investors on March 31, 2000. You may continue to purchase Investor Shares or Institutional Shares in the Fund if: o You are an existing shareholder in the Fund as of the closing date and you: o Add to your account through the purchase of additional Fund shares. o Add to your account through the reinvestment of dividends and cash distributions from any shares owned in the Fund; o You are a discretionary investment advisor that invests through existing accounts in the Fund or at a financial intermediary; or o You are a participant of a qualified defined contribution retirement plan (for example, a 401(k) plan, profit sharing plan and money purchase plan), 403(b) plan or 457 plan that invests through existing accounts in the Fund or at a financial intermediary. If you redeem or exchange all your remaining Fund shares you will not be permitted to buy back into the Fund so long as the Fund remains closed to new investors. If your Fund account drops below the applicable minimum balance, all your remaining shares will be subject to involuntary redemption by the Fund as described in the Prospectus. The Fund may resume sales to new investors at some future date if the Trustees of the Fund determine that it is in the best interests of the Fund and its shareholders. BERGER FUNDS and BERGER SMALL CAP VALUE FUND are registered service marks of Berger LLC; THE BERGER MOUNTAIN LOGO is a registered trademark of Berger LLC; other marks referred to herein are the trademarks, service marks, registered trademarks or registered service marks of the respective owners thereof. 5 3 Contents BERGER FUNDS(R) are a no-load family of mutual funds. A mutual fund pools money from shareholders and invests in a portfolio of securities. This prospectus offers the class of shares designated as Investor Shares of the Berger Small Cap Value Fund, which shares are available to the general public. Berger Small Cap Value Fund(R) - Investor Shares......................... 4 The Fund's Goal and Principal Investment Strategies...................... 4 Principal Risks...........................................................4 The Fund's Past Performance.............................................. 5 Fund Expenses............................................................ 6 Investment Techniques, Securities and Associated Risks....................7 Risk and Investment Table................................................ 7 Risk and Investment Glossary............................................. 9 Buying Shares........................................................... 12 Selling (Redeeming) Shares...............................................14 Information About Your Account...........................................15 Exchanging Shares....................................................... 15 Signature Guarantees/Special Documentation...............................16 Your Share Price........................................................ 16 Other Information About Your Account.................................... 17 Distributions and Taxes..................................................19 Tax-Sheltered Retirement Plans...........................................20 Organization of the Fund.................................................21 Investment Managers..................................................... 21 12b-1 Arrangements.......................................................22 Special Fund Structure...................................................22 Financial Highlights for the Fund........................................23
Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 6 4 Berger Small Cap Value Fund - Investor Shares Ticker Symbol BSCVX The Fund's Goal and Principal Investment Strategies The Fund aims for capital appreciation. In pursuing that goal, the Fund primarily invests in the common stocks of small companies whose stock prices are believed to be undervalued. The Fund's securities selection focuses on companies that are out of favor with markets or have not yet been discovered by the broader investment community. The Fund's investment manager generally looks for companies with: o A low price relative to their assets, earnings, cash flow or business franchise o Products and services that give them a competitive advantage o Quality balance sheets and strong management. The investment manager's philosophy is to weigh a security's downside risk before considering its upside potential, which may help provide an element of capital preservation. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of small companies whose market capitalization, at the time of initial purchase, is less than the 12-month average of the maximum market capitalization for companies included in the Russell 2000 Index (Russell 2000). This average is updated monthly. The Fund's investment manager will generally sell a security when it no longer meets the manager's investment criteria or when it has met the manager's expectations for appreciation. Principal Risks You may be interested in the Fund if you are comfortable with above-average risk and intend to make a long-term investment commitment. Like all managed funds, there is a risk that the investment manager's strategy for managing the Fund may not achieve the desired results. In addition, the price of common stock moves up and down in response to corporate earnings and developments, economic and market conditions and unanticipated events. As a result, the price of the Fund's investments may go down and you could lose money on your investment. The Fund's share price may fluctuate more than that of funds primarily invested in stocks of mid-sized and large companies. Small company securities may underperform as compared to the securities of larger companies. They may also pose greater market, liquidity and information risks because of narrow product lines, limited financial resources, less depth in management or a limited trading market for their stocks. The Fund's investments are often focused in a small number of business sectors, which may pose greater market and liquidity risks. In addition, the Fund may invest in certain securities with unique risks, such as special situations. See "Investment Techniques, Securities and Associated Risks" later in this prospectus for more information on principal risks and other risks. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 7 5 Berger Small Cap Value Fund The Fund's Past Performance The information below shows the Fund's performance through December 31, 2000. These returns include reinvestment of all dividends and capital gains distributions and reflect Fund expenses. As with all mutual funds, past performance does not guarantee future results. Year-by-year returns show you how the Fund's performance has varied by illustrating the differences for each full calendar year for the past ten years. YEAR-BY-YEAR TOTAL RETURN AS OF DECEMBER 31(1) [GRAPH] 1991 24.97% 1992 19.61% 1993 16.27% 1994 6.70% 1995 26.06% 1996 25.60% 1997 36.51% 1998 1.43% 1999 14.31% 2000 26.82% BEST QUARTER: 6/30/99 22.00% WORST QUARTER: 9/30/98 -16.64%
Average annual total return is a measure of the Fund's performance over time. The Fund's average annual return is compared with the Russell 2000, an unmanaged index, with dividends reinvested, which consists of the common stocks of 2000 U.S. companies. While the Fund does not seek to match the returns of the Russell 2000, this index is a good indicator of small company stock market performance. You may not invest in the Russell 2000, and unlike the Fund, it does not incur fees or charges. AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 2000(1)
1 Year 5 Years 10 Years ------ ------- -------- The Fund 26.82% 20.31% 19.41% Russell 2000 -3.02% 10.31% 15.53%
(1) Returns for periods before February 14, 1997, do not include the .25% 12b-1 fee which has been paid by the Investor Shares class since the Fund adopted share classes on that date. This would have reduced the Fund's return. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 8 6 Berger Small Cap Value Fund - Investor Shares Fund Expenses As a shareholder in the Fund, you do not pay any sales loads, but you do indirectly bear Annual Fund Operating Expenses, which vary from year to year.
ANNUAL FUND OPERATING EXPENSES (deducted directly from the Fund) % - --------------------------------- ---- Management fee .81 Distribution (12b-1) fee .25 Other expenses .17 ---- Total Annual Fund Operating Expenses 1.23 Waiver(1) (.06) ---- Net Expenses 1.17 ====
(1) Pursuant to a written agreement and effective March 31, 2000, the Fund's Adviser waives a portion of the 12b-1 fee by the amount such fee is not used in connection with the distribution or servicing of the Investor Shares of the Fund during any period in which the Fund remains closed to new investors. The waiver shown reflects an amount as if the waiver had been in effect for the entire fiscal year. Understanding Expenses Annual Fund operating expenses are paid by the Fund. As a result, they reduce the Fund's return. Fund expenses include management fees, 12b-1 fees and administrative costs such as shareholder recordkeeping and reports, custodian and pricing services and registration fees. Example Costs The following example helps you compare the cost of investing in the Fund with the cost of investing in other mutual funds by showing what your costs may be over time. It uses the same assumptions that other funds use in their prospectuses: o $10,000 initial investment o 5% total return for each year o Fund operating expenses remain the same for each period o Redemption after the end of each period Your actual costs may be higher or lower, so this example should be used for comparison only. Based on these assumptions your costs at the end of each period would be: BERGER SMALL CAP VALUE FUND - INVESTOR SHARES
Years $ - ----- ----- One 119 Three 372 Five 644 Ten 1,420
Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 9 7 Berger Small Cap Value Fund Investment Techniques, Securities and Associated Risks RISK AND INVESTMENT TABLE
Berger Small Cap Value Fund Diversification F - -------------------------------------------------------------------------------------- Small company securities Y Market, liquidity and information risk - -------------------------------------------------------------------------------------- Sector focus Y Market and liquidity risk - -------------------------------------------------------------------------------------- Foreign securities < Market, currency, transaction, liquidity, information and political risk - -------------------------------------------------------------------------------------- Convertible securities(1) < Market, interest rate, prepayment and credit risk - -------------------------------------------------------------------------------------- Investment grade bonds (nonconvertible) < Interest rate, market, call and credit risk - -------------------------------------------------------------------------------------- Companies with limited operating histories 5F Market, liquidity and information risk - -------------------------------------------------------------------------------------- Illiquid securities [][]F Market, liquidity and transaction risk - -------------------------------------------------------------------------------------- Initial Public Offerings (IPOs) < Market, liquidity and information risk - -------------------------------------------------------------------------------------- Special situations Y Market and information risk - -------------------------------------------------------------------------------------- Temporary defensive measures < Opportunity risk - -------------------------------------------------------------------------------------- Borrowing 5F Leverage risk - -------------------------------------------------------------------------------------- Hedging Strategies - -------------------------------------------------------------------------------------- Options(2) (exchange-traded and over-the-counter) [] Hedging, credit, correlation and leverage risk - -------------------------------------------------------------------------------------- Writing (selling) covered call options(2) [][] (exchange-traded and over-the-counter) Opportunity, credit and leverage risk - --------------------------------------------------------------------------------------
Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 10 8 Investment Techniques, Securities and Associated Risks (continued) BEFORE YOU INVEST... in the Fund, make sure you understand the risks involved. All investments involve risk. Generally, the greater the risk, the greater the potential for return. The reverse is also generally true--the lower the risk, the lower the potential for return. Like all mutual funds, an investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. The Fund is not a complete investment program, but may serve to diversify other types of investments in your portfolio. There is no guarantee that the Fund will meet its investment goal, and although you have the potential to make money, you could also lose money by investing in the Fund. The table on the opposite page will help you further understand the risks the Fund takes by investing in certain securities and the investment techniques used by the Fund. A glossary follows this page. You may get more detailed information about the risks of investing in the Fund in the Statement of Additional Information (SAI), including a discussion of debt security ratings in Appendix A to the SAI. KEY TO TABLE Follow down the columns under the name of the Fund. The boxes will tell you: Y Yes, the security or technique is permitted by a Fund and is emphasized by the Fund. --------------------------------------------------------------------- < (Note: Character is a hollow Y) Yes, the security or technique is permitted by the Fund. --------------------------------------------------------------------- F The restriction is fundamental to the Fund. (Fundamental restrictions cannot be changed without a shareholder vote.) --------------------------------------------------------------------- 5 Use of a security or technique is permitted, but subject to a restriction of up to 5% of total assets. --------------------------------------------------------------------- [] (Note: Character is a hollow 5) Use of a security or technique is permitted, but subject to a restriction of up to 5% of net assets. --------------------------------------------------------------------- [][] (Note: Character is a hollow 10) Use of a security or technique is permitted, but subject to a restriction of up to 10% of net assets. --------------------------------------------------------------------- NOTES TO TABLE 1. The Fund has no minimum quality standards for convertible securities, although it will not invest in defaulted securities. It also will not invest 20% or more of its assets in convertible securities rated below investment grade or in unrated convertible securities that the sub-advisor considers to be below investment grade. 2. The Fund may use options only for hedging. Not more than 5% of the Fund's net assets may be used for premiums for options, although the Fund may have more at risk under these contracts than the premium. However, the Fund's aggregate obligations under these contracts may not exceed the total market value of the assets being hedged, such as some or all of the value of the Fund's equity securities. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 11 9 Berger Small Cap Value Fund Risk and Investment Glossary BORROWING refers to a loan of money from a bank or other financial institution undertaken by the Fund for temporary or emergency reasons only. CALL RISK is the possibility that an issuer may redeem or "call" a fixed-income security before maturity at a price below its current market price. An increase in the likelihood of a call may reduce the security's price. COMMON STOCK is a share of ownership (equity) interest in a company. COMPANIES WITH LIMITED OPERATING HISTORIES are securities issued by companies that have been in continuous operation for less than three years. Sometimes called "unseasoned" issuers. CONVERTIBLE SECURITIES are debt or equity securities that may be converted on specified terms into stock of the issuer. CORRELATION RISK occurs when the Fund "hedges"--uses one investment to offset the Fund's position in another. If the two investments do not behave in relation to one another the way Fund managers expect them to, then unexpected results may occur. CREDIT RISK means that the issuer of a security or the counterparty to an investment contract may default or become unable to pay its obligations when due. CURRENCY RISK happens when the Fund buys or sells a security denominated in foreign currency. Foreign currencies "float" in value against the U.S. dollar. Adverse changes in foreign currency values can cause investment losses when the Fund's investments are converted to U.S. dollars. DIVERSIFICATION means a diversified fund may not, with respect to at least 75% of its assets, invest more than 5% of its assets in the securities of one company. A nondiversified fund may be more volatile than a diversified fund because it invests more of its assets in a smaller number of companies and the gains or losses on a single stock will therefore have a greater impact on the fund's share price. The Fund is a diversified fund. FOREIGN SECURITIES are issued by companies located outside of the United States. The Fund considers a company to be located outside the United States if the principal securities trading market for its equity securities is located outside the U.S. or it is organized under the laws of, and has a principal office in, a country other than the U.S. HEDGING RISK comes into play when the Fund uses a security whose value is based on an underlying security or index to "offset" the Fund's position in another security or currency. The objective of hedging is to offset potential losses in one security with gains in the hedge. But a hedge can eliminate or reduce gains as well as offset losses. (Also see "Correlation risk.") Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 12 10 Investment Techniques, Securities and Associated Risks (continued) ILLIQUID SECURITIES are securities that by their nature cannot be sold readily. The Fund will not invest more than 10% of its net assets in these securities. INFORMATION RISK means that information about a security or issuer might not be available, complete, accurate or comparable. INITIAL PUBLIC OFFERING (IPO) is the sale of a company's securities to the public for the first time. IPO companies can be small and have limited operating histories. The price of IPO securities can be highly unstable because of prevailing market psychology and the small number of shares available. In addition, the quality and number of IPOs available for purchase may diminish in the future, and their contribution to Fund performance may be less significant as the Fund grows in size. INTEREST RATE RISK is the risk that changes in interest rates will adversely affect the value of an investor's securities. When interest rates rise, the value of fixed-income securities will generally fall. Conversely, a drop in interest rates will generally cause an increase in the value of fixed-income securities. Longer-term securities are subject to greater interest rate risk. INVESTMENT-GRADE BONDS are rated BBB (Standard & Poor's) or Baa (Moody's) or above. Bonds rated below investment grade are subject to greater credit risk than investment-grade bonds. LEVERAGE RISK occurs in some securities or techniques that tend to magnify the effect of small changes in an index or a market. This can result in a loss that exceeds the amount that was invested in the contract. LIQUIDITY RISK occurs when investments cannot be sold readily. The Fund may have to accept a less-than-desirable price to complete the sale of an illiquid security or may not be able to sell it at all. MARKET CAPITALIZATION is the total current market value of a company's outstanding common stock. MARKET RISK exists in all mutual funds and means the risk that the prices of securities in a market, a sector, or an industry will fluctuate and that such movements might reduce an investment's value. OPPORTUNITY RISK means missing out on an investment opportunity because the assets necessary to take advantage of it are committed to less advantageous investments or strategies. OPTIONS are contracts giving the holder the right but not the obligation to purchase or sell a security on or before a predetermined future date for a fixed price. Options on securities indexes are similar, but settle in cash. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 13 11 Berger Small Cap Value Fund POLITICAL RISK comes into play with investments, particularly foreign investments, that may be adversely affected by nationalization, taxation, war, government instability or other economic or political actions or factors. PREPAYMENT RISK is the risk that, as interest rates fall, borrowers are more likely to refinance their debts. As a result, the principal on certain fixed-income securities may be paid earlier than expected, which could cause investment losses and cause prepaid amounts to have to be reinvested at a relatively lower interest rate. SECTOR FOCUS occurs when a significant portion of the Fund's assets are invested in a relatively small number of related industries. The Fund will not concentrate more than 25% of its total assets in any one industry. Sector focus may increase both market and liquidity risk. SMALL COMPANY SECURITIES are securities issued by small companies, as measured by their market capitalization. The market capitalization range targeted by the Fund appears under the heading "The Fund's Goal and Principal Investment Strategies." In general, the smaller the company, the greater its risks. SPECIAL SITUATIONS are companies about to undergo a structural, financial or management change that may significantly affect the value of their securities. TEMPORARY DEFENSIVE MEASURES may be taken when the Fund's investment manager believes they are warranted because of market conditions. When this happens, the Fund may increase its investment in government securities and other short-term securities without regard to the Fund's investment restrictions, policies or normal investment emphasis. TRANSACTION RISK means that the Fund may be delayed or unable to settle a transaction or that commissions and settlement expenses may be higher than usual. In the case of foreign securities, use of a foreign securities depository to maintain Fund assets may increase this risk. This risk may be minimized through an analysis and continuous monitoring, by the Funds' primary custodian, of the custodial risks of using the depository. WRITING (SELLING) COVERED CALL OPTIONS is the selling of a contract to another party, which gives them the right but not the obligation to buy a particular security from you. The Fund will write call options only if it already owns the security (if it is "covered"). Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 14 12 Buying Shares
Minimums Minimum Initial Investments: - ---------------------------- Regular investment $ 2,000 Low Minimum Investment Plan $ 100
Minimum Subsequent Investments: - ------------------------------- Regular investment $ 50 Regular automatic investment $ 50 Low Minimum Investment Plan $ 100 (Regular monthly automatic investments)
Send new account applications to Berger Funds P.O. Box 219958 Kansas City, MO 64121-9958 OR for overnight, certified or registered mail only Berger Funds 330 West 9th Street, 1st Floor Kansas City, MO 64105 Although the Fund has discontinued public sale to new investors, shareholders who have open Fund accounts may continue to purchase shares and reinvest dividends and capital gains. Once a Fund account is closed, it may not be reopened. An account may be considered closed and subject to redemption by the Fund under certain circumstances described in "Redemption by the Fund of Certain Accounts." BY MAIL o Read this prospectus. o Fill out the application if you are opening a new account. o Make out a check to Berger Funds for the amount you want to invest. o Send the application and check to the Berger Funds in the envelope provided. o To add to an existing account, be sure to include your account number on your check and mail it to the appropriate address above. BY TELEPHONE* o If you already have a Berger Funds account, you may purchase additional shares by telephone order. o You must pay for them within three business days by wire, electronic funds transfer or overnight delivery of a check. If payment is not received within three business days the trade will be cancelled and your account may be charged for the loss to the Fund. o Call (800) 551-5849 for current wire or electronic funds transfer instructions. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 15 13 Berger Small Cap Value Fund BY ONLINE ACCESS* o If you have established a Berger Funds account with electronic funds transfer privileges, you may purchase additional shares via online access. o You will find us online at bergerfunds.com. BY SYSTEMATIC INVESTMENT PLAN o To automatically purchase more shares on a regular basis for a regular minimum or Low Minimum Investment Plan account, fill out the Systematic Investment Plan section of the application. Investments are transferred automatically from your bank account. o The Low Minimum Investment Plan is designed for investors who would like to begin a regular investment program but are reluctant to commit to higher lump sum initial investments. In order to qualify for the Low Minimum Investment Plan, an investor must commit to automatic monthly investments totaling no less than $100 per month per account. Automatic monthly investments must be made until the value of each account opened under the Plan is at least $2,000 or the account will be assessed an annual charge. * All shareholders are automatically granted telephone and online transaction privileges unless they decline them explicitly in writing, either on the account application or by writing to the Berger Funds at the address above. You may give up some level of security by choosing to buy and sell shares by telephone or online rather than by mail. In times of extreme economic or market conditions, transactions by telephone or online may be difficult. Important notes about paying for your shares o Your check must be made payable to Berger Funds. o Purchases must be made in U.S dollars drawn on U.S. banks. o You may not purchase shares by cash, credit card, third-party checks or checks drawn on foreign banks. o Telephone and online purchase orders may not exceed $100,000 on the date the order is placed. Shares previously bought by telephone or online access are included in calculating account size only if payment has been received for those shares. o Orders not paid for on time will be canceled, and shares will be redeemed from your account to compensate for any decline in price of the shares canceled. Berger Funds reserve the right to reject any order and to waive or reduce minimums, or increase minimums following notice. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 16 14 Selling (Redeeming) Shares The Fund is closed to new investors and if a total redemption of your account is made, additional investments in the Fund may not be possible. BY MAIL o Send a written request indicating your account number and the dollar amount or number of shares you are redeeming to the appropriate address shown under "Buying Shares." o Your request must be signed by each registered shareholder, with the signature(s) appearing exactly as they do on your account registration. BY TELEPHONE* o Call (800) 551-5849. BY ONLINE ACCESS* o You will find us online at bergerfunds.com. * For limitations on telephone and online redemptions see "Signature Guarantees/Special Documentation" below. Telephone and online redemptions are not available for shares held in retirement accounts sponsored by the Fund. BY SYSTEMATIC WITHDRAWAL PLAN o Shares may be redeemed automatically ($50 minimum) monthly, quarterly, semi-annually or annually. o A systematic withdrawal plan may be established if you own shares in the Fund worth at least $5,000. o Call (800) 551-5849 for more information and forms. Important notes about payment for your redeemed shares o Generally, payment for your redeemed shares will be sent to you within three business days after receipt of your redemption request in good order. o You may receive payment for redeemed shares via wire or electronic funds transfer. You may elect these services on the account application or send to the Berger Funds a written request providing your bank information with your signature guaranteed. (See "Signature Guarantees/Special Documentation" below.) o Wire and electronic funds transfers are subject to a $1,000 minimum and $100,000 maximum. o You will be charged $10 if you request a wire transfer. There is no charge for an electronic funds transfer. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 17 15 Berger Small Cap Value Fund Information About Your Account o A wire transfer will be sent the next business day after receipt of your order, and an electronic funds transfer will be sent the second business day after receipt of your order. o Proceeds from the redemption of shares purchased by check or through electronic funds transfer may be delayed until full payment for the shares has been received and cleared, which may take up to 15 days from the purchase date. Exchanging Shares Shares of the Fund described in this prospectus may be exchanged for shares of any other Berger Fund or for shares in the Cash Account Trust Portfolios (the CAT Portfolios). The CAT Portfolios are three separately managed, unaffiliated money market funds: the Money Market Portfolio, the Government Securities Portfolio and the Tax-Exempt Portfolio. The exchange privilege with the CAT Portfolios does not constitute an offering or recommendation of the shares of these portfolios by the Berger Funds or Berger LLC. Berger LLC is compensated for administrative services it performs with respect to the CAT Portfolios. When exchanging shares: o Each account must be registered identically--have the same signatures and addresses. o Each Fund or CAT Portfolio must be legally eligible for sale in your state of residence. o You may exchange out of each of the Berger Funds up to four times per calendar year. At this time, there is no limit on the number of exchanges permitted out of the CAT Portfolios. o You may exchange by telephone, online access or mail. o You are responsible for obtaining and reading the prospectus for the Fund or CAT Portfolio into which you are exchanging. o An exchange out of a Berger Fund results in the sale of that Fund's shares and the purchase of another, normally resulting in a taxable event for you. o Exchanges into any new Fund or CAT Portfolio are subject to that Fund's or Portfolio's initial and subsequent investment minimums. The Fund may terminate or modify the exchange privilege in the future. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 18 16 Information About Your Account (continued) Signature Guarantees/Special Documentation The Fund uses Signature Guarantees to protect you and the Fund from possible fraudulent requests for redeemed shares. Your redemption request must be in writing and accompanied by a Signature Guarantee if: o Your request exceeds $100,000. o You request that payment be made to a name other than the one on your account registration. o You request that payment be mailed to an address that has been changed within 30 days of your redemption request or to an address other than the one of record. o You change or add information relating to your designated bank. Berger Funds reserve the right to require Signature Guarantees under other certain circumstances. You can get a Signature Guarantee from most broker-dealers, national or state banks, credit unions, federal savings and loan associations or other eligible institutions. You cannot obtain a Signature Guarantee from a notary public. Make sure the Signature Guarantee appears: o Together with the signature(s) of all registered owner(s) of the redeemed shares on the written redemption request. o On any share certificates you hold for the redeemed shares or on a separate statement of assignment (stock power) that may be obtained from a bank or broker. Additional documents are required for redemptions by corporations, executors, administrators, trustees and guardians. For instructions, call (800) 551-5849, or write to the Berger Funds, P.O. Box 219958, Kansas City, MO 64121-9958. Your Share Price The price at which you buy, sell or exchange Fund shares is the share price or net asset value (NAV). The share price for the Investor Shares of the Fund is determined by adding the Investor Shares' pro rata portion of the total value of the Fund's investments, cash and other assets, deducting the Investor Shares' pro rata portion of the Fund's liabilities and the liabilities attributable directly to the Investor Shares and then dividing that value by the total number of the Investor Shares outstanding. Share price is calculated separately for each class of Fund shares. The Fund's share price is calculated at the close of the regular trading session of the New York Stock Exchange (normally 4:00 p.m. Eastern time) each day that the Exchange is open. Share price is not calculated on the days that the Exchange is closed. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 19 17 Berger Small Cap Value Fund Other Information About Your Account For a purchase, redemption or exchange of Fund shares, your price is the share price next calculated after your request is received in good order by the Fund, its authorized agent or designee. To receive a specific day's price, your request must be received before the close of the New York Stock Exchange on that day. When the Fund calculates its share price, it values the securities it holds at market value. Sometimes market quotes for some securities are not available or are not representative of market value. Examples would be when events occur that materially affect the value of a security at a time when the security is not trading or when the securities are illiquid. In that case, securities may be valued in good faith at fair value, using consistently applied procedures decided on by the trustees. Money market instruments maturing within 60 days are valued at amortized cost, which approximates market value. Assets and liabilities expressed in foreign currencies are converted into U.S. dollars at the prevailing market rates quoted by one or more banks or dealers shortly before the close of the Exchange. The Fund's foreign securities may trade on days that the Exchange is closed and the Fund's daily share price is not calculated. As a result, the Fund's daily share price may be affected, and you will not be able to purchase or redeem shares. SECURITY CONSIDERATIONS You may give up some level of security by choosing to buy or sell shares by telephone or online, rather than by mail. The Fund uses procedures designed to give reasonable assurance that telephone and online instructions are genuine, including recording the transactions, testing the identity of the shareholder placing the order and sending prompt written confirmation of transactions to the shareholder of record. The Fund and its service providers are not liable for acting upon instructions communicated by telephone or online that they believe to be genuine if these procedures are followed. CONFIRMATION OF YOUR PURCHASES AND REDEMPTIONS After any transaction, you will receive written confirmation including the share price and the dollar amount and number of shares bought or redeemed. Exception: Shares purchased under Systematic Investment Plans or redeemed under Systematic Withdrawal Plans will be confirmed quarterly. Partial shares will be calculated to three decimal places. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 20 18 Other Information About Your Account (continued) SHAREHOLDER REPORTS To reduce expenses, the Fund may mail only one copy of most financial reports, prospectuses and proxies to your household, even if you have more than one account in the Fund. Call (800) 551-5849 to begin receiving your own copy or if you need additional copies of financial reports, prospectuses or proxy statements. SHARE CERTIFICATES To assist in minimizing administrative costs, share certificates will not be issued. Records of share ownership are maintained by the Fund's transfer agent in book entry form. If you are selling shares previously issued in certificate form, you need to include the certificate along with your redemption or exchange request. If you have lost your certificate, please call us at (800) 551-5849. PURCHASES THROUGH BROKER-DEALERS You may buy Fund shares through certain broker-dealers or other financial organizations, but these organizations may charge you a fee or may have different minimums for first-time or additional investments that are not applicable if you buy shares directly from the Fund. THIRD-PARTY ADMINISTRATORS Certain brokerage firms and other companies may provide administrative services (such as sub-transfer agency, recordkeeping or shareholder communications services) to investors purchasing shares of the Fund through those companies. The Fund's advisor or the Fund (if approved by its trustees) may pay fees to these companies for their services. These companies may also be appointed as agents for or authorized by the Fund to accept on its behalf purchase and redemption requests that are received in good order. Subject to Fund approval, certain of these companies may be authorized to designate other entities to accept purchase and redemption orders on behalf of the Fund. DATE-RELATED INFORMATION Mutual funds and businesses around the world could be adversely affected if computers do not properly process date-related information. The Fund's advisor is addressing these issues for its computers and is getting reasonable assurances from the Fund's other major service providers that they too are addressing these issues to preserve smooth functioning of the Fund's trading, pricing, shareholder account, custodial and other operations. There can be no assurances, however, that all problems will be avoided. These computer problems could also adversely affect the Fund's investments. Improperly functioning computers may disrupt securities markets generally or result in overall economic uncertainty. Individual companies may also be adversely affected by the cost of fixing their computers, which could be substantial. The Fund's investment manager considers these issues when evaluating investments for the Fund. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 21 19 Berger Small Cap Value Fund REDEMPTIONS IN-KIND The Fund intends to redeem its shares only for cash, although in order to protect the interest of remaining shareholders, it retains the right to redeem its shares in-kind under unusual circumstances. In-kind payment means payment will be made to you in portfolio securities rather than cash. If this occurs, you will incur transaction costs if you sell the securities for cash. You may have difficulty selling the securities and recovering the amount of your redemption if the securities are illiquid. ACCOUNT MINIMUMS The Fund will charge all shareholder accounts (except IRA accounts) with a balance of less than $2,000 that are not making automatic monthly investments an annual fee of $10. This charge is designed to help offset the proportionately higher costs of maintaining small accounts. This charge will apply to accounts that have been over $2,000 at some point in time only if the balance has dropped below this amount because shares were redeemed, not because the share value declined. Shares in accounts that do not meet the minimum balance requirement applicable to them as described below may also be subject to involuntary redemption by the Fund. REDEMPTIONS BY THE FUND OF CERTAIN ACCOUNTS To reduce its expenses, the Fund may involuntarily redeem the shares in your account if your balance drops below $2,000--but only if it drops below this amount because you have redeemed shares, not because the share value has declined. You will be given 60 days' notice before the Fund undertakes any involuntary redemption. During that time, you may buy more shares to bring your account above the minimum. The Fund also reserves the right to close any account if it believes the shareholder is engaging in activities which may be detrimental to the Fund. Distribution and Taxes DISTRIBUTIONS OF INCOME AND GAINS Unless you tell us that you want to receive your distributions in cash, they will be reinvested automatically in Fund shares. The Fund generally makes two kinds of distributions: o Capital gains from the sale of portfolio securities held by the Fund. The Fund will distribute any net realized capital gains annually, normally in December. o Net investment income from interest or dividends received on securities held by the Fund. The Fund will distribute its investment income annually, normally in December. The Fund reserves the right to reinvest into your account undeliverable or uncashed dividend or distribution checks that remain outstanding for six months, or distributions of less than $10. The dividend or distribution amount will be reinvested in shares of the applicable Fund at the NAV next computed after the check is cancelled. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 22 20 Other Information About Your Account (continued) YOUR TAXES You generally will owe tax on amounts distributed to you by the Fund in any non-retirement account whether you reinvest them in additional shares or receive them in cash. Distributions of gains from the sale of assets held by the Fund for more than one year generally are taxable to you at the applicable long-term capital gains rate, regardless of how long you have owned your Fund shares. Distributions from other sources generally are taxed as ordinary income. Distributions made by the Fund to you will normally be capital gains. A portion of those gains may be net short-term capital gains, which are taxed as ordinary income. The Fund generally will not distribute net investment income, although any net investment income that is generated as a by-product of managing its portfolio will be distributed to you. If you redeem Fund shares that have appreciated in value, you will have a taxable gain upon redemption. Exchanges are treated as a redemption and purchase for tax purposes. Therefore, you will also have a taxable gain if you exchange shares that have appreciated in value. ADDITIONAL TAX INFORMATION You should consult your own tax advisor about your particular situation. For more information about other tax matters, including backup withholding for certain taxpayers and other tax aspects of redemptions, see the SAI. Tax-Sheltered Retirement Plans The Fund offers several tax-qualified retirement plans for individuals, businesses and nonprofit organizations. For information about establishing an IRA, Roth IRA, profit-sharing or money purchase pension plan, 403(b) Custodial Account, SEP-IRA, SIMPLE IRA, Education IRA account or other retirement plans, please call (800) 551-5849, or write to the Berger Funds, P.O. Box 219958, Kansas City, MO 64121-9958. Trustees for existing 401(k) or other plans interested in using Fund shares as an investment or investment alternative in their plans are invited to call the Fund at (800) 259-2820. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 23 21 Berger Small Cap Value Fund Organization of the Fund INVESTMENT MANAGERS The following companies provide investment management and administrative services to the Fund. Berger LLC (210 University Blvd., Suite 900, Denver, CO 80206) is the Fund's investment advisor. Berger LLC serves as investment advisor, sub-advisor or administrator to mutual funds and institutional investors. Berger LLC has been in the investment advisory business for 26 years. As investment advisor, Berger LLC oversees, evaluates and monitors the investment advisory services provided by Perkins, Wolf, McDonnell & Company as sub-advisor. For the most recent fiscal year, the Fund paid Berger LLC an advisory fee of 0.81% of net assets. Berger LLC also provides administrative services to the Fund. Perkins, Wolf, McDonnell & Company (PWM) (53 West Jackson Boulevard, Suite 722, Chicago, IL 60604) has been in the investment management business since 1984 and served as investment advisor to the Berger Small Cap Value Fund (then known as The Omni Investment Fund) from 1987 to February 1997, when PWM became the sub-advisor to the Fund. As sub-advisor, PWM provides day-to-day management of the Fund's investment operations. Robert H. Perkins has been the lead investment manager for the Berger Small Cap Value Fund since its inception in 1985. Robert Perkins has been an investment manager since 1970 and serves as President and a director of PWM. As lead manager, Robert Perkins is responsible for the daily decisions of the Fund's security selection. Thomas H. Perkins has also served as investment manager of the Berger Small Cap Value Fund since January 1999. Thomas Perkins has been an investment manager since 1974 and joined PWM as a portfolio manager in 1998. He has also served as investment manager of the Berger Mid Cap Value Fund since its inception in 1998. Previously, he was a portfolio manager of valuation sensitive growth portfolios for Alliance Capital from 1994 to 1998. PORTFOLIO TURNOVER Portfolio changes are made whenever the Fund's investment manager believes that the Fund's goal could be better achieved by investment in another security, regardless of portfolio turnover. At times, portfolio turnover for the Fund may exceed 100% per year. A turnover rate of 100% means the securities owned by the Fund were replaced once during the year. Higher turnover rates may result in higher brokerage costs to the Fund and in higher net taxable gains for you as an investor. The Fund's portfolio turnover rate can be found under the heading "Financial Highlights for the Fund." Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 24 22 Organization of the Fund (continued) 12b-1 ARRANGEMENTS The Fund is a "no-load" fund, meaning that you pay no sales load or commissions when you buy or sell Fund shares. However, the Fund has adopted a 12b-1 plan for its Investor Shares class, permitting it to pay a fee in connection with distribution of those shares. Berger LLC is entitled to be paid a fee under the plan of 0.25% of the Fund's average daily net assets attributable to the Investor Shares. Because this fee is paid on an ongoing basis, this may result in the cost of your investment increasing and over time may cost you more than other types of sales charges. The fee may be used for such things as marketing and promotion, compensation to dealers and others who provide distribution and administrative services, and shareholder support services (such as routine requests for information). SPECIAL FUND STRUCTURE The Fund currently has two classes of shares. The Investors Shares are offered through this prospectus and are available to the general public. The other class of shares, Institutional Shares, are offered through a separate prospectus and are designated for investors who maintain a minimum account balance of $250,000. Each class of shares has its own expenses so that share price, performance and distributions will differ between classes. The 12b-1 plan adopted by the Berger Small Cap Value Fund applies only to the Investor Shares. For more information on Institutional Shares, please call (800) 259-2820. For more information on the multi-class fund structure, see the SAI. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 25 23 Financial Highlights Financial Highlights for the Fund These financial highlights are intended to help you understand the Fund's financial performance for the periods shown. Certain information reflects financial results for a single Fund share. Total return shows you how much an investment in the Fund increased or decreased during each period, assuming you reinvested all dividends and distributions. PricewaterhouseCoopers LLP, independent accountants, audited this information. Their report is included in the Fund's annual report, which is available without charge upon request. Berger Small Cap Value Fund - Investor Shares For a Share Outstanding Throughout the Periods
PERIOD FROM YEARS ENDED SEPTEMBER 30, FEBRUARY 14, 1997(1) 2000 1999 1998 TO SEPTEMBER 30, 1997 ------------------------------------------- --------------------- Net asset value, beginning of period $ 20.94 $ 17.58 $ 22.28 $ 17.24 ------------ ------------ ------------ ------------ From investment operations Net investment income (loss) 0.30 (0.02) 0.42 0.03 Net realized and unrealized gains (losses) from investments and foreign currency transactions 3.97 4.26 (2.58) 5.01 ------------ ------------ ------------ ------------ Total from investment operations 4.27 4.24 (2.16) 5.04 ============ ============ ============ ============ Less dividends and distributions Dividends (from net investment income) (0.20) (0.07) (0.17) -- Distributions (from capital gains) (0.23) (0.81) (2.37) -- ------------ ------------ ------------ ------------ Total dividends and distributions (0.43) (0.88) (2.54) -- ------------ ------------ ------------ ------------ Net asset value, end of period $ 24.78 $ 20.94 $ 17.58 $ 22.28 ------------ ------------ ------------ ------------ Total Return(2) 20.77% 24.69% (10.98)% 29.23% ============ ============ ============ ============ Ratios/Supplemental Data: Net assets, end of period (in thousands) $ 859,030 $ 374,063 $ 108,465 $ 55,211 Net expense ratio to average net assets(3) 1.19% 1.37% 1.56% 1.66%(4) Ratio of net investment income to average net assets 1.69% 1.36% 0.87% 0.60%(4) Gross expense ratio to average net assets 1.23% 1.37% 1.56% 1.66%(4) Portfolio turnover rate(2) 72% 66% 69% 81%
(1) Commencement of investment operations for Investor Shares. (2) Not annualized. (3) Net expenses represent gross expenses reduced by fees waived and/or reimbursed by the Advisor. (4) Annualized. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 26 24 Financial Highlights for the Fund (continued) The following supplemental financial highlights are for the Berger Small Cap Value Fund for periods before February 14, 1997, when the Fund first adopted share classes and began offering the Investor Shares. Therefore, the 0.25% 12b-1 fee paid by the Investor Shares is not reflected in the data on the table. Except for information for the period from January 1, 1997 through February 14, 1997, the information in the table was audited by the Fund's prior independent accountants. The information for the period from January 1, 1997 through February 14, 1997 is unaudited. Berger Small Cap Value Fund Supplemental Financial Highlights For a Share Outstanding Throughout the Periods
PERIOD FROM JANUARY 1, 1997 TO FEBRUARY 14, 1997(2) YEARS ENDED DECEMBER 31 (UNAUDITED) 1996 1995 1994 1993 --------------- ---- ---- ---- ---- Per Share Data(3) Net asset value, beginning of period $ 16.48 $ 14.57 $ 12.75 $ 13.99 $ 13.39 --------- --------- --------- --------- --------- From investment operations Net investment income (loss) (0.02) 0.12 0.09 (0.01) 0.03 Net realized and unrealized gains (losses) on investments 0.78 3.62 3.23 0.91 2.14 --------- --------- --------- --------- --------- Total from investment operations 0.76 3.74 3.32 0.90 2.17 ========= ========= ========= ========= ========= Less dividends and distributions Dividends (from net investment income) 0.00 (0.11) (0.09) 0.00 (0.03) Distributions (from capital gains) 0.00 (1.72) (1.41) (2.14) (1.54) --------- --------- --------- --------- --------- Total dividends and distributions 0.00 (1.83) (1.50) (2.14) (1.57) --------- --------- --------- --------- --------- Net asset value, end of period $ 17.24 $ 16.48 $ 14.57 $ 12.75 $ 13.99 --------- --------- --------- --------- --------- Total Return(4) 4.61% 25.58% 26.07% 6.74% 16.25% ========= ========= ========= ========= ========= Ratios/Supplemental Data: Net assets, end of period $ 38,622 $ 36,041 $ 31,833 $ 18,270 $ 16,309 (in thousands) Ratio of net income (loss) to average net assets (0.87)%(5) 0.69% 0.64% (0.04)% 0.18% Gross expenses ratio to average net assets 2.04%(5) 1.48% 1.64% 1.43% 1.31% Portfolio turnover rate 27% 69% 90% 125% 108% YEARS ENDED DECEMBER 31 1992 1991 1990 1989 1988 1987(1) ---- ---- ---- ---- ---- ------- Per Share Data(3) Net asset value, beginning of period $ 11.39 $ 9.23 $ 12.19 $ 11.21 $ 10.06 $ 11.33 --------- --------- --------- --------- --------- --------- From investment operations Net investment income (loss) 0.09 0.14 0.28 0.23 0.24 0.21 Net realized and unrealized gains (losses) on investments 2.14 2.16 (2.95) 2.71 1.77 (0.29) --------- --------- --------- --------- --------- --------- Total from investment operations 2.23 2.30 (2.67) 2.94 2.01 (0.08) ========= ========= ========= ========= ========= ========= Less dividends and distributions Dividends (from net investment income) (0.10) (0.14) (0.29) (0.22) (0.24) (0.20) Distributions (from capital gains) (0.13) 0.00 0.00 (1.74) (0.62) (0.99) --------- --------- --------- --------- --------- --------- Total dividends and distributions (0.23) (0.14) (0.29) (1.96) (0.86) (1.19) --------- --------- --------- --------- --------- --------- Net asset value, end of period $ 13.39 $ 11.39 $ 9.23 $ 12.19 $ 11.21 $ 10.06 --------- --------- --------- --------- --------- --------- Total Return(4) 19.59% 25.01% (21.94)% 26.44% 20.09% (0.68)% ========= ========= ========= ========= ========= ========= Ratios/Supplemental Data: Net assets, end of period $ 14,007 $ 11,940 $ 9,839 $ 13,576 $ 9,976 $ 6,748 (in thousands) Ratio of net income (loss) to average net assets 0.73% 1.24% 2.34% 1.85% 2.33% 1.87%(5) Gross expenses ratio to average net assets 1.41% 1.52% 1.84% 1.78% 1.44% 1.69%(5) Portfolio turnover rate 105% 130% 146% 118% 103% 189%
(1) Covers the period from February 1, 1987 to December 31, 1987. Effective October 20, 1987, the Fund became publicly registered under the Investment Company Act of 1940. Prior thereto, its shares were not publicly offered. (2) Commencement of Investor Shares class. (3) All per share amounts prior to December 31, 1994 have been adjusted for a 10 for 1 share split which occurred September 30, 1994. (4) Not annualized for periods of less than one full year. (5) Annualized. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Investor Shares 27 This page intentionally left blank 28 This page intentionally left blank 29 FOR MORE INFORMATION: Additional information about the Fund's investments is available in the Fund's semi-annual and annual reports to shareholders. The Fund's annual report contains a discussion of the market conditions and investment strategies that affected the Fund's performance over the past year. You may wish to read the Statement of Additional Information (SAI) for more information on the Fund and the securities it invests in. The SAI is incorporated into this prospectus by reference, which means that it is considered to be part of the prospectus. You can get free copies of the annual and semi-annual reports and the SAI, request other information or get answers to your questions about the Fund by writing or calling the Fund at: Berger Funds P.O. Box 219958 Kansas City, MO 64121-9958 (800) 333-1001 bergerfunds.com Text-only versions of Fund documents can be viewed online or downloaded from the EDGAR database on the SEC's Web site at sec.gov. You can also obtain copies by visiting the SEC's Public Reference Room in Washington D.C. For information on the operation of the Public Reference Room, call (202) 942-8090. Copies of documents may also be obtained, after paying a duplicating fee, by sending your request to the following e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-6009. INVESTMENT COMPANY ACT FILE NUMBER: Berger Omni Investment Trust 811-4273 (Berger Small Cap Value Fund - Investor Shares) SCVPROS 30 January 29, 2001 BERGER SMALL CAP VALUE FUND - INSTITUTIONAL SHARES PROSPECTUS [BERGER FUNDS LOGO] Due to Small Cap Value Fund's current size relative to the range of suitable investments available to the Fund, the Fund has discontinued public sale of its shares to new investors. Shareholders who have open Fund accounts may make additional investments and reinvest dividends and capital gains distributions. Under certain circumstances, current shareholders may also open additional accounts. If a Fund account is closed, however, additional investments in the Fund may not be possible. The Securities and Exchange Commission has not approved or disapproved any shares offered in this prospectus or determined whether this prospectus is accurate or complete. Anyone who tells you otherwise is committing a crime. Like all mutual funds, an investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. There is no guarantee that the Fund will meet its investment goal, and although you have the potential to make money, you could also lose money in the Fund. 31 BERGER SMALL CAP VALUE FUND Due to the Fund's size relative to the range of suitable investments available to the Fund, the Trustees have decided to restrict the Fund's growth. Therefore, the Berger Small Cap Value Fund (the "Fund") was closed to new investors on March 31, 2000. You may continue to purchase Investor Shares or Institutional Shares in the Fund if: o You are an existing shareholder in the Fund as of the closing date and you: o Add to your account through the purchase of additional Fund shares. o Add to your account through the reinvestment of dividends and cash distributions from any shares owned in the Fund; o You are a discretionary investment advisor that invests through existing accounts in the Fund or at a financial intermediary; or o You are a participant of a qualified defined contribution retirement plan (for example, a 401(k) plan, profit sharing plan and money purchase plan), 403(b) plan or 457 plan that invests through existing accounts in the Fund or at a financial intermediary. If you redeem or exchange all your remaining Fund shares you will not be permitted to buy back into the Fund so long as the Fund remains closed to new investors. If your Fund account drops below the applicable minimum balance, all your remaining shares will be subject to involuntary redemption by the Fund as described in the Prospectus. The Fund may resume sales to new investors at some future date if the Trustees of the Fund determine that it is in the best interests of the Fund and its shareholders. BERGER FUNDS and BERGER SMALL CAP VALUE FUND are registered service marks of Berger LLC; THE BERGER MOUNTAIN LOGO is a registered trademark of Berger LLC; other marks referred to herein are the trademarks, service marks, registered trademarks or registered service marks of the respective owners thereof. 32 3 Contents BERGER FUNDS(R) are a no-load family of mutual funds. A mutual fund pools money from shareholders and invests in a portfolio of securities. This prospectus offers the class of shares designated as Institutional Shares of the Berger Small Cap Value Fund. These shares are designed for pension and profit-sharing plans, employee benefit trusts, endowments, foundations and corporations, as well as high net worth individuals and financial intermediaries who are willing to maintain a minimum account balance of $250,000. Berger Small Cap Value Fund(R) - Institutional Shares ........................4 The Fund's Goal and Principal Investment Strategies ..........................4 Principal Risks ..............................................................4 The Fund's Past Performance ..................................................5 Fund Expenses ................................................................6 Investment Techniques, Securities and Associated Risks .......................7 Risk and Investment Glossary .................................................7 Buying Shares ...............................................................11 Selling (redeeming) Shares ..................................................13 Information About Your Account ..............................................14 Exchanging Shares ...........................................................14 Signature Guarantees/Special Documentation ..................................14 Your Share Price ............................................................15 Other Information About Your Account ........................................16 Distribution and Taxes .....................................................18 Tax-Sheltered Retirement Plans ..............................................19 Organization of the Fund ....................................................20 Investment Managers .........................................................20 Special Fund Structure ......................................................21 Financial Highlights for the Fund ...........................................22
Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 33 4 Berger Small Cap Value Fund - Institutional Shares Ticker Symbol BSVIX The Fund's Goal and Principal Investment Strategies The Fund aims for capital appreciation. In pursuing that goal, the Fund primarily invests in the common stocks of small companies whose stock prices are believed to be undervalued. The Fund's securities selection focuses on companies that are out of favor with markets or have not yet been discovered by the broader investment community. The Fund's investment manager generally looks for companies with: o A low price relative to their assets, earnings, cash flow or business franchise o Products and services that give them a competitive advantage o Quality balance sheets and strong management. The investment manager's philosophy is to weigh a security's downside risk before considering its upside potential, which may help provide an element of capital preservation. Under normal circumstances, the Fund invests at least 65% of its assets in equity securities of small companies whose market capitalization, at the time of initial purchase, is less than the 12-month average of the maximum market capitalization for companies included in the Russell 2000 Index (Russell 2000). This average is updated monthly. The Fund's investment manager will generally sell a security when it no longer meets the manager's investment criteria or when it has met the manager's expectations for appreciation. Principal Risks You may be interested in the Fund if you are comfortable with above-average risk and intend to make a long-term investment commitment. Like all managed funds, there is a risk that the investment manager's strategy for managing the Fund may not achieve the desired results. In addition, the price of common stock moves up and down in response to corporate earnings and developments, economic and market conditions and unanticipated events. As a result, the price of the Fund's investments may go down and you could lose money on your investment. The Fund's share price may fluctuate more than that of funds primarily invested in stocks of mid-sized and large companies. Small company securities may underperform as compared to the securities of larger companies. They may also pose greater market, liquidity and information risk because of narrow product lines, limited financial resources, less depth in management or a limited trading market for their stocks. The Fund's investments are often focused in a small number of business sectors, which may pose greater market and liquidity risks. In addition, the Fund may invest in certain securities with unique risks, such as special situations. See "Investment Techniques, Securities and Associated Risks" later in this prospectus for more information on principal risks and other risks. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 34 5 Berger Small Cap Value Fund The Fund's Past Performance The information below shows the Fund's performance through December 31, 2000. These returns include reinvestment of all dividends and capital gains distributions and reflect Fund expenses. As with all mutual funds, past performance does not guarantee future results. Year-by-year returns show you how the Fund's performance has varied by illustrating the differences for each full calendar year for the past ten years. YEAR-BY-YEAR TOTAL RETURN AS OF DECEMBER 31 [GRAPH] 1991 24.97% 1992 19.61% 1993 16.27% 1994 6.70% 1995 26.06% 1996 25.60% 1997 36.93% 1998 1.83% 1999 14.69% 2000 27.16% BEST QUARTER: 6/30/99 22.14% WORST QUARTER: 9/30/98 -16.56%
Average annual total return is a measure of the Fund's performance over time. The Fund's average annual return is compared with the Russell 2000, an unmanaged index, with dividends reinvested, which consists of the common stocks of 2000 U.S. companies. While the Fund does not seek to match the returns of the Russell 2000, this index is a good indicator of small company stock market performance. You may not invest in the Russell 2000, and unlike the Fund, it does not incur fees or charges. AVERAGE ANNUAL RETURNS AS OF DECEMBER 31, 2000
1 Year 5 Years 10 Years ------ ------- -------- The Fund 27.16% 20.63% 19.57% Russell 2000 -3.02% 10.31% 15.53%
Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 35 6 Berger Small Cap Value Fund - Institutional Shares Fund Expenses As a shareholder in the Fund, you do not pay any sales loads, but you do indirectly bear Annual Fund Operating Expenses, which vary from year to year.
ANNUAL FUND OPERATING EXPENSES (deducted directly from the Fund) % - --------------------------------- ----- Management fee .81 Other expenses .07 ----- Total Annual Fund Operating Expenses .88 =====
Understanding Expenses Annual Fund operating expenses are paid by the Fund. As a result, they reduce the Fund's return. Fund expenses include management fees and administrative costs such as shareholder recordkeeping and reports, custodian and pricing services and registration fees. Example Costs The following example helps you compare the cost of investing in the Fund with the cost of investing in other mutual funds by showing what your costs may be over time. It uses the same assumptions that other funds use in their prospectuses: o $10,000 initial investment o 5% total return for each year o Fund operating expenses remain the same for each period o Redemption after the end of each period Your actual costs may be higher or lower, so this example should be used for comparison only. Based on these assumptions your costs at the end of each period would be: BERGER SMALL CAP VALUE FUND - INSTITUTIONAL SHARES
YEARS $ - ----- ----- One 90 Three 281 Five 488 Ten 1,084
Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 36 7 Berger Small Cap Value Fund Investment Techniques, Securities and Associated Risks BEFORE YOU INVEST... in the Fund, make sure you understand the risks involved. All investments involve risk. Generally, the greater the risk, the greater the potential for return. The reverse is also generally true--the lower the risk, the lower the potential for return. Like all mutual funds, an investment in the Fund is not a bank deposit and is not insured or guaranteed by the FDIC or any other government agency. The Fund is not a complete investment program, but may serve to diversify other types of investments in your portfolio. There is no guarantee that the Fund will meet its investment goal, and although you have the potential to make money, you could also lose money by investing in the Fund. The following glossary will help you further understand the risks the Fund takes by investing in certain securities and the investment techniques used by the Fund. You may get more detailed information about the risks of investing in the Fund in the Statement of Additional Information (SAI), including a discussion of debt security ratings in Appendix A to the SAI. Risk and Investment Glossary Borrowing refers to a loan of money from a bank or other financial institution undertaken by the Fund for temporary or emergency reasons only. The Fund will not borrow more than 5% of its total assets. Leverage Risk Call risk is the possibility that an issuer may redeem or "call" a fixed-income security before maturity at a price below its current market price. An increase in the likelihood of a call may reduce the security's price. Common stock is a share of ownership (equity) interest in a company. Companies with limited operating histories are securities issued by companies that have been in continuous operation for less than three years. Sometimes called "unseasoned" issuers. The Fund will not invest more than 5% of its total assets in these securities. Market, Liquidity and Information Risks Convertible securities(1) are debt or equity securities that may be converted on specified terms into stock of the issuer. Market, Interest Rate, Prepayment and Credit Risks Correlation risk occurs when the Fund "hedges"--uses one investment to offset the Fund's position in another. If the two investments do not behave in relation to one another the way Fund managers expect them to, then unexpected results may occur. Credit risk means that the issuer of a security or the counterparty to an investment contract may default or become unable to pay its obligations when due. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 37 8 Investment Techniques, Securities and Associated Risks (continued) Currency risk happens when the Fund buys or sells a security denominated in foreign currency. Foreign currencies "float" in value against the U.S. dollar. Adverse changes in foreign currency values can cause investment losses when the Fund's investments are converted to U.S. dollars. Diversification means a diversified fund may not, with respect to at least 75% of its assets, invest more than 5% of its assets in the securities of one company. A nondiversified fund may be more volatile than a diversified fund because it invests more of its assets in a smaller number of companies and the gains or losses on a single stock will therefore have a greater impact on the fund's share price. The Fund is a diversified fund. Foreign securities are issued by companies located outside of the United States. The Fund considers a company to be located outside the United States if the principal securities trading market for its equity securities is located outside the U.S. or it is organized under the laws of, and has a principal office in, a country other than the U.S. Market, Currency, Transaction, Liquidity, Information and Political Risks Hedging risk comes into play when the Fund uses a security whose value is based on an underlying security or index to "offset" the Fund's position in another security or currency. The objective of hedging is to offset potential losses in one security with gains in the hedge. But a hedge can eliminate or reduce gains as well as offset losses. (Also see "Correlation risk.") Illiquid securities are securities that by their nature cannot be sold readily. The Fund will not invest more than 10% of its net assets in these securities. Market, Liquidity and Transaction Risks Information risk means that information about a security or issuer might not be available, complete, accurate or comparable. Initial public offering (IPO) is the sale of a company's securities to the public for the first time. IPO companies can be small and have limited operating histories. The price of IPO securities can be highly unstable because of prevailing market psychology and the small number of shares available. In addition, the quality and number of IPOs available for purchase may diminish in the future, and their contribution to Fund performance may be less significant as the Fund grows in size. Market, Liquidity and Information Risks Interest rate risk is the risk that changes in interest rates that adversely affect the value of an investor's securities. When interest rates rise, the value of fixed-income securities will generally fall. Conversely, a drop in interest rates will generally cause an increase in the value of fixed-income securities. Longer-term securities are subject to greater interest rate risk. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 38 9 Berger Small Cap Value Fund Investment-grade bonds are rated BBB (Standard & Poor's) or Baa (Moody's) or above. Bonds rated below investment grade are subject to greater credit risk than investment-grade bonds. Interest Rate, Market, Call and Credit Risks Leverage risk occurs in some securities or techniques that tend to magnify the effect of small changes in an index or a market. This can result in a loss that exceeds the amount that was invested in the contract. Liquidity risk occurs when investments cannot be sold readily. The Fund may have to accept a less-than-desirable price to complete the sale of an illiquid security or may not be able to sell it at all. Market capitalization is the total current market value of a company's outstanding common stock. Market risk exists in all mutual funds and means the risk that the prices of securities in a market, a sector or an industry will fluctuate and that such movements might reduce an investment's value. Opportunity risk means missing out on an investment opportunity because the assets necessary to take advantage of it are committed to less advantageous investments or strategies. Options(2) are contracts giving the holder the right but not the obligation to purchase or sell a security on or before a predetermined future date for a fixed price. Options on securities indexes are similar, but settle in cash. The Fund will not use more than 5% of its net assets for premiums to buy options. Hedging, Credit, Correlation and Leverage Risks Political risk comes into play with investments, particularly foreign investments, that may be adversely affected by nationalization, taxation, war, government instability or other economic or political actions or factors. Prepayment risk is the risk that, as interest rates fall, borrowers are more likely to refinance their debts. As a result, the principal on certain fixed-income securities may be paid earlier than expected, which could cause investment losses and cause prepaid amounts to have to be reinvested at a relatively lower interest rate. Sector focus(3) occurs when a significant portion of the Fund's assets are invested in a relatively small number of related industries. The Fund will not concentrate more than 25% of its total assets in any one industry. Sector focus may increase both market and liquidity risk. Market and Liquidity Risks Small company securities(3) are securities issued by small companies, as measured by their market capitalization. The market capitalization range targeted by the Fund appears under the heading "The Fund's Goal and Principal Investment Strategies." In general, the smaller the company, the greater its risks. Market, Liquidity and Information Risks Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 39 10 Investment Techniques, Securities and Associated Risks (continued) Special situations(3) are companies about to undergo a structural, financial or management change that may significantly affect the value of their securities. Market and Information Risks Temporary defensive measures may be taken when the Fund's investment manager believes they are warranted because of market conditions. When this happens, the Fund may increase its investment in government securities and other short-term securities without regard to the Fund's investment restrictions, policies or normal investment emphasis. Opportunity Risk Transaction risk means that the Fund may be delayed or unable to settle a transaction or that commissions and settlement expenses may be higher than usual. In the case of foreign securities, use of a foreign securities depository to maintain Fund assets may increase this risk. This risk may be minimized through an analysis and continuous monitoring, by the Funds' primary custodian, of the custodial risks of using the depository. Writing (selling) covered call options(2) is the selling of a contract to another party, which gives them the right but not the obligation to buy a particular security from you. The Fund writes call options only if it already owns the security (if it is "covered"). The Fund may only write call options up to 10% of its net assets. Opportunity, Credit and Leverage Risks 1. The Fund has no minimum quality standards for convertible securities, although it will not invest in defaulted securities. It also will not invest 20% or more of its assets in convertible securities rated below investment grade or in unrated convertible securities that the sub-advisor considers to be below investment grade. 2. The Fund may use options only for hedging. Not more than 5% of the Fund's net assets may be used for premiums for options, although the Fund may have more at risk under these contracts than the premium. However, the Fund's aggregate obligations under these contracts may not exceed the total market value of the assets being hedged, such as some or all of the value of the Fund's equity securities. 3. The security or technique is emphasized by the Fund. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 40 11 Berger Small Cap Value Fund Buying Shares
Minimums - -------- Initial investment $250,000 Subsequent investments No minimum
Send new account applications to Berger Funds P.O. Box 219958 Kansas City, MO 64121-9958 OR for overnight, certified or registered mail only Berger Funds 330 West 9th Street, 1st Floor Kansas City, MO 64105 Although the Fund has discontinued public sale to new investors, shareholders who have open Fund accounts may continue to purchase shares and reinvest dividends and capital gains. Once a Fund account is closed, it may not be reopened. An account may be considered closed and subject to redemption by the Fund under certain circumstances described in "Redemption by the Fund of Certain Accounts." BY MAIL o Read this prospectus. o Fill out the application if you are opening a new account. o Make out a check to Berger Funds for the amount you want to invest. o Send the application and check to the Berger Funds in the envelope provided. o To add to an existing account, be sure to include your account number on your check and mail it to the appropriate address above. BY WIRE OR ELECTRONIC FUNDS TRANSFER o Payment may be made from your bank to the Berger Funds. o Call (800) 960-8427 for current wire or electronic funds transfer instructions. BY TELEPHONE* o If you already have a Berger Funds account, you may purchase additional shares by telephone order. o You must pay or them within three business days by wire, electronic funds transfer or overnight delivery of a check. If payment is not received within three business days the trade will be cancelled and your account may be charged for the loss to the Fund. o Call (800) 960-8427 for current wire or electronic funds transfer instructions. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 41 12 Buying Shares (continued) BY ONLINE ACCESS* o If you have established a Berger Funds account with electronic funds transfer privileges you may purchase additional shares via online access. o You will find us online at bergerfunds.com. BY AUTOMATIC INVESTMENT PLAN o To automatically purchase more shares on a regular basis, fill out the automatic Investment Plan section of the application. o Investments are transferred automatically from your bank account. o See details on the application. *All shareholders are automatically granted telephone and online transaction privileges unless they decline them explicitly in writing, either on the account application or by writing to the Berger Funds at the address above. You may give up some level of security by choosing to buy and sell shares by telephone or online rather than by mail. In times of extreme economic or market conditions, transactions by telephone or online may be difficult. Important notes about paying for your shares o Your check must be made payable to Berger Funds. o Purchases must be made in U.S dollars drawn on U.S. banks. o You may not purchase shares by cash, credit card, third-party checks or checks drawn on foreign banks. o Subject to approval by the Fund, you may purchase Fund shares with liquid securities that the Fund is eligible to purchase. These securities must have a value that can be readily determined in accordance with the Fund's valuation policies. You may pay for Fund shares with securities only if it is the investment manager's intention to retain them in the Fund's portfolio. The Fund may amend or terminate this practice at any time. o Orders not paid for on time will be canceled, and shares will be redeemed from your account to compensate for any decline in price of the shares canceled. Berger Funds reserve the right to reject any order and to waive or reduce minimums, or increase minimums following notice. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 42 13 Berger Small Cap Value Fund Selling (redeeming) Shares The Fund is closed to new investors and if a total redemption of your account is made, additional investments in the Fund may not be possible. BY MAIL o Send a written request indicating your account number and the dollar amount or number of shares you are redeeming to the appropriate address shown under "Buying Shares." o Your request must be signed by each registered shareholder, with the signature(s) appearing exactly as they do on your account registration. o Include any necessary Signature Guarantees. See "Signature Guarantees/Special Documentation" below. BY TELEPHONE* o Call (800) 960-8427. BY ONLINE ACCESS* o You will find us online at bergerfunds.com. *For limitations on telephone and online redemptions see "Signature Guarantees/Special Documentation" below. Telephone and online redemptions are not available for shares held in retirement accounts sponsored by the Fund. BY SYSTEMATIC WITHDRAWAL PLAN o A systematic withdrawal plan may be established. o Shares may be redeemed automatically ($50 minimum) monthly, quarterly, semi-annually or annually. o Call (800) 960-8427 for more information and forms. Important notes about payment for your redeemed shares o Generally, payment for your redeemed shares will be sent to you within three business days after receipt of your redemption request in good order. o You may receive payment for redeemed shares via wire or electronic funds transfer. You may elect these services on the account application or send to the Berger Funds a written request providing your bank information with your signature guaranteed. (See "Signature Guarantees/Special Documentation" below.) o A wire transfer will be sent the next business day after receipt of your order, and an electronic funds transfer will be sent the second business day after receipt of your order. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 43 14 Information About Your Account o Proceeds from the redemption of shares purchased by check or through electronic funds transfer may be delayed until full payment for the shares has been received and cleared, which may take up to 15 days from the purchase date. Exchanging Shares Shares of the Fund may be exchanged for shares of any other publicly available Berger Funds by calling (800) 960-8427. When exchanging shares: o Each account must be registered identically--have the same signatures and addresses. o Each Fund must be legally eligible for sale in your state of residence. o You may exchange out of each of the Berger Funds up to four times per calendar year. o You may exchange by telephone, online access or mail. o You are responsible for obtaining and reading the prospectus for the Fund into which you are exchanging. o An exchange out of a Berger Fund results in the sale of that Fund's shares and the purchase of another, normally resulting in a taxable event for you. o Exchanges into any new Fund are subject to that Fund's initial and subsequent investment minimums. The Fund may terminate or modify the exchange privilege in the future. Signature Guarantees/Special Documentation The Fund uses Signature Guarantees to protect you and the Fund from possible fraudulent requests for redeemed shares. Your redemption request must be in writing and accompanied by a Signature Guarantee if: o Your request exceeds $100,000. o You request that payment be made to a name other than the one on your account registration. o You request that payment be mailed to an address that has been changed within 30 days of your redemption request or to an address other than the one of record. o You change or add information relating to your designated bank. Berger Funds reserve the right to require Signature Guarantees under other certain circumstances. You can get a Signature Guarantee from most broker-dealers, national or state banks, credit unions, federal savings and loan associations or other eligible institutions. You cannot obtain a Signature Guarantee from a notary public. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 44 15 Berger Small Cap Value Fund Make sure the Signature Guarantee appears: o Together with the signature(s) of all registered owner(s) of the redeemed shares on the written redemption request. o On any share certificates you hold for the redeemed shares or on a separate statement of assignment (stock power) that may be obtained from a bank or broker. Additional documents are required for redemptions by corporations, executors, administrators, trustees and guardians. For instructions, call (800) 960-8427 or write to the Berger Funds, P.O. Box 219958, Kansas City, MO 64121-9958. Your Share Price The price at which you buy, sell or exchange Fund shares is the share price or net asset value (NAV). The Fund's share price is determined by adding the value of the Fund's investments, cash and other assets, deducting liabilities and then dividing that value by the total number of the Fund's shares outstanding. Share price is calculated separately for each class of Fund shares. The Fund's share price is calculated at the close of the regular trading session of the New York Stock Exchange (normally 4:00 p.m. Eastern time) each day that the Exchange is open. Share price is not calculated on the days that the Exchange is closed. For a purchase, redemption or exchange of Fund shares, your price is the share price next calculated after your request is received in good order by the Fund, its authorized agent or designee. To receive a specific day's price, your request must be received before the close of the New York Stock Exchange on that day. When the Fund calculates its share price, it values the securities it holds at market value. Sometimes market quotes for some securities are not available or are not representative of market value. Examples would be when events occur that materially affect the value of a security at a time when the security is not trading or when the securities are illiquid. In that case, securities may be valued in good faith at fair value, using consistently applied procedures decided on by the trustees. Money market instruments maturing within 60 days are valued at amortized cost, which approximates market value. Assets and liabilities expressed in foreign currencies are converted into U.S. dollars at the prevailing market rates quoted by one or more banks or dealers shortly before the close of the Exchange. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 45 16 Other Information About Your Account The Fund's foreign securities may trade on days that the Exchange is closed and the Fund's daily share price is not calculated. As a result, the Fund's daily share price may be affected, and you will not be able to purchase or redeem shares. SECURITY CONSIDERATIONS You may give up some level of security by choosing to buy or sell shares by telephone or online, rather than by mail. The Fund uses procedures designed to give reasonable assurance that telephone and online instructions are genuine, including recording the transactions, testing the identity of the shareholder placing the order and sending prompt written confirmation of transactions to the shareholder of record. The Fund and its service providers are not liable for acting upon instructions communicated by telephone or online that they believe to be genuine if these procedures are followed. CONFIRMATION OF YOUR PURCHASES AND REDEMPTIONS After any transaction, you will receive written confirmation including the share price and the dollar amount and number of shares bought or redeemed. Shares purchased under Automatic Investment Plans or redeemed under Systematic Withdrawal Plans will be confirmed quarterly. Partial shares will be calculated to three decimal places. SHAREHOLDER REPORTS To reduce expenses, the Fund may mail only one copy of most financial reports, prospectuses and proxies to your household, even if you have more than one account in the Fund. Call (800) 960-8427 to begin receiving your own copy or if you need additional copies of financial reports, prospectuses or proxy statements. SHARE CERTIFICATES To assist in minimizing administrative costs, share certificates will not be issued. Records of share ownership are maintained by the Fund's transfer agent in book entry form. If you are selling shares previously issued in certificate form, you need to include the certificate along with your redemption or exchange request. If you have lost your certificate, please call us at (800) 960-8427. PURCHASES THROUGH BROKER-DEALERS You may buy Fund shares through certain broker-dealers or other financial organizations, but these organizations may charge you a fee or may have different minimums for first-time or additional investments that are not applicable if you buy shares directly from the Fund. THIRD-PARTY ADMINISTRATORS Certain brokerage firms and other companies may provide administrative services (such as sub-transfer agency, recordkeeping or shareholder communications services) to investors purchasing shares of the Fund through those companies. The Fund's advisor or the Fund (if approved by its trustees) may pay fees to these companies for their services. These companies may also be appointed as agents for or authorized by the Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 46 17 Berger Small Cap Value Fund Fund to accept on its behalf purchase and redemption requests that are received in good order. Subject to Fund approval, certain of these companies may be authorized to designate other entities to accept purchase and redemption orders on behalf of the Fund. DATE-RELATED INFORMATION Mutual funds and businesses around the world could be adversely affected if computers do not properly process date-related information. The Fund's advisor is addressing these issues for its computers and is getting reasonable assurances from the Fund's other major service providers that they too are addressing these issues to preserve smooth functioning of the Fund's trading, pricing, shareholder account, custodial and other operations. There can be no assurances, however, that all problems will be avoided. These computer problems could also adversely affect the Fund's investments. Improperly functioning computers may disrupt securities markets generally or result in overall economic uncertainty. Individual companies may also be adversely affected by the cost of fixing their computers, which could be substantial. The Fund's investment manager considers these issues when evaluating investments for the Fund. REDEMPTIONS IN-KIND The Fund intends to redeem its shares only for cash, although in order to protect the interest of remaining shareholders, it retains the right to redeem its shares in-kind under unusual circumstances. In-kind payment means payment will be made to you in portfolio securities rather than cash. If this occurs, you will incur transaction costs if you sell the securities for cash. You may have difficulty selling the securities and recovering the amount of your redemption if the securities are illiquid. REDEMPTIONS BY THE FUND OF CERTAIN ACCOUNTS To reduce its expenses, the Fund may involuntarily redeem the shares in your account if your balance drops below $250,000--but only if it drops below this amount because you have redeemed shares, not because the share value has declined. You will be given 60 days' notice before the Fund undertakes any involuntary redemption. During that time, you may buy more shares to bring your account above the minimum. Shareholders owning shares in an account on or before the following dates have lower minimum balance requirements for that account and must maintain these minimum balances to avoid involuntary redemption: February 19, 1998 $100,000 February 14, 1997 $ 500
The Fund also reserves the right to close any account if it believes the shareholder is engaging in activities which may be detrimental to the Fund. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 47 18 Other Information About Your Account (continued) Distribution and Taxes DISTRIBUTIONS OF INCOME AND GAINS Unless you tell us that you want to receive your distributions in cash, they will be reinvested automatically in Fund shares. The Fund generally makes two kinds of distributions: o Capital gains from the sale of portfolio securities held by the Fund. The Fund will distribute any net realized capital gains annually, normally in December. o Net investment income from interest or dividends received on securities held by the Fund. The Fund will distribute its investment income annually, normally in December. The Fund reserves the right to reinvest into your account undeliverable or uncashed dividend or distribution checks that remain outstanding for six months, or distributions of less than $10. The dividend or distribution amount will be reinvested in shares of the applicable Fund at the NAV next computed after the check is cancelled. YOUR TAXES You generally will owe tax on amounts distributed to you by the Fund whether you reinvest them in additional shares or receive them in cash. Distributions of gains from the sale of assets held by the Fund for more than one year generally are taxable to you at the applicable long-term capital gains rate, regardless of how long you have owned your Fund shares. Distributions from other sources generally are taxed as ordinary income. Distributions made by the Fund to you will normally be capital gains. A portion of those gains may be net short-term capital gains, which are taxed as ordinary income. The Fund generally will not distribute net investment income, although any net investment income generated as a by-product of managing its portfolio will be distributed to you. If you redeem Fund shares that have appreciated in value, you will have a taxable gain upon redemption. Exchanges are treated as a redemption and purchase for tax purposes. Therefore, you will also have a taxable gain if you exchange shares that have appreciated in value. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 48 19 Berger Small Cap Value Fund ADDITIONAL TAX INFORMATION You should consult your own tax advisor about your particular situation. For more information about other tax matters, including backup withholding for certain taxpayers and other tax aspects of redemptions, see the SAI. Tax-Sheltered Retirement Plans The Fund offers several tax-qualified retirement plans for individuals, businesses and nonprofit organizations. For information about establishing an IRA, Roth IRA, profit-sharing or money purchase pension plan, 403(b) Custodial Account, SEP-IRA, SIMPLE IRA account or other retirement plans, please call (800) 259-2820, or write to the Berger Funds, P.O. Box 219958, Kansas City, MO 64121-9958. Trustees for existing 401(k) or other plans interested in using Fund shares as an investment or investment alternative in their plans are invited to call the Fund at (800) 259-2820. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 49 20 Organization of the Fund INVESTMENT MANAGERS The following companies provide investment management and administrative services to the Fund. Berger LLC (210 University Blvd., Suite 900, Denver, CO 80206) is the Fund's investment advisor. Berger LLC serves as investment advisor, sub-advisor or administrator to mutual funds and institutional investors. Berger LLC has been in the investment advisory business for 26 years. As investment advisor, Berger LLC oversees, evaluates and monitors the investment advisory services provided by Perkins, Wolf, McDonnell & Company as sub-advisor. For the most recent fiscal year, the Fund paid Berger LLC and advisory fee of 0.81% of net assets. Berger LLC also provides administrative services to the Fund. Perkins, Wolf, McDonnell & Company (PWM) (53 West Jackson Boulevard, Suite 722, Chicago, IL 60604) has been in the investment management business since 1984 and served as investment advisor to the Berger Small Cap Value Fund (then known as The Omni Investment Fund) from 1987 to February 1997, when PWM became the sub-advisor to the Fund. As sub-advisor, PWM provides day-to-day management of the Fund's investment operations. Robert H. Perkins has been the lead investment manager for the Berger Small Cap Value Fund since its inception in 1985. Robert Perkins has been an investment manager since 1970 and serves as President and a director of PWM. As lead manager, Robert Perkins is responsible for the daily decisions of the Fund's security selection. Thomas H. Perkins has also served as investment manager of the Berger Small Cap Value Fund since January 1999. Thomas Perkins has been an investment manager since 1974 and joined PWM as a portfolio manager in 1998. He has also served as investment manager of the Berger Mid Cap Value Fund since its inception in 1998. Previously, he was a portfolio manager of valuation sensitive growth portfolios for Alliance Capital from 1994 to 1998. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 50 21 PORTFOLIO TURNOVER Portfolio changes are made whenever the Fund's investment manager believes that the Fund's goal could be better achieved by investment in another security, regardless of portfolio turnover. At times, portfolio turnover for the Fund has exceeded 100% per year. A turnover rate of 100% means the securities owned by the Fund were replaced once during the year. Higher turnover rates may result in higher brokerage costs to the Fund and in higher net taxable gains for you as an investor. The Fund's portfolio turnover rate can be found under the heading "Financial Highlights for the Fund." SPECIAL FUND STRUCTURE The Fund currently has two classes of shares. The Institutional Shares are offered through this prospectus. The Investor Shares are designed for the general public and are offered through a separate prospectus. Each class of shares has its own expenses so that share price, performance and distributions will differ between classes. The 12b-1 plan adopted by the Berger Small Cap Value Fund applies only to the Investor Shares. For more information on Investor Shares, please call (800) 333-1001. For more information on the multi-class fund structure, see the SAI. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 51 22 Financial Highlights for the Fund The financial highlights will help you understand the Fund's financial performance for the periods shown. Certain information reflects financial results for a single Fund share. Total return shows you how much your investment in the Fund increased or decreased during each period, assuming you reinvested all dividends and distributions. PricewaterhouseCoopers LLP, independent accountants, audited the information for the nine months ended September 30, 1997, and for the years ended September 30, 1998, 1999 and 2000. Their report is included in the Fund's annual report, which is available without charge upon request. The information for the years ended December 31, 1995 and 1996, was audited by other independent accountants. Berger Small Cap Value Fund - Institutional Shares Financial Highlights For a Share Outstanding Throughout the Periods Presented
Period From January 1, 1997 Years Ended to Years Ended September 30, September 30, December 31, 2000 1999 1998 1997 1996 1995 -------- ------------- -------- ---------------- ------------ -------- Net asset value, beginning of period $ 21.00 $ 17.63 $ 22.33 $ 16.48 $ 14.57 $ 12.75 -------- -------- -------- -------- -------- -------- From investment operations Net investment income (loss) 0.33 0.04 0.45 0.07 0.12 0.09 Net realized and unrealized gains (losses) from investments and foreign currency income 4.01 4.28 (2.55) 5.78 3.62 3.23 -------- -------- -------- -------- -------- -------- Total from investment operations 4.34 4.32 (2.10) 5.85 3.74 3.32 -------- -------- -------- -------- -------- -------- Less dividends and distributions Dividends (from net investment income) (0.24) (0.14) (0.23) -- (0.11) (0.09) Distributions (from capital gains) (0.23) (0.81) (2.37) -- (1.72) (1.41) -------- -------- -------- -------- -------- -------- Total dividends and distributions (0.47) (0.95) (2.60) -- (1.83) (1.50) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 24.87 $ 21.00 $ 17.63 $ 22.33 $ 16.48 $ 14.57 -------- -------- -------- -------- -------- -------- Total Return(2) 21.09% 25.18% (10.65)% 33.50% 25.58% 26.07% ======== ======== ======== ======== ======== ======== Ratios/Supplemental Data: Net assets, end of period $862,318 $414,347 $ 92,787 $ 58,450 $ 36,041 $ 31,833 (in thousands) Gross/Net expense ratio to average net assets(3) 0.88% 1.01% 1.19% 1.34%(1) 1.48% 1.64% Ratio of net investment income to average net assets 1.99% 1.69% 1.26% 0.63%(1) 0.69% 0.64% Portfolio turnover rate(2) 72% 66% 69% 81% 69% 90%
1. Annualized. 2. Not annualized. 3. Net expenses represent gross expenses reduced by fees waived and/or reimbursed by the Advisor. Berger Funds - January 29, 2001 Berger Small Cap Value Fund - Institutional Shares 52 This page intentionally left blank 53 This page intentionally left blank 54 This page intentionally left blank 55 This page intentionally left blank 56 This page intentionally left blank 57 FOR MORE INFORMATION: Additional information about the Fund's investments is available in the Fund's semi-annual and annual reports to shareholders. The Fund's annual report contains a discussion of the market conditions and investment strategies that affected its performance over the past year. You may wish to read the Statement of Additional Information (SAI) for more information on the Fund and the securities it invests in. The SAI is incorporated into this prospectus by reference, which means that it is considered to be part of the prospectus. You can get free copies of the annual and semi-annual reports and the SAI, request other information or get answers to your questions about the Fund by writing or calling the Fund at: Berger Funds P.O. Box 219958 Kansas City, MO 64121-9958 (800) 259-2820 bergerfunds.com Text-only versions of Fund documents can be viewed online or downloaded from the EDGAR database on the SEC's Web site at sec.gov. You can also obtain copies by visiting the SEC's Public Reference Room in Washington D.C. For information on the operation of the Public Reference Room, call (202) 942-8090. Copies of documents may also be obtained, after paying a duplicating fee, by sending your request to the following e-mail address: publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, D.C. 20549-6009. INVESTMENT COMPANY ACT FILE NUMBER: Berger Omni Investment Trust 811-4273 (Berger Small Cap Value Fund - Institutional Shares) SCVIPROS 58 BERGER SMALL CAP VALUE FUND (A SERIES OF BERGER OMNI INVESTMENT TRUST) INVESTOR SHARES STATEMENT OF ADDITIONAL INFORMATION SHAREHOLDER SERVICES: 1-800-551-5849 This Statement of Additional Information ("SAI") about the Berger Small Cap Value Fund (the "Fund") is not a prospectus. It relates to the Prospectus describing the Investor Shares of the Fund, dated January 29, 2001, as it may be amended or supplemented from time to time, which may be obtained by writing the Fund at P.O. Box 5005, Denver, Colorado 80217, or calling 1-800-333-1001. The Fund is a "no load" mutual fund, meaning that a buyer pays no commissions or sales charge when buying or redeeming shares of the Fund, although the Fund pays certain costs of distributing its Investor Shares. See "Section 5, Expenses of the Fund - 12b-1 Plan" below. This SAI provides further description of the Fund. The financial statements of the Fund for the fiscal year ended September 30, 2000, and the related Report of Independent Accountants on those statements, are incorporated into this SAI by reference from the Fund's 2000 Annual Report to Shareholders dated September 30, 2000. A copy of that Annual Report is available, without charge, upon request, by calling 1-800-333-1001. DATED JANUARY 29, 2001 59 TABLE OF CONTENTS & CROSS-REFERENCES TO PROSPECTUS
CROSS-REFERENCES TO PAGE RELATED DISCLOSURES SECTION NO. IN PROSPECTUS - ------- ---- ------------------- Introduction 1 Table of Contents 1. Investment Strategies and Risks of the Fund 1 Berger Small Cap Value Fund; The Fund's Goal and Principal Investment Strategies and Principal Risks 2. Investment Restrictions 8 Berger Small Cap Value Fund; The Fund's Goal and Principal Investment Strategies and Principal Risks; Investment Techniques, Securities and the Associated Risks 3. Management of the Fund 10 Organization of the Fund 4. Investment Advisor and Sub-Advisor 13 Organization of the Fund 5. Expenses of the Fund 16 Fund expenses; Organization of the Fund; Financial Highlights for the Fund 6. Brokerage Policy 19 Organization of the Fund 7. How to Purchase and Redeem Shares in the Fund 21 Buying Shares; Selling (Redeeming) Shares 8. How the Net Asset Value is Determined 22 Your Share Price 9. Income Dividends, Capital Gains Distributions and Tax 23 Distributions and Taxes Treatment 10. Suspension of Redemption Rights 24 Other Information About Your Account 11. Tax-Sheltered Retirement Plans 25 Tax-Sheltered Retirement Plans 12. Exchange Privilege and Systematic Withdrawal Plan 27 Exchanging Shares 13. Performance Information 28 Financial Highlights for the Fund 14. Additional Information 29 Organization of the Fund; Special Fund Structure Financial Information 32 Financial Highlights for the Fund
-i- 60 INTRODUCTION The Fund is a series of Berger Omni Investment Trust which was reorganized as a Massachusetts business trust (the "Trust") in May 1990 from a Delaware corporation. Prior to February 14, 1997, the Fund and the Trust were known as The Omni Investment Fund. Fund is a mutual fund, or an open-end, management investment company. The Fund is a diversified fund. 1. INVESTMENT STRATEGIES AND RISKS OF THE FUND The Prospectus discusses the investment objective of the Fund and the principal investment strategies employed to achieve that objective. It also describes the principal risks of investing in the Fund. This section contains supplemental information concerning the types of securities and other instruments in which the Fund may invest, the investment policies and portfolio strategies that the Fund may utilize and certain risks attendant to those investments, policies and strategies. COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in a company. Generally, preferred stock has a specified dividend and ranks after bonds and before common stocks in its claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis. Profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a company's stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. While most preferred stocks pay dividends, the Fund may purchase preferred stock where the issuer has omitted, or is in danger of omitting, payment of its dividends. Such investments would be made primarily for their capital appreciation potential. All investments in stocks are subject to market risk, meaning that their prices may move up and down with the general stock market, and that such movements might reduce their value. DEBT SECURITIES. Debt securities (such as bonds or debentures) are fixed-income securities which bear interest and are issued by corporations or governments. The issuer has a contractual obligation to pay interest at a stated rate on specific dates and to repay principal on a specific maturity date. In addition to market risk, debt securities are generally subject to two other kinds of risk: credit risk and interest rate risk. Credit risk refers to the ability of the issuer to meet interest or principal payments as they come due. The lower the rating given a security by a rating service (such as Moody's Investor Service ("Moody's") and Standard & Poor's ("S&P")), the greater the credit risk the rating service perceives with respect to that security. The Fund will not purchase any nonconvertible securities rated below investment grade (Ba or lower by Moody's, BB or lower by S&P). In cases where the ratings assigned by more than one rating agency differ, the Fund will consider the security as rated in the higher category. If nonconvertible securities purchased by the Fund are downgraded to below investment grade following purchase, the trustees of the Fund, in consultation with the Fund's sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. For a further discussion of debt security ratings, see Appendix A to this SAI. Interest rate risk refers to the fact that the value of fixed-income securities (like debt securities) generally fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the price of fixed-income securities held by the Fund. Conversely, during periods of rising interest rates, the value of fixed-income securities held by the Fund will generally decline. Longer-term securities are generally more sensitive to interest rate changes and are more volatile than shorter-term securities, but they generally offer higher yields to compensate investors for the associated risks. Certain debt securities can also present prepayment risk. For example, a security may contain redemption and call provisions. If an issuer exercises these provisions when interest rates are declining, the Fund could sustain investment losses as well as have to reinvest the proceeds from the security at lower interest rates, resulting in a decreased return for the Fund. -1- 61 CONVERTIBLE SECURITIES. The Fund may also purchase debt or equity securities which are convertible into common stock when the sub-advisor believes they offer the potential for a higher total return than nonconvertible securities. While fixed-income securities generally have a priority claim on a corporation's assets over that of common stock, some of the convertible securities which the Fund may hold are high-yield/high-risk securities that are subject to special risks, including the risk of default in interest or principal payments which could result in a loss of income to the Fund or a decline in the market value of the securities. Convertible securities often display a degree of market price volatility that is comparable to common stocks. The credit risk associated with convertible securities generally is reflected by their ratings by organizations such as Moody's or S&P or a similar determination of creditworthiness by the Fund's sub-advisor. The Fund has no pre-established minimum quality standards for convertible securities and may invest in convertible securities of any quality, including lower rated or unrated securities. However, the Fund will not invest in any security in default at the time of purchase and the Fund will invest less than 20% of the market value of its assets at the time of purchase in convertible securities rated below investment grade. If convertible securities purchased by the Fund are downgraded following purchase, or if other circumstances cause 20% or more of the Fund's assets to be invested in convertible securities rated below investment grade, the trustees of the Fund, in consultation with the sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. For a further discussion of debt security ratings, see Appendix A to this SAI. SECURITIES OF SMALLER COMPANIES. The Fund may invest in securities of companies with small or mid-sized market capitalizations. Market capitalization is defined as total current market value of a company's outstanding common stock. Investments in companies with smaller market capitalizations may involve greater risks and price volatility (that is, more abrupt or erratic price movements) than investments in larger, more mature companies since smaller companies may be at an earlier stage of development and may have limited product lines, reduced market liquidity for their shares, limited financial resources or less depth in management than larger or more established companies. Smaller companies also may be less significant factors within their industries and may have difficulty withstanding competition from larger companies. While smaller companies may be subject to these additional risks, they may also realize more substantial growth than larger or more established companies. SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund may invest in securities of companies with limited operating histories. The Fund considers these to be securities of companies with a record of less than three years' continuous operation, even including the operations of any predecessors and parents. (These are sometimes referred to as "unseasoned issuers.") These companies by their nature have only a limited operating history which can be used for evaluating the company's growth prospects. As a result, investment decisions for these securities may place a greater emphasis on current or planned product lines and the reputation and experience of the company's management and less emphasis on fundamental valuation factors than would be the case for more mature companies. In addition, many of these companies may also be small companies and involve the risks and price volatility associated with smaller companies. INITIAL PUBLIC OFFERINGS. The Fund may invest in a company's securities at the time the company first offers securities to the public, that is, at the time of the company's initial public offering or IPO. Although companies can be any age or size at the time of their IPOs, they are often smaller and have a limited operating history, which involve a greater potential for the value of their securities to be impaired following the IPO. See "Securities of Smaller Companies" and "Securities of Companies with Limited Operating Histories" above. Investors in IPOs can be adversely affected by substantial dilution in the value of their shares, by sales of additional shares and by concentration of control in existing management and principal shareholders. In addition, all of the factors that affect stock market performance may have a greater impact on the shares of IPO companies. The price of a company's securities may be highly unstable at the time of its IPO and for a period thereafter due to market psychology prevailing at the time of the IPO, the absence of a prior public market, the small number of shares available and limited availability of investor information. As a result of this or other factors, the Fund's sub-advisor might decide to sell an IPO security more quickly than it would -2- 62 otherwise, which may result in a significant gain or loss and greater transaction costs to the Fund. Any gains from shares held for 12 months or less will be treated as short-term gains, taxable as ordinary income to the Fund's shareholders. In addition, IPO securities may be subject to varying patterns of trading volume and may, at times, be difficult to sell without an unfavorable impact on prevailing prices. The effect of an IPO investment can have a magnified impact on the Fund's performance when the Fund's asset base is small. Consequently, IPOs may constitute a significant portion of the Fund's returns particularly when the Fund is small. Since the number of securities issued in an IPO is limited, it is likely that IPO securities will represent a smaller component of the Fund's assets as it increases in size, and therefore have a more limited effect on the Fund's performance. There can be no assurance that IPOs will continue to be available for the Fund to purchase. The number or quality of IPOs available for purchase by the Fund may vary, decrease or entirely disappear. In some cases, the Fund may not be able to purchase IPOs at the offering price, but may have to purchase the shares in the aftermarket at a price greatly exceeding the offering price, making it more difficult for the Fund to realize a profit. The advisor's IPO trade allocation procedures govern which funds and other advised accounts participate in the allocation of any IPO. See the heading "Trade Allocations" under Section 4 below. Under the IPO allocation procedures of Berger LLC, the Fund generally will not participate in an IPO if the securities available for allocation to the Fund are insignificant relative to the fund's net assets. As a result, any fund or account whose assets are very large is not likely to participate in the allocation of many IPOs. FOREIGN SECURITIES. The Fund may invest in foreign securities, which may be traded in foreign markets and denominated in foreign currency. The Fund's investments may also include American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) which are similar to ADRs, in bearer form, designed for use in the European securities markets, and in Global Depositary Receipts (GDRs). Investments in foreign securities involve some risks that are different from the risks of investing in securities of U.S. issuers, such as the risk of adverse political, social, diplomatic and economic developments and, with respect to certain countries, the possibility of expropriation, taxes imposed by foreign countries or limitations on the removal of monies or other assets of the Fund. Moreover, the economies of individual foreign countries will vary in comparison to the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. Securities of some foreign companies, particularly those in developing countries, are less liquid and more volatile than securities of comparable domestic companies. A developing country generally is considered to be in the initial stages of its industrialization cycle. Investing in the securities of developing countries may involve exposure to economic structures that are less diverse and mature, and to political systems that can be expected to have less stability than developed countries. There also may be less publicly available information about foreign issuers and securities than domestic issuers and securities, and foreign issuers generally are not subject to accounting, auditing and financial reporting standards, requirements and practices comparable to those applicable to domestic issuers. Also, there is generally less government supervision and regulation of exchanges, brokers, financial institutions and issuers in foreign countries than there is in the U.S. Foreign financial markets typically have substantially less volume than U.S. markets. Foreign markets also have different clearance and settlement procedures and, in certain markets, delays or other factors could make it difficult to effect transactions, potentially causing the Fund to experience losses or miss investment opportunities. The use of a foreign securities depository may increase this risk. The Fund may maintain assets with a foreign securities depository if certain conditions are met. A foreign securities depository may maintain assets on behalf of the Fund if the depository: (i) acts as or operates a system for the central handling of securities that is regulated by a foreign financial regulatory authority; (ii) holds assets on behalf of the Fund under safekeeping conditions no less favorable than those that apply to other participants; (iii) maintains records that identify the assets of participants, and keep its own assets separated from the assets of participants; (iv) provides periodic reports to participants; and (v) undergoes periodic examination by regulatory authorities or independent accountants. In addition, the Fund's primary custodian provides the Fund with an analysis of the custodial risks of -3- 63 using a depository, monitors the depository on a continuous basis, and notifies the Fund of any material changes in risks associated with using the depository. In general, the analysis may include an analysis of a depository's expertise and market reputation, the quality of its services, its financial strength, and insurance or indemnification arrangements, the extent and quality of regulation and independent examination of the depository, its standing in published ratings, its internal controls, and other procedures for safeguarding investments, and any related legal proceedings. Costs associated with transactions in foreign securities are generally higher than with transactions in U.S. securities. The Fund will incur greater costs in maintaining assets in foreign jurisdictions and in buying and selling foreign securities generally, resulting in part from converting foreign currencies into U.S. dollars. In addition, the Fund might have greater difficulty taking appropriate legal action with respect to foreign investments in non-U.S. courts than with respect to domestic issuers in U.S. courts, which may heighten the risk of possible losses through the holding of securities by custodians and securities depositories in foreign countries. When the Fund is invested in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates will affect the value of the investments in its portfolio and the unrealized appreciation or depreciation of investments insofar as U.S. investors are concerned. If the foreign currency in which a security is denominated appreciates against the U.S. dollar, the dollar value of the security will increase. Conversely, a decline in the exchange rate of the foreign currency against the U.S. dollar would adversely affect the dollar value of the foreign securities. Foreign currency exchange rates are determined by forces of supply and demand on the foreign exchange markets, which are in turn affected by the international balance of payments and other economic and financial conditions, government intervention, speculation and other factors. PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS). The Fund may purchase the securities of certain companies considered Passive Foreign Investment Companies (PFICs) under U.S. tax laws. For certain types of PFICs, in addition to bearing their proportionate share of the Fund's expenses (management fees and operating expenses), shareholders will also indirectly bear similar expenses of such PFIC. PFIC investments also may be subject to less favorable U.S. tax treatment, as discussed in Section 9 below. ILLIQUID SECURITIES. The Fund is authorized to invest in securities which are illiquid or not readily marketable because, based upon their nature or the market for such securities, no ready market is available. However, the Fund will not purchase any such security, the purchase of which would cause the Fund to invest more than 10% of its net assets, measured at the time of purchase, in illiquid securities. Investments in illiquid securities involve certain risks to the extent that the Fund may be unable to dispose of such a security at the time desired or at a reasonable price or, in some cases, may be unable to dispose of it at all. If securities become illiquid following purchase or other circumstances cause more than 10% of the Fund's net assets to be invested in illiquid securities, the trustees of the Fund, in consultation with the Fund's sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. Repurchase agreements maturing in more than seven days will be considered as illiquid for purposes of this restriction. REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements with various financial organizations, including commercial banks, registered broker-dealers and registered government securities dealers. A repurchase agreement is an agreement under which the Fund acquires a debt security (generally a debt security issued or guaranteed by the U.S. government or an agency thereof, a banker's acceptance or a certificate of deposit) from a commercial bank, broker or dealer, subject to resale to the seller at an agreed upon price and date (normally, the next business day). A repurchase agreement may be considered a loan collateralized by securities. The resale price reflects an agreed upon interest rate effective for the period the instrument is held by the Fund and is unrelated to the interest rate on the underlying instrument. In these transactions, the securities acquired by the Fund (including accrued interest earned thereon) must have a total value equal to or in excess of the value of the repurchase agreement and are held by the Fund's custodian bank until repurchased. In addition, the trustees will establish guidelines and standards for review by the sub-advisor of the creditworthiness of any bank, broker or dealer party to a -4- 64 repurchase agreement with the Fund. The Fund will not enter into a repurchase agreement maturing in more than seven days if as a result more than 10% of the Fund's net assets would be invested in such repurchase agreements and other illiquid securities. These transactions must be fully collateralized at all times by debt securities (generally a security issued or guaranteed by the U.S. Government or an agency thereof, a banker's acceptance or a certificate of deposit), but involve certain risks, such as credit risk to the Fund if the other party defaults on its obligation and the Fund is delayed or prevented from liquidating the collateral. For example, if the other party to the agreement defaults on its obligation to repurchase the underlying security at a time when the value of the security has declined, the Fund may incur a loss upon disposition of the security. If the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by the Fund not within the control of the Fund and therefore the realization by the Fund on such collateral may automatically be stayed and delayed. Further, it is possible that the Fund may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement. The Fund expects that these risks can be controlled through careful monitoring procedures. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase and sell securities on a when-issued or delayed delivery basis. However, the Fund currently does not intend to purchase or sell securities on a when-issued or delayed delivery basis, if as a result more than 5% of its total assets taken at market value at the time of purchase would be invested in such securities. When-issued or delayed delivery transactions arise when securities (normally, equity obligations of issuers eligible for investment by the Fund) are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price or yield. However, the yield available on a comparable security when delivery takes place may vary from the yield on the security at the time that the when-issued or delayed delivery transaction was entered into. Any failure to consummate a when-issued or delayed delivery transaction may result in the Fund missing the opportunity of obtaining a price or yield considered to be advantageous. When-issued and delayed delivery transactions may generally be expected to settle within one month from the date the transactions are entered into, but in no event later than 90 days. However, no payment or delivery is made by the Fund until it receives delivery or payment from the other party to the transaction. When the Fund purchases securities on a when-issued basis, it will maintain in a segregated account with its custodian cash, U.S. government securities or other liquid assets having an aggregate value equal to the amount of such purchase commitments, until payment is made. If necessary, additional assets will be placed in the account daily so that the value of the account will equal or exceed the amount of the Fund's purchase commitments. SPECIAL SITUATIONS. The Fund may also invest in "special situations." Special situations are companies that have recently experienced or are anticipated to experience a significant change in structure, management, products or services which may significantly affect the value of their securities. Examples of special situations are companies being reorganized or merged, companies emerging from bankruptcy, companies introducing unusual new products or which enjoy particular tax advantages. Other examples are companies experiencing changes in senior management, extraordinary corporate events, significant changes in cost or capital structure or which are believed to be probable takeover candidates. The opportunity to invest in special situations, however, is limited and depends in part on the market's assessment of these companies and their circumstances. By its nature, a "special situation" company involves to some degree a break with the company's past experience. This creates greater uncertainty and potential risk of loss than if the company were operating according to long-established patterns. In addition, stocks of companies in special situations may decline or not appreciate as expected if an anticipated change or development does not occur or is not assessed by the market as favorably as expected. HEDGING TRANSACTIONS. As described in the Prospectus, the Fund is authorized to make limited use of certain types of options, but only for the purpose of hedging, that is, protecting against market risk due to market movements that may adversely affect the value of the Fund's securities or the price of securities that the Fund is considering purchasing. The utilization of options is also subject to policies and -5- 65 procedures which may be established by the trustees from time to time. In addition, the Fund is not required to hedge. Decisions regarding hedging are subject to the sub-advisor's judgment of the cost of the hedge, its potential effectiveness and other factors the sub-advisor considers pertinent. A hedging transaction may partially protect the Fund from a decline in the value of a particular security or its portfolio generally, although hedging may also limit the Fund's opportunity to profit from favorable price movements, and the cost of the transaction will reduce the potential return on the security or the portfolio. In addition, hedging transactions do not eliminate fluctuations in the prices of the underlying securities the Fund owns or intends to acquire. Use of these instruments by the Fund involves the potential for a loss that, in the case of a call option written by the Fund, may exceed the premium received for the option. However, the Fund is permitted to use such instruments for hedging purposes only, and only if the aggregate amount of its obligations under these contracts does not exceed the total market value of the assets the Fund is attempting to hedge, such as a portion or all of its exposure to equity securities. To help ensure that the Fund will be able to meet its obligations under options written by the Fund, the Fund will be required to maintain liquid assets in a segregated account with its custodian bank or to set aside portfolio securities to "cover" its position in these contracts. The principal risks of the Fund utilizing options are: (a) losses resulting from market movements not anticipated by the Fund; (b) possible imperfect correlation between movements in the prices of options and movements in the prices of the securities or positions hedged or used to cover such positions; (c) lack of assurance that a liquid secondary market will exist for any particular options at any particular time, and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close a position when so desired; and (d) the need for additional information and skills beyond those required for the management of a portfolio of traditional securities. In addition, when the Fund enters into an over-the-counter contract with a counterparty, the Fund will assume counterparty credit risk, that is, the risk that the counterparty will fail to perform its obligations, in which case the Fund could be worse off than if the contract had not been entered into. The following is additional information concerning the options which the Fund may utilize, provided that no more than 5% of the Fund's net assets at the time the contract is entered into may be used for premiums paid for the purchase of options. In addition, the Fund may only write call options that are covered and only up to 10% of the Fund's net assets. The following information should be read in conjunction with the information concerning the Fund's use of options and the risks of such instruments contained in the Prospectus. Options on Securities and Securities Indices. The Fund may buy or sell put or call options and write covered call options on securities that are traded on United States or foreign securities exchanges or over-the-counter. Buying an option involves the risk that, during the option period, the price of the underlying security will not increase (in the case of a call) to above the exercise price, or will not decrease (in the case of a put) to below the exercise price, in which case the option will expire without being exercised and the holder would lose the amount of the premium. Writing a call option involves the risk of an increase in the market value of the underlying security, in which case the option could be exercised and the underlying security would then be sold by the Fund to the option holder at a lower price than its current market value and the Fund's potential for capital appreciation on the security would be limited to the exercise price. Moreover, when the Fund writes a call option on a securities index, the Fund bears the risk of loss resulting from imperfect correlation between movements in the price of the index and the price of the securities set aside to cover such position. Although they entitle the holder to buy equity securities, call options to purchase equity securities do not entitle the holder to dividends or voting rights with respect to the underlying securities, nor do they represent any rights in the assets of the issuer of those securities. A call option written by the Fund is "covered" if the Fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio. A call option is also deemed to be covered if the Fund holds a call on the same security and in the same principal amount as the call written and the -6- 66 exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written if the difference is maintained by the Fund in liquid assets in a segregated account with its custodian. The writer of a call option may have no control when the underlying securities must be sold. Whether or not an option expires unexercised, the writer retains the amount of the premium. This amount, of course, may, in the case of a covered call option, be offset by a decline in the market value of the underlying security during the option period. The writer of an exchange-traded call option that wishes to terminate its obligation may effect a "closing purchase transaction." This is accomplished by buying an option of the same series as the option previously written. The effect of the purchase is that the writer's position will be cancelled by the clearing corporation. If the Fund desires to sell a particular security from the Fund's portfolio on which the Fund has written a call option, the Fund will effect a closing transaction prior to or concurrent with the sale of the security. However, a writer may not effect a closing purchase transaction after being notified of the exercise of an option. An investor who is the holder of an exchange-traded option may liquidate its position by effecting a "closing sale transaction." This is accomplished by selling an option of the same series as the option previously bought. There is no guarantee that either a closing purchase or a closing sale transaction can be effected. The Fund will realize a profit from a closing transaction if the price of the purchase transaction is less than the premium received from writing the option or the price received from a sale transaction is more than the premium paid to buy the option; the Fund will realize a loss from a closing transaction if the price of the purchase transaction is more than the premium received from writing the option or the price received from a sale transaction is less than the premium paid to buy the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by the Fund. An option position may be closed out only where there exists a secondary market for an option of the same series. If a secondary market does not exist, it might not be possible to effect closing transactions in particular options with the result that the Fund would have to exercise the options in order to realize any profit. If the Fund is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or the Fund delivers the underlying security upon exercise. Reasons for the absence of a liquid secondary market may include the following: (i) there may be insufficient trading interest in certain options, (ii) restrictions may be imposed by a national securities exchange on which the option is traded ("Exchange") on opening or closing transactions or both, (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying securities, (iv) unusual or unforeseen circumstances may interrupt normal operations on an Exchange, (v) the facilities of an Exchange or of the Options Clearing Corporation ("OCC") may not at all times be adequate to handle current trading volume, or (vi) one or more Exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that Exchange (or in that class or series of options) would cease to exist, although outstanding options on that Exchange that had been issued by the OCC as a result of trades on that Exchange would continue to be exercisable in accordance with their terms. In addition, when the Fund enters into an over-the-counter option contract with a counterparty, the Fund assumes counterparty credit risk, that is, the risk that the counterparty will fail to perform its obligations, in which case the Fund could be worse off than if the contract had not been entered into. An option on a securities index is similar to an option on a security except that, rather than the right to take or make delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, on exercise of the option, an amount of cash if the closing level of the securities index on which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. -7- 67 The Fund may buy call options on securities or securities indices to hedge against an increase in the price of a security or securities that the Fund may buy in the future. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security or index rises sufficiently, the option may expire and become worthless to the Fund. The Fund may buy put options to hedge against a decline in the value of a security or its portfolio. The premium paid for the put option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security or index declines sufficiently, the option may expire and become worthless to the Fund. An example of a hedging transaction using an index option would be if the Fund were to purchase a put on a stock index, in order to protect the Fund against a decline in the value of all securities held by it to the extent that the stock index moves in a similar pattern to the prices of the securities held. While the correlation between stock indices and price movements of the stocks in which the Fund will generally invest may be imperfect, the Fund expects, nonetheless, that the use of put options that relate to such indices will, in certain circumstances, protect against declines in values of specific portfolio securities or the Fund's portfolio generally. Although the purchase of a put option may partially protect the Fund from a decline in the value of a particular security or its portfolio generally, the cost of a put will reduce the potential return on the security or the portfolio. TEMPORARY DEFENSIVE MEASURES. The Fund may increase its investment in government securities, and other short-term, interest-bearing securities without regard to the Fund's otherwise applicable percentage limits, policies or its normal investment emphasis when its sub-advisor believes market conditions warrant a temporary defensive position. Taking larger positions in such short-term investments may serve as a means of preserving capital in unfavorable market conditions. When in a defensive position, the Fund could miss the opportunity to participate in any stock or bond market advances that occur during those periods, which the Fund might have been able to participate in if it had remained more fully invested. PORTFOLIO TURNOVER. The portfolio turnover rates of the Fund are shown in the Financial Highlights table included in the Prospectus. The annual portfolio turnover rates of the Fund have exceeded 100%. A 100% annual turnover rate results, for example, if the equivalent of all of the securities in the Fund's portfolio are replaced in a period of one year. Investment changes in the Fund will be made whenever the investment manager deems them appropriate even if this results in a higher portfolio turnover rate. In addition, portfolio turnover may increase as a result of large amounts of purchases and redemptions of shares of the Fund due to economic, market or other factors that are not within the control of management. Higher portfolio turnover will necessarily result in correspondingly higher brokerage costs for the Fund. The existence of a high portfolio turnover rate has no direct relationship to the tax liability of the Fund, although sales of certain stocks will lead to realization of gains, and, possibly, increased taxable distributions to shareholders. The Fund's brokerage policy is discussed further below under Section 6--Brokerage Policy, and additional information concerning income taxes is located under Section 9--Income Dividends, Capital Gains Distributions and Tax Treatment. 2. INVESTMENT RESTRICTIONS The investment objective of the Fund is capital appreciation. The Fund has also adopted certain investment policies, strategies, guidelines and procedures in pursuing its objective. These may be changed without a shareholder vote. The principal policies and strategies used by the Fund are described in the Prospectus. In addition, the Fund has adopted certain fundamental and non-fundamental restrictions on its investments and other activities, which are listed below. Fundamental restrictions may not be changed without the approval of (i) 67% or more of the voting securities of the Fund present at a meeting of shareholders thereof if the holders of more than 50% of the outstanding voting securities are present or -8- 68 represented by proxy, or (ii) more than 50% of the outstanding voting securities of the Fund. Non-fundamental restrictions may be changed in the future by action of the trustees without shareholder vote. The following fundamental restrictions apply to the Fund. The Fund may not: (1) Issue senior securities as defined in the Investment Company Act of 1940; (2) Invest in companies for the purpose of acquiring control or management thereof; (3) Invest or hold securities of any issuer if the officers and trustees of the Fund and its advisor own individually more than one-half (1/2) of 1% of the securities of such issuer or together own more than 5% of the securities of such issuer; (4) Invest in other investment companies, except in connection with a plan of merger, consolidation, reorganization or acquisition of assets, or in the open market involving no commission or profit to a sponsor or dealer (other than a customary broker's commission); (5) Participate on a joint or joint and several basis in any trading account in securities; (6) Purchase securities of any company with a record of less than three (3) years continuous operation (including that of predecessors) if such purchase would cause the cost of the Fund's investments in all such companies to exceed 5% of the Fund's total assets; (7) Invest in securities (except those of the U.S. government or its agencies) of any issuer if immediately thereafter the Fund would then own more than 10% of that issuer's voting securities; (8) Loan cash or portfolio securities, except in connection with the acquisition of debt securities which the Fund's investment policies and restrictions permit it to purchase; (9) Borrow money in excess of 5% of the value of its assets and, then, only as a temporary measure for extraordinary or emergency purposes; (10) Pledge, mortgage or hypothecate any of its assets to secure a debt; (11) Purchase or sell real estate or any other interests in real estate (including real estate limited partnership interests); (12) Purchase securities on margin or sell short; (13) Invest in commodities or commodity contracts; (14) Act as an underwriter of securities of other issuers or invest in portfolio securities which the Fund might not be free to sell to the public without registration of such securities under the Securities Act of 1933 ("Restricted Securities"); (15) Invest more than 10% of the value of its net assets in illiquid securities, including Restricted Securities, securities which are not readily marketable, repurchase agreements maturing in more than seven (7) days, written over-the-counter ("OTC") options and securities used as cover for written OTC options; (16) Invest in oil, gas or mineral leases; (17) Invest more than 5% of the value of its net assets in warrants or more than 2% of its net assets in warrants that are not listed on the New York Stock Exchange, the American Stock Exchange, or the NASDAQ National Market System; -9- 69 (18) Invest more than 25% of the value of its assets, at the time of purchase, in securities of companies principally engaged in a particular industry, although the Fund may as a temporary defensive measure invest up to 100% of its total assets in obligations issued or guaranteed by the U.S. government or its agencies; or (19) With respect to 75% of the Fund's total assets, purchase the securities of any one issuer (except U.S. government securities) if immediately after and as a result of such purchase (a) the value of the holdings of the Fund in the securities of such issuer exceeds 5% of the value of the Fund's total assets or (b) the Fund owns more than 10% of the outstanding voting securities of such issuer. In applying the Fund's industry concentration restriction (number (18) above), the Fund uses the industry groups used in the Data Monitor Portfolio Monitoring System of William O'Neil & Co. Incorporated. The trustees have adopted additional non-fundamental investment restrictions for the Fund. These limitations may be changed by the trustees without a shareholder vote. The non-fundamental investment restrictions include the following: (1) Only for the purpose of hedging, the Fund may purchase and sell put and call options, but no more than 5% of the Fund's net assets at the time of purchase may be invested in premiums for options. The Fund may only write call options that are covered and only up to 10% of the Fund's net assets. (2) The Fund may not purchase or sell securities on a when-issued or delayed delivery basis, if as a result more than 5% of its total assets taken at market value at the time of purchase would be invested in such securities. Investment restrictions that involve a maximum percentage of securities or assets will not be considered to be violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition or encumbrance of securities or assets of the Fund. 3. MANAGEMENT OF THE FUND The Fund is supervised by trustees who are responsible for major decisions about the Fund's policies and overall Fund oversight. The Fund's board hires the companies that run day-to-day Fund operations, such as the investment advisor, administrator, transfer agent and custodian. The trustees and executive officers of the Fund are listed below, together with information which includes their principal occupations during the past five years and other principal business affiliations. MICHAEL OWEN, c/o Zayed University, Post Office Box 19282, Dubai, United Arab Emirates DOB: 1937. Dean, since September 2000, of Zayed University. Formerly self-employed as a financial and management consultant, and in real estate development from June 1999 to September 2000. From 1993 to June 1999, Dean, and from 1989 to 1993, a member of the Finance faculty, of the College of Business, Montana State University. Formerly (1976-1989), Chairman and Chief Executive Officer of Royal Gold, Inc. (mining). Chairman of the Board of Berger Growth Fund and Berger Large Cap Growth Fund. Chairman of the Trustees of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. * JACK R. THOMPSON, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1949. President and a director since May 1999 (Executive Vice President from February 1999 to May 1999) of Berger Growth Fund and Berger Large Cap Growth Fund. President and a trustee since May 1999 (Executive Vice President from February 1999 to May 1999) of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. President and Director since June, 1999 (Executive Vice President from February 1999 to June 1999) of Berger LLC. Audit Committee Member of the Public -10- 70 Employees' Retirement Association of Colorado (pension plan) since November 1997. Self-employed as a consultant from July 1995 through February 1999. Director of Wasatch Advisors (investment management) from February 1997 to February 1999. Director of Janus Capital Corporation (investment management) from June 1984 through June 1995, and Executive Vice President of the Corporation from April 1989 through June 1995. Treasurer of Janus Capital Corporation from November 1983 through October 1989. Trustee of the Janus Investment Funds from December 1990 through June 1995, and Senior Vice President of the Trust from May 1993 through June 1995. President and a director of Janus Service Corporation (transfer agent) from January 1987 through June 1995. President and a director of Fillmore Agency, Inc. (advertising agency), from January 1990 through June 1995. Executive Vice President and a director of Janus Capital International, Ltd. (investment advisor) from September 1994 through June 1995. President and a director of Janus Distributors, Inc. (broker/dealer), from May 1991 through June 1995. Director of IDEX Management, Inc. (investment management), from January 1985 through June 1995. Trustee and Senior Vice President of the of the Janus Aspen Funds from May 1993 through June 1995. DENNIS E. BALDWIN, 3481 South Race Street, Englewood, CO 80110, DOB: 1928. President, Baldwin Financial Counseling. Formerly (1978-1990), Vice President and Denver Office Manager of Merrill Lynch Capital Markets. Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, DOB: 1925. President, Climate Engineering, Inc. (building environmental systems). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. KATHERINE A. CATTANACH, 672 South Gaylord, Denver, CO 80209, DOB: 1945. Managing Principal, Sovereign Financial Services, Inc. (investment consulting firm). Formerly (1981-1988), Executive Vice President, Captiva Corporation, Denver, Colorado (private investment management firm). Ph.D. in Finance (Arizona State University); Chartered Financial Analyst (CFA). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. PAUL R. KNAPP, Suite 500, 350 West Hubbard Street, Chicago, IL 60602, DOB: 1945. Since October 2000, Executive Officer of DST Systems, Inc. ("DST"), a publicly traded information and transaction processing company which acts as the Funds' transfer agent. Director (since February 1998) and a Vice President (February 1998 - November 1998) of West Side Investments, Inc. (investments), a wholly-owned subsidiary of DST Systems, Inc. Formerly, President, Chief Executive Officer and a director (September 1997 - October 2000) of DST Catalyst, Inc., an international financial markets consulting, software and computer services company, (now DST International, a subsidiary of DST) Previously (1991 - October 2000), Chairman, President, Chief Executive Officer and a director of Catalyst Institute (international public policy research organization focused primarily on financial markets and institutions); also (1991 - September 1997), Chairman, President, Chief Executive Officer and a director of Catalyst Consulting (international financial institutions business consulting firm). Prior thereto (1988-1991), President, Chief Executive Officer and a director of Kessler Asher Group (brokerage, clearing and trading firm). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. HARRY T. LEWIS, JR., 1600 Broadway, Suite 2400, Denver, CO 80202, DOB: 1933. Self-employed as a private investor. Formerly (1981-1988), Senior Vice President, Rocky Mountain Region, of -11- 71 Dain Bosworth Incorporated and member of that firm's Management Committee. Director of J.D. Edwards & Co. (computer software company) since 1995. Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. WILLIAM SINCLAIRE, 3049 S. Perry Park Road, Sedalia, CO 80135, DOB: 1928. President, Santa Clara LLC (privately owned agriculture company). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. * JAY W. TRACEY CFA, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1954. Executive Vice President of the Berger Funds (since August, 2000). Executive Vice President and Chief Investment Officer of Berger LLC (since June 2000). Portfolio manager of the Berger Growth Fund (since August 2000); co-portfolio manager of the Berger Select Fund (since June 2000) and the Berger Large Cap Growth Fund (since January 2001). Formerly, Vice President and Portfolio Manager at OppenheimerFunds, Inc (September 1994 to May 2000) and Managing Director of Buckingham Capital Management (February 1994 to September 1994). * JANICE M. TEAGUE, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1954. Vice President (since November 1998) and Assistant Secretary (since February 2000 and previously from September 1996 to November 1998) and Secretary (November 1998 to February 2000) of the Berger Funds. Vice President (since October 1997), Secretary (since November 1998) and Assistant Secretary (October 1996 through November 1998) with Berger LLC. Vice President and Secretary with Berger Distributors LLC, since August 1998. Formerly, self-employed as a business consultant from June 1995 through September 1996, Secretary of the Janus Funds from January 1990 to May 1995 and Assistant Secretary of Janus Capital Corporation from October 1989 to May 1995. * DAVID J. SCHULTZ, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1950. Vice President and Treasurer (since November 1998) and Assistant Treasurer (September 1996 to November 1998) of the Berger Funds. Vice President (since February 1997) and Controller (since August 1994) with Berger LLC. Chief Financial Officer and Treasurer (since May 1996), Assistant Secretary (since August 1998) and Secretary (May 1996 to August 1998) with Berger Distributors LLC. Formerly, Partner with Smith, Brock & Gwinn (accounting firm) from January 1984 to August 1994. * ANTHONY R. BOSCH, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1965. Vice President of the Berger Funds (since February 2000). Vice President (since June 1999) and Chief Legal Officer (since August 2000) with Berger LLC. Formerly, Assistant Vice President of Federated Investors, Inc. from December 1996 through May 1999, and Attorney with the U.S. Securities and Exchange Commission from June 1990 through December 1996. * BRIAN S. FERRIE, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1958. Vice President of the Berger Funds since November 1998. Vice President (since February 1997) and Chief Compliance Officer (since August 1994) with Berger LLC. Chief Compliance Officer with Berger Distributors LLC, since May 1996. Formerly, Compliance Officer with United Services Advisor, Inc., from January 1988 to July 1994, and Director of Internal Audit of United Services Funds from January 1987 to July 1994. * JOHN PAGANELLI, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1967. Assistant Treasurer of the Berger Funds since November 1998. Vice President (since November 1998) and Manager of Accounting (January 1997 through November 1998) with Berger LLC. Formerly, -12- 72 Manager of Accounting (December 1994 through October 1996) and Senior Accountant (November 1991 through December 1994) with Palmeri Fund Administrators, Inc. * SUE VREELAND, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1948. Secretary of the Berger Funds (since February 2000). Assistant Secretary of Berger LLC and Berger Distributors LLC since June 1999. Formerly, Assistant Secretary of the Janus Funds from March 1994 to May 1999, Assistant Secretary of Janus Distributors, Inc. from June 1995 to May 1997 and Manager of Fund Administration for Janus Capital Corporation from February 1992 to May 1999. - --------- * Interested person (as defined in the Investment Company Act of 1940) of the Fund and of the Fund's advisor or sub-advisor. The trustees of the Fund have adopted a trustee retirement age of 75 years. TRUSTEE COMPENSATION The officers of the Fund received no compensation from the Fund during the fiscal year ended September 30, 2000. However, trustees of the Fund who are not "interested persons" of the Fund or its advisor or sub-advisor are compensated for their services according to a fee schedule, allocated among the Berger Funds. Neither the officers of the Fund nor the trustees receive any form of pension or retirement benefit compensation from the Fund. Set forth below is information regarding compensation paid or accrued during the fiscal year ended September 30, 2000, for each current trustee of the Fund as a director or trustee of the Berger Funds.
AGGREGATE AGGREGATE COMPENSATION(1) NAME AND POSITION COMPENSATION FROM FROM WITH BERGER FUNDS THE FUND ALL BERGER FUNDS(2) ----------------- ----------------- ------------------- Dennis E. Baldwin(3) $ 8,618 $ 46,945 Louis Bindner(3) $ 8,618 $ 46,945 Katherine A. Cattanach(3) $ 8,618 $ 46,945 Paul R. Knapp(3) $ 8,618 $ 46,945 Harry T. Lewis(3) $ 8,618 $ 46,945 Michael Owen(3) $10,451 $ 57,000 William Sinclaire(3) $ 8,392 $ 45,745 Jack R. Thompson(3),(4),(5) $ 0 $ 0
-13- 73 (1) Of the aggregate amounts shown for each director/trustee, the following amounts were deferred under applicable deferred compensation plans: Dennis E. Baldwin $17,939; Louis Bindner $14,239; Katherine A. Cattanach $46,875; Michael Owen $1,125 William Sinclaire $45,675. (2) Includes the Berger Growth Fund, the Berger Large Cap Growth Fund, the Berger Investment Portfolio Trust (seven series), the Berger Institutional Products Trust (five series), the Berger Worldwide Portfolios Trust (one series), the Berger Worldwide Funds Trust (three series) and the Berger Omni Investment Trust (one series). Aggregate compensation figures do not include first-year estimates for any Fund in existence for less than one year. (3) Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Portfolios Trust, Berger Worldwide Funds Trust and Berger Omni Investment Trust. (4) Interested person of Berger LLC. (5) President of Berger Growth Fund, Berger Large Cap Growth Fund, Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Portfolios Trust, Berger Worldwide Funds Trust and Berger Omni Investment Trust. Trustees may elect to defer receipt of all or a portion of their fees pursuant to a fee deferral plan adopted by certain of the Berger Funds. Under the plan, deferred fees are credited to an account and adjusted thereafter to reflect the investment experience of whichever of the Berger Funds (or approved money market funds) is designated by the trustee for this purpose. Pursuant to an SEC exemptive order, those Berger Funds that have adopted the plan are permitted to purchase shares of the designated funds in order to offset their obligation to the trustees participating in the plan. Purchases made pursuant to the plan are excepted from any otherwise applicable investment restriction limiting the purchase of securities of any other investment company. The obligation of a Berger Fund to make payments of deferred fees under the plan is a general obligation of that fund. As of December 29, 2000, the current officers and trustees of the Fund as a group owned of record or beneficially less than 1% of the outstanding shares of the Fund. 4. INVESTMENT ADVISOR AND SUB-ADVISOR BERGER LLC - INVESTMENT ADVISOR Berger LLC, 210 University Boulevard, Suite 900, Denver, CO 80206, is the investment advisor to the Fund. Berger LLC is responsible for managing the investment operations of the Fund and the composition of its investment portfolio. Berger LLC also acts as the Fund's administrator and is responsible for such functions as monitoring compliance with all applicable federal and state laws. Berger LLC is a Nevada Limited Liability Company, and has been in the investment advisory business for 26 years. It serves as investment advisor or sub-advisor to mutual funds and institutional investors and had assets under management of approximately $7.2 billion as of December 31, 2000. Berger LLC is a subsidiary of Stilwell Management Inc. ("Stilwell"), which owns more than 80% of Berger LLC, and is an indirect subsidiary of Stilwell Financial Inc. ("Stilwell Financial"). Stilwell also owns approximately 32% of the outstanding shares of DST Systems, Inc. ("DST"), a publicly traded information and transaction processing company which acts as the Funds' transfer agent. DST, in turn, owns 100% of DST Securities, a registered broker-dealer, which executes portfolio trades for the Fund. Stilwell Financial was previously a wholly-owned subsidiary of Kansas City Southern Industries, Inc. ("KCSI"). On July 12, 2000, KCSI completed a separation of its transportation and financial services segments through a dividend of stock of Stilwell Financial. On that date, KCSI shareholders received two shares of Stilwell Financial for every KCSI share held as of June 28, 2000. The separation resulted in no change in the management or control of the Fund or the Advisor to the Fund. -14- 74 THE SUB-ADVISOR Perkins, Wolf, McDonnell & Company (the "Sub-Advisor" or "PWM"), 53 West Jackson Boulevard, Suite 722, Chicago, Illinois 60604, has been engaged as the Fund's investment sub-advisor. The Sub-Advisor was organized in 1980 under the name Mac-Per-Wolf Co. to operate as a securities broker-dealer. In September 1983, it changed its name to Perkins, Wolf, McDonnell & Company. The Sub-Advisor is a member of the National Association of Securities Dealers, Inc. (the "NASD") and, in 1984, became registered as an investment adviser with the SEC. PWM was the Fund's investment advisor from the date the Fund commenced operations in 1985 to February 1997. PWM became the investment sub-advisor to the Fund on February 14, 1997, following shareholder approval of a new Sub-Advisory Agreement between the Advisor and the Sub-Advisor. PWM has also been the investment sub-advisor to the Berger Mid Cap Value Fund since it commenced operations in August 1998. Robert H. Perkins has been the lead investment manager for the Fund since its inception in 1985. As lead manager, Robert Perkins is responsible for the daily decisions on the security selection for the Fund's portfolio. Robert Perkins has been an investment manager since 1970 and serves as President and a director of PWM. Thomas M. Perkins, brother of Robert Perkins, has also served as investment manager of the Fund since January 1999. Thomas Perkins has been an investment manager since 1974 joined PWM as a portfolio manager in 1998. Robert Perkins owns 46% of PWM. Gregory E. Wolf owns 21% of PWM and serves as its Treasurer and a director. Tom Perkins owns 15% of PWM. INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT Under the Investment Advisory Agreement between the Advisor and the Fund, the Advisor is responsible for managing the investment operations of the Fund and the composition of its investment portfolio. The Investment Advisory Agreement provides that the investment advisor shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Fund, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder and except to the extent otherwise provided by law. Investment advisory fees are charged to the Fund according to the following schedule:
FUND AVERAGE DAILY NET ASSETS ANNUAL RATE ---- ------------------------ ----------- Berger Small Cap Value Fund First $500 million .85% Next $500 million .80% Over $1 billion .75%
This fee is accrued daily and payable monthly. The Investment Advisory Agreement provides that the investment advisor shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Fund, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder and except to the extent otherwise provided by law. The following schedule reflects the advisory fees charged to the Fund for the fiscal year ended September 30, 2000:
FUND ADVISOR INVESTMENT ADVISORY FEE ---- ------- ----------------------- Berger Small Cap Value Fund Berger LLC 0.81%
-15- 75 The Investment Advisory Agreement will continue in effect until the last day of April 2001, and thereafter from year to year if such continuation is specifically approved at least annually by the trustees or by vote of a majority of the outstanding shares of the Fund and in either case by vote of a majority of the trustees of the Fund who are not "interested persons" (as that term is defined in the Investment Company Act of 1940) of the Fund or the Advisor or Sub-Advisor. The Agreement is subject to termination by the Fund or the Advisor on 60 days' written notice, and terminates automatically in the event of its assignment. Under the Sub-Advisory Agreement between the Advisor and the Sub-Advisor, the Sub-Advisor is responsible for day-to-day investment management of the Fund. The Sub-Advisor manages the investments in the Fund and determines what securities and other investments will be acquired, held or disposed of, consistent with the investment objective and policies established by the trustees of the Fund. The Fund pays no fees directly to the Sub-Advisor. The Sub-Advisor will receive from the Advisor a fee at the annual rate of 0.425% of the first $500 million of average daily net assets of the Fund, 0.40% of the next $500 million, and 0.375% of any amount in excess of $1 billion. The Sub-Advisory Agreement provides that the Sub-Advisor shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Fund, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties thereunder and except to the extent otherwise provided by law. The Sub-Advisory Agreement will continue in effect until the last day of April 2001, and thereafter from year to year if such continuation is specifically approved at least annually by the trustees or by vote of a majority of the outstanding shares of the Fund and in either case by vote of a majority of the trustees of the Fund who are not "interested persons" (as that term is defined in the Investment Company Act of 1940) of the Fund or the Advisor or the Sub-Advisor. The Sub-Advisory Agreement is subject to termination by the Fund or the Sub-Advisor on 60 days' written notice, and terminates automatically in the event of its assignment and in the event of termination of the Investment Advisory Agreement. OTHER ARRANGEMENTS BETWEEN THE ADVISOR AND SUB-ADVISOR The Advisor and Sub-Advisor entered into an Agreement, dated November 18, 1996, as amended January 27, 1997, April 8, 1998 and November 17, 1999 (the "November 18 Agreement"), under which, among other things, the Sub-Advisor agreed that, so long as Berger LLC acts as the Fund's Advisor and PWM provides sub-advisory or other services in connection with the Fund, the Sub-Advisor will not manage or provide advisory services to any registered investment company that is in direct competition with the Fund. The November 18 Agreement also provides that if the Sub-Advisory Agreement is terminated before February 14, 2005 (other than for cause), and provided Berger LLC remains as the Fund's Advisor, Berger LLC and PWM will enter into a consulting agreement for PWM to provide consulting services to Berger LLC with respect to the Fund, subject to any requisite approvals under the Investment Company Act of 1940. Under the Consulting Agreement, PWM would provide training and assistance to Berger LLC analysts and marketing support appropriate to the Fund and would be paid a fee at an annual rate of 0.10% of the first $100 million of average daily net assets of the Fund, 0.05% of the next $100 million and 0.02% on any part in excess of $200 million. No part of the consulting fee would be borne by the Fund. -16- 76 TRADE ALLOCATIONS While investment decisions for the Fund are made independently by the sub-advisor, the same investment decision may be made for a Fund and one or more accounts advised by the advisor or sub-advisor. In this circumstance, should purchase and sell orders of the same class of security be in effect on the same day, the orders for such transactions may be combined by the advisor or sub-advisor in order to seek the best combination of net price and execution for each. Client orders partially filled will, as a general matter, be allocated pro rata in proportion to each client's original order, although exceptions may be made to avoid, among other things, odd lots and de minimis allocations. Execution prices for a combined order will be averaged so that each participating client receives the average price paid or received. While in some cases, this policy might adversely affect the price paid or received by a Fund or other participating accounts, or the size of the position obtained or liquidated, the advisor or sub-advisor will aggregate orders if it believes that coordination of orders and the ability to participate in volume transactions will result in the best overall combination of net price and execution. Berger LLC has adopted procedures for allocating to its participating accounts' securities purchased pursuant to a company's initial public offering ("IPO"). The procedures provide that such allocations must be effected in a manner that is fair and equitable to all accounts. Generally, securities received from participating in IPOs will be allocated to participating accounts pro rata based on account size. The key criteria for determining eligibility of the account to participate in an offering is the suitability of the investment for the account. An account may participate in an IPO allocation if Berger LLC believes that, based on the account's investment restrictions, risk profile, asset composition and cash levels, the IPO is an appropriate investment. Accordingly, no account will participate in every IPO allocation. In addition, an account generally will not participate in an IPO if the securities available for allocation to the account are insignificant relative to the account's net assets. As a result, any account whose assets are very large is not likely to participate in the allocation of many or any IPOs. RESTRICTIONS ON PERSONAL TRADING Berger LLC, the Berger Funds and Berger Distributors LLC each permits its directors, officers and employees to purchase and sell securities for their own accounts in accordance with a policy regarding personal investing in each of the Codes of Ethics for Berger LLC, the Berger Funds and Berger Distributors LLC. The policy requires all covered persons to conduct their personal securities transactions in a manner which does not operate adversely to the interests of the Funds or Berger LLC's other advisory clients. Directors and officers of Berger LLC and Berger Distributors LLC, investment personnel and other designated persons deemed to have access to current trading information ("access persons") are required to pre-clear all transactions in securities not otherwise exempt under the policy. Requests for authority to trade will be denied pre-clearance when, among other reasons, the proposed personal transaction would be contrary to the provisions of the policy or would be deemed to adversely affect any transaction then known to be under consideration for or currently being effected on behalf of any client account, including the Funds. PWM has adopted a Code of Ethics which is substantially similar to the Code adopted by Berger LLC. In addition to the pre-clearance requirements described above for Berger LLC and Berger Distributors LLC, the policy subjects directors and officers of Berger LLC, the Berger Funds and Berger Distributors LLC, investment personnel and other access persons to various trading restrictions and reporting obligations. All reportable transactions are reviewed for compliance with the policy. The policy is administered by Berger LLC and the provisions of the policy are subject to interpretation by and exceptions authorized by its management. 5. EXPENSES OF THE FUND In addition to paying an investment advisory fee to Berger LLC, the Fund pays all of its expenses not assumed by Berger LLC, including, but not limited to, custodian and transfer agent fees, legal and accounting expenses, administrative and record keeping expenses, interest charges, federal and state taxes, expenses of shareholders' meetings, compensation of trustees who are not interested persons of -17- 77 Berger LLC, expenses of printing and distributing reports to shareholders and federal and state administrative agencies, and all expenses incurred in connection with the execution of its portfolio transactions, including brokerage commissions on purchases and sales of portfolio securities, which are considered a cost of securities of the Fund. The Fund also pays all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer or sale of shares of the Fund, including, but not limited to, all costs involved in preparing and printing prospectuses for shareholders of the Fund. Under a separate Administrative Services Agreement with respect to the Fund, Berger LLC performs certain administrative and recordkeeping services not otherwise performed by the Fund's custodian and recordkeeper, including the preparation of financial statements and reports to be filed with the Securities and Exchange Commission and state regulatory authorities. For the fiscal year ended September 30, 2000, Berger LLC did not charge an administrative fee to the Fund. The administrative services fees may be changed by the Fund's trustees without shareholder approval. The following table shows the total dollar amounts of advisory fees and administrative services fees paid by the Fund for the periods indicated. For Funds that have two classes of shares, each class bears pro rata its share of the Fund's investment advisory fee based on assets. Berger Small Cap Value Fund
Fiscal Year Ended Investment Administrative September 30, Advisory Fee(1) Service Fee(2) Fee Waiver(3) TOTAL - ----------------- --------------- -------------- ------------- ------------ 2000 $ 9,858,000 $ 0 $ (224,000) $ 9,634,000 1999 $ 3,996,000 $ 44,000 $ 0 $ 4,040,000 1998 $ 1,515,000 $ 17,000 $ 0 $ 1,532,000
(1) Effective October 1, 1999, the investment advisory fee charged to the Fund was reduced from .90% to the following rates of average daily net assets: 0.85% of the first $500 million; 0.80% of the next $500 million and 0.75% in excess of $1 billion. (2) Effective October 1, 1999, the 0.01% administrative services fee was eliminated. (3) For the Investor Shares class only, the Fund's advisor waives a portion of the 12b-1 fee by the amount such fee is not used in connection with the distribution or servicing of the Investor Shares of the Fund during any period in which the Fund remains closed to new investors. The waiver shown reflects an amount as if the waiver had been in effect for the previous fiscal year. The Fund has appointed State Street Bank and Trust Company ("State Street"), 801 Pennsylvania, Kansas City, MO 64105, as its recordkeeping and pricing agent. In addition, State Street also serves as the Funds' custodian. The Fund has appointed DST Systems, Inc. ("DST"), P.O. Box 219958, Kansas City, MO 64121, as its transfer agent and dividend disbursing agent. Approximately 32% of the outstanding shares of DST are owned by Stilwell. As recordkeeping and pricing agent, State Street calculates the daily net asset value of the Fund and performs certain accounting and recordkeeping functions required by the Fund. The Fund pays State Street a monthly base fee plus an asset-based fee. State Street is also reimbursed for certain out-of-pocket expenses. State Street, as custodian, and its subcustodians have custody and provide for the safekeeping of the Fund's securities and cash, and receive and remit the income thereon as directed by the management of the Fund. The custodian and subcustodians do not perform any managerial or policy-making -18- 78 functions for the Fund. For its services as custodian, State Street receives an asset-based fee plus certain transaction fees and out-of-pocket expenses. As transfer agent and dividend disbursing agent, DST maintains all shareholder accounts of record; assists in mailing all reports, proxies and other information to the Fund's shareholders; calculates the amount of, and delivers to the Fund's shareholders, proceeds representing all dividends and distributions; and performs other related services. For these services, DST receives a fee from the Fund at an annual rate of $14.00 per open Fund shareholder account, subject to preset volume discounts, plus certain transaction fees and fees for closed accounts, and is reimbursed for out-of-pocket expenses. All of State Street's and DST's fees are subject to reduction pursuant to an agreed formula for certain earnings credits on the cash balances of the Fund. Earnings credits received by the Fund can be found on the Fund's Statement of Operations in the Annual Report incorporated by reference into this Statement of Additional Information. 12B-1 PLAN The Fund has adopted a 12b-1 plan (the "Plan") pursuant to Rule 12b-1 under the Investment Company Act of 1940, which provides for the payment to Berger LLC of a 12b-1 fee of 0.25% per annum of the Fund's average daily net assets attributable to the Investor Shares to finance activities primarily intended to result in the sale of those shares. The Plan is intended to benefit the Investor Shares class of the Fund by attracting new assets into the class and thereby affording potential cost reductions due to economies of scale. The expenses paid by Berger LLC may include, but are not limited to: - -- payments made to, and costs incurred by, the Fund's principal underwriter in connection with the distribution of Investor Shares, including payments made to and expenses of officers and registered representatives of the Distributor; - -- payments made to and expenses of other persons (including employees of Berger LLC) who are engaged in, or provide support services in connection with, the distribution of Investor Shares, such as answering routine telephone inquiries and processing shareholder requests for information; - -- compensation (including incentive compensation and/or continuing compensation based on the amount of customer assets maintained in the Fund) paid to securities dealers, financial institutions and other organizations which render distribution and administrative services in connection with the distribution of Investor Shares, including services to holders of Investor Shares and prospective investors; - -- costs related to the formulation and implementation of marketing and promotional activities, including direct mail promotions and television, radio, newspaper, magazine and other mass media advertising; - -- costs of printing and distributing prospectuses and reports to prospective shareholders of Investor Shares; - -- costs involved in preparing, printing and distributing sales literature for Investor Shares; - -- costs involved in obtaining whatever information, analyses and reports with respect to market and promotional activities on behalf of the Fund relating to Investor Shares that Berger LLC deems advisable; - -- and such other costs relating to Investor Shares as the Fund may from time to time reasonably deem necessary or appropriate in order to finance activities primarily intended to result in the sale of Investor Shares. Such 12b-1 fee payments are to be made by the Fund to Berger LLC with respect to each fiscal year of the Fund without regard to the actual distribution expenses incurred by Berger LLC in such year; -19- 79 that is, if the distribution expenditures incurred by Berger LLC are less than the total of such payments in such year, the difference is not to be reimbursed to the Fund by Berger LLC, and if the distribution expenditures incurred by Berger LLC are more than the total of such payments, the excess is not to be reimbursed to Berger LLC by the Fund. From time to time the Fund may engage in activities which jointly promote the sale of Investor Shares and other funds that are or may in the future be advised or administered by Berger LLC, which costs are not readily identifiable as related to any one fund. In such cases, the Fund's 12b-1 fees may be used to finance the joint promotion of the shares of the Investor Shares, along with the shares of the other fund. Berger LLC allocates the cost of such joint promotional activity among the funds involved on the basis of their respective net assets, unless otherwise directed by the trustees. The current 12b-1 Plan will continue in effect until the end of April 2001, and from year to year thereafter if approved at least annually by the Fund's trustees and those trustees who are not interested persons of the Fund and have no direct or indirect financial interest in the operation of the Plan or any related agreements by votes cast in person at a meeting called for such purpose. The Plan may not be amended to increase materially the amount to be spent on distribution of Investor Shares without shareholder approval. For the fiscal year ended September 30, 2000, $1,320,000 was paid to Berger LLC pursuant to the Plan. OTHER EXPENSE INFORMATION The trustees of the Fund have authorized portfolio transactions to be placed on an agency basis through DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of DST. When transactions are effected through DSTS, the commission received by DSTS is credited against, and thereby reduces, certain operating expenses that the Fund would otherwise be obligated to pay. No portion of the commission is retained by DSTS. DSTS may be considered an affiliate of Berger LLC due to the ownership interest of Stilwell in both DST and Berger LLC. The Fund and/or its Advisor may enter into arrangements with certain brokerage firms and other companies(such as recordkeepers and administrators) to provide administrative services (such as sub-transfer agency, recordkeeping, shareholder communications, sub-accounting and/or other services) to investors purchasing shares of the Fund through those firms or companies. The Fund's Advisor or the Fund (if approved by its trustees) may pay fees to these companies for their services. These companies may also be appointed as agents for or authorized by the Fund to accept on its behalf purchase and redemption requests that are received in good order. Subject to Fund approval, certain of these companies may be authorized to designate other entities to accept purchase and redemption orders on behalf of the Fund. The Fund's Advisor may also enter into arrangements with organizations that solicit clients for the Advisor, which may include clients who purchase shares of the Fund. While the specific terms of each arrangement may differ, generally, the fee paid by the Advisor under such arrangements is based on the value of the referred client's assets managed by the Advisor. None of the fees paid to such organizations will be borne by the Fund. -20- 80 DISTRIBUTOR The distributor (principal underwriter) of the Fund's shares is Berger Distributors LLC (the "Distributor"), 210 University Blvd., Suite 900, Denver, CO 80206. The Distributor may be reimbursed by Berger LLC for its costs in distributing the Fund's Investor Shares. 6. BROKERAGE POLICY Although the Fund retains full control over its own investment policies, under the terms of its Investment Advisory Agreement, Berger LLC as the Fund's advisor is directed to place the portfolio transactions of the Fund. A report on the placement of brokerage business is given to the trustees of the Fund every quarter, indicating the brokers with whom Fund portfolio business was placed and the basis for such placement. The brokerage commissions paid by the Fund during the past three fiscal years were as follows: BROKERAGE COMMISSIONS
Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended September 30, September 30, September 30, 2000 1999 1998 ------------- ------------- --------------- BERGER SMALL CAP VALUE FUND $ 4,682,000 $ 1,870,000 $ 567,000
The Investment Advisory Agreement authorizes and directs the advisor to place portfolio transactions for the Fund only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates. However, the Agreement specifically authorizes the advisor to place such transactions with a broker with whom it has negotiated a commission that is in excess of the commission another broker or dealer would have charged for effecting that transaction if the advisor determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker viewed in terms of either that particular transaction or the overall responsibilities of the advisor. Accordingly, the advisor or sub-advisor does not have an obligation to seek the lowest available commission. In accordance with this provision of the Agreement, portfolio brokerage business of the Fund may be placed with brokers who provide useful brokerage and research services to the advisor or sub-advisor. The Fund's advisor may consider the value of research provided as a factor in the choice of brokers. "Research" includes computerized on-line stock quotation systems and related data feeds from stock exchanges, computerized trade order entry, execution and confirmation systems, fundamental and technical analysis data and software, computerized stock market and business news services, economic research, account performance data and computer hardware used for the receipt of electronic research services and broker and other third-party equity research, such as publications or writings which furnish advice as to the value of securities and advisability of investing, and analyses and reports concerning issuers, industries, securities, market trends, and portfolio strategies. Research may be provided orally, in print, or electronically. These services included a service used by the independent trustees of the Fund in reviewing the Investment Advisory Agreement. In some cases, a product or services termed "research" may serve other functions unrelated to the making of investment decisions. When a product has such a mixed use, the advisor will make a good faith allocation of the cost of the product according to the use made of it. The portion of the product that assists the advisor or sub-advisor in the investment decision-making process may be paid for with a Fund's commission dollars. The advisor or sub-advisor pays for the portion of the product that is -21- 81 not "research" with its own funds. Accordingly, the decision whether and how to allocate the costs of such a product presents a conflict of interest for the advisor or sub-advisor. The Fund's advisor does not enter into formal agreements with any brokers regarding the placement of securities transactions because of any such brokerage or research services that they provide. An advisor or sub-advisor may, however, make arrangements with and maintain internal procedures for allocating transactions to brokers who provide such services to encourage them to provide services expected to be useful to the advisor's or sub-advisor's clients, including the Funds. Brokers may suggest a level of business they would like to receive in return for the brokerage and research they provide. The advisor or sub-advisor then determines whether to continue receiving the research and brokerage provided and the approximate amount of commissions it is willing to pay to continue the brokerage and research arrangement with each broker. The actual amount of commissions a broker may receive may be more or less than a broker's suggested allocations, depending on advisor's or sub-advisor's level of business, market conditions and other relevant factors. Even under these arrangements, however, the placement of all Fund transactions, must be consistent with the Funds' brokerage placement and execution policies, and must be directed to a broker who renders satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates. During the fiscal year ended September 30, 2000 of the brokerage commissions paid by the Fund, the following amounts were paid to brokers who provided to the Fund selected brokerage or research services prepared by the broker or subscribed or paid for by the broker on behalf of the Fund:
FUND AMOUNT OF TRANSACTIONS AMOUNT OF COMMISSIONS Berger Small Cap Value Fund $ 94,291,000 $ 304,000
These brokerage and research services received from brokers are often helpful to Berger LLC in performing its investment advisory responsibilities to the Fund, and the availability of such services from brokers does not reduce the responsibility of Berger LLC' advisory personnel to analyze and evaluate the securities in which the Fund invests. The brokerage and research services obtained as a result of the Fund's brokerage business also will be useful to Berger LLC in making investment decisions for its other advisory accounts, and, conversely, information obtained by reason of placement of brokerage business of such other accounts may be used by Berger LLC in rendering investment advice to the Fund. Although such brokerage and research services may be deemed to be of value to Berger LLC, they are not expected to decrease the expenses that Berger LLC would otherwise incur in performing its investment advisory services for the Fund nor will the advisory fees that are received by Berger LLC from the Fund be reduced as a result of the availability of such brokerage and research services from brokers. The trustees of the Fund have authorized portfolio transactions to be placed on an agency basis through DSTS, a wholly-owned broker-dealer subsidiary of DST. When transactions are effected through DSTS, the commission received by DSTS is credited against, and thereby reduces, certain operating expenses that the Fund would otherwise be obligated to pay. No portion of the commission is retained by -22- 82 DSTS. DSTS may be considered an affiliate of Berger LLC due to the ownership interest of Stilwell in both DST and Berger LLC. Included in the brokerage commissions paid by the Fund during the fiscal year ended September 30, 2000, as stated in the preceding Brokerage Commissions table, are the following amounts paid to DSTS, which served to reduce the Fund's out-of-pocket expenses as follows: DSTS COMMISSIONS AND RELATED EXPENSE REDUCTIONS
DSTS DSTS DSTS Commissions Reduction in Commissions Reduction in Commissions Reduction in Paid Expenses FYE Paid Expenses FYE Paid Expenses FYE FYE 9/30/00 9/30/00(1) FYE 9/30/99 9/30/99(1) FYE 9/30/98 9/30/98(1) ----------- ------------ ----------- ---------- ----------- ------------ Berger Small Cap $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Value Fund
(1) No portion of the commission is retained by DSTS. Difference between commissions paid through DSTS and reduction in expenses constitute commissions paid to an unaffiliated clearing broker. The Fund's advisor places securities orders with a limited number of major institutional brokerage firms chosen for the reliability and quality of execution; commission rates; quality of research coverage of major U.S. companies, the U.S. economy and the securities markets; promptness; back office capabilities; capital strength and financial stability; prior performance in serving the advisor and its clients; and knowledge of other buyers and sellers. The advisor selects the broker for each order based on the factors above, as well as the size, difficulty and other characteristics of the order. The directors or trustees of the Funds have also authorized sales of shares of the Funds by a broker-dealer and the recommendations of a broker-dealer to its customers that they purchase Fund shares to be considered as factors in the selection of broker-dealers to execute portfolio transactions for the Funds. In addition, the advisor may also consider payments made by brokers to a Fund or to other persons on behalf of a Fund for services provided to the Fund for which it would otherwise be obligated to pay, such as transfer agency fees. In placing portfolio business with any such broker or dealer, the advisor will seek the best execution of each transaction. 7. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND MINIMUM INITIAL INVESTMENTS: Regular investment $ 2,000 Low Minimum Investment Plan $ 100 MINIMUM SUBSEQUENT INVESTMENTS: Regular investment $ 50 Automatic investment $ 50 Low Minimum Investment Plan (required monthly automatic investments) $ 100
To purchase shares in the Fund, simply complete the application form enclosed with the Prospectus. Then mail it with a check payable to "Berger Funds" to the following address: Berger Funds P.O. Box 219958 Kansas City, MO 64121 If a shareholder is adding to an existing account, shares may also be purchased by placing an order by telephone call to the Fund at 1-800-551-5849 or via on-line access, and remitting payment to DST -23- 83 Systems, Inc. Payment for shares ordered on-line must be made by electronic funds transfer. In order to make sure that payment for telephone purchases is received on time, shareholders are encouraged to remit payment by electronic funds transfer. Shareholders may also remit payment for telephone purchases by wire or by overnight delivery. In addition, Fund shares may be purchased through certain broker-dealers that have established mutual fund programs and certain other organizations connected with pension and retirement plans. These broker-dealers and other organizations may charge investors a transaction or other fee for their services, may require different minimum initial and subsequent investments than the Fund and may impose other charges or restrictions different from those applicable to shareholders who invest in the Fund directly. Fees charged by these organizations will have the effect of reducing a shareholder's total return on an investment in Fund shares. No such charge will apply to an investor who purchases Fund shares directly from the Fund as described above. Procedures for purchasing, selling (redeeming) and exchanging Fund shares by telephone and online are described in the Prospectus. The Fund may terminate or modify those procedures and related requirements at any time, although shareholders of the Fund will be given notice of any termination or material modification. Berger LLC may, at its own risk, waive certain of those procedures and related requirements. 8. HOW THE NET ASSET VALUE IS DETERMINED The net asset value of the Fund is determined once daily, at the close of the regular trading session of the New York Stock Exchange (the "Exchange") (normally 4:00 p.m., Eastern time, Monday through Friday) each day that the Exchange is open. The Exchange is closed and the net asset value of the Fund is not determined on weekends and on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day each year. The share price for the Investor Shares of the Fund is determined by adding the Investor Shares' pro rata portion of the total value of the Fund's investments, cash and other assets, deducting the Investor Shares' pro rata portion of the Fund's liabilities and the liabilities attributable directly to the Investor Shares, and then dividing that value by the total number of the Investor Shares outstanding. Since net asset value for the Fund is calculated by class, and since the Investor Shares and each other class of the Fund has its own expenses, the per share net asset value of the Fund will vary by class. In determining net asset value, securities listed or traded primarily on national exchanges, The Nasdaq Stock Market and foreign exchanges are valued at the last sale price on such markets, or, if such a price is lacking for the trading period immediately preceding the time of determination, such securities are valued at the mean of their current bid and asked prices. Securities that are traded in the over-the-counter market are valued at the mean between their current bid and asked prices. The market value of individual securities held by the Fund will be determined by using prices provided by pricing services which provide market prices to other mutual funds or, as needed, by obtaining market quotations from independent broker/dealers. Short-term money market securities maturing within 60 days are valued on the amortized cost basis, which approximates market value. All assets and liabilities initially expressed in terms of non-U.S. dollar currencies are translated into U.S. dollars at the prevailing market rates as quoted by one or more banks or dealers shortly before the close of the Exchange. Securities and assets for which quotations are not readily available or are not representative of market value may be valued at their fair value determined in good faith pursuant to consistently applied procedures established by the trustees. Examples would be when events occur that materially affect the value of a security at a time when the security is not trading or when the securities are illiquid. Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the Exchange. The values of foreign securities used in computing the net asset value of the shares of the Fund are determined as of the earlier of such market close or the closing time of the Exchange. Occasionally, events affecting the value of such securities may occur between the times at which they are determined and the close of the Exchange, or when the foreign market on which such securities trade is closed but the Exchange is open, which will not be reflected in the computation of net asset value. If during such periods, events occur which materially affect the value of such securities, the securities -24- 84 may be valued at their fair value as determined in good faith pursuant to consistently applied procedures established by the trustees. The Fund's securities may be listed primarily on foreign exchanges or over-the-counter dealer markets which may trade on days when the Exchange is closed (such as a customary U.S. holiday) and on which the Fund's net asset value is not calculated. As a result, the net asset value of the Fund may be significantly affected by such trading on days when shareholders cannot purchase or redeem shares of the Fund. 9. INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT This discussion summarizes certain federal income tax issues relating to the Fund. As a summary, it is not an exhaustive discussion of all possible tax ramifications. Accordingly, shareholders are urged to consult with their tax advisors with respect to their particular tax consequences. TAX STATUS OF THE FUND. If the Fund meets certain investment and distribution requirements, it will be treated as a "regulated investment company" (a "RIC") under the Internal Revenue Code and will not be subject to federal income tax on earnings that it distributes in a timely manner to shareholders. It also may be subject to an excise tax on undistributed income if it does not meet certain timing requirements for distributions. The Fund intends to qualify as a RIC annually and to make timely distributions in order to avoid income and excise tax liabilities. TAX ON FUND DISTRIBUTIONS. With certain exceptions provided by law, the Fund will report annually to the Internal Revenue Service and to each shareholder information about the tax treatment of the shareholder's distributions. Dividends paid by the Fund, whether received in cash or reinvested in additional Fund shares, will be treated as ordinary income to the shareholders. Distributions of net capital gain, whether received in cash or reinvested in Fund shares, will be taxable to the shareholders, but the rate of tax will vary depending upon the Fund's holding periods in the assets whose sale resulted in the capital gain. Dividends and distributions that are declared in October, November or December but not distributed until the following January will be considered to be received by the shareholders on December 31. In general, net capital gains from assets held by the Fund for more than 12 months will be subject to a maximum tax rate of 20% and net capital gains from assets held for 12 months or less will be taxed as ordinary income. Distributions will be subject to these capital gains rates, regardless of how long a shareholder has held Fund shares. Assets contributed to a Fund in an in-kind purchase of Fund shares may generate more gain upon their sale than if the assets had been purchased by the Fund with cash contributed to the Fund in a cash purchase of Fund shares. If the Fund's distributions for a taxable year exceeds its tax earnings and profits available for distribution, all or a portion of its distributions may be treated as a return of capital. To the extent a distribution is treated as a return of capital, a shareholder's basis in his or her Fund shares will be reduced by that amount. If a shareholder has elected to receive dividends and/or capital gain distributions in cash and the U.S. Postal Service is unable to deliver checks to the shareholder's address of record, or if a shareholder's checks remain uncashed for six months, the Fund reserves the right to reinvest the amount distributed in shares of the applicable Fund at the NAV next computed after the check is cancelled, and to convert the shareholder's distribution option from receiving cash to having all dividend and other distributions reinvested in additional shares. In addition, no interest will accrue on amounts represented by uncashed distribution or redemption checks. Additionally, the Funds reserve the right to reinvest distributions of less than $10 in shares of the applicable Fund at the next computed NAV. -25- 85 TAX ON REDEMPTIONS OF FUND SHARES. Shareholders may be subject to tax on the redemption of their Fund shares. In general, redemptions may give rise to a capital gain or loss, the treatment of which will depend on the shareholder's holding period in the Fund shares. Tax laws may prevent the deduction of a loss on the sale of Fund shares if the shareholder reinvests in the Fund shortly before or after the sale giving rise to the loss. Any loss on the redemption or other sale or exchange of Fund shares held for six months or less will be treated as a long-term capital loss to the extent of any long-term capital gain distribution received on the shares. INCOME FROM FOREIGN SOURCES. Dividends and interest received by the Fund on foreign securities may give rise to withholding and other taxes imposed by foreign countries, although these taxes may be reduced by applicable tax treaties. Foreign taxes will generally be treated as expenses of the Fund, unless the Fund has more than 50% of its assets invested in foreign corporate securities at the end of the Fund's taxable year. In that case, if the Fund makes an election, shareholders of the Fund may be able to deduct (as an itemized deduction) or, claim a foreign tax credit for their share of foreign taxes, subject to limitations prescribed in the tax law. If the Fund invests in a foreign corporation that is a passive foreign investment company (a "PFIC"), special rules apply that may affect the tax treatment of gains from the sale of the stock and may cause the Fund to incur IRS tax and interest charges. However, the Fund may be eligible to elect one of two alternative tax treatments with respect to PFIC shares which would avoid these taxes and charges, but also may affect, among other things, the amount and character of gain or loss and the timing of the recognition of income with respect to PFIC shares. Accordingly, the amounts, character and timing of income distributed to shareholders of the Fund holding PFIC shares may differ substantially as compared to a fund that did not invest in PFIC shares. INCOME FROM CERTAIN TRANSACTIONS. Some or all of the Fund's investments may include transactions that are subject to special tax rules. Transactions involving foreign currencies may give rise to gain or loss that could affect the Fund's ability to make ordinary dividend distributions. Investment in certain financial instruments, such as options, futures contracts and forward contracts, may require annual recognition of unrealized gains and losses. Transactions that are treated as "straddles" may affect the character and/or timing of other gains and losses of the Fund. If the Fund enters into a transaction (such as a "short sale against the box") that reduces the risk of loss on an appreciated financial position that it already holds, the entry into the transaction may constitute a constructive sale and require immediate recognition of gain. BACKUP WITHHOLDING. In general, if a shareholder is subject to backup withholding, the Fund will be required to withhold federal income tax at a rate of 31% from distributions to that shareholder. These payments are creditable against the shareholder's federal income tax liability. FOREIGN SHAREHOLDERS. Foreign shareholders of the Fund generally will be subject to a 30% U.S. withholding tax on dividends paid by the Fund from ordinary income and short-term capital gain, although the rate may be reduced by a tax treaty. If a foreign shareholder dies while owning Fund shares, those shares may be subject to U.S. estate taxes. 10. SUSPENSION OF REDEMPTION RIGHTS The right of redemption may be suspended for any period during which the New York Stock Exchange is closed or the Securities and Exchange Commission determines that trading on the Exchange is restricted, or when there is an emergency as determined by the Securities and Exchange Commission as a result of which it is not reasonably practicable for the Fund to dispose of securities owned by it or to determine the value of its net assets, or for such other period as the Securities and Exchange Commission may by order permit for the protection of shareholders of the Fund. The Fund intends to redeem its shares only for cash, although it retains the right to redeem its shares in-kind under unusual circumstances, in order to protect the interests of the remaining shareholders, by the delivery of securities selected from its assets at its discretion. The Fund is, however, governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to which the Fund is obligated to redeem shares -26- 86 solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any 90-day period for any one shareholder. For purposes of this threshold, each underlying account holder whose shares are held of record in certain omnibus accounts is treated as one shareholder. Should redemptions by any shareholder during any 90-day period exceed such limitation, the Fund will have the option of redeeming the excess in cash or in-kind. If shares are redeemed in-kind, the redeeming shareholder generally will incur brokerage costs in converting the assets to cash. The redeeming shareholder may have difficulty selling the securities and recovering the amount of the redemption if the securities are illiquid. The method of valuing securities used to make redemption in-kind will be the same as the method of valuing portfolio securities described under Section 8. 11. TAX-SHELTERED RETIREMENT PLANS The Fund offers several tax-qualified retirement plans for individuals, businesses and non-profit organizations, including a Profit-Sharing Plan, a Money Purchase Pension Plan, an Individual Retirement Account (IRA), a Roth IRA, an Education IRA and a 403(b) Custodial Account for adoption by employers and individuals who wish to participate in such Plans. For information on other types of retirement plans offered by the Fund, please call 1-800-333-1001 or write to the Fund c/o Berger LLC, P.O. Box 5005, Denver, CO 80217. PROFIT-SHARING AND MONEY PURCHASE PENSION PLANS Employers, self-employed individuals and partnerships may make tax-deductible contributions to the tax-qualified retirement plans offered by the Fund. All income and capital gains accumulated in the Plans are tax free until withdrawn. The amounts that are deductible depend upon the type of Plan or Plans adopted. If you, as an employer, self-employed person or partnership, adopt the Profit-Sharing Plan, you may vary the amount of your contributions from year to year and may elect to make no contribution at all for some years. If you adopt the Money Purchase Pension Plan, you must commit yourself to make a contribution each year according to a formula in the Plan that is based upon your employees' compensation or your earned income. By adopting both the Profit-Sharing and the Money Purchase Pension Plan, you can increase the amount of contributions that you may deduct in any one year. If you wish to purchase shares of the Fund in conjunction with one or both of these tax-qualified plans, you may use an Internal Revenue Service approved prototype Trust Agreement and Retirement Plan available from the Fund. State Street serves as trustee of the Plan, for which it charges an annual trustee's fee for the Fund or Cash Account Trust Money Portfolio (discussed below) in which the participant's account is invested. Contributions under the Plans are invested exclusively in shares of the Fund or the Cash Account Trust Money Market Portfolios, which are then held by the trustee under the terms of the Plans to create a retirement fund in accordance with the tax code. Distributions from the Profit-Sharing and Money Purchase Pension Plans generally may not be made without penalty until the participant reaches age 59 1/2 and must begin no later than April 1 of the calendar year following the year in which the participant attains age 70 1/2. A participant who is not a 5% owner of the employer may postpone such distributions to April 1 of the calendar year following the year of retirement. This exception does not apply to distributions from an individual retirement account (IRA). Except for required distributions after age 70 1/2, periodic distributions over more than 10 years and the distribution of any after-tax contributions, distributions are subject to 20% Federal income tax withholding unless those distributions are rolled directly to another qualified plan or an IRA. Participants may not be able to receive distributions immediately upon request because of certain requirements under federal tax law. Since distributions which do not satisfy these requirements can result in adverse tax consequences, consultation with an attorney or tax advisor regarding the Plans is recommended. You should also consult with your tax advisor regarding state tax law implications of participation in the Plans. In order to receive the necessary materials to create a Profit-Sharing or Money Purchase Pension Plan, please write to the Fund, c/o Berger LLC, Inc., P.O. Box 5005, Denver, Colorado 80217, or call -27- 87 1-800-333-1001. Trustees for 401(k) or other existing plans interested in utilizing Fund shares as an investment or investment alternative in their plans should contact the Fund at 1-800-333-1001. INDIVIDUAL RETIREMENT ACCOUNT (IRA) If you are an individual with compensation or earned income, whether or not you are actively participating in an existing qualified retirement plan, you can provide for your own retirement by adopting an IRA. Under an IRA, you can contribute each year up to the lesser of 100% of your compensation or $2,000. If you are married and you file a joint return, you and your spouse together may make contributions totaling up to $4,000 to two IRAs (with no more than $2,000 being contributed to either account) if your joint income is $4,000 or more, even if one spouse has no earned income. If neither you nor your spouse are active participants in an existing qualified retirement plan, or if your income does not exceed certain amounts, the amounts contributed to your IRA can be deducted for Federal income tax purposes whether or not your deductions are itemized. If you or your spouse are covered by an existing qualified retirement plan, the deductibility of your IRA contributions will be phased out for federal income tax purposes if your income exceeds specified amounts, although the income level at which your IRA contributions will no longer be deductible is higher if only your spouse (but not you) is an active participant. However, whether your contributions are deductible or not, the income and capital gains accumulated in your IRA are not taxed until the account is distributed. If you wish to create an IRA to invest in shares of the Fund, you may use the Fund's IRA custodial agreement form which is an adaptation of the form provided by the Internal Revenue Service. Under the IRA custodial agreement, IFTC will serve as custodian, for which it will charge an annual custodian fee for the Fund and each other Berger Fund and Cash Account Trust Money Market Portfolio in which the IRA is invested. Distributions from an IRA generally may not be made without penalty until you reach age 59 1/2 and must begin no later than April 1 of the calendar year following the year in which you attain age 70 1/2. Since distributions which do not satisfy these requirements can result in adverse tax consequences, consultation with an attorney or tax advisor is recommended. You should also consult with your tax advisor about state taxation of your account. In order to receive the necessary materials to create an IRA account, please write to the Fund, c/o Berger LLC, Inc., P.O. Box 5005, Denver, Colorado 80217, or call 1-800-333-1001. ROTH IRA If you are an individual with compensation or earned income, you may contribute up to the lesser of $2,000 or 100% of your compensation to a Roth IRA, as long as your income does not exceed a specified income level ($95,000 for single individuals, $150,000 for married individuals filing jointly). A Roth IRA is similar in many respects to a traditional IRA, as described above. However, the maximum amount you may contribute to a Roth IRA is phased out between that income level and a maximum income amount ($110,000 and $160,000, respectively), and you may not make any contribution at all to a Roth IRA if your income exceeds the maximum income amount. Also, you can make contributions to a Roth IRA even after you reach age 70-1/2, and you are not required to take distributions from a Roth IRA prior to your death. Contributions to a Roth IRA are not deductible for federal income tax purposes. However, the income and capital gains accumulated in a Roth IRA are not taxed while held in the IRA, and distributions can be taken tax-free if the Roth IRA has been established for a minimum of five years and the distribution is after age 59-1/2, for a first time home purchase, or upon death or disability. An individual with an income of less than $100,000 who is not married filing separately can roll his or her existing IRA into a Roth IRA. However, the individual must pay taxes on the fair market value of the existing IRA on the date of the rollover. Please consult your tax advisor concerning Roth IRA rollovers. -28- 88 EDUCATION IRA Anyone may open and contribute to an Education IRA as long as it is established on behalf of a child who is less than 18 years of age at the time of contribution. You may contribute up to $500 in a calendar year for the benefit of any one student as long as your income does not exceed a specified income level ($95,000 for single individuals, $150,000 for married individuals filing jointly). Like a Roth IRA, the maximum amount you may contribute to an Education IRA is phased out between that income level and a maximum income amount ($110,000 and 160,000), respectively) and you may not make any contribution at all to an Education IRA if your income exceeds the maximum income amount. Contributions to an Education IRA are not deductible for federal income tax purposes, and any amount contributed to an Education IRA above the maximum of $500 for any one student is considered "excess contribution" which is subject to an excise tax. Withdrawals from an Education IRA are tax free if the amounts withdrawn are made to cover the cost of qualified higher education expenses of a student while attending an eligible educational institution, so long as the amount withdrawn in a year does not exceed the qualified higher education expenses for that year. If the withdrawal does not meet the tax-free requirements, the portion of the account attributable to dividends or gains may be subject to a withdrawal penalty. For more information on Education IRA withdrawals, please consult your tax advisor. 403(b) CUSTODIAL ACCOUNTS If you are employed by a public school system or certain federally tax-exempt private schools, colleges, universities, hospitals, religious and charitable or other nonprofit organizations, you may establish a 403(b) Custodial Account. Your employer must participate in the establishment of the account. If your employer participates, it will automatically deduct the amount you designate from your gross salary and contribute it to your 403(b) Custodial Account. The amount which you may contribute annually under a salary reduction agreement is generally the lesser of $9,500 or your exclusion allowance, which is based upon a specified formula, and other Internal Revenue Code limits apply. There is a $50 minimum investment in the 403(b) Custodial Account. Contributions made to the account reduce the amount of your current income subject to Federal income tax. Federal income tax is not paid on your contribution until you begin making withdrawals. In addition, all income and capital gains accumulated in the account are tax-free until withdrawn. Withdrawals from your 403(b) Custodial Agreement may begin as soon as you reach age 59 1/2 and must begin no later than April 1 of the year following the later of the calendar year in which you attain age 70 1/2 or the calendar year in which you retire. Except for required distributions after age 70 1/2 and periodic distributions over more than 10 years, distributions are subject to 20% Federal income tax withholding unless those distributions are rolled directly to another 403(b) account or annuity or an individual retirement account (IRA). You may not be able to receive distributions immediately upon request because of certain notice requirements under federal tax law. Since distributions which do not satisfy these requirements can result in adverse tax consequences, consultation with an attorney or tax advisor regarding the 403(b) Custodial Account is recommended. You should also consult with your tax advisor about state taxation of your account. Individuals who wish to purchase shares of a Fund in conjunction with a 403(b) Custodial Account may use a Custodian Account Agreement and related forms available from the Funds. IFTC serves as custodian of the 403(b) Custodial Account, for which it charges an annual custodian fee for each Fund or Cash Account Trust Money Market Portfolio in which the participant's account is invested. In order to receive the necessary materials to create a 403(b) Custodial Account, please write to the Berger Funds, c/o Berger LLC, P.O. Box 5005, Denver, Colorado 80217, or call 1-800-333-1001. 12. EXCHANGE PRIVILEGE AND SYSTEMATIC WITHDRAWAL PLAN A shareholder who owns shares of the Fund worth at least $5,000 at the current net asset value may establish a Systematic Withdrawal account from which a fixed sum will be paid to the shareholder at regular intervals by the Fund in which the shareholder is invested. -29- 89 To establish a Systematic Withdrawal account, the shareholder deposits Fund shares with the Fund and appoints the Fund as agent to redeem shares in the shareholder's account in order to make monthly, quarterly, semi-annual or annual withdrawal payments to the shareholder of a fixed amount. The minimum withdrawal payment is $50.00. These payments generally will be made on the 25th day of the month. Withdrawal payments are not yield or income on the shareholder's investment, since portions of each payment will normally consist of a return of the shareholder's investment. Depending on the size of the disbursements requested and the fluctuation in value of the Fund's portfolio, redemptions for the purpose of making such disbursements may reduce or even exhaust the shareholder's account. The shareholder may vary the amount or frequency of withdrawal payments, temporarily discontinue them, or change the designated payee or payee's address, by notifying the Fund. The shareholder may, of course, make additional deposits of Fund shares in the shareholder's account at any time. Since redemption of shares to make withdrawal payments is a taxable event, each investor should consult a tax advisor concerning proper tax treatment of the redemption. Any shareholder may exchange any or all of the shareholder's shares in the Fund for shares of any of the other available Berger Funds or for shares of the Money Market Portfolio, the Government Securities Portfolio or the Tax-Exempt Portfolio of the Cash Account Trust ("CAT Portfolios"), separately managed, unaffiliated money market funds, without charge, after receiving a current prospectus of the other Fund or CAT Portfolio. The exchange privilege with the CAT Portfolios does not constitute an offering or recommendation of the shares of any such CAT Portfolio by the Fund or Berger LLC. Berger LLC is compensated for administrative services it performs with respect to the CAT Portfolios. Exchanges into or out of the Fund are made at the net asset value per share next determined after the exchange request is received. Each exchange represents the sale of shares from one Fund and the purchase of shares in another, which may produce a gain or loss for income tax purposes. An exchange of shares may be made by written request directed to DST Systems, Inc., via on-line access, or simply by telephoning the Berger Funds at 1-800-551-5849. This privilege may be terminated or amended by the Fund, and is not available in any state in which the shares of the Fund or CAT Portfolio being acquired in the exchange are not eligible for sale. Shareholders automatically have telephone and on-line privileges to authorize exchanges unless they specifically decline this service in the account application or in writing. 13. PERFORMANCE INFORMATION From time to time in advertisements, the Fund may discuss its performance ratings as published by recognized mutual fund statistical services, such as Lipper Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc., or Value Line Investment Survey or by publications of general interest such as The Wall Street Journal, Investor's Business Daily, Money, Barron's, Financial World or Kiplinger's Personal Finance Magazine. In addition, the Fund may compare its performance to that of recognized broad-based securities market indices, including the Standard & Poor's 500 Stock Index, the Dow Jones Industrial Average, the Russell 2000 Stock Index, the Standard & Poor's 600 Small Cap Index, the Nasdaq Composite Index, or more narrowly-based or blended indices which reflect the market sectors in which the Fund invests. The total return of the Fund is calculated for any specified period of time by assuming the purchase of shares of the Fund at the net asset value at the beginning of the period. Each dividend or other distribution paid by the Fund is assumed to have been reinvested at the net asset value on the reinvestment date. The total number of shares then owned as a result of this process is valued at the net asset value at the end of the period. The percentage increase is determined by subtracting the initial value of the investment from the ending value and dividing the remainder by the initial value. The Fund's total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical annually compounded return that would have produced -30- 90 the same total return if the Fund's performance had been constant over the entire period. Total return figures are based on the overall change in value of a hypothetical investment in the Fund. Because average annual total returns for more than one year tend to smooth out variations in the Fund's return, investors should recognize that such figures are not the same as actual year-by-year results. All performance figures for the Fund are based upon historical results and do not assure future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Quotations of average annual total return for the Fund will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in the Fund over periods of 1, 3, 5 and 10 years, or for the period since the Fund's registration statement became effective, if shorter. These are the rates of return that would equate the initial amount invested to the ending redeemable value. These rates of return are calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period). All total return figures reflect the deduction of a proportional share of Fund expenses on an annual basis, and assume that all dividends and distributions are reinvested when paid. Shares of the Fund had no class designations until February 14, 1997, when all of the then-existing shares were designated as Investor Shares and the Fund commenced offering another class of shares. Total return of the Investor Shares and other classes of shares of the Fund will be calculated separately. Because each class of shares is subject to different expenses, the performance of each class for the same period will differ. For the 1-year, 3-year, 5-year and 10-year periods ended September 30, 2000, and for the period from October 21, 1987 (date of first public offering) through September 30, 1999, the average annual total returns for the Investor Shares of the Fund were 20.77%, 10.26%, 18.24%, 17.96% and 15.20%, respectively. Performance data for the Investor Shares include periods prior to the Fund's adoption of class designations on February 14, 1997, and therefore, for those periods, do not reflect the 0.25% per year 12b-1 fee applicable to the Investor Shares, which came into effect on that date. 14. ADDITIONAL INFORMATION The Fund was originally organized in November 1984 as a Delaware corporation. In May 1990, the Fund was reorganized from a Delaware corporation into a Massachusetts business trust known as The Omni Investment Fund (the "Trust"). Pursuant to the Fund's reorganization, the Fund as a series of the Trust assumed all of the assets and liabilities of the Fund as a Delaware corporation, and Fund shareholders received shares of the Massachusetts business trust equal both in number and net asset value to their shares of the Delaware corporation. All references in this SAI to the Fund and all financial and other information about the Fund prior to such reorganization are to the Fund as a Delaware corporation. All references after such reorganization are to the Fund as a series of the Trust. On February 14, 1997, the name of the Trust was changed to Berger Omni Investment Trust and the name of the Fund was changed to the Berger Small Cap Value Fund. The name "Berger Small Cap Value Fund(R)" was registered as a service mark in September 1998. The Trust is authorized to issue an indefinite number of shares of beneficial interest having a par value of $0.01 per share, which may be issued in any number of series. Currently, the Fund is the only series established under the Trust, although others may be added in the future. The shares of each series of the Trust are permitted to be divided into classes. Currently, the Fund issues two classes of shares: The Investor Shares, to which this SAI relates, are available to the general public, subject to the Fund's regular minimum investment requirements as specified in that prospectus (currently $2,000 minimum initial investment). A separate class of shares, Institutional Shares, are offered through a separate prospectus and statement of additional information and are designed for pension and profit-sharing plans, employee benefit -31- 91 trusts, endowments, foundations and corporations, as well as high net worth individuals, who are willing to maintain a minimum account balance of $250,000. Institutional Shares are also made available for purchase and dividend reinvestment to all holders of the Fund's shares as of February 14, 1997, when all the Fund's then outstanding shares were designated as Institutional Shares, subject to a minimum account balance requirement of $500. Under the Fund's Declaration of Trust, each trustee will continue in office until the termination of the Trust or his or her earlier death, resignation, incapacity, retirement or removal. Vacancies will be filled by a majority vote of the remaining trustees, subject to the provisions of the Investment Company Act of 1940. Therefore, no annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the Investment Company Act of 1940. Subject to the foregoing, shareholders have the power to vote for the election and removal of trustees, to terminate or reorganize the Trust, to amend the Declaration of Trust, and on any other matters on which a shareholder vote is required by the Investment Company Act of 1940, the Declaration of Trust, the Trust's bylaws or the trustees. Shareholders of the Fund and, where applicable, the other series/classes of the Trust, generally vote separately on matters relating to those respective series/classes, although they vote together and with the holders of any other series/classes of the Trust in the election of trustees of the Trust and on all matters relating to the Trust as a whole. Shareholders are entitled to one vote for each full share held and fractional votes for fractional shares held on matters submitted to a vote of shareholders. Shares of the Fund do not have cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of trustees can elect 100% of the trustees if they choose to do so, and in such event the holders of the remaining shares will not be able to elect any person as a trustee. Shares of the Fund are fully paid and non-assessable when issued. Dividends, distributions and the residual assets of the Fund in the event of liquidation are distributed to shareholders equally for each outstanding share of the Fund, subject to any applicable distinctions by class. Shares of the Fund have no preemptive rights. Fund shares have no subscription rights or conversion rights, except that shareholders of any class of the Fund may convert their shares into shares of any other class of the Fund in the event and only in the event the shareholder ceases to be eligible to purchase or hold shares of the original class, or becomes eligible to purchase shares of a different class, by reason of a change in the shareholder's status under the conditions of eligibility in effect for such class at that time. Shares of the Fund may be transferred by endorsement or stock power as is customary, but the Fund is not required to recognize any transfer until it is recorded on the books. Under Massachusetts law, shareholders of the Fund could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Fund or the trustees. The Fund's Declaration of Trust provides for indemnification out of the property of the Fund for all loss and expense of any shareholder of the Fund held personally liable for the obligations of the Fund. Accordingly, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund would be unable to meet its obligations. The possibility that these circumstances would occur is remote. The trustees intend to conduct the operations of the Fund to avoid, to the extent possible, liability of shareholders for liabilities of the Fund. Under governing corporate law, the Fund may enter into a variety of corporate transactions, such as reorganizations, conversions, mergers and asset transfers, or may be liquidated. Any such transaction would be subject to a determination from the trustees that the transaction was in the best interests of the Fund and its shareholders, and may require obtaining shareholder approval. MORE INFORMATION ON SPECIAL FUND STRUCTURE The Fund has divided its shares into classes and has two classes of shares outstanding, the Investor Shares covered by this SAI and the Institutional Shares offered through a separate prospectus and statement of additional information. The Fund implemented its multi-class structure by adopting a Rule 18f-3 -32- 92 Plan under the Investment Company Act of 1940 permitting it to issue its shares in classes. The Fund's Rule 18f-3 Plan governs such matters as class features, dividends, voting, allocation of income and expenses between classes, exchange and trustee monitoring of the Plan. Each class is subject to such investment minimums and other conditions of eligibility as are set forth in the relevant prospectus for the class, as it may be amended from time to time. Institutional Shares are designed for institutional, individual, and other investors willing to maintain a higher minimum account balance, currently set at $250,000. Information concerning Institutional Shares is available from the Fund at 1-800-259-2820. Subject to the Trust's Declaration of Trust and any other applicable provisions, the trustees of the Trust have the authority to create additional classes, or change existing classes, from time to time, in accordance with Rule 18f-3 under the Act. PRINCIPAL SHAREHOLDERS Insofar as the management of the Fund is aware, as of December 29, 2000, no person owned, beneficially or of record, more than 5% of the outstanding Investor Shares of the Fund, except for the following:
OWNER PERCENTAGE - ----- ---------- National Financial Services Corp. ("Fidelity") 200 Liberty St. 31.58%(1) One World Financial Center New York, NY 10281 Charles Schwab & Co., Inc. 101 Montgomery Street 17.19%(2) San Francisco, CA 94104 Merrill Lynch Pierce, Fenner & Smith Inc. 11.16% 4800 Deer Lake Dr. E. Jacksonville, FL 32246
(1) In addition, Fidelity holds of record 9.42% of the Institutional Shares class of the Fund, which together with its Investor Shares, constitute 20.48% of the Fund's total outstanding shares. -33- 93 (2) In addition, Charles Schwab & Co., Inc. holds of record 19.34% of the Institutional Shares class of the Fund, which together with its Investor Shares, constitute 18.27% of the Fund's total outstanding shares. (3) Constitutes 5.57% of the Fund's total outstanding shares. Any person owning more than 25% of the outstanding securities of the Fund may be deemed to control it. Fidelity is believed to hold its shares of the Fund as nominee for the benefit of its clients or customers. DISTRIBUTION Berger Distributors LLC, as the Fund's Distributor, is the principal underwriter of the Fund's shares. The Distributor is a wholly-owned subsidiary of Berger LLC. The Distributor is a registered broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. The Distributor acts as the agent of the Fund in connection with the sale of the Fund's shares in all states in which the shares are eligible for sale and in which the Distributor is qualified as a broker-dealer. David J. Schultz, Chief Financial Officer, Assistant Secretary and Treasurer of the Distributor, is also Vice President and Treasurer of the Fund. Janice M. Teague, Vice President and Secretary of the Distributor, is also Vice President and Assistant Secretary of the Fund. Brian Ferrie, Vice President and Chief Compliance Officer of the Distributor, is also Vice President of the Fund. Sue Vreeland, Assistant Secretary of the Distributor, is also Secretary of the Fund. The Trust, on behalf of the Fund, and the Distributor are parties to a Distribution Agreement that continues through April 2001, and thereafter from year to year if such continuation is specifically approved at least annually by the trustees or by vote of a majority of the outstanding shares of the Fund and in either case by vote of a majority of the trustees of the Trust who are not "interested persons" (as that term is defined in the Investment Company Act of 1940) of the Trust or the Distributor. The Distribution Agreement is subject to termination by the Trust or the Distributor on 60 days' prior written notice, and terminates automatically in the event of its assignment. Under the Distribution Agreement, the Distributor continuously offers the Fund's shares and solicits orders to purchase Fund shares at net asset value. The Distributor is not compensated for its services under the Distribution Agreement, but may be reimbursed by Berger LLC for its costs in distributing Fund shares. OTHER INFORMATION The Fund has filed with the Securities and Exchange Commission, Washington, D.C., a Registration Statement under the Securities Act of 1933, as amended, with respect to the securities of the Fund of which this SAI is a part. If further information is desired with respect to the Fund or such securities, reference is made to the Registration Statement and the exhibits filed as a part thereof. Davis, Graham & Stubbs LLP, 1550 Seventeenth Street, Suite 500, Denver, Colorado, acts as counsel to the Fund. INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver, Colorado, acted as independent accountants for the Fund for the year ended September 30, 2000. In that capacity, PricewaterhouseCoopers LLP audited the financial statements of the Fund referenced below under "Financial Information" and assisted the Fund in connection with the preparation of its 1999 income tax returns. PricewaterhouseCoopers LLP has been appointed to act as independent accountants for the Fund for the fiscal year ended September 30, 2001. In that capacity, PricewaterhouseCoopers LLP will audit the financial statements of the Fund and assist the Fund in connection with the preparation of its 2000 income tax returns. -34- 94 FINANCIAL INFORMATION The following financial statements for the Fund are incorporated herein by reference from the Annual Report to Shareholders of the Fund dated September 30, 2000, in each case along with the Report of Independent Accountants thereon dated November 8, 2000: Schedule of Investments as of September 30, 2000 Statements of Assets and Liabilities as of September 30, 2000 Statements of Operations for the Year Ended September 30, 2000 Statements of Changes in Net Assets for each of the periods indicated. Notes to Financial Statements, September 30, 2000 Financial Highlights for each of the periods indicated. The above-referenced Annual Report is enclosed with a copy of this SAI. Additional copies of that Annual Report may be obtained upon request without charge by calling the Fund at 1-800-333-1001. -35- 95 APPENDIX A HIGH-YIELD/HIGH RISK CONVERTIBLE BONDS The Fund may invest in convertible securities of any quality, including unrated securities or securities rated below investment grade (Ba or lower by Moody's, BB or lower by S&P). However, the Fund will not purchase any security in default at the time of purchase. The Fund will not invest more than 20% of the market value of its assets at the time of purchase in convertible securities rated below investment grade. Securities rated below investment grade are subject to greater risk that adverse changes in the financial condition of their issuers or in general economic conditions, or an unanticipated rise in interest rates, may impair the ability of their issuers to make payments of interest and principal or dividends. The market prices of lower grade securities are generally less sensitive to interest rate changes than higher-rated investments, but more sensitive to economic changes or individual corporate developments. Periods of economic uncertainty and change can be expected to result in volatility of prices of these securities. Lower rated securities also may have less liquid markets than higher rated securities, and their liquidity as well as their value may be adversely affected by poor economic conditions. Adverse publicity and investor perceptions as well as new or proposed laws may also have a negative impact on the market for high-yield/high-risk bonds. In the event of an unanticipated default, the Fund will experience a reduction in its income and could expect a decline in the market value of the securities affected. The prices of these securities may be more volatile and the markets for them may be less liquid than those for higher-rated securities. Unrated securities, while not necessarily of lower quality than rated securities, may not have as broad a market. Unrated securities will be included in the Fund's percentage limits for investments rated below investment grade, unless the Fund's sub-advisor deems such securities to be the equivalent of investment grade. If securities purchased by the Fund are downgraded following purchase, or if other circumstances cause the Fund to exceed its percentage limits on assets invested in securities rated below investment grade, the trustees of the Fund, in consultation with the Fund's sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. Relying in part on ratings assigned by credit agencies in making investments will not protect the Fund from the risk that the securities will decline in value, since credit ratings represent evaluations of the safety of principal, dividend and/or interest payments, and not the market values of such securities. Moreover, such ratings may not be changed on a timely basis to reflect subsequent events. Although the market for high-yield debt securities has been in existence for many years and from time to time has experienced economic downturns, this market has involved a significant increase in the use of high-yield debt securities to fund highly leverage corporate acquisitions and restructurings. Past experience may not, therefore, provide an accurate indication of future performance of the high-yield debt securities market, particularly during periods of economic recession. Expenses incurred in recovering an investment in a defaulted security may adversely affect the Fund's net asset value. Moreover, the reduced liquidity of the secondary market for such securities may adversely affect the market price of, and the ability of the Fund to value, particular securities at certain times, thereby making it difficult to make specific valuation determinations. CORPORATE BOND RATINGS The ratings of fixed-income securities by Moody's and Standard & Poor's are a generally accepted measurement of credit risk. However, they are subject to certain limitations. Ratings are generally based upon historical events and do not necessarily reflect the future. In addition, there is a period of time between the issuance of a rating and the update of the rating, during which time a published rating may be inaccurate. -36- 96 KEY TO MOODY'S CORPORATE RATINGS AAA-Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. AA-Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A-Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. BAA-Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. BA-Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during good and bad times over the future. Uncertainty of position characterizes bonds of this class. B-Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. CAA-Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. CA-Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C-Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category. -37- 97 KEY TO STANDARD & POOR'S CORPORATE RATINGS AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA-Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. A-Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB-Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions, or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B, CCC, CC AND C-Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are out-weighed by the large uncertainties or major risk exposures to adverse conditions. C1-The rating C1 is reserved for income bonds on which no interest is being paid. D-Debt rated D is in default, and payment of interest and/or repayment of principal is in arrears. PLUS (+) OR MINUS (-)-The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. -38- 98 BERGER SMALL CAP VALUE FUND (A SERIES OF BERGER OMNI INVESTMENT TRUST) INSTITUTIONAL SHARES STATEMENT OF ADDITIONAL INFORMATION SHAREHOLDER SERVICES: 1-800-960-8427 This Statement of Additional Information ("SAI") about the Berger Small Cap Value Fund (the "Fund") Institutional Shares is not a prospectus. It relates to the Prospectus describing the Institutional Shares of the Fund, dated January 29, 2001, as it may be amended or supplemented from time to time, which may be obtained by writing the Fund at P.O. Box 5005, Denver, Colorado 80217, or calling 1-800-259-2820. This SAI is about the class of shares of the Fund designated as Institutional Shares. Institutional Shares are designed for pension and profit-sharing plans, employee benefit trusts, endowments, foundations and corporations, as well as high net worth individuals, who are willing to maintain a minimum account balance of $250,000. Shares of the Fund may be offered through certain financial intermediaries that may charge their customers transaction or other fees with respect to the customers' investment in the Fund. Institutional Shares are also made available for purchase and dividend reinvestment to all holders of the Fund's shares as of February 14, 1997, when all the Fund's then outstanding shares were designated as Institutional Shares, subject to a minimum account balance of $500. The Fund is a series of Berger Omni Investment Trust, a Massachusetts business trust (the "Trust"). Prior to February 14, 1997, the Fund and the Trust were known as The Omni Investment Fund. The financial statements of the Fund for the fiscal year ended September 30, 2000, and the related Report of Independent Accountants on those statements, are incorporated into this SAI by reference from the Fund's 2000 Annual Report to Shareholders dated September 30, 2000. A copy of that Annual Report is available, without charge, upon request, by calling 1-800-259-2820. JANUARY 29, 2001 99 TABLE OF CONTENTS & CROSS-REFERENCES TO PROSPECTUS
SECTION PAGE CROSS-REFERENCES TO NO. RELATED DISCLOSURES IN PROSPECTUS - ------- ---- ------------------- Introduction 1 Table of Contents 1. Investment Strategies and Risks of the Fund 1 Berger Small Cap Value Fund; The Fund's Goal and Principal Investment Strategies; Principal Risks 2. Investment Restrictions 8 Berger Small Cap Value Fund; Investment Techniques, Securities and Associated Risks 3. Management of the Fund 10 Organization of the Fund 4. Investment Advisor and Sub-Advisor 13 Organization of the Fund 5. Expenses of the Fund 16 Organization of the Fund; Financial Highlights for the Fund 6. Brokerage Policy 18 Organization of the Fund 7. How to Purchase and Redeem Shares in the Fund 20 Buying Shares; Selling (Redeeming) Shares; Exchanging Shares 8. How the Net Asset Value is Determined 21 Your Share Price 9. Income Dividends, Capital Gains Distributions 22 Distributions and Taxes and Tax Treatment 10. Suspension of Redemption Rights 23 Other Information About Your Account 11. Tax-Sheltered Retirement Plans 24 Tax-Sheltered Retirement Plans 12. Exchange Privilege 24 Exchanging Shares 13. Performance Information 24 Financial Highlights for the Fund 14. Additional Information 25 Organization of the Fund; Special Fund Structure Financial Information 29 Financial Highlights for the Fund
-i- 100 INTRODUCTION The Berger Small Cap Value Fund (the "Fund") is a mutual fund, or an open-end, management investment company. The Fund is a diversified fund. The Fund's investment objective is capital appreciation. 1. INVESTMENT STRATEGIES AND RISKS OF THE FUND The Prospectus discusses the investment objective of the Fund and the principal investment strategies employed to achieve that objective. It also describes the principal risks of investing in the Fund. This section contains supplemental information concerning the types of securities and other instruments in which the Fund may invest, the investment policies and portfolio strategies that the Fund may utilize and certain risks attendant to those investments, policies and strategies. COMMON AND PREFERRED STOCKS. Stocks represent shares of ownership in a company. Generally, preferred stock has a specified dividend and ranks after bonds and before common stocks in its claim on income for dividend payments and on assets should the company be liquidated. After other claims are satisfied, common stockholders participate in company profits on a pro-rata basis. Profits may be paid out in dividends or reinvested in the company to help it grow. Increases and decreases in earnings are usually reflected in a company's stock price, so common stocks generally have the greatest appreciation and depreciation potential of all corporate securities. While most preferred stocks pay dividends, the Fund may purchase preferred stock where the issuer has omitted, or is in danger of omitting, payment of its dividends. Such investments would be made primarily for their capital appreciation potential. All investments in stocks are subject to market risk, meaning that their prices may move up and down with the general stock market, and that such movements might reduce their value. DEBT SECURITIES. Debt securities (such as bonds or debentures) are fixed-income securities which bear interest and are issued by corporations or governments. The issuer has a contractual obligation to pay interest at a stated rate on specific dates and to repay principal on a specific maturity date. In addition to market risk, debt securities are generally subject to two other kinds of risk: credit risk and interest rate risk. Credit risk refers to the ability of the issuer to meet interest or principal payments as they come due. The lower the rating given a security by a rating service (such as Moody's Investor Service ("Moody's") and Standard & Poor's ("S&P")), the greater the credit risk the rating service perceives with respect to that security. The Fund will not purchase any nonconvertible securities rated below investment grade (Ba or lower by Moody's, BB or lower by S&P). In cases where the ratings assigned by more than one rating agency differ, the Fund will consider the security as rated in the higher category. If nonconvertible securities purchased by the Fund are downgraded to below investment grade following purchase, the trustees of the Fund, in consultation with the Fund's sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. For a further discussion of debt security ratings, see Appendix A to this SAI. Interest rate risk refers to the fact that the value of fixed-income securities (like debt securities) generally fluctuate in response to changes in interest rates. A decrease in interest rates will generally result in an increase in the price of fixed-income securities held by the Fund. Conversely, during periods of rising interest rates, the value of fixed-income securities held by the Fund will generally decline. Longer-term securities are generally more sensitive to interest rate changes and are more volatile than shorter-term securities, but they generally offer higher yields to compensate investors for the associated risks. Certain debt securities can also present prepayment risk. For example, a security may contain redemption and call provisions. If an issuer exercises these provisions when interest rates are declining, the Fund could sustain investment losses as well as have to reinvest the proceeds from the security at lower interest rates, resulting in a decreased return for the Fund. CONVERTIBLE SECURITIES. The Fund may also purchase debt or equity securities which are convertible into common stock when the sub-advisor believes they offer the potential for a higher total return -1- 101 than nonconvertible securities. While fixed-income securities generally have a priority claim on a corporation's assets over that of common stock, some of the convertible securities which the Fund may hold are high-yield/high-risk securities that are subject to special risks, including the risk of default in interest or principal payments which could result in a loss of income to the Fund or a decline in the market value of the securities. Convertible securities often display a degree of market price volatility that is comparable to common stocks. The credit risk associated with convertible securities generally is reflected by their ratings by organizations such as Moody's or S&P or a similar determination of creditworthiness by the Fund's sub-advisor. The Fund has no pre-established minimum quality standards for convertible securities and may invest in convertible securities of any quality, including lower rated or unrated securities. However, the Fund will not invest in any security in default at the time of purchase and the Fund will invest less than 20% of the market value of its assets at the time of purchase in convertible securities rated below investment grade. If convertible securities purchased by the Fund are downgraded following purchase, or if other circumstances cause 20% or more of the Fund's assets to be invested in convertible securities rated below investment grade, the trustees of the Fund, in consultation with the sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. For a further discussion of debt security ratings, see Appendix A to this SAI. SECURITIES OF SMALLER COMPANIES. The Fund may invest in securities of companies with small or mid-sized market capitalizations. Market capitalization is defined as total current market value of a company's outstanding common stock. Investments in companies with smaller market capitalizations may involve greater risks and price volatility (that is, more abrupt or erratic price movements) than investments in larger, more mature companies since smaller companies may be at an earlier stage of development and may have limited product lines, reduced market liquidity for their shares, limited financial resources or less depth in management than larger or more established companies. Smaller companies also may be less significant factors within their industries and may have difficulty withstanding competition from larger companies. While smaller companies may be subject to these additional risks, they may also realize more substantial growth than larger or more established companies. SECURITIES OF COMPANIES WITH LIMITED OPERATING HISTORIES. The Fund may invest in securities of companies with limited operating histories. The Fund considers these to be securities of companies with a record of less than three years' continuous operation, even including the operations of any predecessors and parents. (These are sometimes referred to as "unseasoned issuers.") These companies by their nature have only a limited operating history which can be used for evaluating the company's growth prospects. As a result, investment decisions for these securities may place a greater emphasis on current or planned product lines and the reputation and experience of the company's management and less emphasis on fundamental valuation factors than would be the case for more mature companies. In addition, many of these companies may also be small companies and involve the risks and price volatility associated with smaller companies. INITIAL PUBLIC OFFERINGS. The Fund may invest in a company's securities at the time the company first offers securities to the public, that is, at the time of the company's initial public offering or IPO. Although companies can be any age or size at the time of their IPOs, they are often smaller and have a limited operating history, which involve a greater potential for the value of their securities to be impaired following the IPO. See "Securities of Smaller Companies" and "Securities of Companies with Limited Operating Histories" above. Investors in IPOs can be adversely affected by substantial dilution in the value of their shares, by sales of additional shares and by concentration of control in existing management and principal shareholders. In addition, all of the factors that affect stock market performance may have a greater impact on the shares of IPO companies. The price of a company's securities may be highly unstable at the time of its IPO and for a period thereafter due to market psychology prevailing at the time of the IPO, the absence of a prior public market, the small number of shares available and limited availability of investor information. As a result of this or other factors, the Fund's sub-advisor might decide to sell an IPO security more quickly than it would otherwise, which may result in a significant gain or loss and greater transaction costs to the Fund. Any gains from shares held for 12 months or less will be treated as short-term gains, taxable as ordinary -2- 102 income to the Fund's shareholders. In addition, IPO securities may be subject to varying patterns of trading volume and may, at times, be difficult to sell without an unfavorable impact on prevailing prices. The effect of an IPO investment can have a magnified impact on the Fund's performance when the Fund's asset base is small. Consequently, IPOs may constitute a significant portion of the Fund's returns particularly when the Fund is small. Since the number of securities issued in an IPO is limited, it is likely that IPO securities will represent a smaller component of the Fund's assets as it increases in size, and therefore have a more limited effect on the Fund's performance. There can be no assurance that IPOs will continue to be available for the Fund to purchase. The number or quality of IPOs available for purchase by a Fund may vary, decrease or entirely disappear. In some cases, the Fund may not be able to purchase IPOs at the offering price, but may have to purchase the shares in the aftermarket at a price greatly exceeding the offering price, making it more difficult for the Fund to realize a profit. The advisor's IPO trade allocation procedures govern which funds and other advised accounts participate in the allocation of any IPO. See the heading "Trade Allocations" under Section 4 below. Under the IPO allocation procedures of Berger LLC, the Fund generally will not participate in an IPO if the securities available for allocation to the Fund are insignificant relative to the Fund's net assets. As a result, any fund or account whose assets are very large is not likely to participate in the allocation of many IPOs. FOREIGN SECURITIES. The Fund may invest in foreign securities, which may be traded in foreign markets and denominated in foreign currency. The Fund's investments may also include American Depositary Receipts (ADRs), European Depositary Receipts (EDRs) which are similar to ADRs, in bearer form, designed for use in the European securities markets, and in Global Depositary Receipts (GDRs). Investments in foreign securities involve some risks that are different from the risks of investing in securities of U.S. issuers, such as the risk of adverse political, social, diplomatic and economic developments and, with respect to certain countries, the possibility of expropriation, taxes imposed by foreign countries or limitations on the removal of monies or other assets of the Fund. Moreover, the economies of individual foreign countries will vary in comparison to the U.S. economy in such respects as growth of gross domestic product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payments position. Securities of some foreign companies, particularly those in developing countries, are less liquid and more volatile than securities of comparable domestic companies. A developing country generally is considered to be in the initial stages of its industrialization cycle. Investing in the securities of developing countries may involve exposure to economic structures that are less diverse and mature, and to political systems that can be expected to have less stability than developed countries. There also may be less publicly available information about foreign issuers and securities than domestic issuers and securities, and foreign issuers generally are not subject to accounting, auditing and financial reporting standards, requirements and practices comparable to those applicable to domestic issuers. Also, there is generally less government supervision and regulation of exchanges, brokers, financial institutions and issuers in foreign countries than there is in the U.S. Foreign financial markets typically have substantially less volume than U.S. markets. Foreign markets also have different clearance and settlement procedures and, in certain markets, delays or other factors could make it difficult to effect transactions, potentially causing the Fund to experience losses or miss investment opportunities. The use of a foreign securities depository may increase this risk. The Fund may maintain assets with a foreign securities depository if certain conditions are met. A foreign securities depository may maintain assets on behalf of the Fund if the depository: (i) acts as or operates a system for the central handling of securities that is regulated by a foreign financial regulatory authority; (ii) holds assets on behalf of the Fund under safekeeping conditions no less favorable than those that apply to other participants; (iii) maintains records that identify the assets of participants, and keep its own assets separated from the assets of participants; (iv) provides periodic reports to participants; and (v) undergoes periodic examination by regulatory authorities or independent accountants. In addition, the Fund's primary custodian provides the Fund with an analysis of the custodial risks of using a depository, monitors the depository on a -3- 103 continuous basis, and notifies the Fund of any material changes in risks associated with using the depository. In general, the analysis may include an analysis of a depository's expertise and market reputation, the quality of its services, its financial strength, and insurance or indemnification arrangements, the extent and quality of regulation and independent examination of the depository, its standing in published ratings, its internal controls, and other procedures for safeguarding investments, and any related legal proceedings. Costs associated with transactions in foreign securities are generally higher than with transactions in U.S. securities. The Fund will incur greater costs in maintaining assets in foreign jurisdictions and in buying and selling foreign securities generally, resulting in part from converting foreign currencies into U.S. dollars. In addition, the Fund might have greater difficulty taking appropriate legal action with respect to foreign investments in non-U.S. courts than with respect to domestic issuers in U.S. courts, which may heighten the risk of possible losses through the holding of securities by custodians and securities depositories in foreign countries. When the Fund is invested in securities denominated or quoted in currencies other than the U.S. dollar, changes in foreign currency exchange rates will affect the value of the investments in its portfolio and the unrealized appreciation or depreciation of investments insofar as U.S. investors are concerned. If the foreign currency in which a security is denominated appreciates against the U.S. dollar, the dollar value of the security will increase. Conversely, a decline in the exchange rate of the foreign currency against the U.S. dollar would adversely affect the dollar value of the foreign securities. Foreign currency exchange rates are determined by forces of supply and demand on the foreign exchange markets, which are in turn affected by the international balance of payments and other economic and financial conditions, government intervention, speculation and other factors. PASSIVE FOREIGN INVESTMENT COMPANIES (PFICS). The Fund may purchase the securities of certain companies considered Passive Foreign Investment Companies (PFICs) under U.S. tax laws. For certain types of PFICs, in addition to bearing their proportionate share of the Fund's expenses (management fees and operating expenses), shareholders will also indirectly bear similar expenses of such PFIC. PFIC investments also may be subject to less favorable U.S. tax treatment, as discussed in Section 9 below. ILLIQUID SECURITIES. The Fund is authorized to invest in securities which are illiquid or not readily marketable because, based upon their nature or the market for such securities, no ready market is available. However, the Fund will not purchase any such security, the purchase of which would cause the Fund to invest more than 10% of its net assets, measured at the time of purchase, in illiquid securities. Investments in illiquid securities involve certain risks to the extent that the Fund may be unable to dispose of such a security at the time desired or at a reasonable price or, in some cases, may be unable to dispose of it at all. If securities become illiquid following purchase or other circumstances cause more than 10% of the Fund's net assets to be invested in illiquid securities, the trustees of the Fund, in consultation with the Fund's sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. Repurchase agreements maturing in more than seven days will be considered as illiquid for purposes of this restriction. REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements with various financial organizations, including commercial banks, registered broker-dealers and registered government securities dealers. A repurchase agreement is an agreement under which the Fund acquires a debt security (generally a debt security issued or guaranteed by the U.S. government or an agency thereof, a banker's acceptance or a certificate of deposit) from a commercial bank, broker or dealer, subject to resale to the seller at an agreed upon price and date (normally, the next business day). A repurchase agreement may be considered a loan collateralized by securities. The resale price reflects an agreed upon interest rate effective for the period the instrument is held by the Fund and is unrelated to the interest rate on the underlying instrument. In these transactions, the securities acquired by the Fund (including accrued interest earned thereon) must have a total value equal to or in excess of the value of the repurchase agreement and are held by the Fund's custodian bank until repurchased. In addition, the trustees will establish guidelines and standards for review by the sub-advisor of the creditworthiness of any bank, broker or dealer party to a repurchase agreement with the Fund. The Fund will not enter into a repurchase agreement maturing in more -4- 104 than seven days if as a result more than 10% of the Fund's net assets would be invested in such repurchase agreements and other illiquid securities. These transactions must be fully collateralized at all times by debt securities (generally a security issued or guaranteed by the U.S. Government or an agency thereof, a banker's acceptance or a certificate of deposit), but involve certain risks, such as credit risk to the Fund if the other party defaults on its obligation and the Fund is delayed or prevented from liquidating the collateral. For example, if the other party to the agreement defaults on its obligation to repurchase the underlying security at a time when the value of the security has declined, the Fund may incur a loss upon disposition of the security. If the other party to the agreement becomes insolvent and subject to liquidation or reorganization under the Bankruptcy Code or other laws, a court may determine that the underlying security is collateral for a loan by the Fund not within the control of the Fund and therefore the realization by the Fund on such collateral may automatically be stayed and delayed. Further, it is possible that the Fund may not be able to substantiate its interest in the underlying security and may be deemed an unsecured creditor of the other party to the agreement. The Fund expects that these risks can be controlled through careful monitoring procedures. WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Fund may purchase and sell securities on a when-issued or delayed delivery basis. However, the Fund currently does not intend to purchase or sell securities on a when-issued or delayed delivery basis, if as a result more than 5% of its total assets taken at market value at the time of purchase would be invested in such securities. When-issued or delayed delivery transactions arise when securities (normally, equity obligations of issuers eligible for investment by the Fund) are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price or yield. However, the yield available on a comparable security when delivery takes place may vary from the yield on the security at the time that the when-issued or delayed delivery transaction was entered into. Any failure to consummate a when-issued or delayed delivery transaction may result in the Fund missing the opportunity of obtaining a price or yield considered to be advantageous. When-issued and delayed delivery transactions may generally be expected to settle within one month from the date the transactions are entered into, but in no event later than 90 days. However, no payment or delivery is made by the Fund until it receives delivery or payment from the other party to the transaction. When the Fund purchases securities on a when-issued basis, it will maintain in a segregated account with its custodian cash, U.S. government securities or other liquid assets having an aggregate value equal to the amount of such purchase commitments, until payment is made. If necessary, additional assets will be placed in the account daily so that the value of the account will equal or exceed the amount of the Fund's purchase commitments. SPECIAL SITUATIONS. The Fund may also invest in "special situations." Special situations are companies that have recently experienced or are anticipated to experience a significant change in structure, management, products or services which may significantly affect the value of their securities. Examples of special situations are companies being reorganized or merged, companies emerging from bankruptcy, companies introducing unusual new products or which enjoy particular tax advantages. Other examples are companies experiencing changes in senior management, extraordinary corporate events, significant changes in cost or capital structure or which are believed to be probable takeover candidates. The opportunity to invest in special situations, however, is limited and depends in part on the market's assessment of these companies and their circumstances. By its nature, a "special situation" company involves to some degree a break with the company's past experience. This creates greater uncertainty and potential risk of loss than if the company were operating according to long-established patterns. In addition, stocks of companies in special situations may decline or not appreciate as expected if an anticipated change or development does not occur or is not assessed by the market as favorably as expected. HEDGING TRANSACTIONS. As described in the Prospectus, the Fund is authorized to make limited use of certain types of options, but only for the purpose of hedging, that is, protecting against market risk due to market movements that may adversely affect the value of the Fund's securities or the price of securities that the Fund is considering purchasing. The utilization of options is also subject to policies and procedures which may be established by the trustees from time to time. In addition, the Fund is not required -5- 105 to hedge. Decisions regarding hedging are subject to the sub-advisor's judgment of the cost of the hedge, its potential effectiveness and other factors the sub-advisor considers pertinent. A hedging transaction may partially protect the Fund from a decline in the value of a particular security or its portfolio generally, although hedging may also limit the Fund's opportunity to profit from favorable price movements, and the cost of the transaction will reduce the potential return on the security or the portfolio. In addition, hedging transactions do not eliminate fluctuations in the prices of the underlying securities the Fund owns or intends to acquire. Use of these instruments by the Fund involves the potential for a loss that, in the case of a call option written by the Fund, may exceed the premium received for the option. However, the Fund is permitted to use such instruments for hedging purposes only, and only if the aggregate amount of its obligations under these contracts does not exceed the total market value of the assets the Fund is attempting to hedge, such as a portion or all of its exposure to equity securities. To help ensure that the Fund will be able to meet its obligations under options written by the Fund, the Fund will be required to maintain liquid assets in a segregated account with its custodian bank or to set aside portfolio securities to "cover" its position in these contracts. The principal risks of the Fund utilizing options are: (a) losses resulting from market movements not anticipated by the Fund; (b) possible imperfect correlation between movements in the prices of options and movements in the prices of the securities or positions hedged or used to cover such positions; (c) lack of assurance that a liquid secondary market will exist for any particular options at any particular time, and possible exchange-imposed price fluctuation limits, either of which may make it difficult or impossible to close a position when so desired; and (d) the need for additional information and skills beyond those required for the management of a portfolio of traditional securities. In addition, when the Fund enters into an over-the-counter contract with a counterparty, the Fund will assume counterparty credit risk, that is, the risk that the counterparty will fail to perform its obligations, in which case the Fund could be worse off than if the contract had not been entered into. The following is additional information concerning the options which the Fund may utilize, provided that no more than 5% of the Fund's net assets at the time the contract is entered into may be used for premiums paid for the purchase of options. In addition, the Fund may only write call options that are covered and only up to 10% of the Fund's net assets. The following information should be read in conjunction with the information concerning the Fund's use of options and the risks of such instruments contained in the Prospectus. Options on Securities and Securities Indices. The Fund may buy or sell put or call options and write covered call options on securities that are traded on United States or foreign securities exchanges or over-the-counter. Buying an option involves the risk that, during the option period, the price of the underlying security will not increase (in the case of a call) to above the exercise price, or will not decrease (in the case of a put) to below the exercise price, in which case the option will expire without being exercised and the holder would lose the amount of the premium. Writing a call option involves the risk of an increase in the market value of the underlying security, in which case the option could be exercised and the underlying security would then be sold by the Fund to the option holder at a lower price than its current market value and the Fund's potential for capital appreciation on the security would be limited to the exercise price. Moreover, when the Fund writes a call option on a securities index, the Fund bears the risk of loss resulting from imperfect correlation between movements in the price of the index and the price of the securities set aside to cover such position. Although they entitle the holder to buy equity securities, call options to purchase equity securities do not entitle the holder to dividends or voting rights with respect to the underlying securities, nor do they represent any rights in the assets of the issuer of those securities. A call option written by the Fund is "covered" if the Fund owns the underlying security covered by the call or has an absolute and immediate right to acquire that security without additional cash consideration (or for additional cash consideration held in a segregated account by its custodian) upon conversion or exchange of other securities held in its portfolio. A call option is also deemed to be covered if the Fund holds a call on the same security and in the same principal amount as the call written and the -6- 106 exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written if the difference is maintained by the Fund in liquid assets in a segregated account with its custodian. The writer of a call option may have no control when the underlying securities must be sold. Whether or not an option expires unexercised, the writer retains the amount of the premium. This amount, of course, may, in the case of a covered call option, be offset by a decline in the market value of the underlying security during the option period. The writer of an exchange-traded call option that wishes to terminate its obligation may effect a "closing purchase transaction." This is accomplished by buying an option of the same series as the option previously written. The effect of the purchase is that the writer's position will be cancelled by the clearing corporation. If the Fund desires to sell a particular security from the Fund's portfolio on which the Fund has written a call option, the Fund will effect a closing transaction prior to or concurrent with the sale of the security. However, a writer may not effect a closing purchase transaction after being notified of the exercise of an option. An investor who is the holder of an exchange-traded option may liquidate its position by effecting a "closing sale transaction." This is accomplished by selling an option of the same series as the option previously bought. There is no guarantee that either a closing purchase or a closing sale transaction can be effected. The Fund will realize a profit from a closing transaction if the price of the purchase transaction is less than the premium received from writing the option or the price received from a sale transaction is more than the premium paid to buy the option; the Fund will realize a loss from a closing transaction if the price of the purchase transaction is more than the premium received from writing the option or the price received from a sale transaction is less than the premium paid to buy the option. Because increases in the market price of a call option will generally reflect increases in the market price of the underlying security, any loss resulting from the repurchase of a call option is likely to be offset in whole or in part by appreciation of the underlying security owned by the Fund. An option position may be closed out only where there exists a secondary market for an option of the same series. If a secondary market does not exist, it might not be possible to effect closing transactions in particular options with the result that the Fund would have to exercise the options in order to realize any profit. If the Fund is unable to effect a closing purchase transaction in a secondary market, it will not be able to sell the underlying security until the option expires or the Fund delivers the underlying security upon exercise. Reasons for the absence of a liquid secondary market may include the following: (i) there may be insufficient trading interest in certain options, (ii) restrictions may be imposed by a national securities exchange on which the option is traded ("Exchange") on opening or closing transactions or both, (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options or underlying securities, (iv) unusual or unforeseen circumstances may interrupt normal operations on an Exchange, (v) the facilities of an Exchange or of the Options Clearing Corporation ("OCC") may not at all times be adequate to handle current trading volume, or (vi) one or more Exchanges could, for economic or other reasons, decide or be compelled at some future date to discontinue the trading of options (or a particular class or series of options), in which event the secondary market on that Exchange (or in that class or series of options) would cease to exist, although outstanding options on that Exchange that had been issued by the OCC as a result of trades on that Exchange would continue to be exercisable in accordance with their terms. In addition, when the Fund enters into an over-the-counter option contract with a counterparty, the Fund assumes counterparty credit risk, that is, the risk that the counterparty will fail to perform its obligations, in which case the Fund could be worse off than if the contract had not been entered into. An option on a securities index is similar to an option on a security except that, rather than the right to take or make delivery of a security at a specified price, an option on a securities index gives the holder the right to receive, on exercise of the option, an amount of cash if the closing level of the securities index on which the option is based is greater than, in the case of a call, or less than, in the case of a put, the exercise price of the option. -7- 107 The Fund may buy call options on securities or securities indices to hedge against an increase in the price of a security or securities that the Fund may buy in the future. The premium paid for the call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security or index rises sufficiently, the option may expire and become worthless to the Fund. The Fund may buy put options to hedge against a decline in the value of a security or its portfolio. The premium paid for the put option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security or index declines sufficiently, the option may expire and become worthless to the Fund. An example of a hedging transaction using an index option would be if the Fund were to purchase a put on a stock index, in order to protect the Fund against a decline in the value of all securities held by it to the extent that the stock index moves in a similar pattern to the prices of the securities held. While the correlation between stock indices and price movements of the stocks in which the Fund will generally invest may be imperfect, the Fund expects, nonetheless, that the use of put options that relate to such indices will, in certain circumstances, protect against declines in values of specific portfolio securities or the Fund's portfolio generally. Although the purchase of a put option may partially protect the Fund from a decline in the value of a particular security or its portfolio generally, the cost of a put will reduce the potential return on the security or the portfolio. TEMPORARY DEFENSIVE MEASURES. The Fund may increase its investment in government securities, and other short-term, interest-bearing securities without regard to the Fund's otherwise applicable percentage limits, policies or its normal investment emphasis when its sub-advisor believes market conditions warrant a temporary defensive position. Taking larger positions in such short-term investments may serve as a means of preserving capital in unfavorable market conditions. When in a defensive position, the Fund could miss the opportunity to participate in any stock or bond market advances that occur during those periods, which the Fund might have been able to participate in if it had remained more fully invested. PORTFOLIO TURNOVER. The portfolio turnover rates of the Fund are shown in the Financial Highlights table included in the Prospectus. The annual portfolio turnover rates of the Fund have exceeded 100%. A 100% annual turnover rate results, for example, if the equivalent of all of the securities in the Fund's portfolio are replaced in a period of one year. Investment changes in the Fund will be made whenever the investment manager deems them appropriate even if this results in a higher portfolio turnover rate. In addition, portfolio turnover may increase as a result of large amounts of purchases and redemptions of shares of the Fund due to economic, market or other factors that are not within the control of management. Higher portfolio turnover will necessarily result in correspondingly higher brokerage costs for the Fund. The existence of a high portfolio turnover rate has no direct relationship to the tax liability of the Fund, although sales of certain stocks will lead to realization of gains, and, possibly, increased taxable distributions to shareholders. The Fund's brokerage policy is discussed further below under Section 6--Brokerage Policy, and additional information concerning income taxes is located under Section 9--Income Dividends, Capital Gains Distributions and Tax Treatment. 2. INVESTMENT RESTRICTIONS The investment objective of the Fund is capital appreciation. The Fund has also adopted certain investment policies, strategies, guidelines and procedures in pursuing its objective. These may be changed without a shareholder vote. The principal policies and strategies used by the Fund are described in the Prospectus. In addition, the Fund has adopted certain fundamental and non-fundamental restrictions on its investments and other activities, which are listed below. Fundamental restrictions may not be changed without the approval of (i) 67% or more of the voting securities of the Fund present at a meeting of shareholders thereof if the holders of more than 50% of the outstanding voting securities are present or -8- 108 represented by proxy, or (ii) more than 50% of the outstanding voting securities of the Fund. Non-fundamental restrictions may be changed in the future by action of the trustees without shareholder vote. The following fundamental restrictions apply to the Fund. The Fund may not: (1) Issue senior securities as defined in the Investment Company Act of 1940; (2) Invest in companies for the purpose of acquiring control or management thereof; (3) Invest or hold securities of any issuer if the officers and trustees of the Fund and its advisor own individually more than one-half (1/2) of 1% of the securities of such issuer or together own more than 5% of the securities of such issuer; (4) Invest in other investment companies, except in connection with a plan of merger, consolidation, reorganization or acquisition of assets, or in the open market involving no commission or profit to a sponsor or dealer (other than a customary broker's commission); (5) Participate on a joint or joint and several basis in any trading account in securities; (6) Purchase securities of any company with a record of less than three (3) years continuous operation (including that of predecessors) if such purchase would cause the cost of the Fund's investments in all such companies to exceed 5% of the Fund's total assets; (7) Invest in securities (except those of the U.S. government or its agencies) of any issuer if immediately thereafter the Fund would then own more than 10% of that issuer's voting securities; (8) Loan cash or portfolio securities, except in connection with the acquisition of debt securities which the Fund's investment policies and restrictions permit it to purchase; (9) Borrow money in excess of 5% of the value of its assets and, then, only as a temporary measure for extraordinary or emergency purposes; (10) Pledge, mortgage or hypothecate any of its assets to secure a debt; (11) Purchase or sell real estate or any other interests in real estate (including real estate limited partnership interests); (12) Purchase securities on margin or sell short; (13) Invest in commodities or commodity contracts; (14) Act as an underwriter of securities of other issuers or invest in portfolio securities which the Fund might not be free to sell to the public without registration of such securities under the Securities Act of 1933 ("Restricted Securities"); (15) Invest more than 10% of the value of its net assets in illiquid securities, including Restricted Securities, securities which are not readily marketable, repurchase agreements maturing in more than seven (7) days, written over-the-counter ("OTC") options and securities used as cover for written OTC options; (16) Invest in oil, gas or mineral leases; (17) Invest more than 5% of the value of its net assets in warrants or more than 2% of its net assets in warrants that are not listed on the New York Stock Exchange, the American Stock Exchange, or the NASDAQ National Market System; -9- 109 (18) Invest more than 25% of the value of its assets, at the time of purchase, in securities of companies principally engaged in a particular industry, although the Fund may as a temporary defensive measure invest up to 100% of its total assets in obligations issued or guaranteed by the U.S. government or its agencies; or (19) With respect to 75% of the Fund's total assets, purchase the securities of any one issuer (except U.S. government securities) if immediately after and as a result of such purchase (a) the value of the holdings of the Fund in the securities of such issuer exceeds 5% of the value of the Fund's total assets or (b) the Fund owns more than 10% of the outstanding voting securities of such issuer. In applying the Fund's industry concentration restriction (number (18) above), the Fund uses the industry groups used in the Data Monitor Portfolio Monitoring System of William O'Neil & Co. Incorporated. The trustees have adopted additional non-fundamental investment restrictions for the Fund. These limitations may be changed by the trustees without a shareholder vote. The non-fundamental investment restrictions include the following: (1) Only for the purpose of hedging, the Fund may purchase and sell put and call options, but no more than 5% of the Fund's net assets at the time of purchase may be invested in premiums for options. The Fund may only write call options that are covered and only up to 10% of the Fund's net assets. (2) The Fund may not purchase or sell securities on a when-issued or delayed delivery basis, if as a result more than 5% of its total assets taken at market value at the time of purchase would be invested in such securities. Investment restrictions that involve a maximum percentage of securities or assets will not be considered to be violated unless an excess over the percentage occurs immediately after, and is caused by, an acquisition or encumbrance of securities or assets of the Fund. 3. MANAGEMENT OF THE FUND The Fund is supervised by trustees who are responsible for major decisions about the Fund's policies and overall Fund oversight. The Fund's board hires the companies that run day-to-day Fund operations, such as the investment advisor, administrator, transfer agent and custodian. The trustees and executive officers of the Fund are listed below, together with information which includes their principal occupations during the past five years and other principal business affiliations. MICHAEL OWEN, c/o Zayed University, Post Office Box 19282, Dubai, United Arab Emirates DOB: 1937. Dean, since September 2000, of Zayed University. Formerly self-employed as a financial and management consultant, and in real estate development from June 1999 to September 2000. From 1993 to June 1999, Dean, and from 1989 to 1993, a member of the Finance faculty, of the College of Business, Montana State University. Formerly (1976-1989), Chairman and Chief Executive Officer of Royal Gold, Inc. (mining). Chairman of the Board of Berger Growth Fund and Berger Large Cap Growth Fund. Chairman of the Trustees of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. * JACK R. THOMPSON, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1949. President and a director since May 1999 (Executive Vice President from February 1999 to May 1999) of Berger Growth Fund and Berger Large Cap Growth Fund. President and a trustee since May 1999 (Executive Vice President from February 1999 to May 1999) of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. President and Director -10- 110 since June, 1999 (Executive Vice President from February 1999 to June 1999) of Berger LLC. Audit Committee Member of the Public Employees' Retirement Association of Colorado (pension plan) since November 1997. Self-employed as a consultant from July 1995 through February 1999. Director of Wasatch Advisors (investment management) from February 1997 to February 1999. Director of Janus Capital Corporation (investment management) from June 1984 through June 1995, and Executive Vice President of the Corporation from April 1989 through June 1995. Treasurer of Janus Capital Corporation from November 1983 through October 1989. Trustee of the Janus Investment Funds from December 1990 through June 1995, and Senior Vice President of the Trust from May 1993 through June 1995. President and a director of Janus Service Corporation (transfer agent) from January 1987 through June 1995. President and a director of Fillmore Agency, Inc. (advertising agency), from January 1990 through June 1995. Executive Vice President and a director of Janus Capital International, Ltd. (investment advisor) from September 1994 through June 1995. President and a director of Janus Distributors, Inc. (broker/dealer), from May 1991 through June 1995. Director of IDEX Management, Inc. (investment management), from January 1985 through June 1995. Trustee and Senior Vice President of the of the Janus Aspen Funds from May 1993 through June 1995. DENNIS E. BALDWIN, 3481 South Race Street, Englewood, CO 80110, DOB: 1928. President, Baldwin Financial Counseling. Formerly (1978-1990), Vice President and Denver Office Manager of Merrill Lynch Capital Markets. Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. LOUIS R. BINDNER, 1075 South Fox, Denver, CO 80223, DOB: 1925. President, Climate Engineering, Inc. (building environmental systems). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. KATHERINE A. CATTANACH, 672 South Gaylord, Denver, CO 80209, DOB: 1945. Managing Principal, Sovereign Financial Services, Inc. (investment consulting firm). Formerly (1981-1988), Executive Vice President, Captiva Corporation, Denver, Colorado (private investment management firm). Ph.D. in Finance (Arizona State University); Chartered Financial Analyst (CFA). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. PAUL R. KNAPP, Suite 500, 350 West Hubbard Street, Chicago, IL 60602, DOB: 1945. Since October 2000, Executive Officer of DST Systems, Inc. ("DST"), a publicly traded information and transaction processing company which acts as the Funds' transfer agent. Director (since February 1998) and a Vice President (February 1998 - November 1998) of West Side Investments, Inc. (investments), a wholly-owned subsidiary of DST Systems, Inc. Formerly, President, Chief Executive Officer and a director (September 1997 - October 2000) of DST Catalyst, Inc., an international financial markets consulting, software and computer services company, (now DST International, a subsidiary of DST) Previously (1991 - October 2000), Chairman, President, Chief Executive Officer and a director of Catalyst Institute (international public policy research organization focused primarily on financial markets and institutions); also (1991 - September 1997), Chairman, President, Chief Executive Officer and a director of Catalyst Consulting (international financial institutions business consulting firm). Prior thereto (1988-1991), President, Chief Executive Officer and a director of Kessler Asher Group (brokerage, clearing and trading firm). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. -11- 111 HARRY T. LEWIS, JR., 1600 Broadway, Suite 2400, Denver, CO 80202, DOB: 1933. Self-employed as a private investor. Formerly (1981-1988), Senior Vice President, Rocky Mountain Region, of Dain Bosworth Incorporated and member of that firm's Management Committee. Director of J.D. Edwards & Co. (computer software company) since 1995. Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. WILLIAM SINCLAIRE, 3049 S. Perry Park Road, Sedalia, CO 80135, DOB: 1928. President, Santa Clara LLC (privately owned agriculture company). Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. * JAY W. TRACEY, CFA, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1954. Executive Vice President of the Berger Funds (since August, 2000). Executive Vice President and Chief Investment Officer of Berger LLC (since June 2000). Portfolio manager of the Berger Growth Fund (since August 2000); co-portfolio manager of the Berger Select Fund (since June 2000) and the Berger Large Cap Growth Fund (since January 2001). Formerly, Vice President and Portfolio Manager at OppenheimerFunds, Inc (September 1994 to May 2000) and Managing Director of Buckingham Capital Management (February 1994 to September 1994). * JANICE M. TEAGUE, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1954. Vice President (since November 1998) and Assistant Secretary (since February 2000 and previously from September 1996 to November 1998) and Secretary (November 1998 to February 2000) of the Berger Funds. Vice President (since October 1997), Secretary (since November 1998) and Assistant Secretary (October 1996 through November 1998) with Berger LLC. Vice President and Secretary with Berger Distributors LLC, since August 1998. Formerly, self-employed as a business consultant from June 1995 through September 1996, Secretary of the Janus Funds from January 1990 to May 1995 and Assistant Secretary of Janus Capital Corporation from October 1989 to May 1995. * DAVID J. SCHULTZ, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1950. Vice President and Treasurer (since November 1998) and Assistant Treasurer (September 1996 to November 1998) of the Berger Funds. Vice President (since February 1997) and Controller (since August 1994) with Berger LLC. Chief Financial Officer and Treasurer (since May 1996), Assistant Secretary (since August 1998) and Secretary (May 1996 to August 1998) with Berger Distributors LLC Formerly, Partner with Smith, Brock & Gwinn (accounting firm) from January 1984 to August 1994. * ANTHONY R. BOSCH, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1965. Vice President of the Berger Funds (since February 2000). Vice President (since June 1999) and Chief Legal Officer (since August 2000) with Berger LLC. Formerly, Assistant Vice President of Federated Investors, Inc. from December 1996 through May 1999, and Attorney with the U.S. Securities and Exchange Commission (from June 1990 through December 1996). * BRIAN S. FERRIE, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1958. Vice President of the Berger Funds since November 1998. Vice President (since February 1997) and Chief Compliance Officer (since August 1994) with Berger LLC. Chief Compliance Officer with Berger Distributors LLC, since May 1996. Formerly, Compliance Officer with United Services Advisor, Inc., from January 1988 to July 1994, and Director of Internal Audit of United Services Funds from January 1987 to July 1994. -12- 112 * JOHN PAGANELLI, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1967. Assistant Treasurer of the Berger Funds since November 1998. Vice President (since November 1998) and Manager of Accounting (January 1997 through November 1998) with Berger LLC. Formerly, Manager of Accounting (December 1994 through October 1996) and Senior Accountant (November 1991 through December 1994) with Palmeri Fund Administrators, Inc. * SUE VREELAND, 210 University Boulevard, Suite 900, Denver, CO 80206, DOB: 1948. Secretary of the Berger Funds (since February 2000). Assistant Secretary of Berger LLC and Berger Distributors LLC since June 1999. Formerly, Assistant Secretary of the Janus Funds from March 1994 to May 1999, Assistant Secretary of Janus Distributors, Inc. from June 1995 to May 1997 and Manager of Fund Administration for Janus Capital Corporation from February 1992 to May 1999. - ---------- * Interested person (as defined in the Investment Company Act of 1940) of the Fund and of the Fund's advisor or sub-advisor. The trustees of the Fund have adopted a trustee retirement age of 75 years. TRUSTEE COMPENSATION The officers of the Fund received no compensation from the Fund during the fiscal year ended September 30, 2000. However, trustees of the Fund who are not "interested persons" of the Fund or its advisor or sub-advisor are compensated for their services according to a fee schedule, allocated among the Berger Funds. Neither the officers of the Fund nor the trustees receive any form of pension or retirement benefit compensation from the Fund. Set forth below is information regarding compensation paid or accrued during the fiscal year ended September 30, 2000, for each current trustee of the Fund as a director or trustee of the Berger Funds.
NAME AND POSITION AGGREGATE AGGREGATE WITH BERGER FUNDS COMPENSATION FROM COMPENSATION(1) THE FUND FROM ALL BERGER FUNDS(2) ----------------- ----------------- ------------------- Dennis E. Baldwin(3) $ 8,618 $46,945 Louis Bindner(3) $ 8,618 $46,945 Katherine A. Cattanach(3) $ 8,618 $46,945 Paul R. Knapp(3) $ 8,618 $46,945 Harry T. Lewis(3) $ 8,618 $46,945 Michael Owen(3) $10,451 $57,000 William Sinclaire(3) $ 8,392 $45,745 Jack R. Thompson(3),(4),(5) $ 0 $ 0
-13- 113 (1) Of the aggregate amounts shown for each director/trustee, the following amounts were deferred under applicable deferred compensation plans: Dennis E. Baldwin $17,939; Louis Bindner $14,239; Katherine A. Cattanach $46,875; Michael Owen $1,125; William Sinclaire $45,675. (2) Includes the Berger Growth Fund, the Berger Large Cap Growth Fund, the Berger Investment Portfolio Trust (five series), the Berger Institutional Products Trust (four series), the Berger Worldwide Portfolios Trust (one series), the Berger Worldwide Funds Trust (three series) and the Berger Omni Investment Trust (one series). (3) Director of Berger Growth Fund and Berger Large Cap Growth Fund. Trustee of Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Funds Trust, Berger Worldwide Portfolios Trust and Berger Omni Investment Trust. (4) Interested person of Berger LLC. (5) President of Berger Growth Fund, Berger Large Cap Growth Fund, Berger Investment Portfolio Trust, Berger Institutional Products Trust, Berger Worldwide Portfolios Trust, Berger Worldwide Funds Trust and Berger Omni Investment Trust. Trustees may elect to defer receipt of all or a portion of their fees pursuant to a fee deferral plan adopted by certain of the Berger Funds. Under the plan, deferred fees are credited to an account and adjusted thereafter to reflect the investment experience of whichever of the Berger Funds (or approved money market funds) is designated by the trustee for this purpose. Pursuant to an SEC exemptive order, those Berger Funds that have adopted the plan are permitted to purchase shares of the designated funds in order to offset their obligation to the trustees participating in the plan. Purchases made pursuant to the plan are excepted from any otherwise applicable investment restriction limiting the purchase of securities of any other investment company. The obligation of a Berger Fund to make payments of deferred fees under the plan is a general obligation of that fund. As of December 29, 2000, the current officers and trustees of the Fund as a group owned of record or beneficially less than 1% of the outstanding shares of the Fund and the Trust. 4. INVESTMENT ADVISOR AND SUB-ADVISOR BERGER LLC - INVESTMENT ADVISOR Berger LLC, 210 University Boulevard, Suite 900, Denver, CO 80206, is the investment advisor to the Fund. Berger LLC is responsible for managing the investment operations of the Fund and the composition of its investment portfolio. Berger LLC also acts as the Fund's administrator and is responsible for such functions as monitoring compliance with all applicable federal and state laws. Berger LLC is a Nevada Limited Liability Company, and has been in the investment advisory business for 26 years. It serves as investment advisor or sub-advisor to mutual funds and institutional investors and had assets under management of approximately $7.2 billion as of December 31, 2000. Berger LLC is a subsidiary of Stilwell Management Inc. ("Stilwell"), which owns more than 80% of Berger LLC, and is an indirect subsidiary of Stilwell Financial Inc. ("Stilwell Financial"). Stilwell also owns approximately 32% of the outstanding shares of DST Systems, Inc. ("DST"), a publicly traded information and transaction processing company which acts as the Funds' transfer agent. DST, in turn, owns 100% of DST Securities, a registered broker-dealer, which executes portfolio trades for the Funds. Stilwell Financial was previously a wholly-owned subsidiary of Kansas City Southern Industries, Inc. ("KCSI"). On July 12, 2000, KCSI completed a separation of its transportation and financial services segments through a dividend of stock of Stilwell Financial. On that date, KCSI shareholders received two shares of Stilwell Financial for every KCSI share held as of June 28, 2000. The separation resulted in no change in the management or control of the Funds or the Advisor to the Funds. -14- 114 THE SUB-ADVISOR Perkins, Wolf, McDonnell & Company (the "Sub-Advisor" or "PWM"), 53 West Jackson Boulevard, Suite 722, Chicago, Illinois 60604, has been engaged as the Fund's investment sub-advisor. The Sub-Advisor was organized in 1980 under the name Mac-Per-Wolf Co. to operate as a securities broker-dealer. In September 1983, it changed its name to Perkins, Wolf, McDonnell & Company. The Sub-Advisor is a member of the National Association of Securities Dealers, Inc. (the "NASD") and, in 1984, became registered as an investment adviser with the SEC. PWM was the Fund's investment advisor from the date the Fund commenced operations in 1985 to February 1997. PWM became the investment sub-advisor to the Fund on February 14, 1997, following shareholder approval of a new Sub-Advisory Agreement between the Advisor and the Sub-Advisor. PWM has also been the investment sub-advisor to the Berger Mid Cap Value Fund since it commenced operations in August 1998. Robert H. Perkins has been the lead investment manager for the Fund since its inception in 1985. As lead manager, Robert Perkins is responsible for the daily decisions on the security selection for the Fund's portfolio. Robert Perkins has been an investment manager since 1970 and serves as President and a director of PWM. Thomas M. Perkins, brother of Robert Perkins, has also served as investment manager of the Fund since January 1999. Thomas Perkins has been an investment manager since 1974 joined PWM as a portfolio manager in 1998. Robert Perkins owns 46% of PWM. Gregory E. Wolf owns 21% of PWM and serves as its Treasurer and a director. Tom Perkins owns 15% of PWM. INVESTMENT ADVISORY AGREEMENT AND SUB-ADVISORY AGREEMENT Under the Investment Advisory Agreement between the Advisor and the Fund, the Advisor is responsible for managing the investment operations of the Fund and the composition of its investment portfolio. The Investment Advisory Agreement provides that the investment advisor shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Fund, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder and except to the extent otherwise provided by law. Investment advisory fees are charged to the Fund according to the following schedule:
FUND AVERAGE DAILY ANNUAL RATE NET ASSETS ---- ------------- ------------ Berger Small Cap Value Fund First $500 million .85% Next $500 million .80% Over $1 billion .75%
This fee is accrued daily and payable monthly. The Investment Advisory Agreement provides that the investment advisor shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Fund, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties hereunder and except to the extent otherwise provided by law. The following schedule reflects the advisory fees charged to the Fund for the fiscal year ended September 30, 2000: -15- 115
FUND ADVISOR INVESTMENT ADVISORY FEE ---- ------- ----------------------- Berger Small Cap Value Fund Berger LLC 0.81%
The Investment Advisory Agreement will continue in effect until the last day of April 2001, and thereafter from year to year if such continuation is specifically approved at least annually by the trustees or by vote of a majority of the outstanding shares of the Fund and in either case by vote of a majority of the trustees of the Fund who are not "interested persons" (as that term is defined in the Investment Company Act of 1940) of the Fund or the Advisor or Sub-Advisor. The Agreement is subject to termination by the Fund or the Advisor on 60 days' written notice, and terminates automatically in the event of its assignment. Under the Sub-Advisory Agreement between the Advisor and the Sub-Advisor, the Sub-Advisor is responsible for day-to-day investment management of the Fund. The Sub-Advisor manages the investments in the Fund and determines what securities and other investments will be acquired, held or disposed of, consistent with the investment objective and policies established by the trustees of the Fund. The Fund pays no fees directly to the Sub-Advisor. The Sub-Advisor will receive from the Advisor a fee at the annual rate of 0.425% of the first $500 million of average daily net assets of the Fund, 0.40% of the next $500 million, and 0.375% of any amount in excess of $1 billion. The Sub-Advisory Agreement provides that the Sub-Advisor shall not be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission taken with respect to the Fund, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of reckless disregard of its obligations and duties thereunder and except to the extent otherwise provided by law. The Sub-Advisory Agreement will continue in effect until the last day of April 2001, and thereafter from year to year if such continuation is specifically approved at least annually by the trustees or by vote of a majority of the outstanding shares of the Fund and in either case by vote of a majority of the trustees of the Fund who are not "interested persons" (as that term is defined in the Investment Company Act of 1940) of the Fund or the Advisor or the Sub-Advisor. The Sub-Advisory Agreement is subject to termination by the Fund or the Sub-Advisor on 60 days' written notice, and terminates automatically in the event of its assignment and in the event of termination of the Investment Advisory Agreement. OTHER ARRANGEMENTS BETWEEN THE ADVISOR AND SUB-ADVISOR The Advisor and Sub-Advisor entered into an Agreement, dated November 18, 1996, as amended January 27, 1997, April 8, 1998 and November 17, 1999 (the "November 18 Agreement"), under which, among other things, the Sub-Advisor agreed that, so long as Berger LLC acts as the Fund's Advisor and PWM provides sub-advisory or other services in connection with the Fund, the Sub-Advisor will not manage or provide advisory services to any registered investment company that is in direct competition with the Fund. The November 18 Agreement also provides that if the Sub-Advisory Agreement is terminated before February 14, 2005 (other than for cause), and provided Berger LLC remains as the Fund's Advisor, Berger LLC and PWM will enter into a consulting agreement for PWM to provide consulting services to Berger LLC with respect to the Fund, subject to any requisite approvals under the Investment Company Act of 1940. Under the Consulting Agreement, PWM would provide training and assistance to Berger LLC analysts and marketing support appropriate to the Fund and would be paid a fee at an annual rate of 0.10% of the first $100 million of average daily net assets of the Fund, 0.05% of the next $100 million and 0.02% on any part in excess of $200 million. No part of the consulting fee would be borne by the Fund. -16- 116 TRADE ALLOCATIONS While investment decisions for the Fund are made independently by the sub-advisor, the same investment decision may be made for a Fund and one or more accounts advised by the advisor or sub-advisor. In this circumstance, should purchase and sell orders of the same class of security be in effect on the same day, the orders for such transactions may be combined by the advisor or sub-advisor in order to seek the best combination of net price and execution for each. Client orders partially filled will, as a general matter, be allocated pro rata in proportion to each client's original order, although exceptions may be made to avoid, among other things, odd lots and de minimis allocations. Execution prices for a combined order will be averaged so that each participating client receives the average price paid or received. While in some cases, this policy might adversely affect the price paid or received by a Fund or other participating accounts, or the size of the position obtained or liquidated, the advisor or sub-advisor will aggregate orders if it believes that coordination of orders and the ability to participate in volume transactions will result in the best overall combination of net price and execution. Berger LLC has adopted procedures for allocating to its participating accounts' securities purchased pursuant to a company's initial public offering ("IPO"). The procedures provide that such allocations must be effected in a manner that is fair and equitable to all accounts. Generally, securities received from participating in IPOs will be allocated to participating accounts pro rata based on account size. The key criteria for determining eligibility of the account to participate in an offering is the suitability of the investment for the account. An account may participate in an IPO allocation if Berger LLC believes that, based on the account's investment restrictions, risk profile, asset composition and cash levels, the IPO is an appropriate investment. Accordingly, no account will participate in every IPO allocation. In addition, an account generally will not participate in an IPO if the securities available for allocation to the account are insignificant relative to the account's net assets. As a result, any fund or account whose assets are very large is not likely to participate in the allocation of many IPOs. RESTRICTIONS ON PERSONAL TRADING Berger LLC, the Berger Funds and Berger Distributors LLC each permits its directors, officers and employees to purchase and sell securities for their own accounts in accordance with a policy regarding personal investing in each of the Codes of Ethics for Berger LLC, the Berger Funds and Berger Distributors LLC. The policy requires all covered persons to conduct their personal securities transactions in a manner which does not operate adversely to the interests of the Funds or Berger LLC's other advisory clients. Directors and officers of Berger LLC and Berger Distributors LLC, investment personnel and other designated persons deemed to have access to current trading information ("access persons") are required to pre-clear all transactions in securities not otherwise exempt under the policy. Requests for authority to trade will be denied pre-clearance when, among other reasons, the proposed personal transaction would be contrary to the provisions of the policy or would be deemed to adversely affect any transaction then known to be under consideration for or currently being effected on behalf of any client account, including the Funds. PWM has adopted a Code of Ethics which is substantially similar to the Code adopted by Berger LLC. In addition to the pre-clearance requirements described above for Berger LLC and Berger Distributors LLC, the policy subjects directors and officers of Berger LLC, the Berger Funds and Berger Distributors LLC, investment personnel and other access persons to various trading restrictions and reporting obligations. All reportable transactions are reviewed for compliance with the policy. The policy is administered by Berger LLC and the provisions of the policy are subject to interpretation by and exceptions authorized by its management. 5. EXPENSES OF THE FUND In addition to paying an investment advisory fee to Berger LLC, the Fund pays all of its expenses not assumed by Berger LLC, including, but not limited to, custodian and transfer agent fees, legal and accounting expenses, administrative and record keeping expenses, interest charges, federal and state -17- 117 taxes, expenses of shareholders' meetings, compensation of trustees who are not interested persons of Berger LLC, expenses of printing and distributing reports to shareholders and federal and state administrative agencies, and all expenses incurred in connection with the execution of its portfolio transactions, including brokerage commissions on purchases and sales of portfolio securities, which are considered a cost of securities of the Fund. The Fund also pays all expenses incurred in complying with all federal and state laws and the laws of any foreign country applicable to the issue, offer or sale of shares of the Fund, including, but not limited to, all costs involved in preparing and printing prospectuses for shareholders of the Fund. Under a separate Administrative Services Agreement with respect to the Fund, Berger LLC performs certain administrative and recordkeeping services not otherwise performed by the Fund's custodian and recordkeeper, including the preparation of financial statements and reports to be filed with the Securities and Exchange Commission and state regulatory authorities. For the fiscal year ended September 30, 2000, Berger LLC did not charge an administrative fee to the Fund. The administrative services fees may be changed by the Fund's trustees without shareholder approval. The following table shows the total dollar amounts of advisory fees and administrative services fees paid by the Fund for the periods indicated. For Funds that have two classes of shares, each class bears pro rata its share of the Fund's investment advisory fee based on assets. Berger Small Cap Value Fund
Fiscal Year Ended Investment Administrative Fee Waiver TOTAL September 30, Advisory Fee(1) Service Fee(2) - ------------- --------------- -------------- ---------- ----- 2000 $9,858,000 $ 0 $ (224,000) $9,634,000 1999 $3,996,000 $ 44,000 $ 0 $4,040,000 1998 $1,515,000 $ 17,000 $ 0 $1,532,000
(1) Effective October 1, 1999, the investment advisory fee charged to the Fund was reduced from .90% to the following rates of average daily net assets: 0.85% of the first $500 million; 0.80% of the next $500 million and 0.75% in excess of $1 billion. (2) Effective October 1, 1999, the 0.01% administrative services fee was eliminated. The Fund has appointed State Street Bank and Trust Company ("State Street"), 801 Pennsylvania, Kansas City, MO 64105, as its recordkeeping and pricing agent. In addition, State Street also serves as the Funds' custodian. Each of the Funds has appointed DST Systems, Inc. ("DST"), P.O. Box 219958, Kansas City, MO 64121, as its transfer agent and dividend disbursing agent. Approximately 32% of the outstanding shares of DST are owned by Stilwell. As recordkeeping and pricing agent, State Street calculates the daily net asset value of the Fund and performs certain accounting and recordkeeping functions required by the Fund. The Fund pays State Street a monthly base fee plus an asset-based fee. State Street is also reimbursed for certain out-of-pocket expenses. State Street, as custodian, and its subcustodians have custody and provide for the safekeeping of the Fund's securities and cash, and receive and remit the income thereon as directed by the management of the Fund. The custodian and subcustodians do not perform any managerial or policy-making functions for the Fund. For its services as custodian, State Street receives an asset-based fee plus certain transaction fees and out-of-pocket expenses. -18- 118 As transfer agent and dividend disbursing agent, DST maintains all shareholder accounts of record; assists in mailing all reports, proxies and other information to the Fund's shareholders; calculates the amount of, and delivers to the Fund's shareholders, proceeds representing all dividends and distributions; and performs other related services. For these services, DST receives a fee from the Fund at an annual rate of $14.00 per open Fund shareholder account, subject to preset volume discounts, plus certain transaction fees and fees for closed accounts, and is reimbursed for out-of-pocket expenses. All of State Street's and DST's fees are subject to reduction pursuant to an agreed formula for certain earnings credits on the cash balances of the Fund. Earnings credits received by the Fund can be found on the Fund's Statement of Operations in the Annual Report incorporated by reference into this Statement of Additional Information OTHER EXPENSE INFORMATION The trustees of the Fund have authorized portfolio transactions to be placed on an agency basis through DST Securities, Inc. ("DSTS"), a wholly-owned broker-dealer subsidiary of DST. When transactions are effected through DSTS, the commission received by DSTS is credited against, and thereby reduces, certain operating expenses that the Fund would otherwise be obligated to pay. No portion of the commission is retained by DSTS. DSTS may be considered an affiliate of Berger LLC due to the ownership interest of Stilwell in both DST and Berger LLC. The Fund and/or its Advisor may enter into arrangements with certain brokerage firms and other companies(such as recordkeepers and administrators) to provide administrative services (such as sub-transfer agency, recordkeeping, shareholder communications, sub-accounting and/or other services) to investors purchasing shares of the Fund through those firms or companies. The Fund's Advisor or the Fund (if approved by its trustees) may pay fees to these companies for their services. These companies may also be appointed as agents for or authorized by the Fund to accept on its behalf purchase and redemption requests that are received in good order. Subject to Fund approval, certain of these companies may be authorized to designate other entities to accept purchase and redemption orders on behalf of the Fund. The Fund's Advisor may also enter into arrangements with organizations that solicit clients for the Advisor, which may include clients who purchase shares of the Fund. While the specific terms of each arrangement may differ, generally, the fee paid by the Advisor under such arrangements is based on the value of the referred client's assets managed by the Advisor. None of the fees paid to such organizations will be borne by the Fund. DISTRIBUTOR The distributor (principal underwriter) of the Fund's shares is Berger Distributors LLC (the "Distributor"), 210 University Blvd., Suite 900, Denver, CO 80206. The Distributor may be reimbursed by Berger LLC for its costs in distributing the Fund's Institutional Shares. 6. BROKERAGE POLICY Although the Fund retains full control over its own investment policies, under the terms of its Investment Advisory Agreement, Berger LLC as the Fund's advisor is directed to place the portfolio transactions of the Fund. A report on the placement of brokerage business is given to the trustees of the Fund every quarter, indicating the brokers with whom Fund portfolio business was placed and the basis for such placement. The brokerage commissions paid by the Fund during the past three fiscal years were as follows: -19- 119 BROKERAGE COMMISSIONS
Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended September 30, September 30, September 30, 2000 1999 1998 ------------- ------------- ------------- BERGER SMALL CAP VALUE FUND $ 4,682,000 $ 1,870,000 $ 567,000
The Investment Advisory Agreement authorizes and directs the advisor to place portfolio transactions for the Fund only with brokers and dealers who render satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates. However, the Agreement specifically authorizes the advisor to place such transactions with a broker with whom it has negotiated a commission that is in excess of the commission another broker or dealer would have charged for effecting that transaction if the advisor determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker viewed in terms of either that particular transaction or the overall responsibilities of the advisor. Accordingly, the advisor or sub-advisor does not have an obligation to seek the lowest available commission. In accordance with this provision of the Agreement, portfolio brokerage business of the Fund may be placed with brokers who provide useful brokerage and research services to the advisor or sub-advisor. The Fund's advisor may consider the value of research provided as a factor in the choice of brokers. "Research" includes computerized on-line stock quotation systems and related data feeds from stock exchanges, computerized trade order entry, execution and confirmation systems, fundamental and technical analysis data and software, computerized stock market and business news services, economic research, account performance data and computer hardware used for the receipt of electronic research services and broker and other third-party equity research, such as publications or writings which furnish advice as to the value of securities and advisability of investing, and analyses and reports concerning issuers, industries, securities, market trends, and portfolio strategies. Research may be provided orally, in print, or electronically. These services included a service used by the independent trustees of the Fund in reviewing the Investment Advisory Agreement. In some cases, a product or services termed "research" may serve other functions unrelated to the making of investment decisions. When a product has such a mixed use, the advisor will make a good faith allocation of the cost of the product according to the use made of it. The portion of the product that assists the advisor or sub-advisor in the investment decision-making process may be paid for with a Fund's commission dollars. The advisor or sub-advisor pays for the portion of the product that is not "research" with its own funds. Accordingly, the decision whether and how to allocate the costs of such a product presents a conflict of interest for the advisor or sub-advisor. The Fund's advisor does not enter into formal agreements with any brokers regarding the placement of securities transactions because of any such brokerage or research services that they provide. An advisor or sub-advisor may, however, make arrangements with and maintain internal procedures for allocating transactions to brokers who provide such services to encourage them to provide services expected to be useful to the advisor's or sub-advisor's clients, including the Funds. Brokers may suggest a level of business they would like to receive in return for the brokerage and research they provide. The advisor or sub-advisor then determines whether to continue receiving the research and brokerage provided and the approximate amount of commissions it is willing to pay to continue the brokerage and research arrangement with each broker. The actual amount of commissions a broker may receive may be more or less than a broker's suggested allocations, depending on advisor's or sub-advisor's level of business, market conditions and other relevant factors. Even under these arrangements, however, the placement of all Fund transactions, must be consistent with the Funds' brokerage placement and execution policies, and must be directed to a broker who renders satisfactory service in the execution of orders at the most favorable prices and at reasonable commission rates. -20- 120 During the fiscal year ended September 30, 2000 of the brokerage commissions paid by the Fund, the following amounts were paid to brokers who provided to the Fund selected brokerage or research services prepared by the broker or subscribed or paid for by the broker on behalf of the Fund:
FUND AMOUNT OF TRANSACTIONS AMOUNT OF COMMISSIONS - ---- ---------------------- --------------------- Berger Small Cap Value Fund $ 94,291,000 $ 304,000
These brokerage and research services received from brokers are often helpful to Berger LLC in performing its investment advisory responsibilities to the Fund, and the availability of such services from brokers does not reduce the responsibility of Berger LLC' advisory personnel to analyze and evaluate the securities in which the Fund invests. The brokerage and research services obtained as a result of the Fund's brokerage business also will be useful to Berger LLC in making investment decisions for its other advisory accounts, and, conversely, information obtained by reason of placement of brokerage business of such other accounts may be used by Berger LLC in rendering investment advice to the Fund. Although such brokerage and research services may be deemed to be of value to Berger LLC, they are not expected to decrease the expenses that Berger LLC would otherwise incur in performing its investment advisory services for the Fund nor will the advisory fees that are received by Berger LLC from the Fund be reduced as a result of the availability of such brokerage and research services from brokers. Under the Investment Advisory Agreement in effect until February 14, 1997, the advisor was permitted to place the Fund's brokerage with affiliated brokers, subject to adhering to certain procedures adopted by the trustees and subject to obtaining prompt execution or orders at the most favorable net price. All the brokerage commissions shown in the Brokerage Commissions table above for the fiscal year ended December 31, 1996, and $138,000 of the brokerage commissions shown in the table for the fiscal year ended September 30, 1997 (which constituted all of the brokerage commissions paid by the Fund for the period January 1, 1997, to February 14, 1997), were paid to PWM, which is also a registered broker-dealer. On February 14, 1997, new arrangements for the Berger Small Cap Value Fund came into effect with shareholder approval and since that time, the trustees have not authorized the Fund's brokerage to be placed with any broker or dealer affiliated with the Advisor or Sub-Advisor, except through DSTS under the circumstances described immediately below. The trustees of the Fund have authorized portfolio transactions to be placed on an agency basis through DSTS, a wholly-owned broker-dealer subsidiary of DST. When transactions are effected through DSTS, the commission received by DSTS is credited against, and thereby reduces, certain operating expenses that the Fund would otherwise be obligated to pay. No portion of the commission is retained by DSTS. DSTS may be considered an affiliate of Berger LLC due to the ownership interest of Stilwell in both DST and Berger LLC. Included in the brokerage commissions paid by the Fund during the fiscal year ended September 30, 2000, as stated in the preceding Brokerage Commissions table, are the following amounts paid to DSTS, which served to reduce the Fund's out-of-pocket expenses as follows: DSTS COMMISSIONS AND RELATED EXPENSE REDUCTIONS
DSTS Reduction in DSTS Reduction in DSTS Reduction in Commissions Expenses FYE Commissions Expenses FYE Commissions Expenses FYE Paid 9/30/00 Paid 9/30/99 Paid 9/30/98(1) FYE 9/30/00 FYE 9/30/99 FYE 9/30/98 ----------- ------------ ----------- ------------ ----------- ------------ Berger Small Cap $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Value Fund
-21- 121 (1) No portion of the commission is retained by DSTS. Difference between commissions paid through DSTS and reduction in expenses constitute commissions paid to an unaffiliated clearing broker. The Fund's advisor places securities orders with a limited number of major institutional brokerage firms chosen for the reliability and quality of execution; commission rates; quality of research coverage of major U.S. companies, the U.S. economy and the securities markets; promptness; back office capabilities; capital strength and financial stability; prior performance in serving the advisor and its clients; and knowledge of other buyers and sellers. The advisor selects the broker for each order based on the factors above, as well as the size, difficulty and other characteristics of the order. The directors or trustees of the Funds have also authorized sales of shares of the Funds by a broker-dealer and the recommendations of a broker-dealer to its customers that they purchase Fund shares to be considered as factors in the selection of broker-dealers to execute portfolio transactions for the Funds. In addition, the advisor may also consider payments made by brokers to a Fund or to other persons on behalf of a Fund for services provided to the Fund for which it would otherwise be obligated to pay, such as transfer agency fees. In placing portfolio business with any such broker or dealer, the advisor will seek the best execution of each transaction. 7. HOW TO PURCHASE AND REDEEM SHARES IN THE FUND Minimum Initial Investment for Institutional Shares: $250,000.00
Institutional Shares in the Fund may be purchased at the relevant net asset value without a sales charge. The minimum initial investment for Institutional Shares of the Fund is $250,000. (This requirement is not applicable to shareholder accounts opened prior to February 14, 1997, which met the initial investment minimum in effect for the Fund at the time of their initial purchase.) To purchase shares in the Fund, simply complete the application form enclosed with the Prospectus. Then mail it with a check payable to "Berger Funds" to the following address: Berger Funds P.O. Box 219958 Kansas City, MO 64121 Payment for shares purchased may be made by wire, electronic funds transfer or mail. All purchase orders are effected at the relevant net asset value per share of the Fund next determined after receipt of the purchase order, completed application and payment. A purchase order, together with payment in proper form, received by the Fund, its authorized agent or designee prior to the close of the New York Stock Exchange (the "Exchange") on a day the Fund is open for business will be effected at that day's net asset value. An order received after that time will be effected at the net asset value determined on the next business day. Additional investments may be made at any time by mail, telephone (1-800-960-8427) or online (bergerfunds.com) at the relevant net asset value by calling or writing the Fund and making payment by wire or electronic funds transfer as outlined above. In addition, Fund shares may be purchased through certain broker-dealers that have established mutual fund programs and certain other organizations connected with pension and retirement plans. These broker-dealers and other organizations may charge investors a transaction or other fee for their services, may require different minimum initial and subsequent investments than the Fund and may impose other charges or restrictions different from those applicable to shareholders who invest in the Fund directly. Fees charged by these organizations will have the effect of reducing a shareholder's total return on an investment in Fund shares. No such charge will apply to an investor who purchases Fund shares directly from the Fund as described above. -22- 122 Procedures for purchasing, selling (redeeming) and exchanging Fund shares by telephone and online are described in the Prospectus. The Fund may terminate or modify those procedures and related requirements at any time, although shareholders of the Fund will be given notice of any termination or material modification. Berger LLC may, at its own risk, waive certain of those procedures and related requirements. 8. HOW THE NET ASSET VALUE IS DETERMINED The net asset value of the Fund is determined once daily, at the close of the regular trading session of the New York Stock Exchange (the "Exchange") (normally 4:00 p.m., Eastern time, Monday through Friday) each day that the Exchange is open. The Exchange is closed and the net asset value of the Fund is not determined on weekends and on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day each year. The per share net asset value of the Institutional Shares is determined by dividing the Institutional Shares' pro rata portion of the total value of the Fund's securities and other assets, less the Institutional Shares' pro rata portion of the Fund's liabilities and the liabilities attributable to the Institutional Shares, by the total number of Institutional Shares outstanding. Since net asset value for the Fund is calculated by class, and since the Institutional Shares and each other class of the Fund has its own expenses, the per share net asset value of the Fund will vary by class. In determining net asset value, securities listed or traded primarily on national exchanges, The Nasdaq Stock Market and foreign exchanges are valued at the last sale price on such markets, or, if such a price is lacking for the trading period immediately preceding the time of determination, such securities are valued at the mean of their current bid and asked prices. Securities that are traded in the over-the-counter market are valued at the mean between their current bid and asked prices. The market value of individual securities held by the Fund will be determined by using prices provided by pricing services which provide market prices to other mutual funds or, as needed, by obtaining market quotations from independent broker/dealers. Short-term money market securities maturing within 60 days are valued on the amortized cost basis, which approximates market value. All assets and liabilities initially expressed in terms of non-U.S. dollar currencies are translated into U.S. dollars at the prevailing market rates as quoted by one or more banks or dealers shortly before the close of the Exchange. Securities and assets for which quotations are not readily available or are not representative of market value may be valued at their fair value determined in good faith pursuant to consistently applied procedures established by the trustees. Examples would be when events occur that materially affect the value of a security at a time when the security is not trading or when the securities are illiquid. Generally, trading in foreign securities markets is substantially completed each day at various times prior to the close of the Exchange. The values of foreign securities used in computing the net asset value of the shares of the Fund are determined as of the earlier of such market close or the closing time of the Exchange. Occasionally, events affecting the value of such securities may occur between the times at which they are determined and the close of the Exchange, or when the foreign market on which such securities trade is closed but the Exchange is open, which will not be reflected in the computation of net asset value. If during such periods, events occur which materially affect the value of such securities, the securities may be valued at their fair value as determined in good faith pursuant to consistently applied procedures established by the trustees. The Fund's securities may be listed primarily on foreign exchanges or over-the-counter dealer markets which may trade on days when the Exchange is closed (such as a customary U.S. holiday) and on which the Fund's net asset value is not calculated. As a result, the net asset value of the Fund may be significantly affected by such trading on days when shareholders cannot purchase or redeem shares of the Fund. 9. INCOME DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND TAX TREATMENT This discussion summarizes certain federal income tax issues relating to the Fund. As a summary, it is not an exhaustive discussion of all possible tax ramifications. Accordingly, shareholders are urged to consult with their tax advisors with respect to their particular tax consequences. -23- 123 TAX STATUS OF THE FUND. If the Fund meets certain investment and distribution requirements, it will be treated as a "regulated investment company" (a "RIC") under the Internal Revenue Code and will not be subject to federal income tax on earnings that it distributes in a timely manner to shareholders. It also may be subject to an excise tax on undistributed income if it does not meet certain timing requirements for distributions. The Fund intends to qualify as a RIC annually and to make timely distributions in order to avoid income and excise tax liabilities. TAX ON FUND DISTRIBUTIONS. With certain exceptions provided by law, the Fund will report annually to the Internal Revenue Service and to each shareholder information about the tax treatment of the shareholder's distributions. Dividends paid by the Fund, whether received in cash or reinvested in additional Fund shares, will be treated as ordinary income to the shareholders. Distributions of net capital gain, whether received in cash or reinvested in Fund shares, will be taxable to the shareholders, but the rate of tax will vary depending upon the Fund's holding periods in the assets whose sale resulted in the capital gain. Dividends and distributions that are declared in October, November or December but not distributed until the following January will be considered to be received by the shareholders on December 31. In general, net capital gains from assets held by the Fund for more than 12 months will be subject to a maximum tax rate of 20% and net capital gains from assets held for 12 months or less will be taxed as ordinary income. Distributions will be subject to these capital gains rates, regardless of how long a shareholder has held Fund shares. Assets contributed to a Fund in an in-kind purchase of Fund shares may generate more gain upon their sale than if the assets had been purchased by the Fund with cash contributed to the Fund in a cash purchase of Fund shares. If the Fund's distributions for a taxable year exceeds its tax earnings and profits available for distribution, all or a portion of its distributions may be treated as a return of capital. To the extent a distribution is treated as a return of capital, a shareholder's basis in his or her Fund shares will be reduced by that amount. If a shareholder has elected to receive dividends and/or capital gain distributions in cash and the U.S. Postal Service is unable to deliver checks to the shareholder's address of record, or if a shareholder's checks remain uncashed for six months, the Fund reserves the right to reinvest the amount distributed in shares of the applicable Fund at the NAV next computed after the check is cancelled, and to convert the shareholder's distribution option from receiving cash to having all dividend and other distributions reinvested in additional shares. In addition, no interest will accrue on amounts represented by uncashed distribution or redemption checks. Additionally, the Funds reserve the right to reinvest distributions of less than $10 in shares of the applicable Fund at the next computed NAV. TAX ON REDEMPTIONS OF FUND SHARES. Shareholders may be subject to tax on the redemption of their Fund shares. In general, redemptions may give rise to a capital gain or loss, the treatment of which will depend on the shareholder's holding period in the Fund shares. Tax laws may prevent the deduction of a loss on the sale of Fund shares if the shareholder reinvests in the Fund shortly before or after the sale giving rise to the loss. Any loss on the redemption or other sale or exchange of Fund shares held for six months or less will be treated as a long-term capital loss to the extent of any long-term capital gain distribution received on the shares. INCOME FROM FOREIGN SOURCES. Dividends and interest received by the Fund on foreign securities may give rise to withholding and other taxes imposed by foreign countries, although these taxes may be reduced by applicable tax treaties. Foreign taxes will generally be treated as expenses of the Fund, unless the Fund has more than 50% of its assets invested in foreign corporate securities at the end of the Fund's taxable year. In that case, if the Fund makes an election, shareholders of the Fund may be able to deduct (as an itemized deduction) or claim a foreign tax credit for their share of foreign taxes, subject to limitations prescribed in the tax law. -24- 124 If the Fund invests in a foreign corporation that is a passive foreign investment company (a "PFIC"), special rules apply that may affect the tax treatment of gains from the sale of the stock and may cause the Fund to incur IRS tax and interest charges. However, the Fund may be eligible to elect one of two alternative tax treatments with respect to PFIC shares which would avoid these taxes and charges, but also may affect, among other things, the amount and character of gain or loss and the timing of the recognition of income with respect to PFIC shares. Accordingly, the amounts, character and timing of income distributed to shareholders of the Fund holding PFIC shares may differ substantially as compared to a fund that did not invest in PFIC shares. INCOME FROM CERTAIN TRANSACTIONS. Some or all of the Fund's investments may include transactions that are subject to special tax rules. Transactions involving foreign currencies may give rise to gain or loss that could affect the Fund's ability to make ordinary dividend distributions. Investment in certain financial instruments, such as options, futures contracts and forward contracts, may require annual recognition of unrealized gains and losses. Transactions that are treated as "straddles" may affect the character and/or timing of other gains and losses of the Fund. If the Fund enters into a transaction (such as a "short sale against the box") that reduces the risk of loss on an appreciated financial position that it already holds, the entry into the transaction may constitute a constructive sale and require immediate recognition of gain. BACKUP WITHHOLDING. In general, if a shareholder is subject to backup withholding, the Fund will be required to withhold federal income tax at a rate of 31% from distributions to that shareholder. These payments are creditable against the shareholder's federal income tax liability. FOREIGN SHAREHOLDERS. Foreign shareholders of the Fund generally will be subject to a 30% U.S. withholding tax on dividends paid by the Fund from ordinary income and short-term capital gain, although the rate may be reduced by a tax treaty. If a foreign shareholder dies while owning Fund shares, those shares may be subject to U.S. estate taxes. 10. SUSPENSION OF REDEMPTION RIGHTS The right of redemption may be suspended for any period during which the New York Stock Exchange is closed or the Securities and Exchange Commission determines that trading on the Exchange is restricted, or when there is an emergency as determined by the Securities and Exchange Commission as a result of which it is not reasonably practicable for the Fund to dispose of securities owned by it or to determine the value of its net assets, or for such other period as the Securities and Exchange Commission may by order permit for the protection of shareholders of the Fund. The Fund intends to redeem its shares only for cash, although it retains the right to redeem its shares in-kind under unusual circumstances, in order to protect the interests of the remaining shareholders, by the delivery of securities selected from its assets at its discretion. The Fund is, however, governed by Rule 18f-1 under the Investment Company Act of 1940 pursuant to which the Fund is obligated to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net assets of the Fund during any 90-day period for any one shareholder. For purposes of this threshold, each underlying account holder whose shares are held of record in certain omnibus accounts is treated as one shareholder. Should redemptions by any shareholder during any 90-day period exceed such limitation, the Fund will have the option of redeeming the excess in cash or in-kind. If shares are redeemed in-kind, the redeeming shareholder generally will incur brokerage costs in converting the assets to cash. The redeeming shareholder may have difficulty selling the securities and recovering the amount of the redemption if the securities are illiquid. The method of valuing securities used to make redemption in-kind will be the same as the method of valuing portfolio securities described under Section 8. 11. TAX-SHELTERED RETIREMENT PLANS The Fund offers several tax-qualified retirement plans for individuals, businesses and nonprofit organizations. For information about establishing an IRA, Roth IRA, profit-sharing or money purchase pension plan, 403(b) Custodial Account, SEP-IRA, SIMPLE IRA account or other retirement -25- 125 plans, please call 1-800-259-2820 or write to the Berger Funds c/o Berger LLC, P.O. Box 5005, Denver, CO 80217. Trustees for existing 401(k) or other plans interested in using Fund shares as an investment or investment alternative in their plans are invited to call the Fund at 1-800-259-2820. The Fund also offers an Automatic Investment Plan (minimum $50 per month) and a Systematic Withdrawal Plan (minimum of $50 withdrawn monthly, quarterly, semiannually or annually). Forms for these plans may be obtained by writing to the Fund, c/o DST Systems, Inc., P.O. Box 219958, Kansas City, MO 64121, or call 1-800-960-8427. 12. EXCHANGE PRIVILEGE Any shareholder may exchange any or all of the shareholder's shares in the Fund, subject to stated minimums, for shares of any of the other available Berger Funds, without charge, after receiving a current prospectus of the other fund. Exchanges into or out of the Fund are made at the net asset value per share next determined after the exchange request is received. Each exchange represents the sale of shares from one fund and the purchase of shares in another, which may produce a gain or loss for federal income tax purposes. An exchange of shares may be made by written request directed to DST Systems, Inc., by telephoning the Fund at 1-800-960-8427 or by contacting the Fund online at www.bergerfunds.com. This privilege is revocable by the Fund, and is not available in any state in which the shares of the Berger Fund being acquired in the exchange are not eligible for sale. Shareholders automatically have telephone and online transaction privileges to authorize exchanges unless they specifically decline this service in the account application or in writing. 13. PERFORMANCE INFORMATION From time to time in advertisements, the Fund may discuss its performance ratings as published by recognized mutual fund statistical services, such as Lipper Analytical Services, Inc., CDA Investment Technologies, Inc., Morningstar, Inc., or Value Line Investment Survey or by publications of general interest such as The Wall Street Journal, Investor's Business Daily, Money, Barron's, Financial World or Kiplinger's Personal Finance Magazine. In addition, the Fund may compare its performance to that of recognized broad-based securities market indices, including the Standard & Poor's 500 Stock Index, the Dow Jones Industrial Average, the Russell 2000 Stock Index, the Standard & Poor's 600 Small Cap Index, the Nasdaq Composite Index, or more narrowly-based or blended indices which reflect the market sectors in which the Fund invests. The total return of the Fund is calculated for any specified period of time by assuming the purchase of shares of the Fund at the net asset value at the beginning of the period. Each dividend or other distribution paid by the Fund is assumed to have been reinvested at the net asset value on the reinvestment date. The total number of shares then owned as a result of this process is valued at the net asset value at the end of the period. The percentage increase is determined by subtracting the initial value of the investment from the ending value and dividing the remainder by the initial value. The Fund's total return reflects the Fund's performance over a stated period of time. An average annual total return reflects the hypothetical annually compounded return that would have produced the same total return if the Fund's performance had been constant over the entire period. Total return figures are based on the overall change in value of a hypothetical investment in the Fund. Because average annual total returns for more than one year tend to smooth out variations in the Fund's return, investors should recognize that such figures are not the same as actual year-by-year results. All performance figures for the Fund are based upon historical results and do not assure future performance. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Quotations of average annual total return for the Fund will be expressed in terms of the average annual compounded rate of return of a hypothetical investment in the Fund over periods of 1, 3, 5 and 10 years, or for the period since the Fund's registration statement became effective, if shorter. These -26- 126 are the rates of return that would equate the initial amount invested to the ending redeemable value. These rates of return are calculated pursuant to the following formula: P(1 + T)n = ERV (where P = a hypothetical initial payment of $1,000, T = the average annual total return, n = the number of years and ERV = the ending redeemable value of a hypothetical $1,000 payment made at the beginning of the period). All total return figures reflect the deduction of a proportional share of Fund expenses on an annual basis, and assume that all dividends and distributions are reinvested when paid. Shares of the Fund had no class designations until February 14, 1997, when all of the then-existing shares were designated as Institutional Shares and the Fund commenced offering another class of shares. Total return of the Institutional Shares and other classes of shares of the Fund will be calculated separately. Because each class of shares is subject to different expenses, the performance of each class for the same period will differ. For the 1-year, 3-year, 5-year and 10-year periods ended September 30, 2000, and for the period from October 21, 1987 (date of first public offering) through September 30, 1999, the average annual total returns for the Institutional Shares of the Fund were 21.09%, 10.64%, 18.54%, 18.11% and 15.31%, respectively. 14. ADDITIONAL INFORMATION The Fund was originally organized in November 1984 as a Delaware corporation. In May 1990, the Fund was reorganized from a Delaware corporation into a Massachusetts business trust known as The Omni Investment Fund (the "Trust"). Pursuant to the Fund's reorganization, the Fund as a series of the Trust assumed all of the assets and liabilities of the Fund as a Delaware corporation, and Fund shareholders received shares of the Massachusetts business trust equal both in number and net asset value to their shares of the Delaware corporation. All references in this SAI to the Fund and all financial and other information about the Fund prior to such reorganization are to the Fund as a Delaware corporation. All references after such reorganization are to the Fund as a series of the Trust. On February 14, 1997, the name of the Trust was changed to Berger Omni Investment Trust and the name of the Fund was changed to the Berger Small Cap Value Fund. The name "Berger Small Cap Value Fund(R)" was registered as a service mark in September 1998. The Trust is authorized to issue an indefinite number of shares of beneficial interest having a par value of $0.01 per share, which may be issued in any number of series. Currently, the Fund is the only series established under the Trust, although others may be added in the future. The shares of each series of the Trust are permitted to be divided into classes. Currently, the Fund issues two classes of shares: The Institutional Shares, to which this SAI relates, are designed for pension and profit-sharing plans, employee benefit trusts, endowments, foundations and corporations, as well as high net worth individuals, who are willing to maintain a minimum account balance of $250,000. Institutional Shares are also made available for purchase and dividend reinvestment to all holders of the Fund's shares as of February 14, 1997, when all the Fund's then outstanding shares were designated as Institutional Shares, subject to a minimum account balance requirement of $500. A separate class of shares, Investor Shares, are offered through a separate prospectus and statement of additional information and are available to the general public, subject to the Fund's regular minimum investment requirements as specified in that prospectus (currently $2,000 minimum initial investment). Under the Fund's Declaration of Trust, each trustee will continue in office until the termination of the Trust or his or her earlier death, resignation, incapacity, retirement or removal. Vacancies will be filled by a majority vote of the remaining trustees, subject to the provisions of the Investment Company Act of 1940. Therefore, no annual or regular meetings of shareholders normally will be held, unless otherwise required by the Declaration of Trust or the Investment Company Act of 1940. Subject to the foregoing, shareholders have the power to vote for the election and removal of trustees, to terminate or reorganize the Trust, to amend the Declaration of Trust, and on any other matters on which a shareholder vote is required by the Investment Company Act of 1940, the Declaration of Trust, the Trust's bylaws or the trustees. -27- 127 Shareholders of the Fund and, where applicable, the other series/classes of the Trust, generally vote separately on matters relating to those respective series/classes, although they vote together and with the holders of any other series/classes of the Trust in the election of trustees of the Trust and on all matters relating to the Trust as a whole. Shareholders are entitled to one vote for each full share held and fractional votes for fractional shares held on matters submitted to a vote of shareholders. Shares of the Fund do not have cumulative voting rights, which means that the holders of more than 50% of the shares voting for the election of trustees can elect 100% of the trustees if they choose to do so, and in such event the holders of the remaining shares will not be able to elect any person as a trustee. Shares of the Fund are fully paid and non-assessable when issued. Dividends, distributions and the residual assets of the Fund in the event of liquidation are distributed to shareholders equally for each outstanding share of the Fund, subject to any applicable distinctions by class. Shares of the Fund have no preemptive rights. Fund shares have no subscription rights or conversion rights, except that shareholders of any class of the Fund may convert their shares into shares of any other class of the Fund in the event and only in the event the shareholder ceases to be eligible to purchase or hold shares of the original class, or becomes eligible to purchase shares of a different class, by reason of a change in the shareholder's status under the conditions of eligibility in effect for such class at that time. Shares of the Fund may be transferred by endorsement or stock power as is customary, but the Fund is not required to recognize any transfer until it is recorded on the books. Under Massachusetts law, shareholders of the Fund could, under certain circumstances, be held personally liable for the obligations of the Fund. However, the Declaration of Trust disclaims shareholder liability for acts or obligations of the Fund and requires that notice of such disclaimer be given in each agreement, obligation, or instrument entered into or executed by the Fund or the trustees. The Fund's Declaration of Trust provides for indemnification out of the property of the Fund for all loss and expense of any shareholder of the Fund held personally liable for the obligations of the Fund. Accordingly, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which the Fund would be unable to meet its obligations. The possibility that these circumstances would occur is remote. The trustees intend to conduct the operations of the Fund to avoid, to the extent possible, liability of shareholders for liabilities of the Fund. Under governing corporate law, the Fund may enter into a variety of corporate transactions, such as reorganizations, conversions, mergers and asset transfers, or may be liquidated. Any such transaction would be subject to a determination from the trustees that the transaction was in the best interests of the Fund and its shareholders, and may require obtaining shareholder approval. MORE ON SPECIAL FUND STRUCTURE The Fund has divided its shares into classes and has two classes of shares outstanding, the Institutional Shares covered by this SAI and the Investor Shares offered through a separate prospectus and statement of additional information. The Fund implemented its multi-class structure by adopting a Rule 18f-3 Plan under the Investment Company Act of 1940 permitting it to issue its shares in classes. The Fund's Rule 18f-3 Plan governs such matters as class features, dividends, voting, allocation of income and expenses between classes, exchange and trustee monitoring of the Plan. Each class is subject to such investment minimums and other conditions of eligibility as are set forth in the relevant prospectus for the class, as it may be amended from time to time. Investor Shares are made available to the general public and bear a 0.25% 12b-1 fee. Information concerning Investor Shares is available from the Fund at 1-800-333-1001. Subject to the Trust's Declaration of Trust and any other applicable provisions, the trustees of the Trust have the authority to create additional classes, or change existing classes, from time to time, in accordance with Rule 18f-3 under the Act. -28- 128 PRINCIPAL SHAREHOLDERS Insofar as the management of the Fund is aware, as of December 29, 2000, no person owned, beneficially or of record, more than 5% of the outstanding Institutional Shares of the Fund, except for the following:
OWNER PERCENTAGE - ----- ---------- Charles Schwab & Co., Inc. 19.34%(1) 101 Montgomery Street San Francisco, CA 94104 PFPC FBO LPL Supermarket Program 13.06%(3) 211 S. Gulph Rd. King of Prussa, PA 19406-3101 National Financial Services Corp. ("Fidelity") 9.42%(3) 200 Liberty St. One World Financial Center New York, NY 10281
(1) In addition, Charles Schwab & Co., Inc. holds of record 17.19% of the Investor Shares class of the Fund, which together with its Institutional Shares, constitute 18.27% of the Fund's total outstanding shares. (2) Constitutes 6.54% of the Fund's total outstanding shares. (3) In addition, Fidelity holds of record 31.58% of the Investor Shares class of the Fund, which together with its Institutional Shares constitute 20.48% of the Fund's total outstanding shares. Any person owning more than 25% of the outstanding securities of the Fund may be deemed to control it. Fidelity is believed to hold its shares of the Fund as nominee for the benefit of its clients or customers. DISTRIBUTION Berger Distributors LLC, as the Fund's Distributor, is the principal underwriter of the Fund's shares. The Distributor is a wholly-owned subsidiary of Berger LLC. The Distributor is a registered broker-dealer under the Securities Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. The Distributor acts as the agent of the Fund in connection with the sale of the Fund's shares in all states in which the shares are eligible for sale and in which the Distributor is qualified as a broker-dealer. -29- 129 David J. Schultz, Chief Financial Officer, Assistant Secretary and Treasurer of the Distributor, is also Vice President and Treasurer of the Fund. Janice M. Teague, Vice President and Secretary of the Distributor, is also Vice President and Assistant Secretary of the Fund. Brian Ferrie, Vice President and Chief Compliance Officer of the Distributor, is also Vice President of the Fund. Sue Vreeland, Assistant Secretary of the Distributor, is also Secretary of the Fund. The Trust, on behalf of the Fund, and the Distributor are parties to a Distribution Agreement that continues through April 2000, and thereafter from year to year if such continuation is specifically approved at least annually by the trustees or by vote of a majority of the outstanding shares of the Fund and in either case by vote of a majority of the trustees of the Trust who are not "interested persons" (as that term is defined in the Investment Company Act of 1940) of the Trust or the Distributor. The Distribution Agreement is subject to termination by the Trust or the Distributor on 60 days' prior written notice, and terminates automatically in the event of its assignment. Under the Distribution Agreement, the Distributor continuously offers the Fund's shares and solicits orders to purchase Fund shares at net asset value. The Distributor is not compensated for its services under the Distribution Agreement, but may be reimbursed by Berger LLC for its costs in distributing Fund shares. OTHER INFORMATION The Fund has filed with the Securities and Exchange Commission, Washington, D.C., a Registration Statement under the Securities Act of 1933, as amended, with respect to the securities of the Fund of which this SAI is a part. If further information is desired with respect to the Fund or such securities, reference is made to the Registration Statement and the exhibits filed as a part thereof. Davis, Graham & Stubbs LLP, 1550 Seventeenth Street, Suite 500, Denver, Colorado, acts as counsel to the Fund. -30- 130 INDEPENDENT ACCOUNTANTS PricewaterhouseCoopers LLP, 1670 Broadway, Suite 1000, Denver, Colorado, acted as independent accountants for the Fund for the year ended September 30, 2000. In that capacity, PricewaterhouseCoopers LLP audited the financial statements of the Fund referenced below under "Financial Information" and assisted the Fund in connection with the preparation of its 1999 income tax returns. PricewaterhouseCoopers LLP has been appointed to act as independent accountants for the Fund for the fiscal year ended September 30, 2001. In that capacity, PricewaterhouseCoopers LLP will audit the financial statements of the Fund and assist the Fund in connection with the preparation of its 2000 income tax returns. FINANCIAL INFORMATION The following financial statements for the Fund are incorporated herein by reference from the Annual Report to Shareholders of the Fund dated September 30, 2000, in each case along with the Report of Independent Accountants thereon dated November 8, 2000: Schedule of Investments as of September 30, 2000 Statements of Assets and Liabilities as of September 30, 2000 Statements of Operations for the Year Ended September 30, 2000 Statements of Changes in Net Assets each of the periods indicated. Notes to Financial Statements, September 30, 2000 Financial Highlights for each of the periods indicated The above-referenced Annual Report is enclosed with a copy of this SAI. Additional copies of that Annual Report may be obtained upon request without charge by calling the Fund at 1-800-259-2820. -31- 131 APPENDIX A HIGH-YIELD/HIGH RISK CONVERTIBLE BONDS The Fund may invest in convertible securities of any quality, including unrated securities or securities rated below investment grade (Ba or lower by Moody's, BB or lower by S&P). However, the Fund will not purchase any security in default at the time of purchase. The Fund will not invest more than 20% of the market value of its assets at the time of purchase in convertible securities rated below investment grade. Securities rated below investment grade are subject to greater risk that adverse changes in the financial condition of their issuers or in general economic conditions, or an unanticipated rise in interest rates, may impair the ability of their issuers to make payments of interest and principal or dividends. The market prices of lower grade securities are generally less sensitive to interest rate changes than higher-rated investments, but more sensitive to economic changes or individual corporate developments. Periods of economic uncertainty and change can be expected to result in volatility of prices of these securities. Lower rated securities also may have less liquid markets than higher rated securities, and their liquidity as well as their value may be adversely affected by poor economic conditions. Adverse publicity and investor perceptions as well as new or proposed laws may also have a negative impact on the market for high-yield/high-risk bonds. In the event of an unanticipated default, the Fund will experience a reduction in its income and could expect a decline in the market value of the securities affected. The prices of these securities may be more volatile and the markets for them may be less liquid than those for higher-rated securities. Unrated securities, while not necessarily of lower quality than rated securities, may not have as broad a market. Unrated securities will be included in the Fund's percentage limits for investments rated below investment grade, unless the Fund's sub-advisor deems such securities to be the equivalent of investment grade. If securities purchased by the Fund are downgraded following purchase, or if other circumstances cause the Fund to exceed its percentage limits on assets invested in securities rated below investment grade, the trustees of the Fund, in consultation with the Fund's sub-advisor, will determine what action, if any, is appropriate in light of all relevant circumstances. Relying in part on ratings assigned by credit agencies in making investments will not protect the Fund from the risk that the securities will decline in value, since credit ratings represent evaluations of the safety of principal, dividend and/or interest payments, and not the market values of such securities. Moreover, such ratings may not be changed on a timely basis to reflect subsequent events. Although the market for high-yield debt securities has been in existence for many years and from time to time has experienced economic downturns, this market has involved a significant increase in the use of high-yield debt securities to fund highly leverage corporate acquisitions and restructurings. Past experience may not, therefore, provide an accurate indication of future performance of the high-yield debt securities market, particularly during periods of economic recession. Expenses incurred in recovering an investment in a defaulted security may adversely affect the Fund's net asset value. Moreover, the reduced liquidity of the secondary market for such securities may adversely affect the market price of, and the ability of the Fund to value, particular securities at certain times, thereby making it difficult to make specific valuation determinations. CORPORATE BOND RATINGS The ratings of fixed-income securities by Moody's and Standard & Poor's are a generally accepted measurement of credit risk. However, they are subject to certain limitations. Ratings are generally based upon historical events and do not necessarily reflect the future. In addition, there is a period of time between the issuance of a rating and the update of the rating, during which time a published rating may be inaccurate. -32- 132 KEY TO MOODY'S CORPORATE RATINGS Aaa-Bonds which are rated Aaa are judged to be of the best quality. They carry the smallest degree of investment risk and are generally referred to as "gilt edge." Interest payments are protected by a large or by an exceptionally stable margin and principal is secure. While the various protective elements are likely to change, such changes as can be visualized are most unlikely to impair the fundamentally strong position of such issues. Aa-Bonds which are rated Aa are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high grade bonds. They are rated lower than the best bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risks appear somewhat larger than in Aaa securities. A-Bonds which are rated A possess many favorable investment attributes and are to be considered as upper medium grade obligations. Factors giving security to principal and interest are considered adequate but elements may be present which suggest a susceptibility to impairment sometime in the future. Baa-Bonds which are rated Baa are considered as medium grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and in fact have speculative characteristics as well. Ba-Bonds which are rated Ba are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during good and bad times over the future. Uncertainty of position characterizes bonds of this class. B-Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any long period of time may be small. Caa-Bonds which are rated Caa are of poor standing. Such issues may be in default or there may be present elements of danger with respect to principal or interest. Ca-Bonds which are rated Ca represent obligations which are speculative in a high degree. Such issues are often in default or have other marked shortcomings. C-Bonds which are rated C are the lowest rated class of bonds and issues so rated can be regarded as having extremely poor prospects of ever attaining any real investment standing. Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating classification from Aa through B in its corporate bond rating system. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic category. KEY TO STANDARD & POOR'S CORPORATE RATINGS AAA-Debt rated AAA has the highest rating assigned by Standard & Poor's. Capacity to pay interest and repay principal is extremely strong. AA-Debt rated AA has a very strong capacity to pay interest and repay principal and differs from the higher rated issues only in small degree. -33- 133 A-Debt rated A has a strong capacity to pay interest and repay principal although it is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than debt in higher rated categories. BBB-Debt rated BBB is regarded as having an adequate capacity to pay interest and repay principal. Whereas it normally exhibits adequate protection parameters, adverse economic conditions, or changing circumstances are more likely to lead to a weakened capacity to pay interest and repay principal for debt in this category than in higher rated categories. BB, B, CCC, CC AND C-Debt rated BB, B, CCC, CC and C is regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. BB indicates the lowest degree of speculation and C the highest degree of speculation. While such debt will likely have some quality and protective characteristics, these are out-weighed by the large uncertainties or major risk exposures to adverse conditions. C1-The rating C1 is reserved for income bonds on which no interest is being paid. D-Debt rated D is in default, and payment of interest and/or repayment of principal is in arrears. PLUS (+) OR MINUS (-)-The ratings from "AA" to "CCC" may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. -34- 134 BERGER OMNI INVESTMENT TRUST PART C. OTHER INFORMATION ITEM 23. EXHIBITS The Exhibit Index following the signature page below is incorporated herein by reference. ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT. None. ITEM 25. INDEMNIFICATION. Article XII of the Amended and Restated Declaration of Trust of the Registrant, dated April 19, 1990, provides for indemnification of officers and trustees of the Trust against liabilities and expenses of litigation incurred by them in connection with any claim, action, suit or proceeding (or settlement of the same) in which they become involved by virtue of their office, unless their conduct is determined to constitute willful misfeasance, bad faith, gross negligence or reckless disregard of their duties or unless it has been determined that they have not acted in good faith in the reasonable belief that their actions were in or not opposed to the best interests of the Trust. The Trust also may advance money for these expenses, provided that the trustees or officers undertake to repay the Trust if it is ultimately determined that they are not entitled to indemnification. The Trust has the power to purchase insurance on behalf of its trustees and officers, whether or not it would be permitted or required to indemnify them for any such liability under the Declaration of Trust or applicable law, and the Trust has purchased and maintains an insurance policy covering such persons against certain liabilities incurred in their official capacities. ITEM 26. BUSINESS OR OTHER CONNECTIONS OF INVESTMENT ADVISER. The business of Berger LLC, the investment adviser of the Fund, is described in the Prospectus and in Section 4 of the Statement of Additional Information which are included in this Registration Statement. Information relating to the business and other connections of the officers and directors of Berger Associates (current and for the past two years) is listed in Schedules A and D of Berger LLC's Form ADV as filed with the Securities and Exchange Commission (File No. 801-9451, dated January 23, 2001), which information from such schedules is incorporated herein by reference. The business of Perkins, Wolf, McDonnell & Company ("PWM"), sub-advisor to the Fund, is also described in the Prospectus and in Section 4 of the Statement of Additional Information. Information relating to the business and other connections of the officers and directors of PWM (current and for the past two years) is listed in Schedules A and D of PWM's Form ADV (File No. 801-19974), as filed with the Securities and Exchange Commission on December 14, 2000, which information from such schedules is incorporated herein by reference. ITEM 27. PRINCIPAL UNDERWRITER. (a) Investment companies for which the Fund's principal underwriter also acts as principal underwriter: Berger Growth Fund, Inc. Berger Large Cap Growth Fund, Inc. Berger Investment Portfolio Trust - --Berger Small Company Growth Fund - --Berger New Generation Fund - --Berger Balanced Fund C-1 135 - --Berger Select Fund - --Berger Mid Cap Growth Fund - --Berger Mid Cap Value Fund - --Berger Information Technology Fund Berger Omni Investment Trust - --Berger Small Cap Value Fund Berger Institutional Products Trust - --Berger IPT - Growth Fund - --Berger IPT - Growth and Income Fund - --Berger IPT - Small Company Growth Fund - --Berger IPT - New Generation Fund - --Berger IPT - International Fund Berger Worldwide Funds Trust - --Berger International Fund - --International Equity Fund - --Berger International CORE Fund (b) For Berger Distributors LLC:
Positions and Positions and Offices with Offices with Name Underwriter Registrant ---- ------------- -------------- David G. Mertens President and CEO None David J. Schultz Chief Financial Officer, Assistant Vice President and Treasurer Secretary and Treasurer Brian Ferrie Vice President and Chief Compliance Vice President Officer Janice M. Teague Vice President and Secretary Vice President and Assistant Secretary Sue Vreeland Assistant Secretary Secretary
The principal business address of each of the persons in the table above is 210 University Blvd., Suite 900, Denver, CO 80206. (c) Not applicable. ITEM 28. LOCATION OF ACCOUNTS AND RECORDS. The accounts, books and other documents required to be maintained by Section 31(a) of the 1940 Act and the rules promulgated thereunder are maintained as follows: (a) Shareholder records are maintained by the Registrant's transfer agent, DST Systems, Inc., P.O. Box 419958, Kansas City, MO 64141; (b) Accounting records relating to cash and other money balances; asset, liability, reserve, capital, income and expense accounts; portfolio securities; purchases and sales; and brokerage commissions are maintained by the Registrant's Recordkeeping and Pricing Agent, State Street Bank and Trust Company ("State Street"), 801 Pennsylvania, Kansas City, Missouri 64105. Other records of the Registrant relating to purchases and sales; the Declaration of Trust; minute books and other trust C-2 136 records; brokerage orders; performance information and other records are maintained at the offices of the Registrant at 210 University Boulevard, Suite 900, Denver, Colorado 80206. (c) Certain records relating to day-to-day portfolio management of the Fund are kept at the offices of Perkins, Wolf, McDonnell & Company, 53 West Jackson Boulevard, Suite 818, Chicago, Illinois 60604. ITEM 29. MANAGEMENT SERVICES. None. ITEM 30. UNDERTAKINGS. Not applicable. SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City and County of Denver, and State of Colorado, on the 26th day of January, 2001. BERGER OMNI INVESTMENT TRUST (Registrant) By: /s/ Jack R. Thompson ------------------------------ Name: Jack R. Thompson ---------------------------- Title: President --------------------------- Pursuant to the requirements of the Securities Act of 1933, this amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Jack R. Thompson President (Principal January 26, 2001 - ---------------------------------------------- Executive Officer) Jack R. Thompson and Trustee /s/ David J. Schultz Vice President and January 26, 2001 - ---------------------------------------------- Treasurer (Principal David J. Schultz Financial Officer) /s/ John Paganelli Assistant Treasurer January 26, 2001 - ---------------------------------------------- (Principal Accounting John Paganelli Officer)
C-3 137 Dennis E. Baldwin Trustee January 26, 2001 - ---------------------------------------------- Dennis E. Baldwin * Louis R. Bindner Trustee January 26, 2001 - ---------------------------------------------- Louis R. Bindner * Katherine A. Cattanach Trustee January 26, 2001 - ---------------------------------------------- Katherine A. Cattanach * Paul R. Knapp Trustee January 26, 2001 - ---------------------------------------------- Paul R. Knapp * Harry T. Lewis, Jr. Trustee January 26, 2001 - ---------------------------------------------- Harry T. Lewis, Jr. * Michael Owen Trustee January 26, 2001 - ---------------------------------------------- Michael Owen * William Sinclaire Trustee January 26, 2001 - ---------------------------------------------- William Sinclaire *
* By: /s/ Jack R. Thompson --------------------- Jack R. Thompson Attorney-in-fact C-4 138 BERGER OMNI INVESTMENT TRUST EXHIBIT INDEX
N-1A EDGAR EXHIBIT EXHIBIT NUMBER NUMBER NAME OF EXHIBIT - ------------- ---------- ----------------- (1) Exhibit 23(a)-1 Amended and Restated Declaration of Trust (2) Exhibit 23(b) Bylaws Exhibit 23(c) Not applicable (3) Exhibit 23(d)-1 Form of Investment Advisory Agreement between the Trust and Berger LLC (14) Exhibit 23(d)-1a Form of Amendment to Investment Advisory Agreement (4) Exhibit 23(d)-2 Form of Sub-Advisory Agreement between Berger LLC and Perkins, Wolf, McDonnell & Co. (14) Exhibit 23(d)-2a Form of Amendment to Sub-Advisory Agreement (5) Exhibit 23(e) Form of Distribution Agreement between the Trust and Berger LLC Exhibit 23(f) Not applicable (6) Exhibit 23(g)-1 Form of Custody Agreement between IFTC and the Trust * Exhibit 23(g)-1a EX-99B.23(g)-1a Form of Assignment of Custody and Recordkeeping and Pricing Agent Agreement * Exhibit 23(g)-2 EX-99B.23(g)-2 Form of Foreign Custody Agreement * Exhibit 23(g)-3 EX-99B-23(g)-3 Form of Retirement Custody Agreement (7) Exhibit 23(h)-1 Form of Administrative Services Agreement for Berger Small Cap Value Fund (8) Exhibit 23(h)-2 Form of Recordkeeping and Pricing Agent Agreement between IFTC and the Trust (9) Exhibit 23(h)-3 Form of (Transfer) Agency Agreement between IFTC and the Trust * Exhibit 23(h)-3a EX-99B.23(h)-3a Form of Assignment of Agency Agreement (10) Exhibit 23(i) Opinion and consent of Counsel * Exhibit 23(j) EX-99B.23(j) Consent of PricewaterhouseCoopers LLP Exhibit 23(k) Not applicable (11) Exhibit 23(l) Investment Letters from Initial Stockholders (12) Exhibit 23(m) Rule 12b-1 Plan for Berger Small Cap Value Fund Investor Shares (13) Exhibit 23(o) Rule 18f-3 Plan for the Berger Small Cap Value Fund (14) Exhibit 23(p)-1 Code of Ethics of the Berger Funds (15) Exhibit 23(p)-2 Code of Ethics of Berger LLC * Exhibit 23(p)-2a EX-99B.23(p)-2a Amended Code of Ethics of Berger LLC (15) Exhibit 23(p)-3 Code of Ethics of Berger Distributors LLC * Exhibit 23(p)-6 EX-99B.23(p)-6 Code of Ethics for Perkins, Wolf, McDonnell and Company
- ---------- * Filed herewith Filed previously as indicated below and incorporated herein by reference: (1) Filed as Exhibit 1 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. 139 (2) Filed as Exhibit 2 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (3) Filed as Exhibit 5.1 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (4) Filed as Exhibit 5.2 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (5) Filed as Exhibit 6 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (6) Filed as Exhibit 8 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (7) Filed as Exhibit 9.2 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (8) Filed as Exhibit 9.3 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (9) Filed as Exhibit 9.4 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (10) Filed as Exhibit 10 with Post-Effective Amendment No. 10 to Registrant's Registration Statement on Form N-1A, filed April 30, 1996, and incorporated herein by reference. (11) Filed as Exhibit 13 with Post-Effective Amendment No. 10 to Registrant's Registration Statement on Form N-1A, filed April 30, 1996, and incorporated herein by reference. (12) Filed as Exhibit 15 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (13) Filed as Exhibit 18 with Post-Effective Amendment No. 11 to Registrant's Registration Statement on Form N-1A, filed December 16, 1996. (14) Filed as Exhibit number listed with Post-Effective Amendment No. 20 to Registrant's Registration Statement on Form N-1A, filed January 28, 2000. (15) Filed as Exhibit number listed with Post-Effective Amendment No. 8 to the Registration Statement on Form N-1A of the Berger Institutional Products Trust, filed April 28, 2000. EX-99.B.23(G).1A 2 d83561dex99-b_23g1a.txt FORM OF ASSIGNMENT OF CUSTODY & RECORDKEEPING 1 ASSIGNMENT, AMENDMENT AND CONSENT THIS ASSIGNMENT, AMENDMENT AND CONSENT AGREEMENT (the "Amendment") is made and entered into effective as of March 1, 2000 by and among BERGER INVESTMENT PORTFOLIO TRUST, BERGER GROWTH FUND, INC., BERGER GROWTH AND INCOME FUND, INC., BERGER/BIAM WORLDWIDE FUNDS TRUST, BERGER/BIAM WORLDWIDE PORTFOLIOS TRUST, BERGER OMNI INVESTMENT TRUST, AND BERGER INSTITUTIONAL PRODUCTS TRUST (collectively "Berger"), INVESTORS FIDUCIARY TRUST COMPANY ("IFTC"), and STATE STREET BANK AND TRUST COMPANY ("State Street"). WHEREAS, IFTC has agreed to provide certain services to the entity referenced below pursuant to the referenced agreements (collectively, the "Agreements"): BERGER INVESTMENT PORTFOLIO TRUST: Recordkeeping and Pricing Agent Agreement dated December 14, 1993 as amended December 1, 1998, Custody Agreement dated December 20, 1995, and various related Special Custody Account (Short Sales) and Procedural and Safekeeping Agreements BERGER GROWTH FUND, INC. F/K/A/ THE ONE HUNDRED FUND, INC.: Recordkeeping and Pricing Agent Agreement dated October 1, 1992 as amended December 1, 1998 and January 31, 2000, Custody Agreement dated December 20, 1995 as amended January 31, 2000, and various related Special Custody Account Agreement (Short Sales) and Procedural and Safekeeping Agreements BERGER GROWTH AND INCOME FUND, INC. F/K/A BERGER ONE HUNDRED AND ONE FUND, INC.: Recordkeeping and Pricing Agent Agreement dated October 1, 1992 as amended December 1, 1998 and January 31, 2000, Custody Agreement dated December 20, 1995 as amended January 31, 2000, and various related Special Custody Account (Short Sales) and Procedural and Safekeeping Agreements BERGER/BIAM WORLDWIDE FUNDS TRUST: Recordkeeping and Pricing Agent Agreement dated October 3, 1996 as amended December 1, 1998 and Custody Agreement dated October 3, 1996 BERGER/BIAM WORLDWIDE PORTFOLIOS TRUST: Recordkeeping, Pricing Agent and Transfer Agency Agreement dated October 3, 1996 as amended December 1, 1998 and Custody Agreement dated October 3, 1996 BERGER OMNI INVESTMENT TRUST: Recordkeeping and Pricing Agent Agreement dated January 1, 1997 as amended December 1, 1998 and Custody Agreement dated January 1, 1997; and BERGER INSTITUTIONAL PRODUCTS TRUST: Recordkeeping and Pricing Agent Agreement dated December 20, 1995 as amended December 1, 1998, Custody Agreement dated December 20, 1995 and various related Special Custody Account (Short Sales) and Procedural and Safekeeping Agreements WHEREAS, State Street and IFTC, its wholly owned subsidiary, have commenced a reorganization that will ultimately result in the liquidation of IFTC, and, therefore, IFTC desires to assign, and State Street desires to assume, each of the Agreements; and WHEREAS, Berger and State Street desire to amend and supplement the Agreements upon the following terms and conditions. NOW THEREFORE, for and in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Berger, IFTC and State Street hereby agree that the Agreements are assigned, amended and supplemented as follows: 2 1. IFTC hereby assigns all of its rights, duties and obligations under the Agreements to State Street and State Street hereby assumes all of such rights, duties and obligations. Berger hereby consents to such assignment and assumption. 2. The first paragraph of each Agreement is hereby amended by deleting "127 West 10th Street" and replacing it with "801 Pennsylvania Avenue". 3. The "Notice" provisions of the Agreements are hereby amended by replacing the address of State Street as follows: State Street Bank and Trust Company 801 Pennsylvania Avenue Kansas City, Missouri 64105-1716 Attention: Chief Financial Officer 4. General Provisions. This Amendment may be executed in any number of counterparts, each constituting an original and all considered one and the same agreement. This Amendment is intended to modify and amend the Agreements and the terms of this Amendment and the Agreements are to be construed to be cumulative and not exclusive of each other. Except as provided herein, the Agreements are hereby ratified and confirmed and remain in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized officers to be effective as of the date first above written. INVESTORS FIDUCIARY TRUST COMPANY By: --------------------------------- Name, Title STATE STREET BANK AND TRUST COMPANY By: --------------------------------- Name , Title BERGER INVESTMENT PORTFOLIO TRUST By: --------------------------------- Name, Title BERGER GROWTH FUND, INC By: --------------------------------- Name, Title BERGER GROWTH AND INCOME FUND, INC By: --------------------------------- Name, Title BERGER/BIAM WORLDWIDE FUNDS TRUST By: --------------------------------- Name, Title BERGER/BIAM WORLDWIDE PORTFOLIOS TRUST By: --------------------------------- Name, Title BERGER OMNI INVESTMENT TRUST By: --------------------------------- Name, Title BERGER INSTITUTIONAL PRODUCTS TRUST By: --------------------------------- Name, Title EX-99.B.23(G).2 3 d83561dex99-b_23g2.txt FORM OF FOREIGN CUSTODY AGREEMENT 1 AMENDMENT TO CUSTODY AGREEMENT This Amendment to the Custody Agreement is made as of _____________ by and between BERGER OMNI INVESTMENT TRUST (the "Fund") and STATE STREET BANK AND TRUST COMPANY (the "Custodian"). Capitalized terms used in this Amendment without definition shall have the respective meanings given to such terms in the Custody Agreement referred to below. WHEREAS, the Fund and Investors Fiduciary Trust Company entered into a Custody Agreement dated as of January 1, 1997, (as amended and in effect from time to time, the "Agreement") and the Agreement was assigned from Investors Fiduciary Trust Company to Custodian, effective March 1, 2000; and WHEREAS, the Fund is authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets, and the Fund has made each such series subject to the Agreement (each such series, together with all other series subsequently established by the Fund and made subject to the Agreement in accordance with the terms thereof, shall be referred to as a "Portfolio", and, collectively, the "Portfolios"); and WHEREAS, the Fund and the Custodian desire to amend certain provisions of the Agreement to reflect revisions to Rule 17f-5 ("Rule 17f-5") and the adoption of Rule 17f-7 ("Rule 17f-7") promulgated under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, the Fund and the Custodian desire to amend and restate certain other provisions of the Agreement relating to the custody of assets of each of the Portfolios held outside of the United States. NOW THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter contained, the parties hereby agree to amend the Agreement, pursuant to the terms thereof, as follows: I. Paragraph 3.S.1. of the Agreement is hereby renumbered, as of the effective date of this Amendment, as Paragraph 3.S. and Paragraph 3.S.2 of the Agreement is hereby deleted. II. New Paragraph 3.X and 3.Y. of the Agreement are hereby added, as of the effective date of this Amendment, as set forth below. 3.X. PROVISIONS RELATING TO RULES 17f-5 AND 17f-7 3.X.1. DEFINITIONS. Capitalized terms in this Amendment shall have the following meanings: "Country Risk" means all factors reasonably related to the systemic risk of holding Foreign Assets in a particular country including, but not limited to, such country's political environment, economic and financial infrastructure (including any Eligible Securities Depository operating in the country), prevailing or developing custody and settlement practices, and laws and regulations applicable to the safekeeping and recovery of Foreign Assets held in custody in that country. "Eligible Foreign Custodian" has the meaning set forth in section (a)(1) of Rule 17f-5, including a majority-owned or indirect subsidiary of a U.S. Bank (as defined in Rule 17f-5), a bank holding 1 2 company meeting the requirements of an Eligible Foreign Custodian (as set forth in Rule 17f-5 or by other appropriate action of the U.S. Securities and Exchange Commission (the "SEC")), or a foreign branch of a Bank (as defined in Section 2(a)(5) of the 1940 Act) meeting the requirements of a custodian under Section 17(f) of the 1940 Act; the term does not include any Eligible Securities Depository. "Eligible Securities Depository" has the meaning set forth in section (b)(1) of Rule 17f-7. "Foreign Assets" means any of the Portfolios' investments (including foreign currencies) for which the primary market is outside the United States and such cash and cash equivalents as are reasonably necessary to effect the Portfolios' transactions in such investments. "Foreign Custody Manager" has the meaning set forth in section (a)(3) of Rule 17f-5. 3.X.2. THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. 3.X.2.1 DELEGATION TO THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Fund, by resolution adopted by its Board of Trustees (the "Board"), hereby delegates to the Custodian, subject to Section (b) of Rule 17f-5, the responsibilities set forth in this Section 3.2 with respect to Foreign Assets of the Portfolios held outside the United States, and the Custodian hereby accepts such delegation as Foreign Custody Manager with respect to the Portfolios. 3.X.2.2 COUNTRIES COVERED. The Foreign Custody Manager shall be responsible for performing the delegated responsibilities defined below only with respect to the countries and custody arrangements for each such country listed on Schedule A to this Agreement, which list of countries may be amended from time to time by the Fund with the agreement of the Foreign Custody Manager. The Foreign Custody Manager shall list on Schedule A the Eligible Foreign Custodians selected by the Foreign Custody Manager to maintain the assets of the Portfolios, which list of Eligible Foreign Custodians may be amended from time to time in the sole discretion of the Foreign Custody Manager. The Foreign Custody Manager will provide amended versions of Schedule A in accordance with Section 3.2.5 hereof. Upon the receipt by the Foreign Custody Manager of Proper Instructions to open an account or to place or maintain Foreign Assets in a country listed on Schedule A, and the fulfillment by the Fund, on behalf of the Portfolios, of the applicable account opening requirements for such country, the Foreign Custody Manager shall be deemed to have been delegated by the Board on behalf of the Portfolios responsibility as Foreign Custody Manager with respect to that country and to have accepted such delegation. Execution of this Amendment by the Fund shall be deemed to be a Proper Instruction to open an account, or to place or maintain Foreign Assets, in each country listed on Schedule A in which the Custodian has previously placed or currently maintains Foreign Assets pursuant to the terms of the Agreement. Following the receipt of Proper Instructions directing the Foreign Custody Manager to close the account of a Portfolio with the Eligible Foreign Custodian selected by the Foreign Custody Manager in a designated country, the delegation by the Board on behalf of the Portfolios to the Custodian as Foreign Custody Manager for that country shall be deemed to have been withdrawn and the Custodian shall immediately cease to be the Foreign Custody Manager of the Portfolios with respect to that country. 2 3 The Foreign Custody Manager may withdraw its acceptance of delegated responsibilities with respect to a designated country upon written notice to the Fund. Thirty days (or such longer period to which the parties agree in writing) after receipt of any such notice by the Fund, the Custodian shall have no further responsibility in its capacity as Foreign Custody Manager to the Fund with respect to the country as to which the Custodian's acceptance of delegation is withdrawn. 3.X.2.3 SCOPE OF DELEGATED RESPONSIBILITIES: (a) SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. Subject to the provisions of this Section 3.2, the Foreign Custody Manager may place and maintain the Foreign Assets in the care of the Eligible Foreign Custodian selected by the Foreign Custody Manager in each country listed on Schedule A, as amended from time to time. In performing its delegated responsibilities as Foreign Custody Manager to place or maintain Foreign Assets with an Eligible Foreign Custodian, the Foreign Custody Manager shall determine that the Foreign Assets will be subject to reasonable care, based on the standards applicable to custodians in the country in which the Foreign Assets will be held by that Eligible Foreign Custodian, after considering all factors relevant to the safekeeping of such assets, including, without limitation the factors specified in Rule 17f-5(c)(1). (b) CONTRACTS WITH ELIGIBLE FOREIGN CUSTODIANS. The Foreign Custody Manager shall determine that the contract governing the foreign custody arrangements with each Eligible Foreign Custodian selected by the Foreign Custody Manager will satisfy the requirements of Rule 17f-5(c)(2). (c) MONITORING. In each case in which the Foreign Custody Manager maintains Foreign Assets with an Eligible Foreign Custodian selected by the Foreign Custody Manager, the Foreign Custody Manager shall establish a system to monitor (i) the appropriateness of maintaining the Foreign Assets with such Eligible Foreign Custodian and (ii) the contract governing the custody arrangements established by the Foreign Custody Manager with the Eligible Foreign Custodian. In the event the Foreign Custody Manager determines that the custody arrangements with an Eligible Foreign Custodian it has selected are no longer appropriate, the Foreign Custody Manager shall notify the Board in accordance with Section 3.2.5 hereunder. 3.X.2.4 GUIDELINES FOR THE EXERCISE OF DELEGATED AUTHORITY. For purposes of this Section 3.2, the Board shall be deemed to have considered and determined to accept such Country Risk as is incurred by placing and maintaining the Foreign Assets in each country for which the Custodian is serving as Foreign Custody Manager of the Portfolios. 3.X.2.5 REPORTING REQUIREMENTS. The Foreign Custody Manager shall report the withdrawal of the Foreign Assets from an Eligible Foreign Custodian and the placement of such Foreign Assets with another Eligible Foreign Custodian by providing to the Board an amended Schedule A at the end of the calendar quarter in which an amendment to such Schedule has occurred. The Foreign Custody Manager shall make written reports notifying the Board of any other material change in the foreign custody arrangements of the Portfolios described in this Section 3.2 after the occurrence of the material change. 3.X.2.6 STANDARD OF CARE AS FOREIGN CUSTODY MANAGER OF A PORTFOLIO. In performing the responsibilities delegated to it, the Foreign Custody Manager agrees to exercise 3 4 reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of assets of management investment companies registered under the 1940 Act would exercise. 3.X.2.7 REPRESENTATIONS WITH RESPECT TO RULE 17f-5. The Foreign Custody Manager represents to the Fund that it is a U.S. Bank as defined in section (a)(7) of Rule 17f-5. The Fund represents to the Custodian that the Board has determined that it is reasonable for the Board to rely on the Custodian to perform the responsibilities delegated pursuant to this Agreement to the Custodian as the Foreign Custody Manager of the Portfolios. 3.X.2.8 EFFECTIVE DATE AND TERMINATION OF THE CUSTODIAN AS FOREIGN CUSTODY MANAGER. The Board's delegation to the Custodian as Foreign Custody Manager of the Portfolios shall be effective as of the date hereof and shall remain in effect until terminated at any time, without penalty, by written notice from the terminating party to the non-terminating party. Termination will become effective thirty (30) days after receipt by the non-terminating party of such notice. The provisions of Section 3.2.2 hereof shall govern the delegation to and termination of the Custodian as Foreign Custody Manager of the Portfolios with respect to designated countries. 3.X.3 ELIGIBLE SECURITIES DEPOSITORIES. 3.X.3.1 ANALYSIS AND MONITORING. The Custodian shall (a) provide the Fund (or its duly-authorized investment manager or investment adviser) with an analysis of the custody risks associated with maintaining assets with the Eligible Securities Depositories set forth on Schedule B hereto in accordance with section (a)(1)(i)(A) of Rule 17f-7, and (b) monitor such risks on a continuing basis, and promptly notify the Fund (or its duly-authorized investment manager or investment adviser) of any material change in such risks, in accordance with section (a)(1)(i)(B) of Rule 17f-7. 3.X.3.2 STANDARD OF CARE. The Custodian agrees to exercise reasonable care, prudence and diligence in performing the duties set forth in Section 3.X.3.1. 3.Y. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE PORTFOLIOS HELD OUTSIDE THE UNITED STATES. 3.Y.1 DEFINITIONS. Capitalized terms in this Article 4 shall have the following meanings: "Foreign Securities System" means an Eligible Securities Depository listed on Schedule B hereto. "Foreign Sub-Custodian" means a foreign banking institution serving as an Eligible Foreign Custodian. 3.Y.2. HOLDING SECURITIES. The Custodian shall identify on its books as belonging to the Portfolios the foreign securities held by each Foreign Sub-Custodian or Foreign Securities System. The Custodian may hold foreign securities for all of its customers, including the Portfolios, with any Foreign Sub-Custodian in an account that is identified as belonging to the Custodian for the benefit of its customers, provided however, that (i) the records of the Custodian with respect to foreign securities of the Portfolios which are maintained in such account shall identify those securities as belonging to the Portfolios and (ii), to the extent permitted and customary in the market in which the 4 5 account is maintained, the Custodian shall require that securities so held by the Foreign Sub-Custodian be held separately from any assets of such Foreign Sub-Custodian or of other customers of such Foreign Sub-Custodian. 3.Y.3. FOREIGN SECURITIES SYSTEMS. Foreign securities shall be maintained in a Foreign Securities System in a designated country through arrangements implemented by the Custodian or a Foreign Sub-Custodian, as applicable, in such country. 3.Y.4. TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. 3.Y.4.1. DELIVERY OF FOREIGN ASSETS. The Custodian or a Foreign Sub-Custodian shall release and deliver foreign securities of the Portfolios held by the Custodian or such Foreign Sub-Custodian, or in a Foreign Securities System account, only upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, and only in the following cases: (i) upon the sale of such foreign securities for the Portfolio in accordance with commercially reasonable market practice in the country where such foreign securities are held or traded, including, without limitation: (A) delivery against expectation of receiving later payment; or (B) in the case of a sale effected through a Foreign Securities System, in accordance with the rules governing the operation of the Foreign Securities System; (ii) in connection with any repurchase agreement related to foreign securities; (iii) to the depository agent in connection with tender or other similar offers for foreign securities of the Portfolios; (iv) to the issuer thereof or its agent when such foreign securities are called, redeemed, retired or otherwise become payable; (v) to the issuer thereof, or its agent, for transfer into the name of the Custodian (or the name of the respective Foreign Sub-Custodian or of any nominee of the Custodian or such Foreign Sub-Custodian) or for exchange for a different number of bonds, certificates or other evidence representing the same aggregate face amount or number of units; (vi) to brokers, clearing banks or other clearing agents for examination or trade execution in accordance with market custom; provided that in any such case the Foreign Sub-Custodian shall have no responsibility or liability for any loss arising from the delivery of such securities prior to receiving payment for such securities except as may arise from the Foreign Sub-Custodian's own negligence or willful misconduct; (vii) for exchange or conversion pursuant to any plan of merger, consolidation, recapitalization, reorganization or readjustment of the securities of the issuer of such securities, or pursuant to provisions for conversion contained in such securities, or pursuant to any deposit agreement; 5 6 (viii) in the case of warrants, rights or similar foreign securities, the surrender thereof in the exercise of such warrants, rights or similar securities or the surrender of interim receipts or temporary securities for definitive securities; (ix) for delivery as security in connection with any borrowing by the Portfolios requiring a pledge of assets by the Portfolios; (x) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (xi) in connection with the lending of foreign securities; and (xii) for any other purpose, but only upon receipt of Proper Instructions specifying the foreign securities to be delivered and naming the person or persons to whom delivery of such securities shall be made. 3.Y.4.2. PAYMENT OF PORTFOLIO MONIES. Upon receipt of Proper Instructions, which may be continuing instructions when deemed appropriate by the parties, the Custodian shall pay out, or direct the respective Foreign Sub-Custodian or the respective Foreign Securities System to pay out, monies of a Portfolio in the following cases only: (i) upon the purchase of foreign securities for the Portfolio, unless otherwise directed by Proper Instructions, by (A) delivering money to the seller thereof or to a dealer therefor (or an agent for such seller or dealer) against reasonable assurance in accordance with industry practice of receiving later delivery of such foreign securities; or (B) in the case of a purchase effected through a Foreign Securities System, in accordance with the rules governing the operation of such Foreign Securities System; (ii) in connection with the conversion, exchange or surrender of foreign securities of the Portfolio; (iii) for the payment of any expense or liability of the Portfolio, including but not limited to the following payments: interest, taxes, investment advisory fees, transfer agency fees, fees under this Agreement, legal fees, accounting fees, and other operating expenses; (iv) for the purchase or sale of foreign exchange or foreign exchange contracts for the Portfolio, including transactions executed with or through the Custodian or its Foreign Sub-Custodians; (v) in connection with trading in options and futures contracts, including delivery as original margin and variation margin; (vi) for payment of part or all of the dividends received in respect of securities sold short; (vii) in connection with the borrowing or lending of foreign securities; and 6 7 (viii) for any other purpose, but only upon receipt of Proper Instructions specifying the amount of such payment and naming the person or persons to whom such payment is to be made. 3.Y.4.3. MARKET CONDITIONS. Settlement and payment for Foreign Assets received for the account of the Portfolios and delivery of Foreign Assets maintained for the account of the Portfolios may be effected in accordance with the customary established securities trading or processing practices and procedures in the country or market in which the transaction occurs, including, without limitation, delivering Foreign Assets to the purchaser thereof or to a dealer therefor (or an agent for such purchaser or dealer) with the expectation of receiving later payment for such Foreign Assets from such purchaser or dealer. The Custodian shall provide to the Board the information with respect to custody and settlement practices in countries in which the Custodian employs a Foreign Sub-Custodian described on Schedule C hereto at the time or times set forth on such Schedule. The Custodian may revise Schedule C from time to time, provided that no such revision shall result in the Board being provided with substantively less information than had been previously provided hereunder. 3.Y.5. REGISTRATION OF FOREIGN SECURITIES. The foreign securities maintained in the custody of a Foreign Sub-Custodian (other than bearer securities) shall be registered in the name of the applicable Portfolio or in the name of the Custodian or in the name of any Foreign Sub-Custodian or in the name of any nominee of the foregoing, and the Fund on behalf of such Portfolio agrees to hold any such nominee harmless from any liability as a holder of record of such foreign securities. The Custodian or a Foreign Sub-Custodian shall not be obligated to accept securities on behalf of a Portfolio under the terms of this Agreement unless the form of such securities and the manner in which they are delivered are in accordance with reasonable market practice. 3.Y.6 BANK ACCOUNTS. The Custodian shall identify on its books as belonging to the Fund cash (including cash denominated in foreign currencies) deposited with the Custodian. Where the Custodian is unable to maintain, or market practice does not facilitate the maintenance of, cash on the books of the Custodian, a bank account or bank accounts shall be opened and maintained outside the United States on behalf of a Portfolio with a Foreign Sub-Custodian. All accounts referred to in this Section shall be subject only to draft or order by the Custodian (or, if applicable, such Foreign Sub-Custodian) acting pursuant to the terms of this Agreement to hold cash received by or from or for the account of the Portfolio. Cash maintained on the books of the Custodian (including its branches, subsidiaries and affiliates), regardless of currency denomination, is maintained in bank accounts established under, and subject to the laws of, The Commonwealth of Massachusetts. 3.Y.7. COLLECTION OF INCOME. The Custodian shall use reasonable commercial efforts to collect all income and other payments with respect to the Foreign Assets held hereunder to which the Portfolios shall be entitled and shall credit such income, as collected, to the applicable Portfolio. In the event that extraordinary measures are required to collect such income, the Fund and the Custodian shall consult as to such measures and as to the compensation and expenses of the Custodian relating to such measures. 3.Y.8 SHAREHOLDER RIGHTS. With respect to the foreign securities held pursuant to this Article 4, the Custodian will use reasonable commercial efforts to facilitate the exercise of voting and other shareholder rights, subject always to the laws, regulations and practical constraints that may exist 7 8 in the country where such securities are issued. The Fund acknowledges that local conditions, including lack of regulation, onerous procedural obligations, lack of notice and other factors may have the effect of severely limiting the ability of the Fund to exercise shareholder rights. 3.Y.9. COMMUNICATIONS RELATING TO FOREIGN SECURITIES. The Custodian shall transmit promptly to the Fund written information with respect to materials received by the Custodian via the Foreign Sub-Custodians from issuers of the foreign securities being held for the account of the Portfolios (including, without limitation, pendency of calls and maturities of foreign securities and expirations of rights in connection therewith). With respect to tender or exchange offers, the Custodian shall transmit promptly to the Fund written information with respect to materials so received by the Custodian from issuers of the foreign securities whose tender or exchange is sought or from the party (or its agents) making the tender or exchange offer. The Custodian shall not be liable for any untimely exercise of any tender, exchange or other right or power in connection with foreign securities or other property of the Portfolios at any time held by it unless (i) the Custodian or the respective Foreign Sub-Custodian is in actual possession of such foreign securities or property and (ii) the Custodian receives Proper Instructions with regard to the exercise of any such right or power, and both (i) and (ii) occur at least three business days prior to the date on which the Custodian is to take action to exercise such right or power. 3.Y.10 LIABILITY OF FOREIGN SUB-CUSTODIANS. Each agreement pursuant to which the Custodian employs a Foreign Sub-Custodian shall, to the extent possible, require the Foreign Sub-Custodian to exercise reasonable care in the performance of its duties, and to indemnify, and hold harmless, the Custodian from and against any loss, damage, cost, expense, liability or claim arising out of or in connection with the Foreign Sub-Custodian's performance of such obligations. At the Fund's election, the Portfolios shall be entitled to be subrogated to the rights of the Custodian with respect to any claims against a Foreign Sub-Custodian as a consequence of any such loss, damage, cost, expense, liability or claim if and to the extent that the Portfolios have not been made whole for any such loss, damage, cost, expense, liability or claim. 3.Y.11 TAX LAW. The Custodian shall have no responsibility or liability for any obligations now or hereafter imposed on the Fund, the Portfolios or the Custodian as custodian of the Portfolios by the tax law of the United States or of any state or political subdivision thereof. It shall be the responsibility of the Fund to notify the Custodian of the obligations imposed on the Fund with respect to the Portfolios or the Custodian as custodian of the Portfolios by the tax law of countries other than those mentioned in the above sentence, including responsibility for withholding and other taxes, assessments or other governmental charges, certifications and governmental reporting. The sole responsibility of the Custodian with regard to such tax law shall be to use reasonable efforts to assist the Fund with respect to any claim for exemption or refund under the tax law of countries for which the Fund has provided such information. 3.Y.12. TAX RECLAIMS. (i) Subject to the provisions hereof, Custodian shall apply for a reduction of withholding tax and any refund of any tax paid or tax credits which apply in each applicable market in respect of income payments on the Assets for Fund's benefit which Custodian is aware may be available to Fund. 8 9 (ii) The provision of tax reclaim services by Custodian is conditional upon Custodian's receiving from Fund or, to the extent the Assets are beneficially owned by others, from each beneficial owner, (A) a declaration of the beneficial owner's identity and place of residence and (B) certain other documentation (pro forma copies of which are available from Custodian). Fund acknowledges that, if Custodian does not receive such declarations, documentation and information Custodian shall be unable to provide tax reclaim services. (iii) Custodian shall not be liable to Fund or any third party for any taxes, fines or penalties payable by Custodian or Fund, and shall be indemnified accordingly if these result from the inaccurate completion of documents by Fund or any third party, or as a result of the provision to Custodian or any third party of inaccurate or misleading information or the withholding of material information by Fund or any other third party, or as a result of any delay of any revenue authority or any other matter beyond Custodian's control. (iv) Custodian shall perform tax reclaim services only with respect to taxation levied by the revenue authorities of the countries notified to Fund from time to time and Custodian may, by notification in writing, at Custodian's absolute discretion, supplement or amend the markets in which tax reclaim services are offered. Other than as expressly provided in this sub-clause, Custodian shall have no responsibility with regard to Fund's tax position or status in any jurisdiction. (v) Fund confirms that Custodian is authorized to disclose any information requested by any revenue authority or any governmental body in relation to Fund or the securities and/or cash held for Fund. (vi) Tax reclaim services may be provided by Custodian or, in whole or in part, by one or more third parties appointed by custodian (which may be Custodian's affiliates); provided that custodian shall be liable for the performance of any such third party to the same extent as Custodian would have been if Custodian performed such services. 3.Y.13. LIABILITY OF CUSTODIAN. Except as may arise from the Custodian's own negligence or willful misconduct or the negligence or willful misconduct of a Sub-Custodian, the Custodian shall be without liability to the Fund for any loss, liability, claim or expense resulting from or caused by anything which is part of Country Risk. The Custodian shall be liable for the acts or omissions of a Foreign Sub-Custodian to the same extent as set forth with respect to sub-custodians generally in the Agreement and, regardless of whether assets are maintained in the custody of a Foreign Sub-Custodian or a Foreign Securities System, the Custodian shall not be liable for any loss, damage, cost, expense, liability or claim resulting from nationalization, expropriation, currency restrictions, or acts of war or terrorism, or any other loss where the Sub-Custodian has otherwise acted with reasonable care. III. Except as specifically superseded or modified herein, the terms and provisions of the Agreement shall continue to apply with full force and effect. In the event of any conflict between 9 10 the terms of the Agreement prior to this Amendment and this Amendment, the terms of this Amendment shall prevail. If the Custodian is delegated the responsibilities of Foreign Custody Manager pursuant to the terms of hereof, in the event of any conflict between the provisions of Paragraph 3.X. and 3.Y hereof, the provisions of Paragraph 3.X shall prevail. IN WITNESS WHEREOF, each of the parties has caused this Amendment to be executed in its name and behalf by its duly authorized representative as of the date first above written. WITNESSED BY: STATE STREET BANK AND TRUST COMPANY By: - -------------------------- --------------------------------- Name: Title: WITNESSED BY: BERGER OMNI INVESTMENT TRUST By: - -------------------------- --------------------------------- Name: Title: 10 EX-99.B.23(G).3 4 d83561dex99-b_23g3.txt FORM OF RETIREMENT CUSTODY AGREEMENT 1 RETIREMENT PLAN CUSTODIAL SERVICES AGREEMENT THIS AGREEMENT is made and entered into as of November 17, 2000, by and between each registered investment company ("the Funds") listed on Schedule A hereto as it may be amended from time to time (herein referred to individually and collectively as the "Company" or "Companies"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company ("State Street"). WHEREAS, Company desires to name a custodial trustee without discretionary trust powers and/or a custodian (in either or both capacities a "Custodian") for individual retirement accounts, simplified employee pension plans, 403(b)(7) custodial accounts and defined contribution retirement plans (whether or not "qualified" under the Internal Revenue Code of 1986 ("Code") and whether or not subject to the Employee Retirement Income Security Act of 1974 ("ERISA")) (all such accounts and plans are herein referred to collectively as "Plans") which Company sponsors, or may hereafter sponsor, for participants to invest solely in shares of the Company's investment portfolio or portfolios; and WHEREAS, State Street is willing to serve as Custodian with respect to Plans approved by State Street, but only on the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties agree as follows: 1. State Street shall serve as Custodian for Plans sponsored by the Company which State Street approves as hereinafter provided. Company and State Street agree to evidence their agreement for State Street to act as such with respect to each Plan approved by State Street by executing a Retirement Plan Custodial Services Confirmation substantially in the form attached hereto as Exhibit A ("Confirmation"), and each party agrees to execute such further documents evidencing such agreement as may be reasonably requested by either party from time to time. As to each Plan, the "Effective Date" for purposes hereof shall be the date specified as such in the Confirmation for such Plan. State Street certifies that it is qualified to act as Custodian for the Plans under the requirements of the Code. 2. No Plan shall provide for State Street to serve as Custodian for any assets whatsoever other than shares of the Company. In no event shall any Plan provide for State Street (i) to have or exercise any discretionary authority or discretionary control whatsoever respecting management of the Plan or any authority or control respecting management or disposition of any assets of the Plan; (ii) to render or have authority or responsibility to render investment advice with respect to any moneys or other property of any Plan; or (iii) to have or exercise any discretionary authority or discretionary responsibility in the administration of any Plan. No Plan shall provide for State Street to be, and in no event shall State Street be deemed to be, a "fiduciary" as defined in ERISA. 3. State Street shall serve as Custodian with respect to the Company only during such period of time as the Company maintains its shareholder accounts and records on the computerized mutual fund recordkeeping system of DST Systems, Inc. (the "System"). State Street shall at all times have full access to and use of all accounts and records relating to accounts on which State Street is named custodian or trustee and which are maintained on the System for purposes of performing its duties and obligations as such custodian or trustee. In addition, State Street, its auditors and accountants, and to the extent required by law its regulatory authorities, shall have full access at all times to all such accounts and records for purposes of audit, examination, and testing and verifying compliance with the terms of the Plans and any other applicable governing documents, all applicable requirements of law and all applicable accounting standards. Company hereby irrevocably authorizes and instructs DST Systems, Inc. ("System Provider") to provide such access to State Street and to permit State Street to make use of such accounts and records upon demand. The Company irrevocably acknowledges and agrees that State Street may appoint agents and subcontractors with respect to servicing such accounts. If a party appoints an agent or delegates its responsibilities under this Agreement, in whole or in part, such party shall remain responsible for the performance of such responsibilities. The provisions of this paragraph shall continue after the termination of System and other services provided by System Provider to the Company for so long as such access to and use of such accounts and records may be reasonably required by State Street for the purposes stated above. Further, Company shall deliver to State Street a 2 Consent and Authorization substantially in the form attached hereto as Exhibit B. State Street's agreement to serve as Custodian hereunder shall not be effective as to the Company until State Street has received such Consent and Authorization executed by the Company. 4. Company shall submit to State Street for approval all Plans for which Company wishes for State Street to serve as Custodian, including any and all related application forms, adoption agreements, transfer request forms, disclosure statements, Plan loan-related documents, beneficiary designation forms and any other Plan-related documents ("Plan Documents"), and any and all amendments, modifications and supplements thereto which Company may propose to use from time to time. State Street shall not become the Custodian of any Plan unless and until it has approved the applicable Plan Documents in writing as evidenced by its execution of the Confirmation referencing the same, and State Street shall not be deemed to have accepted and agreed to any subsequent amendment, modification or supplement to any Plan Document unless and until it has approved the same in writing. State Street's review and approval of all Plan Documents and any and all amendments, modifications and supplements thereto is solely for State Street's benefit, and Company shall bear full responsibility for the form and content thereof and compliance with all applicable laws, rules and regulations, as amended from time to time. Company shall be responsible for acquiring, at Company's sole expense, Internal Revenue Service determination letters ("IRS Letters") with respect to all Plans for which such determination letters are required by the Code and shall promptly provide State Street copies thereof. 5. Company shall be solely responsible for all costs and expenses (i) of preparing, printing and distributing all Plan Documents and amendments, modifications and supplements thereto, including but not limited to costs and expenses necessary in order to comply with new or amended laws, rules and regulations, or (ii) related to or arising from any merger, reorganization, dissolution, termination or other organizational change involving any Plan or Company. 6. With respect to all existing and future Plans (if any) in existence with enrolled participants prior to the Effective Date with respect thereto, in the event an additional registered investment company is to be added to Schedule A or a registered investment company is reorganized into one of the Companies listed on Schedule A: (i) Company, at its sole expense, shall in a timely manner obtain the removal or resignation of any prior trustee or custodian, modify and amend Plan Documents as necessary to name State Street as Custodian and give all notices, obtain all approvals and take such other steps as may be required in connection therewith under the Plan Documents and applicable laws, rules and regulations. (ii) Except as provided in the next paragraph, Company, at its sole expense, shall cause to be prepared, mailed, distributed and filed all tax reports, information returns and other documents required by the Code with respect to Plan accounts ("Returns"), and shall cause to be withheld and paid all taxes relating to such accounts, with respect to the portion of the calendar year during which the Effective Date occurs which is prior thereto. (iii) Provided that State Street consents to do so in writing, State Street shall cause to be prepared, mailed, distributed and filed all Returns for the calendar year in which the Effective Date occurs; provided, however, that Company shall provide or cause to be provided to State Street all necessary information with respect to the portion of such year prior to the Effective Date. State Street shall be entitled to rely on the accuracy and completeness of such information with no duty to investigate or verify the same, and Company shall indemnify and hold harmless State Street from and against, any and all losses, liabilities, claims, demands, actions, suits and expenses (including reasonable attorneys fees and penalties and other sums assessed by any federal, state or local governmental agency including the Internal Revenue Service and the United States Department of Labor ("Government Authority")) arising out of or resulting from any error, omission, inaccuracy or other deficiency therein. Company, at its sole expense, shall cause to be withheld and paid all taxes relating to such accounts with respect to the portion of the calendar year during which the Effective Date occurs which is prior thereto. (iv) If and to the extent necessary to permit performance of all duties and obligations of the Custodian, Company, at its sole expense, shall transfer or cause to be transferred onto the System to the 2 3 maximum extent possible, and shall otherwise deliver or cause to be delivered to the transfer agent or other agent(s) which will perform shareholder account recordkeeping and servicing functions with respect to Plan accounts after the Effective Date, all relevant records previously maintained with respect to the accounts of participants in such Plans. (v) State Street shall have no responsibility for, and Company shall, except to the extent (if any) prohibited by ERISA, indemnify and hold harmless State Street from and against, any and all losses, liabilities, claims, demands, actions, suits and expenses (including reasonable attorneys fees and penalties and other sums assessed by any Government Authority) arising out of or resulting from (a) any acts, omissions or errors of any previous trustee or custodian, including but not limited to its failure to file or mail any Returns, withhold or pay any taxes, or file any schedules or other required information, (b) any error, omission, inaccuracy or other deficiency in the Plan participant account records or other relevant records created and maintained prior to the Effective Date, or (c) costs and expenses of enforcing Company's obligations and agreements hereunder. 7. As compensation for its services as Custodian as provided for in this Agreement, the Company agrees that State Street shall be paid the fees set forth in Exhibit C attached hereto, as the same may be amended from time to time by mutual agreement of the parties. 8. Subject to any longer notice periods required by the Plan Documents, Company may remove State Street, and State Street may resign, as Custodian of any or all the Plans by providing sixty (60) days written notice to the other party. In the event of such removal or resignation, this Agreement shall terminate and Company, at its sole expense, shall in a timely manner appoint a successor trustee or custodian, modify and amend Plan Documents as necessary to delete all references to State Street, and give all notices, obtain all approvals and take such other steps as may be required in connection therewith under the Plan Documents and applicable laws, rules and regulations. 9. Except to the extent (if any) prohibited by ERISA, and except to the extent resulting from the negligence or willful misconduct of State Street, Company shall indemnify and hold harmless State Street from and against any and all losses, liabilities, claims, demands, actions, suits and expenses whatsoever (including reasonable attorneys fees, penalties and other sums assessed by any Government Authority, and all costs and expenses of enforcing Company's obligations and agreements hereunder) arising out of, resulting from or in connection with (i) the Plans and Plan Documents, (ii) the appointment of and service by State Street as Custodian therefor, (iii) any acts, omissions or errors of any successor trustee or custodian (including but not limited to its failure to file or mail any Returns, reports, schedules or other required documentation, or withhold or pay any taxes) or of any Plan administrator, co-trustee or other fiduciary, (iv) any instructions given by or on behalf of the Company, or any policies, procedures or practices adopted or followed by the Company or the Company's transfer or other shareholder servicing agent(s) (other than State Street), with respect to shareholder account recordkeeping and servicing which impacts Plan accounts, or (v) the failure of Company to perform any of its obligations hereunder. 10. This Agreement shall be construed according to, and the rights and liabilities of the parties hereto shall be governed by, the laws of the Commonwealth of Massachusetts, without reference to the conflicts of laws principles thereof. 11. Neither this Agreement nor any rights or obligations hereunder may be assigned by either party hereto, whether voluntarily, involuntarily or by operation of law, without the prior written consent of the other, such consent not to be unreasonably withheld, except to entities controlled by, under common control with or controlling the assigning party, provided that such assignee has financial capacity at least equal to that of the assignor. The foregoing restriction on assignment shall not preclude either party from appointing agents and delegating responsibilities hereunder to such agents. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. 12. The provisions for indemnification extended hereunder are intended to and shall continue after and survive the expiration, termination or cancellation of this Agreement. All rights and remedies of each party hereunder shall be cumulative of all other rights and remedies which may be available to such party. 3 4 13. No provisions of the Agreement may be amended or modified in any manner except by a written agreement properly authorized and executed by each party hereto. 14. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 15. If any provision of this Agreement shall be determined to be invalid or unenforceable, the remaining provisions of this Agreement shall not be affected thereby, and every provision of this Agreement shall remain in full force and effect and shall remain enforceable to the fullest extent permitted by applicable law. 16. Neither the execution nor performance of this Agreement shall be deemed to create a partnership or joint venture by and between Company and State Street. 17. This Agreement shall be deemed for all purposes to constitute a separate and discrete agreement between State Street and each of the Companies listed on Schedule A as it may be amended by the parties, and no Company shall be responsible or liable for any of the obligations of any other Company under this Agreement, notwithstanding anything to the contrary contained herein. 18. State Street acknowledges that all shareholder accounts and records are confidential information, and State Street represents that State Street will maintain the confidentiality of the information and will use the information solely for the purposes for which the information is disclosed. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the day and year first above written by their respective duly authorized officers. STATE STREET BANK AND TRUST COMPANY By: ------------------------------- Name: ----------------------------- Title: ---------------------------- THE FUNDS LISTED ON SCHEDULE A By: ------------------------------- Name: ----------------------------- Title: ---------------------------- 4 5 SCHEDULE A LIST OF INVESTMENT COMPANIES (10/2000) BERGER GROWTH FUND, INC., A MARYLAND CORPORATION BERGER GROWTH AND INCOME FUND, INC., A MARYLAND CORPORATION BERGER INVESTMENT PORTFOLIO TRUST, A DELAWARE BUSINESS TRUST Series: Berger Mid Cap Growth Fund Berger Mid Cap Value Fund Berger Small Company Growth Fund Berger New Generation Fund Berger Select Fund Berger Balanced Fund Berger Information Technology Fund BERGER WORLDWIDE FUNDS TRUST, A DELAWARE BUSINESS TRUST Series: Berger International Fund Berger International CORE Fund International Equity Fund BERGER OMNI INVESTMENT TRUST, A MASSACHUSETTS BUSINESS TRUST Series: Berger Small Cap Value Fund 5 6 EXHIBIT A RETIREMENT PLAN CUSTODIAL SERVICES CONFIRMATION THIS CONFIRMS THAT THE FUNDS LISTED ON SCHEDULE A (herein referred to individually and collectively as the "Company" or "Companies") has designated, and hereby designates, STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company with offices at 225 Franklin Street, Boston, Massachusetts 02110 ("State Street"), as custodial trustee without discretionary trust powers/ custodian under the Traditional, Roth, Education, SEP and Simple individual retirement accounts/403(b) plans/qualified plans ("Plans") sponsored by Company, which are created and governed by the following described Plan documents: Berger Funds Universal IRA Information Kit (2/1999) Berger Funds Simple IRA Kit (10/1999) Berger Funds 403(b)(7) Plan Kit (5/2000) Berger Funds Money Purchase Pension and Profit Sharing Plans (Amended 7/1994) State Street has accepted, and hereby accepts, such appointment and certifies that it is qualified to act as such under the applicable provisions of the Internal Revenue Code of 1986, as amended. This agreement is made under and subject to the terms of that certain Retirement Plan Custodial Services Agreement by and between Company and State Street dated as of November 17, 2000 (the "Agreement"), which is hereby incorporated herein by reference. The Effective Date of this agreement for purposes of the Agreement shall be November 17, 2000. IN WITNESS WHEREOF, the parties have caused this instrument to be executed by their respective duly authorized officers. STATE STREET BANK AND TRUST COMPANY By: ------------------------------- Name: ----------------------------- Title: ---------------------------- THE FUNDS LISTED ON SCHEDULE A By: ------------------------------- Name: ----------------------------- Title: ---------------------------- 7 EXHIBIT B CONSENT AND AUTHORIZATION In consideration of State Street Bank and Trust Company ("State Street") serving as custodian and/or custodial trustee for the Accounts (as hereinafter defined), the undersigned registered investment companies agree that State Street shall at all times have full access to and use of all accounts and records relating to Accounts which are maintained on the computerized mutual fund shareholder recordkeeping system of DST Systems, Inc. ("System Provider") for purposes of performing its duties and obligations as such custodian and/or custodial trustee. In addition, State Street, its auditors and accountants, and to the extent required by law its regulatory authorities, shall have full access at all times to all such accounts and records for purposes of audit, examination, and testing and verifying compliance with all applicable requirements of law, all applicable accounting standards, and the terms of the retirement plan documents, trust and custody agreements and other applicable governing documents relating to the Accounts. System Provider is hereby authorized and instructed to provide such access to State Street and to permit State Street to make use of such accounts and records upon demand. The undersigned acknowledges and agrees that System provider may serve as agent and sub-contractor of State Street with respect to the Accounts. The provisions of this Consent and Authorization shall continue after the termination of System and other services provided by System Provider to the undersigned for so long as such access to and use of such accounts and records may be reasonably required by State Street. The term "Accounts" shall mean all individual retirement accounts, simplified employee pension plan accounts, 403(b)(7) custodial accounts, Keogh accounts, defined contribution retirement plan accounts and other accounts of any type for which State Street may from time to time be named as custodian or trustee which contain shares issued by the undersigned investment companies. This Consent and Authorization is irrevocable in every respect, shall be binding upon the undersigned and its successors and assigns and shall inure to the benefit of State Street and System Provider and their respective successors and assigns. THE FUNDS LISTED ON SCHEDULE A By: -------------------------- Name: ------------------------ Title: ----------------------- 8 EXHIBIT C FEE SCHEDULE Retirement accounts annual maintenance fee charged to account holders: $12 per fund account, with a maximum of $24 per social security number. EX-99.B.23(H).3A 5 d83561dex99-b_23h3a.txt FORM OF ASSIGNMENT OF AGENCY AGREEMENT 1 ASSIGNMENT, AMENDMENT AND CONSENT THIS ASSIGNMENT, AMENDMENT AND CONSENT AGREEMENT (the "Amendment") is made and entered into effective as of June 1, 2000, by and among BERGER GROWTH FUND, INC., BERGER GROWTH AND INCOME FUND, INC., BERGER INVESTMENT PORTFOLIO TRUST, BERGER INSTITUTIONAL PRODUCTS TRUST, BERGER WORLDWIDE FUNDS TRUST, AND BERGER OMNI INVESTMENT TRUST (collectively the "Berger Funds"), INVESTORS FIDUCIARY TRUST COMPANY ("IFTC"), STATE STREET BANK AND TRUST COMPANY ("State Street") and DST SYSTEMS, INC. ("DST"). WHEREAS, IFTC has agreed to provide certain services ("Services") to the Berger Funds pursuant to the referenced agreements (collectively, the "Agreements"): BERGER GROWTH FUND, INC. F/K/A/ THE ONE HUNDRED FUND, INC.: Agency Agreement dated March 24, 1992, as amended BERGER GROWTH AND INCOME FUND, INC. F/K/A BERGER ONE HUNDRED AND ONE FUND, INC.: Agency Agreement dated March 24, 1992, as amended BERGER INVESTMENT PORTFOLIO TRUST: Agency Agreement dated December 14, 1993, as amended BERGER INSTITUTIONAL PRODUCTS TRUST: Agency Agreement dated December 20, 1995, as amended BERGER WORLDWIDE FUNDS TRUST F/K/A BERGER/BIAM WORLDWIDE FUNDS TRUST: Agency Agreement dated October 3, 1996, as amended BERGER OMNI INVESTMENT TRUST: Agency Agreement dated January 1, 1997, as amended WHEREAS, IFTC is a wholly owned subsidiary of State Street as a result of the sale by DST and Kemper Financial Services, Inc. of each of their interests in IFTC to State Street; WHEREAS, State Street and IFTC have commenced a reorganization that will ultimately result in the liquidation of IFTC; WHEREAS, IFTC has for the duration of the term of the Agreements contractually delegated the performance of the Services to DST pursuant to an agreement between IFTC and DST dated September 1, 1992, as amended; WHEREAS, DST and the Berger Funds desire that DST continues to perform the Services under the terms and conditions of the Agreements; and WHEREAS, IFTC desires to assign, and DST desires to assume, each Agreement and, the Berger Funds and DST desire to amend and supplement the Agreements upon the following terms and conditions. 2 NOW THEREFORE, for and in consideration of the mutual promises contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Berger Funds, IFTC, State Street and DST hereby agree that the Agreements are assigned, amended and supplemented as follows: 1. Effective as to all rights, duties, liabilities and obligations arising out of transactions occurring or omitted on or after June 1, 2000, IFTC hereby assigns all of its rights, duties, liabilities and obligations under the Agreements to DST and DST hereby assumes all of such rights, duties, liabilities and obligations. The Berger Funds hereby consent to such assignment and assumption. Notwithstanding the foregoing, effective as to all of IFTC's rights, duties, liabilities and obligations arising out of transactions occurring or omitted before June 1, 2000, IFTC hereby assigns all of its rights, duties, liabilities and obligations under the Agreements to State Street and State Street hereby assumes all of such rights, duties, liabilities and obligations. The Berger Funds hereby consent to such assignment and assumption. 2. This Amendment is intended to modify and amend the Agreements and the terms of this Amendment and the Agreements are to be construed to be cumulative and not exclusive of each other. Except as provided herein, the Agreements are hereby ratified and confirmed and remain in full force and effect. THIS AMENDMENT may be executed in two or more counterparts, which taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized officers to be effective as of the date first above written. INVESTORS FIDUCIARY TRUST COMPANY By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- STATE STREET BANK AND TRUST COMPANY By: -------------------------------------- Name: ------------------------------------ Title: ----------------------------------- DST SYSTEMS, INC. By: -------------------------------------- Name: Kenneth V. Hagar Title: Vice President, Chief Financial Officer And Treasurer BERGER GROWTH FUND, INC. By: ------------------------------------- Name: Janice M. Teague Title: Vice President BERGER GROWTH AND INCOME FUND, INC. By: ------------------------------------- Name: Janice M. Teague Title: Vice President BERGER INVESTMENT PORTFOLIO TRUST By: ------------------------------------- Name: Janice M. Teague Title: Vice President 3 BERGER INSTITUTIONAL PRODUCTS TRUST By: ------------------------------------- Name: Janice M. Teague Title: Vice President BERGER WORLDWIDE FUNDS TRUST By: ------------------------------------- Name: Janice M. Teague Title: Vice President BERGER OMNI INVESTMENT TRUST By: ------------------------------------- Name: Janice M. Teague Title: Vice President EX-99.B.23(J) 6 d83561dex99-b_23j.txt CONSENT OF PRICEWATERHOUSCOOPERS LLP 1 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 8, 2000, relating to the financial statements and financial highlights which appears in the September 30, 2000 Annual Report to Shareholders of Berger Investment Portfolio Trust, which is also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Financial Highlights" and "Independent Accountants" in such Registration Statement. PricewaterhouseCoopers LLP Denver, Colorado January 24, 2001 EX-99.B.23(P).2A 7 d83561dex99-b_23p2a.txt AMENDED CODE OF ETHICS OF BERGER LLC 1 CODE OF ETHICS AND STATEMENT OF POLICIES ADOPTED BY BERGER LLC LAST REVISED DECEMBER 22, 2000 2 I. STATEMENT OF GENERAL PRINCIPLES The success of Berger LLC (the "Adviser") as an investment adviser depends upon its reputation for excellence and integrity in the investment marketplace. All Directors, officers and employees of the Adviser must therefore act in accordance with the highest ethical standards. A relationship of trust and confidence exists between the Adviser and its clients. As a result, the interests of the Adviser's clients must always come first. This means that all actions by Directors, officers and employees of the Adviser which are detrimental, or potentially detrimental, to the Adviser's clients must be avoided. While this principle extends to a broad range of actions and practices, it is of particular relevance to any decision relating to the personal investment activities of all Directors, officers and employees of the Adviser since such activities may involve potential conflicts of interest. In order to fulfill their fiduciary duties, all Directors, officers and employees of the Adviser must conduct their personal securities transactions in a manner which does not operate adversely to the interests of the Adviser's clients and must otherwise avoid serving their own personal interests ahead of such clients. In order to ensure that Directors, officers and employees of the Adviser comply with their fiduciary duties and other standards imposed by federal securities law upon their personal investment activities, the Adviser has adopted this Code of Ethics and Statement of Policies (the "Code"). The Code includes specific provisions with which all covered persons must comply. However, compliance with these technical provisions alone will not be sufficient to insulate from scrutiny trades which show a pattern of abuse of the individual's fiduciary relationships. All Directors, officers and employees are expected to abide by the spirit of the Code and the principles articulated herein. Upon assuming their position with the Adviser, each Director, officer or employee of the Adviser is required to certify in writing that they have read and understand the Code and that they recognize they are subject to the Code and will comply with its requirements. In the course of fulfilling the responsibilities of their position, Directors, officers, and employees of the Adviser may deal with issuers of securities, broker/dealers and business associates of the Adviser and its clients. Such relationships can result in the individual being offered or given investment opportunities, perquisites, or gifts from persons doing or seeking business with the Adviser or its clients. All such offers and gifts which are more than de minimis in value (see Section III.(d) of the Code) should be declined or returned in order to prevent a situation which might compromise or appear to compromise a Director's, officer's or employee's exercise of independent and objective judgment on behalf of the Adviser's clients. This Code establishes policies and procedures which govern certain types of personal securities transaction by individuals deemed "Access Persons" of the Adviser. In addition, the Code establishes policies and procedures applicable to all Directors, officers and employees of the Adviser which have been designed to detect and prevent the misuse of material, nonpublic information in securities transactions and to provide guidance in other legal and regulatory matters. Compliance with the Code is a condition of employment and willful or repeated violations of its provisions may be cause for termination of employment. II. DEFINITIONS (a) "Access Person" means (i) any Director or officer of the Adviser, (ii) any employee of the Adviser (or any employee of any company in a Control relationship to the Adviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a Security by an Investment Company/Account, or whose functions relate to the making of any 1 3 recommendations with respect to such purchases or sales and (iii) any natural person in a Control relationship to the Adviser who obtains information concerning recommendations made to an Investment Company/Account, with regard to the purchase or sale of a Security. (b) "Beneficial Ownership" shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is subject to the provisions of Section 16 and the rules and regulations thereunder, except that the determination of direct or indirect beneficial ownership shall apply to all Securities which an Access Person has or acquires. See Appendix A attached hereto for further explanation of the definition of Beneficial Ownership. (c) "Investment Personnel" shall mean (i) any employee of the Adviser (or any employee of any company in a Control relationship to the Adviser) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of a Security by an Investment Company/Account and (ii) any natural person who controls the Adviser and who obtains information concerning recommendations made to the Fund regarding the purchase or sale of a Security by an Investment Company/Account. Investment Personnel shall include all persons employed by the Adviser as portfolio managers, security analysts and security traders. (d) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the Investment Company Act of 1940 (generally, all securities) except that it shall not include shares of registered open-end investment companies (i.e., mutual funds), direct obligations of the Government of the United States (e.g., U.S. Treasury securities), banker's acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. (e) "Purchase or sale of a Security", or phrases of similar import, shall include, among other things, the purchase, writing or sale of an option to purchase or sell that Security (but does not include the exercise or expiration of an option to purchase or sell a Security), the purchase or sale of any derivative Security whose value is derived from that Security, such as a Security convertible into or exchangeable for that Security, and the purchase or sale of any other Security which has a substantial economic relationship to that Security being purchased or sold by an Investment Company/Account (e.g., a Security issued by a partnership which has a substantial portion of its assets invested in the Security being purchased or sold). (f) A Security is "being considered for purchase or sale" when a portfolio manager is seriously considering the purchase or sale of a Security for an Investment Company/Account, or, with respect to a security analyst who makes a recommendation to purchase or sell a Security for an Investment Company/Account, when such person seriously considers making such a recommendation. (g) "Control", which shall have the same meaning as that set forth in Section 2(a)(9) of the Investment Company Act of 1940, generally means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. 2 4 (h) "Compliance Officer" shall mean the employee of the Adviser designated by the Adviser to receive reports and take certain actions as provided in this Code of Ethics and Statement of Policies. The Compliance Officer may appoint designees to carry out his/her functions pursuant to the Code. (i) "Investment Company/Account" means a company registered as such under the Investment Company Act of 1940 and for which the Adviser or an entity controlled by the Adviser is the investment adviser or sub-adviser, or any pension or profit-sharing plan or any institutional or private account managed by the Adviser. (j) "Director" of the Adviser shall mean a member of the Board of Directors of the Adviser's member-manager, Stilwell Management, Inc. (k) "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934. (l) "Limited Offering" means an offering that is exempt from registration under the Securities Act of 1933 pursuant to Section 4(2) or Section 4(6) or pursuant to Rule 504, Rule 505, or Rule 506 thereunder. (m) "Adviser Management" means the following officers of Berger LLC, (i) the President and Chief Executive Officer, (ii) the Vice President of Administration, (iii) the Compliance Officer, and (iv) the Chief Legal Officer. Any Director, officer or employee of the Adviser who has any questions regarding these definitions should consult with the Compliance Officer. III. PROHIBITIONS NOTE: SUBJECT TO A FINAL DECISION BY ADVISER MANAGEMENT AFTER HAVING REVIEWED ALL OF THE FACTS AND CIRCUMSTANCES RELEVANT TO THE PARTICULAR TRANSACTION, INDIVIDUALS COVERED BY THE FOLLOWING PROHIBITIONS MAY BE REQUIRED TO DISGORGE ALL OR A PORTION OF ANY PROFITS GAINED OR LOSSES AVOIDED AS A RESULT OF PARTICIPATING IN ANY OF THE PROHIBITED PERSONAL SECURITIES TRANSACTIONS DISCUSSED BELOW. SEE SECTION VII. SANCTIONS OF THE CODE FOR A MORE DETAILED DISCUSSION OF THIS MATTER. Prohibitions Applicable To All Access Persons (a) No Access Person shall purchase or sell, directly or indirectly, any Security in which he or she has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership and which he or she knows or should have known at the time of such purchase or sale that: (1) the Security is being purchased or sold by an Investment Company/Account; (2) the Security is being considered for purchase or sale by an Investment Company/Account; or (3) the Security has been purchased or sold by an Investment Company/Account within the previous 7 calendar days. 3 5 Although explained more fully in the definition of "purchase or sale of a Security" in Section II. of the Code, it bears emphasis here that included for purposes of this prohibition is any personal securities transaction involving a derivative Security or other Security which has a substantial economic relationship to the Security being considered for purchase or sale or that is being, or that within the previous 7 calendar days has been, purchased or sold by an Investment Company/Account. (b) All Access Persons are prohibited from the purchase or sale of Securities without prior approval from the Compliance Officer, unless such purchase or sale is an exempted transaction as defined in Section IV. of the Code. The preclearance process shall include the Compliance Officer presenting each requested personal securities transaction to the Adviser's portfolio manager(s) (or, for Investment Companies/Accounts for which the Adviser has contracted with another investment adviser, to such sub-adviser) for the purpose of determining whether the provisions of Sections III.(a)(1) and III.(a)(2) prevent its current approval. If granted, such approval will normally be given in writing (see Appendix B). In circumstances that require approval of the transaction to be granted verbally, the Compliance Officer shall document for the Adviser's records all information pertinent to the approved purchase or sale. Any approval for a personal securities transaction will be effective for 3 business days following the date of approval (unless otherwise specified in the written approval). Any transaction not completed within the 3 day (or other specified) time period will require reapproval by the Compliance Officer prior to engaging in any further purchases or sales. When requesting approval for a personal securities transaction, all Access Persons should be careful to identify for the Compliance Officer any factors potentially relevant to a conflict of interest. This is especially true when an Access Person requests approval to purchase or sell a Security with a complicated investment structure, since the Security may be substantially economically related to a separate Security which is being considered for purchase or sale or being purchased or sold by an Investment Company/Account. A portfolio manager may not preclear his/her own personal securities transactions. Any personal securities transaction requested by a portfolio manager shall, in addition to the standard preclearance process, be presented to the President of the Adviser for his/her approval. In addition, because the Compliance Officer may not preclear his/her own personal securities transactions, the Compliance Officer shall request approval for his or her personal securities transactions from his/her direct supervisor. (c) All Access Persons are prohibited from inducing or causing an Investment Company/Account to take action, or fail to take action, for personal benefit, rather than to benefit such Investment Company/Account. For example, an Access Person would violate this Code by causing an Investment Company/Account to purchase a Security owned by the Access Person for the purpose of supporting or increasing the price of that Security or by causing an Investment Company/Account to refrain from selling a Security in an attempt to protect a personal investment, such as an option on that Security. (d) All Access Persons are prohibited from receiving from or giving to any person or entity that does business with or on behalf of the Adviser or the Investment Companies/Accounts any gifts or other things of value which, on an annual basis, in total could reasonably be valued above $100. However, this policy does not apply to customary business meals or entertainment, or promotional items (e.g., pens, mugs, caps, T-shirts, etc.) which are consistent with customary business practices in the industry. 4 6 (e) All Access Persons must immediately notify the Compliance Officer upon becoming a member of a board of directors of a publicly traded company. As a condition of being given approval to engage in any personal securities transaction involving the securities of such company(s), the Access Person will be required to obtain documented approval to trade from the company's management, in light of their procedures designed to prevent the misuse of material, nonpublic information by company insiders (For a description of each Director's, officer's and employee's responsibilities in the event that they come into the possession of material, nonpublic information, see Section VIII. of the Code). Notwithstanding this provision, those Access Persons that are also Investment Personnel are generally prohibited from serving on the board of directors of publicly traded companies (See Section III.(j) of the Code). Prohibitions Applicable Only To Investment Personnel (f) Prior to recommending a Security for purchase or sale by an Investment Company/Account, Investment Personnel are required to provide disclosure, if applicable, of any ownership/Security position they have in the issuer, or any present or proposed business relationship between such issuer and such person, to the Chief Investment Officer and the Compliance Officer. In the event that such disclosure is required of the Chief Investment Officer, it should be made to the President and the Compliance Officer. The Investment Personnel's holdings/relationship will then be reviewed to determine whether it presents a conflict of interest that should be addressed prior to the Adviser acting on their purchase or sale recommendation for the Investment Company/Account. (g) All Investment Personnel are prohibited from profiting in the purchase and sale, or sale and purchase, of the same (or equivalent) Security within 60 calendar days. This prohibition shall not apply to exchange-traded stock options that are purchased for the purpose of establishing a bona fide position hedge on Securities held in excess of 60 calendar days, or to options on or Securities based on stock indices which are composed of 100 or more Securities. However, any transaction which is exempt from this prohibition shall be subject to all otherwise applicable provisions of the Code, including but not limited to the preclearance requirements of Section III(b). (h) All Investment Personnel are prohibited from acquiring any Security in an Initial Public Offering. (i) All Investment Personnel are prohibited from acquiring any Security in a Limited Offering without prior written approval. Request for such approval should be made via a memorandum directed to the Chief Investment Officer and the Compliance Officer. Limited Offerings for which the Chief Investment Officer is seeking approval will be reviewed by the President and the Compliance Officer. The memo shall state the name of the company, the number of shares/units being offered and the offering price per share/unit, a description of the company's history and operations, and a discussion of whether the company's current business plan anticipates a future Initial Public Offering of its Securities. No approval will be granted for the acquisition of Securities in a Limited Offering if the company currently has any publicly traded equity Securities (or other publicly traded Securities convertible into 5 7 equity Securities) issued and outstanding. A copy of the Limited Offering agreement or the purchase contract should be attached to the memo. Subsequent to Investment Personnel obtaining shares/units of a company in a Limited Offering, the company may issue and have outstanding publicly traded Securities. If in the course of performing their job responsibilities any Investment Personnel who acquired shares/units in a Limited Offering transaction becomes involved in the consideration of an investment in the issuer by an Investment Company/Account, they will disclose the existence of their personal ownership in the company to the Chief Investment Officer and the Compliance Officer. In the event that such disclosure is required of the Chief Investment Officer, it should be made to the President and the Compliance Officer. The Adviser will then excuse such employee from the investment decision making process for the Security. (j) All Investment Personnel are prohibited from serving on the boards of directors of publicly traded companies, absent prior authorization based upon a determination by Adviser Management that the board service would be consistent with the interests of the Investment Companies/Accounts. In instances where Adviser Management determines that board service for a company is merited, such Investment Personnel will be subject to the same restrictions that are imposed on all other Access Persons with respect to their personal securities transactions which involve Securities of the company for which they are a director, as described in Section III.(e) of the Code. (k) All Investment Personnel must make disclosure with respect to any family member(s) employed in the securities business who might be in a position to benefit as a result of the trading activity of the Investment Companies/Accounts. It is prohibited for Investment Personnel to influence the allocation of brokerage for direct or indirect personal or familial benefit. However, such disclosure shall not be deemed evidence that any benefit has been conferred, directly or indirectly, by Investment Personnel on such family member(s). (l) All Investment Personnel are prohibited from purchasing Securities of those broker-dealers or parent companies (if any) that are identified from time to time by the Adviser's Brokerage Review Group, based upon the level and nature of services that they provide to the Investment Companies/Accounts. Prohibition Applicable Only To Portfolio Managers (m) All portfolio managers are prohibited from purchasing or selling any Security (or equivalent Security) within 7 calendar days before or after an Investment Company/Account that he or she manages purchases or sells that Security. If the application of this prohibition would work to the disadvantage of an Investment Company/Account (e.g., a portfolio manager sells a Security for his own account and three days later, after new events have occurred, he or she determines that an Investment Company Account should purchase the same Security), the portfolio manager shall request an exemption from this prohibition from Adviser Management. Adviser Management shall consult with other Investment Personnel prior to making their determination whether to grant such an exemption. A memo documenting the reason for granting this exemption should be prepared for any such request that is approved. 6 8 IV. EXEMPTED TRANSACTIONS The prohibitions of Section III. of the Code shall not apply to: (a) purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control; (b) purchases or sales which are non-volitional on the part of the Access Person, such as Securities acquired as a result of a spin-off of an entity from a company whose Securities are owned by an Access Person, or the involuntary sale of Securities due to a merger or as the result of a company exercising a call provision on its outstanding debt; (c) purchases which are part of an automatic dividend reinvestment plan or a company sponsored stock purchase plan; (d) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; and (e) any Securities transaction, or series of related transactions, involving 500 shares or less in the aggregate, if the issuer has a market capitalization (outstanding shares multiplied by the current price per share) greater than $10 billion. This exemption (e) is not available to portfolio managers. V. REPORTING (a) Within 10 days of their commencement of employment with the Adviser (or if not an employee, of their otherwise becoming an Access Person to the Adviser), all Access Persons shall disclose in writing to the Compliance Officer all of their Security holdings in which they have any direct or indirect Beneficial Ownership at such time as the person became an Access Person (see Appendix E). Thereafter, when requested by the Compliance Officer all Access Persons shall on an annual basis disclose in writing to the Compliance Officer all of their Security holdings in which they have any direct or indirect Beneficial Ownership. This information must be current as of a date no more than 30 days before the report is submitted. Both the Initial and the Annual Holdings Report shall contain the following information: (1) the title, number of shares and the principal amount of each Security; (2) the name of any broker, dealer or bank with whom the Access Person maintained an account in which any Securities were held; and (3) the date that the report is submitted by the Access Person. The above notwithstanding, an Access Person shall not be required to make a report with respect to any Security held in any account over which he or she does not have any direct or indirect influence or control. Each such report may contain a statement that the report shall not be construed as an admission by the Access Person that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates. 7 9 (b) All Access Persons shall direct their brokers to supply the Compliance Officer, on a timely basis, duplicate copies of confirmations of all personal securities transactions and copies of all statements for all Securities accounts. Please note that even if the Access Person does not currently intend to purchase or sell Securities (as defined at Section II.(d) above) in the account, the Access Person must direct their brokers to send the Compliance Officer duplicate confirmations and statements on the account if the account allows any trading in such Securities. (c) Whether or not one of the exemptions listed in Section IV. of the Code applies, each Access Person shall file with the Compliance Officer a written report (see Appendix C) containing the information described in Section V.(d) of the Code with respect to each transaction in any Security in which such Access Person by reason of such transaction acquires or disposes of any direct or indirect Beneficial Ownership in the Security; provided, however, that an Access Person shall not be required to make a report with respect to any transaction effected for any account over which he or she does not have any direct or indirect influence or control. Each such report may contain a statement that the report shall not be construed as an admission by the Access Person that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates. (d) Such report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: (1) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Security involved; (2) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (3) the price at which the Security transaction was effected; (4) the name of the broker, dealer or bank with or through whom the transaction was effected; and (5) the date that the report is submitted by the Access Person. For any report concerning a purchase or sale in which the Access Person relied upon one of the exemptions provided in Section IV. of the Code, the Access Person will provide a brief statement of the exemption relied upon and the circumstances of the transaction if requested by the Compliance Officer. In addition to such report, within 10 days after the end of the calendar quarter in which an Access Person opens any brokerage account, the Access Person provide the Compliance Officer with the following information: (1) the name of the broker, dealer or bank with whom the Access Person established the account; (2) the date the account was established; and (3) the date that the report is submitted by the Access Person. (e) The Securities transaction reporting requirements of Sections V. (c) and V.(d) of the Code may be satisfied by the Compliance Officer receiving all confirmations of Security transactions and/or periodic statements for each Access Person's Securities accounts. Confirmations of Security transactions and/or Security account statements received by the Compliance Officer will be distributed quarterly to Access Persons 8 10 for their review to ensure that such confirmations/statements include all Security transactions required to be reported under this Code. (f) An Access Person will be deemed to have participated in, and must report under this Code, any Securities transactions participated in by: (1) The person's spouse; (2) The person's minor children; (3) Any other relatives sharing the person's household; (4) A trust in which the person has a "pecuniary interest" (meaning the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction, in the subject Securities), unless such person has no direct or indirect control over the trust; (5) A trust as to which the person is a trustee, unless such person has no pecuniary interest in the Securities held by the trust; (6) A revocable trust as to which the person is a settler; unless such person has no direct or indirect control over the trust; or (7) A partnership of which the person is a partner (including most investment clubs), unless such person has no direct or indirect control over the partnership. (g) The Compliance Officer shall identify all Access Persons who are required to make the reports required by Section V. of the Code and shall inform them of their reporting obligations hereunder. VI. REVIEW The Compliance Officer shall review or supervise the review of the personal securities transactions and the holdings reported pursuant to Section V. of the Code. Personal securities transactions and holdings reported by the Compliance Officer shall be reviewed by his or her direct supervisor. As part of this review, each such reported personal securities transaction shall be compared against the trading activity of the Investment Companies/Accounts to determine whether a violation of Section III. of the Code may have occurred. If the Compliance Officer or his/her direct supervisor determines that a violation may have occurred, he or she shall promptly submit the pertinent information regarding the transaction to Adviser Management, who shall evaluate whether a violation of the Code has occurred, taking into account all the exemptions provided under Section IV. of the Code, and if so, whether such violation is material. Adviser Management will consider all relevant facts and circumstances surrounding the transaction prior to making its determination. In addition, before making any determination that a material violation has occurred, Adviser Management shall give the person involved an opportunity to supply additional information regarding the transaction in question. VII. SANCTIONS If a final determination is made that a material violation of this Code has occurred, Adviser Management may require the Access Person to disgorge to the affected Investment Company/Account or, if not related to a particular Investment Company/Account, a charitable organization, all or a portion of the profits gained or losses avoided as a result of the prohibited transaction. The Compliance Officer or his/her direct supervisor shall provide a written report of Adviser Management's determination to the Board of Directors of the member-manager for such 9 11 further action and sanctions as said Board deems appropriate, which sanctions may in the Board's discretion include, among other things, imposition of a monetary penalty and/or censure, suspension or termination of the Access Person. A shall also be provided to the Board of directors/trustees of each investment company for which the Adviser is the investment adviser or sub-adviser. VIII. PROCEDURES FOR PREVENTING TRADING ON MATERIAL, NONPUBLIC INFORMATION (a) In addition to the prohibitions set forth in Section III. of the Code which are applicable only to Access Persons of the Adviser, the Adviser forbids any Director, officer or employee (including spouses, minor children and adults living in the same household as the Director, officer or employee), either personally or on behalf of others (such as Investment Companies/Accounts managed by the Adviser) from trading on material, nonpublic information or communicating material, nonpublic information to others in violation of the securities laws. This conduct is frequently referred to as "insider trading." The Adviser's policy against insider trading applies to every Director, officer and employee and extends to activities within and outside their duties at the Adviser. Any questions regarding the Adviser's policies and procedures should be referred to the Compliance Officer. The term "insider trading" is not defined in the federal securities laws, but generally is used to refer to the use of material, nonpublic information to trade in securities (whether or not one is an "insider") or to the communication of material, nonpublic information to others. While the law concerning insider trading is not static, it is generally understood that the law prohibits: o trading by an insider, while in possession of material, nonpublic information, or o trading by a non-insider, while in possession of material, nonpublic information, where the information either was disclosed to the non-insider in violation of an insider's duty to keep it confidential or was misappropriated, or o communicating material, nonpublic information to others. The elements of insider trading and the penalties for such unlawful conduct are discussed below. If you have any questions after reviewing this policy statement, you should consult the Compliance Officer. 1. Who is an insider? The concept of "insider" is broad. It includes directors, officers and employees of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship with a company and, as a result, is given access to information solely for such company's purposes. A temporary insider can include, among others, a company's attorneys, accountants, consultants and bank lending officers, and the employees and associates of such persons. Temporary insiders also can include persons who receive material, nonpublic information from his or her spouse, parent, child or sibling. In addition, the Adviser may become a temporary insider of a company it advises or for which it performs other services. According to the Supreme Court, the company must expect the outsider to keep the nonpublic information 10 12 confidential, and the relationship must at least imply such a duty before the outsider will be considered a temporary insider. In addition, one who receives material, nonpublic information (a "tippee") or one who gives material, nonpublic information to another person (a "tipper") may become an insider and therefore incur liability for insider trading. Finally, and perhaps most relevant for the Code, a Director, officer or employee of the Adviser may become an insider if material, nonpublic information is received from an insider of a company whose securities are held or being considered for purchase by an Investment Company/Account. 2. What is Material Information? Trading on inside information is not a basis for liability unless the information is material. "Material information" generally is defined as information for which there is a substantial likelihood that a reasonable investor would consider it important in a decision to buy, hold or sell stock, or information that is reasonably certain to have a substantial effect on the price of a company's securities. Information that Directors, officers or employees should consider material includes, but is not limited to: dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments. Material information does not have to relate to a company's business. For example, in Carpenter v. U.S., 108 U.S. 316 (1987), the U.S. Supreme Court considered material certain information about the contents of a forthcoming newspaper column that was expected to affect the market price of a security. In that case, a Wall Street Journal reporter was found criminally liable for disclosing to others the dates that reports on various companies would appear in the Journal and whether those reports would be favorable. 3. What is Nonpublic Information? Information is nonpublic until it has been effectively communicated to the marketplace. One must be able to point to some fact to show that the information is generally public. For example, information found in a report filed with the U.S. Securities and Exchange Commission ("SEC") or appearing in Dow Jones, Reuters Economic Services, The Wall Street Journal or other publications would be considered public. 4. Penalties for Insider Trading Penalties for trading on or communicating material, nonpublic information are severe, both for the individuals involved in such unlawful conduct and their employers. A person can be subjected to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties include: o civil injunctions, o treble damages, o jail sentences of up to ten years, o civil penalties for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited, 11 13 o criminal fines (no matter how small the profit) of up to $1 million, civil penalties for the employer or other controlling person of up to the greater of $1 million or three times the profit gained or loss avoided. Because of the serious potential penalties against employers as well as violators, any violation of this Code of Ethics and Statement of Policies which involves insider trading can be expected to result in serious sanctions by the Adviser, including dismissal of the persons involved for cause. (b) The following procedures have been established to aid the Directors, officers and employees of the Adviser in avoiding insider trading, and to aid the Adviser in preventing, detecting and imposing sanctions against insider trading. Every Director, officer and employee of the Adviser must follow these procedures or risk serious sanctions by the Adviser, including dismissal for cause, substantial personal liability and criminal penalties. If you have any questions about these procedures, you should consult the Compliance Officer. Identifying Inside Information in the Context of Personal Securities Trading Before trading for yourself or others, including Investment Companies/Accounts managed by the Adviser, in the securities of a company about which you may have potential inside information, whether obtained through the Adviser's activities or not, ask yourself the following questions: (a) Is the information material? Is there a substantial likelihood that a reasonable investor would consider this information important in making his or her decision to buy, hold or sell stock? Is it reasonably certain that this information would substantially affect the market price of the security if it were generally disclosed? (b) Is the information nonpublic? To whom has this information been provided? Has the information been effectively communicated to the marketplace by being filed with the SEC or published in Reuters, The Wall Street Journal or other such publications? (c) If your securities transactions became the subject of scrutiny, how would they be viewed after-the-fact with the benefit of hindsight? As a result, before engaging in any transaction, you should carefully consider how regulators and others might view your transaction in hindsight. If, after consideration of the above, you believe that the information is material and nonpublic, or if you have any doubt as to whether the information is material and nonpublic, you must take the following steps: (1) Report the matter immediately to the Compliance Officer, (2) Refrain from purchasing or selling the securities on behalf of yourself or others, including Investment Companies/Accounts managed by the Adviser, (3) Refrain from communicating the information inside or outside of the Adviser, other than to the Compliance Officer, and 12 14 (4) After the Compliance Officer has reviewed the issue, you will be instructed to continue the prohibitions against trading and communication, or you will be allowed to trade and communicate the information. Restricting Access to Material, Nonpublic Information (a) General Procedures Material, nonpublic information in the possession of a Director, officer or employee of the Adviser may not be communicated to anyone, including persons within the Adviser except to the Compliance Officer as provided in Section VIII. (b) of the Code or as is necessary for individuals to perform their duties at the Adviser. In addition, care should be taken so that such information is secure. For example, files containing material, nonpublic information should be maintained in a secure manner; access to computer files containing material, nonpublic information should be restricted. (b) Contacts With Public Companies For the Adviser, contacts with public companies represent an important part of its research efforts. The Adviser may make investment decisions on the basis of its conclusions formed through such contacts and analysis of publicly-available information. Difficult legal issues arise, however, when, in the course of these contacts, a Director, officer or employee of the Adviser becomes aware of material, nonpublic information. This could happen, for example, if a company's Chief Financial Officer prematurely discloses quarterly results to an analyst or an investor relations representative makes a selective disclosure of adverse news to a handful of investors. In such situations, the Adviser must make a judgment as to its further conduct. To protect the Adviser and its Investment Companies/Accounts, all Directors, officers and employees of the Adviser should contact the Compliance Officer immediately if they believe that they may have received material, nonpublic information. (c) Tender Offers Tender offers represent a particular concern in the law of insider trading for two reasons. First, tender offer activity often produces extraordinary gyrations in the price of the target company's securities. Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases). Second, the SEC has adopted a rule which expressly forbids trading and "tipping" while in possession of material, nonpublic information regarding a tender offer received from the tender offeror, the target company or anyone acting on behalf of either. Directors, officers and employees of the Adviser should exercise particular caution any time they become aware of nonpublic information relating to a tender offer. 13 15 Procedures Designed to Prevent and Detect Insider Trading The following procedures are designed to prevent and detect insider trading within the Adviser or by the Adviser's Directors, officers and employees. To prevent and detect insider trading the Compliance Officer should: (a) Provide, on an annual basis, an educational program designed to familiarize Directors, officers and employees of the Adviser with the Adviser's policies and procedures on insider trading, misuse of material, nonpublic information, reporting requirements for personal securities transactions and related matters. (b) Answer questions from Directors, officers and employees of the Adviser relating to the Adviser's policies and procedures. (c) Resolve issues of whether information received by Directors, officers and employees of the Adviser is material and nonpublic. (d) Review on an annual basis and update as necessary the Adviser's policies and procedures to reflect changes in rules, regulations and case law. (e) When it has been determined that a Director, officer or employee of the Adviser has material, nonpublic information on a company, the Compliance Officer will take reasonable steps to (i) ensure that such information is not disseminated, and (ii) restrict Directors, officers and employees from trading in securities to which the information relates, either for their own accounts or for Investment Companies/Accounts managed by the Adviser. These objectives will be served by placing the company on a "Restricted List" that will be maintained by the Compliance Officer. While each such company is on the Restricted List, no portfolio manager shall initiate or recommend any transaction in the company's securities in any Investment Companies/Accounts managed by the Adviser. The Compliance Officer will be responsible for removing a particular company from the Restricted List after having received permission for such action from Adviser Management, and will be responsible for making available the Restricted List and any updates to it to all Investment Personnel. The Restricted List is highly confidential and shall, under no circumstances, be discussed with or disseminated to anyone outside of the Adviser. Special Restricted List Procedures (1) Purchase and Sale of Securities Issued by the Adviser's Parent Company More than 80% of the Adviser's stock is indirectly owned by a publicly traded company (the "Parent Company"). As a result, the Parent Company is considered to be in a position of Control with respect to the Adviser. Federal securities law prohibits any Investment Company for which the Adviser acts as investment adviser or sub-adviser from investing in the securities of such a company. The Parent Company has been placed on the Adviser's Restricted List indefinitely, and therefore no Investment Company/Account may invest in any of its securities. Personal security transactions by Directors, officers and employees of the Adviser in the securities of the Parent Company will be allowed pursuant to policies and procedures as in effect from time to time that will be provided by the Compliance Officer. 14 16 (2) Publicly Traded Companies for Which a Director, Officer or Employee of the Adviser Serves as a Director or Officer Subject to the requirement that they disclose their position to the Compliance Officer (and, in the case of Investment Personnel, that they obtain prior approval from Adviser Management), Directors, officers and employees of the Adviser may serve on the boards of directors of publicly traded companies. In addition, Directors, officers and employees of the Adviser may be officers of publicly traded companies. To preclude the possibility of trades of such companies' securities occurring in Investment Companies/Accounts while the Adviser may be in possession of material, nonpublic information, any publicly traded company for which a Director, officer or employee of the Adviser is a director or officer shall be placed on the Restricted List and shall remain on the list until their directorship or officership is terminated and the Director, officer or employee of the Adviser ceases to be an insider to the company. While a company is on the Restricted List, each of the Adviser's Directors, officers and employees who are a member of the board of directors of a publicly traded company or an officer of a publicly traded company may engage in personal securities transactions involving the securities of such company, subject to preclearance that will be conditioned upon obtaining documented approval to trade from such company's management, in light of their procedures designed to prevent the misuse of material, nonpublic information by company insiders. (f) Promptly, upon learning of a potential violation of the Adviser's policies and procedures on insider trading, prepare a written report to Adviser Management with full details about the potential violation and recommendations for further action. IX. ANNUAL REPORTING AND CERTIFICATION (a) On an annual basis, the Compliance Officer shall prepare a written report to the President of the Adviser and the Directors setting forth the following: (1) A summary of the existing procedures to detect and prevent violations of the Code, (2) Full details of any investigation, either internal or by a regulatory agency, of any violations of the Code, the resolution of such investigations and the steps taken to prevent further violations, (3) An evaluation of the current compliance procedures and any recommendations for improvement, and (4) A description of the Adviser's continuing efforts to educate all Directors, officers and employees of the Adviser regarding the Code, including the dates of any such educational programs presented since the last report. 15 17 A report setting forth the above shall also be made annually to the board of directors/trustees of each Investment Company for which the Adviser acts as investment adviser or sub-adviser, except that any information about violations of the Code may be limited to only material violations. In addition, the Adviser shall certify to each such Investment Company annually that it has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. Before being approved as an investment adviser or sub-adviser for any Investment Company, the Adviser is required to provide the Code to the Investment Company's directors/trustees for approval along with a certification that the Adviser has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. Any material changes to the Code must be approved by each Investment Company's directors/trustees within 6 months after adoption of the material change. (b) On an annual basis, all Directors, officers and employees of the Adviser are required to certify in writing that they have read and understand the Code of Ethics and Statement of Policies and recognize that they are subject thereto. In addition, all such persons are required to certify annually that they have complied with the requirements of the Code and, as for Access Persons, that they have reported all personal securities transactions and holdings required to be reported pursuant to the Code (see Appendix D). In conjunction with such certification, the Compliance Officer will provide all Access Persons with an educational program designed to familiarize them with their responsibilities under the Code. If a Director, officer or employee of the Adviser has any questions pertaining to these responsibilities or about the policies or procedures contained in the Code, they should discuss them with the Compliance Officer prior to completing their annual certification statement. X. OTHER LEGAL AND REGULATORY MATTERS (a) Confidentiality. All account information concerning the Adviser's clients (e. g., name, account size, specific securities held, securities trades, etc.) is absolutely confidential. Therefore, access to Investment Company/Account information is limited to those individuals who must have such access to perform their duties, and such information shall not be communicated to any other person either within or outside the Adviser. The confidentiality of all Investment Company/Account information is critical to the Adviser's reputation for excellence and integrity and maintenance of the Adviser's competitive position, and any disclosure of confidential information can be expected to result in serious sanctions by the Adviser, including possible dismissal for cause. (b) Bankruptcy/Criminal Offenses. The Adviser is required to notify regulatory organizations when certain events occur regarding its Directors, officers and/or employees. Accordingly the Chief Legal Officer must be notified if any of the following occur with respect to a Director, officer or employee: o Personal bankruptcy. o The bankruptcy of a corporation in which any Director, officer or employee owns 10% or more of the securities. 16 18 o Arrest, arraignment, indictment or conviction for, or the entry of a guilty or no contest plea for, any criminal offense (other than minor traffic violations). (c) Receipt of Legal Documents. On occasion, employees are served with legal documents (e.g., a subpoena) for the Adviser. Upon receipt of legal documents, the Adviser's Chief Legal Officer is to be notified immediately. (d) Retention of Outside Counsel. Directors, officers and employees may not retain the services of outside counsel under circumstances such that the Adviser would be obligated to pay legal fees unless the Adviser's Chief Legal Officer has granted approval for retention of such counsel in advance. (e) Contact with Industry Regulators. In the event of an inquiry from an industry regulator--whether via the telephone, mail or personal visit--Directors, officers and employees must contact the Adviser's Chief Legal Officer as soon as possible for instructions. (f) Political Contributions. The use of funds or assets of the Adviser for any unlawful or improper purpose is prohibited. This prohibition includes any contribution to any public official, political candidate or political entity, except as may be expressly permitted by law. This shall also preclude unlawful contributions through consultants, customers or other third parties, including payments where Directors, officers or employees of the Adviser know or have reason to believe that payments made to such other third parties will be used as unlawful contributions. The above prohibitions relate only to the use of corporate funds and in no way are intended to discourage Directors, officers or employees from making personal contributions to political candidates or parties of their choice. No such individual contribution will be reimbursed by the Adviser in any manner, directly or indirectly. (g) Business Conduct. It is the policy of the Adviser to conduct business in accordance with the applicable laws and regulations of the United States and all other individual states and countries in which the Adviser operates or has any significant contacts. Engaging in unethical business practices will subject Directors, officers and employees to appropriate disciplinary action, including dismissal for cause if warranted, and may result in prosecution for violating federal, state or foreign laws. No payment (cash or otherwise) can be made (directly or indirectly) to any employee, official or representative of any domestic or foreign governmental agency, instrumentality, party, or candidate thereof, for the purpose of influencing any act, omission or decision. The Adviser's books, records and accounts must be maintained in sufficient detail as to accurately reflect the transactions and dispositions of its assets. No undisclosed or unrecorded fund or asset of the Adviser may be established for any purpose. Any Director, officer or employee with questions about or knowledge of violations of these policies must contact the Adviser's Chief Legal Officer. XI. MISCELLANEOUS PROVISIONS (a) The Adviser shall maintain records in the manner and to the extent set forth below, and make such records available for examination by representatives of the SEC: 17 19 (1) A copy of this Code and any other code of ethics which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of the Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an Access Person pursuant to the Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; (4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to the Code, and who are, or within the past five years have been, responsible for reviewing these reports, shall be maintained in an easily accessible place; and (5) A record of any decision, and the reasons supporting the decision, to approve the acquisition by any Investment Personnel of a Security pursuant to a Limited Offering shall be preserved for a period of not less than five years from the end of the fiscal year in which the approval was granted. (b) All reports of Securities transactions and any other information filed with the Adviser or furnished to any person pursuant to the Code shall be treated as confidential, but are subject to review as provided herein and by representatives of the SEC or any other regulatory or self-regulatory organization to the extent required by law or regulation. (c) Adviser Management may from time to time adopt such interpretations of the Code and such exceptions to provisions of the Code as they deem appropriate. A memo should be prepared to document the reason for granting any such exceptions. 18 20 APPENDIX A For purposes of the attached Code of Ethics and Statement of Policies, a "beneficial owner" shall mean any Director, officer or employee who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect opportunity to profit or share in any profit derived from a transaction in the subject securities (a "pecuniary interest'). The term "Beneficial Ownership" of securities would include not only ownership of securities held by a Director, officer or employee for his or her own benefit, whether in bearer form or registered in their name or otherwise, but also ownership of securities held for his or her benefit by others (regardless of whether or how they are registered) such as custodians, brokers, executors, administrators, or trustees (including trusts in which he or she has only a remainder interest), and securities held for his or her account by pledgees, securities owned by a partnership in which he or she is a member if they may exercise a controlling influence over the purchase, sale or voting of such securities, and securities owned by any corporation that he or she should regard as a personal holding corporation. Correspondingly, this term would exclude securities held by a Director, officer or employee for the benefit of someone else. Ordinarily, this term would not include securities held by executors or administrators in estates in which a Director, officer or employee is a legatee or beneficiary unless there is a specific legacy to such person of such securities or such person is the sole legatee or beneficiary and there are other assets in the estate sufficient to pay debts ranking ahead of such legacy, or the securities are held in the estate more than a year after the decedent's death. Securities held in the name of another should be considered as "beneficially" owned by a Director, officer or employee where such person enjoys "benefits substantially equivalent to ownership". The U.S. Securities and Exchange Commission has said that although the final determination of Beneficial Ownership is a question to be determined in the light of the facts of the particular case, generally a person is regarded as the beneficial owner of securities held in the name of his or her spouse and their minor children. Absent special circumstances such relationship ordinarily results in such person obtaining benefits substantially equivalent to ownership, e.g., application of the income derived from such securities to maintain a common home, to meet expenses that such person otherwise would meet from other sources, or the ability to exercise a controlling influence over the purchase, sale or voting of such securities. A Director, officer, or employee also may be regarded as the beneficial owner of securities held in the name of another person, if by reason of any contract, understanding, relationship, agreement, or other arrangement, he or she obtains therefrom benefits substantially equivalent to those of ownership. Moreover, the fact that the holder is a relative or relative of a spouse and sharing the same home as a Director, officer or employee may in itself indicate that the Director, officer or employee would obtain benefits substantially equivalent to those of ownership from securities held in the name of such relative. Thus, absent countervailing facts, it is expected that securities held by relatives of the Director, officer or employee or his or her spouse who share the same home as the Director, officer or employee will be treated as being beneficially owned by the Director, officer or employee. A Director, officer or employee also is regarded as the beneficial owner of securities held in the name of a spouse, minor children or other person, even though he or she does not obtain therefrom the aforementioned benefits of ownership, if they can vest or revest title in themselves at once or at some future time. 19 21 APPENDIX B APPROVAL FORM FOR THE PURCHASE/SALE OF SECURITIES ================================================================================ PROPOSED TRANSACTION TO BE COMPLETED BY THE ACCESS PERSON (1)(2) Security Description: ----------------------------------------------------------- Security Symbol: Security Exchange --------------------- ---------------- Type of Transaction: Purchase Sale ------ ------- Maximum Number of Shares/Principal Amount of Debt: ------------------------------ Except as follows, I am not aware of any factors that pertain to this proposed personal security transaction that would be relevant to the determination of whether such transaction could be in conflict with the interests of an Investment Company/Account managed by Berger LLC (See Section III (b) of the Code): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - --------------------------- --------------------------------- ------------ Access Person (please print) Signature of Access Person Date (1) See Berger LLC's Code of Ethics and Statement of Policies (the "Code") for the definition of "Access Person." (2) As described in Section IV. Exempted Transactions of the Code, certain transactions involving the purchase or sale of Securities are not prohibited and therefore do not require pre-clearance. IT IS THE RESPONSIBILITY OF THE ACCESS PERSON TO CORRECTLY DETERMINE WHETHER THEIR PROPOSED PERSONAL SECURITY TRANSACTION IS AN EXEMPTED TRANSACTION UNDER THE CODE. ANY ACCESS PERSON WHO HAS QUESTIONS REGARDING THIS DETERMINATION SHOULD CONSULT WITH THE COMPLIANCE OFFICER PRIOR TO ENGAGING IN THE PROPOSED PERSONAL SECURITY TRANSACTION. ================================================================================ APPROVAL/DISAPPROVAL TO BE COMPLETED BY THE COMPLIANCE OFFICER The above proposed transaction has been: Approved for execution within 3 ----- business days after the date of this approval Approved for execution between ----- and ------------ ----------- Disapproved ----- Comments: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- - ---------------------------------- --------------------------------- Signature of Compliance Officer Date 22 APPENDIX C PERSONAL SECURITIES TRANSACTIONS REPORT BERGER LLC
NAME: FOR THE QUARTER ENDED: -------------------------------------------------- ------------------------------------------ (Please Print) [ ] - Confirmations for all of my reportable personal [ ] - Confirmations for all of my reportable personal securities transactions for the quarter are securities transactions for the quarter are attached attached to this report. to this report EXCEPT AS DESCRIBED BELOW: Security Description (including interest Transaction rate and maturity Number Principal Nature of Name of Broker, Date date, if applicable) Symbol of Shares Amount Transaction Price Dealer or Bank - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ DEFINITIONS: Principal Amount - Total amount received or paid for the security. Nature of Transaction - Purchase, sale or other acquisition or disposition. Price - Price per share at which transaction was effected. Broker, Dealer or Bank - Name of broker, dealer or bank with or through whom the transaction was effected. NOTE: Transactions in shares of registered open-end investment companies (i.e., mutual funds), direct obligations of the Government of the United States (e.g., U.S. Treasury securities), banker's acceptances, bank certificates of deposit, commercial paper and high-quality short-term debt instruments, including repurchase agreements, are not required to be reported. STATEMENT: THIS REPORT IS NOT TO BE CONSTRUED AS AN ADMISSION BY ME THAT I HAVE ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES TO WHICH THIS REPORT RELATES. ---------------------------------------------------- ---------------------------- (Signature) (Date)
23 APPENDIX D ANNUAL CONFIRMATION FOR YOUR BERGER LLC CODE OF ETHICS AND STATEMENT OF POLICIES (THE "CODE") I have carefully read and understand the Code. I recognize that I must comply with the Code and that I am subject to the policies and procedures contained therein. I understand that the policies and procedures stated in this Code are subject to change and that, from time to time, I may receive information about changes in the policies and procedures contained therein. I recognize that I have / have not (Compliance Officer to circle one) been deemed to be an Access Person under the Code until I receive further written notice from the Compliance Officer. In addition (please check the appropriate line below): _____________- I have complied with the requirements of the Code at all times since my last Confirmation for the Code, and I have reported all of my personal securities transactions since my last Confirmation which are required to be reported pursuant to the Code. _____________- I have complied with the requirements of the Code at all times since my last Confirmation for the Code, except in certain instances during the period, a description of which is attached hereto, which the Compliance Officer is aware of and which have been addressed by Adviser management. I have reported all of my personal securities transactions since my last Confirmation for the Code which are required to be reported pursuant to the Code. As required to be reported annually by all Access Persons under the Code, attached (if applicable) is a complete listing, as of the date of this Confirmation, of all of my Security holdings in which I have any direct or indirect Beneficial Ownership. - ------------------------------- ------------------------------------ Date of Confirmation Covered Person's Name (please print) ------------------------------------ Covered Person's Signature 24 APPENDIX E PERSONAL SECURITIES HOLDINGS REPORT (1), (2) BERGER LLC NAME: DATE: ---------------------------------------- --------------------------- (Please Print) Number of Shares or Security Description Symbol Principal Amount of Debt - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ================================================================================ (1) Pursuant to the provisions of Section V.(a) of Berger LLC's Code of Ethics and Statement of Policies (the "Code"), this report shall include a complete listing of the Access Person's Security holdings (see (2) below) in which they have any direct or indirect Beneficial Ownership. (2) The term "Security" as defined in the Code excludes shares of registered open-end investment companies (i.e., mutual funds), direct obligations of the Government of the United States (e.g., U.S. Treasury securities) banker's acceptances, bank certificates of deposit, commercial paper and high-quality short-term debt instruments, including repurchase agreements. Therefore, holdings by Access Persons in these types of investments are not required to be included on this report. ------------------------------------------- (Signature) EX-99.B.23(P).6 8 d83561dex99-b_23p6.txt CODE OF ETHICS FOR PERKINS, WOLF, MCDONNELL AND CO 1 CODE OF ETHICS OF PERKINS, WOLF, MCDONNELL & COMPANY AS INVESTMENT ADVISER TO THE BERGER ACCOUNTS EFFECTIVE APRIL 28, 2000 2 I. GENERAL POLICY The basic principle which should govern all officers, directors and employees of Perkins, Wolf, McDonnell & Company ("PWM" or the "Adviser") as investment adviser to certain accounts pursuant to subadvisory agreements which PWM has entered into with Berger LLC ("Berger Accounts") is that the functions of PWM should be carried on with loyalty to the interest of the Berger Accounts' shareholders. The Berger Accounts will be operated exclusively for the benefit of their shareholders, and the best interests of their shareholders shall, at all times, govern the actions of all officers, directors and employees of PWM (while acting as investment adviser). In adhering to the foregoing basic principle of loyalty, it is recognized that directors, officers and employees of PWM must not profit, directly or indirectly, due to their position or capacity with PWM to the detriment or at the expense of the shareholders of the Berger Accounts. No person shall take for their own advantage any corporate opportunity for profit, which that person learns about due to such person's position. Upon assuming their position with the Adviser, each Director, officer or employee of the Adviser is required to certify in writing that they have read and understand the Code and that they recognize they are subject to the Code and will comply with its requirements. II. DEFINITIONS (a) "Access Person" means (i) any Director or officer of the Adviser, (ii) any employee of the Adviser (or of any company in a Control relationship to the Adviser) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a Security by a Berger Account, or whose functions relate to the making of any recommendations with respect to such purchases or sales and (iii) any natural person in a Control relationship to the Adviser who obtains information concerning recommendations made to a Berger Account, with regard to the purchase or sale of a Security. (b) "Beneficial Ownership" shall be interpreted in the same manner as it would be under Rule 16a-1(a)(2) under the Securities Exchange Act of 1934 in determining whether a person is subject to the provisions of Section 16 and the rules and regulations thereunder, except that the determination of direct or indirect beneficial ownership shall apply to all Securities which an Access Person has or acquires. Application of this definition is explained in more detail in Appendix A attached hereto. (c) "Investment Personnel" shall mean (i) any employee of the Adviser (or any employee of any company in a Control relationship to the Adviser) who, in connection with his or her regular functions or duties, makes or participates in making recommendations regarding the purchase or sale of a Security by a Berger Account and (ii) any natural person who controls the Adviser and who obtains information concerning recommendations made to the Fund regarding the purchase or sale of a Security by a Berger Account. Investment Personnel shall include all persons employed by the Adviser as portfolio managers, security analysts and security traders. (d) "Security" shall have the same meaning as that set forth in Section 2(a)(36) of the Investment Company Act of 1940 (generally, all securities) except that it shall not include shares of registered open-end investment companies (i.e., mutual funds), 1 3 direct obligations of the Government of the United States (e.g., U.S. Treasury securities), banker's acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. (e) "Purchase or sale of a Security", or phrases of similar import, shall include, among other things, the purchase, writing or sale of an option to purchase or sell that Security, the purchase or sale of any derivative Security whose value is derived from that Security, such as a Security convertible into or exchangeable for that Security, and the purchase or sale of any other Security which has a substantial economic relationship to that Security being purchased or sold by a Berger Account (e.g., a Security issued by a partnership which has a substantial portion of its assets invested in the Security being purchased or sold). (f) A Security is "being considered for purchase or sale" when a portfolio manager is seriously considering the purchase or sale of a Security for a Berger Account, or,with respect to a security analyst who makes a recommendation to purchase or sell a Security for a Berger Account, when such person seriously considers making such a recommendation. (g) "Control", which shall have the same meaning as that set forth in Section 2(a)(9) of the Investment Company Act of 1940, generally means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. (h) "Compliance Officer" shall mean the employee of the Adviser designated by vote of the Board of Directors of the Adviser to receive reports and take certain actions as provided in this Code of Ethics and Statement of Policies. (i) "Berger Account" means a company registered under the Investment Company Act of 1940, or any pension or profit-sharing plan or any institutional or private account for which Berger LLC is the investment adviser or sub-adviser and PWM is the sub-adviser. (j) "Director" of the Adviser shall mean a member of the Board of Directors of the Adviser. (k) "Initial Public Offering" means an offering of securities registered under the Securities Act of 1933, the issuer of which, immediately before the registration, was not subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934. (l) "Limited Offering" means an offering that is exempt from registration under the Securities Act of 1933 pursuant to section 4(2) or section 4(6) or pursuant to rule 504, rule 505, or rule 506 thereunder. Any Director, officer or employee of the Adviser who has any questions regarding these definitions should consult with the Adviser's Compliance Officer. III. PROHIBITIONS NOTE: SUBJECT TO A FINAL DECISION BY ADVISER MANAGEMENT AFTER HAVING REVIEWED ALL OF THE FACTS AND CIRCUMSTANCES RELEVANT TO THE PARTICULAR TRANSACTION, INDIVIDUALS COVERED BY THE FOLLOWING PROHIBITIONS MAY BE REQUIRED TO DISGORGE ALL OR A PORTION OF ANY PROFITS GAINED OR LOSSES AVOIDED AS A RESULT OF PARTICIPATING IN ANY OF THE PROHIBITED PERSONAL SECURITIES 2 4 TRANSACTIONS DISCUSSED BELOW. SEE SECTION VII. SANCTIONS OF THE CODE FOR A MORE DETAILED DISCUSSION OF THIS MATTER. Prohibitions Applicable To All Access Persons (a) No Access Person shall purchase or sell, directly or indirectly, any Security in which he or she has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership and which he or she knows or should have known at the time of such purchase or sale: (1) is being purchased or sold by a Berger Account; or (2) is being considered for purchase or sale by a Berger Account. Although explained more fully in the definition of "purchase or sale of a Security" in Section II. of the Code, it bears emphasis here that included for purposes of this prohibition is any personal securities transaction involving a derivative Security or other Security which has a substantial economic relationship to the Security being considered for purchase or sale or being purchased or sold by a Berger Account. (b) All Access Persons are prohibited from the purchase or sale of Securities without prior approval from the Compliance Officer, unless such purchase or sale is an exempted transaction as defined in Sections IV.(a) through Section IV.(e) of the Code. Such approval will normally be granted in writing (see Appendix B). In circumstances that require approval of the transaction to be granted verbally , the Compliance Officer shall document for the Adviser's records all information pertinent to the approved purchase or sale. Any approval for a personal securities transaction will be effective for 3 business days following the date of approval (unless otherwise specified in the written approval). Any transaction not completed within the 3 day (or other specified) time period will require reapproval by the Compliance Officer prior to engaging in any further purchases or sales. When requesting approval for a personal securities transaction, all Access Persons should be careful to identify for the Compliance Officer any factors potentially relevant to a conflict of interest. This is especially true when an Access Person requests approval to purchase or sell a Security with a complicated investment structure, since the Security may be substantially economically related to a separate Security which is being considered for purchase or sale or being purchased or sold by a Berger Account. Because the Compliance Officer may not preclear a personal securities transaction in which he or she has a beneficial interest, the Compliance Officer shall request approval for his or her personal securities transactions from the Adviser's Chief Investment Officer. (c) All Access Persons are prohibited from receiving on an annual basis any gifts or other things of value from any person or entity that does business with or on behalf of the Adviser or the Berger Accounts which in total could reasonably be valued above $100. However, this policy does not apply to customary business meals or entertainment, or promotional items (e.g., pens, mugs, caps, T-shirts, etc.) which are consistent with customary business practices in the industry. (d) All Access Persons must immediately notify the Compliance Officer upon becoming a member of a board of directors of a publicly traded company. As a condition of 3 5 being given approval to engage in any personal securities transaction involving the securities of such company(s), the Access Person will be required to obtain documented approval to trade from the company's management, in light of their procedures designed to prevent the misuse of material, nonpublic information by company insiders (For a description of each Director's, officer's and employee's responsibilities in the event that they come into the possession of material, nonpublic information, see PWM's Insider Trading Policies and Procedures). Notwithstanding this provision, those Access Persons that are also Investment Personnel are generally prohibited from serving on the board of directors of publicly traded companies (See Section III.(i) of the Code). Prohibitions Applicable Only To Investment Personnel (e) Prior to recommending a Security for purchase or sale by a Berger Account, Investment Personnel are required to provide disclosure, if applicable, of any ownership/Security position they have in the issuer, or any present or proposed business relationship between such issuer and such person, to the Chief Investment Officer and the Compliance Officer. In the event that such disclosure is required of the Chief Investment Officer, it should be made to the Compliance Officer. The Investment Personnel's holdings/relationship will then be reviewed to determine whether it presents a conflict of interest that should be addressed prior to the Adviser acting on their purchase or sale recommendation for the Berger Account. (f) All Investment Personnel are prohibited from profiting in the purchase and sale, or sale and purchase, of the same (or equivalent) Security within 60 calendar days, unless the Security was not purchased, sold or held by a Berger Account during the 60-day period. This prohibition shall not apply to exchange-traded stock options that are purchased for the purpose of establishing a bona fide position hedge on Securities held in excess of 60 calendar days, or to options on stock indices which are composed of 100 or more Securities. However, any transaction which is exempt from this prohibition shall be subject to all otherwise applicable provisions of the Code, including but not limited to the preclearance requirements of Section III(b). (g) All Investment Personnel are prohibited from acquiring any Security in an Initial Public Offering. (h) All Investment Personnel are prohibited from acquiring any Security in a Limited Offering without prior written approval. Request for such approval should be made via a memorandum directed to the Chief Investment Officer and the Compliance Officer. Limited Offerings for which the Chief Investment Officer is seeking approval will be reviewed by the Chief Operating Officer and the Compliance Officer. The memo shall state the name of the company, the number of shares/units being offered and the offering price per share/unit, a description of the company's history and operations, and a discussion of whether the company's current business plan anticipates a future Initial Public Offering of its Securities. No approval will be granted for the acquisition of Securities in a Limited Offering if the company currently has any publicly traded equity Securities (or other publicly traded Securities convertible into equity Securities) issued and outstanding. A copy of the Limited Offering agreement or the purchase contract should be attached to the memo. Subsequent to Investment Personnel obtaining shares/units of a company in a Limited Offering, the company may issue and have outstanding publicly traded 4 6 Securities. If in the course of performing their job responsibilities any Investment Personnel who acquired shares/units in a Limited Offering transaction becomes involved in the consideration of an investment in the issuer by a Berger Account, they will disclose the existence of their personal ownership in the company to the Chief Investment Officer. The Adviser will then excuse such employee from the investment decision making process for the Security. (i) All Investment Personnel are prohibited from serving on the boards of directors of publicly traded companies, absent prior authorization based upon a determination by Adviser management that the board service would be consistent with the interests of the Berger Accounts. In instances where Adviser management determines that board service for a company is merited, such Investment Personnel will be subject to the same restrictions that are imposed on all other Access Persons with respect to their personal securities transactions which involve Securities of the company for which they are a director, as described in Section III. (d) of the Code. (j) All Investment Personnel must make disclosure with respect to any family member(s) employed in the securities business who might be in a position to benefit as a result of the trading activity of the Berger Accounts. It is prohibited for Investment Personnel to influence the allocation of brokerage of a Berger Account for direct or indirect personal or familial benefit. However, such disclosure shall not be deemed evidence that any benefit has been conferred, directly or indirectly, by Investment Personnel on such family member(s). Prohibition Applicable Only To Portfolio Managers (k) All portfolio managers are prohibited from purchasing or selling any Security (or equivalent Security) within at least 7 calendar days before or after a Berger Account purchases or sells that Security. IV. EXEMPTED TRANSACTIONS The prohibitions of Section III. of the Code shall not apply to: (a) purchases or sales effected in any account over which the Access Person has no direct or indirect influence or control; (b) purchases or sales which are non-volitional on the part of the Access Person, such as Securities acquired as a result of a spin-off of an entity from a company whose Securities are owned by an Access Person, or the involuntary sale of Securities due to a merger or as the result of a company exercising a call provision on its outstanding debt; (c) purchases which are part of an automatic dividend reinvestment plan; (d) purchases effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent such rights were acquired from such issuer, and sales of such rights so acquired; and (e) any Securities transaction, or series of related transactions, involving 500 shares or less in the aggregate, if the issuer has a market capitalization (outstanding shares multiplied by the current price per share) greater than $5 billion. 5 7 V. REPORTING (a) (a) Within 10 days of their commencement of employment with the Adviser (or if not an employee, of their otherwise becoming an Access Person to the Adviser), all Access Persons shall disclose in writing to the Compliance Officer all of their Security holdings in which they have any direct or indirect Beneficial Ownership at such time as the person became an Access Person (see Appendix E). Thereafter, when requested by the Compliance Officer all Access Persons shall on an annual basis disclose in writing to the Compliance Officer all of their Security holdings in which they have any direct or indirect Beneficial Ownership. This information must be current as of a date no more than 30 days before the report is submitted. Both the Initial and the Annual Holdings Report shall contain the following information: (1) the title, number of shares and the principal amount of each Security; (2) the name of any broker, dealer or bank with whom the Access Person maintained an account in which any Securities were held; and (3) the date that the report is submitted by the Access Person. The above notwithstanding, an Access Person shall not be required to make a report with respect to any Security held in any account over which he or she does not have any direct or indirect influence or control. Each such report may contain a statement that the report shall not be construed as an admission by the Access Person that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates. (b) All Access Persons shall direct their brokers to supply the Compliance Officer, on a timely basis, duplicate copies of confirmations of all personal securities transactions and copies of all statements for all Securities accounts. Please note that even if the Access Person does not currently intend to purchase or sell Securities (as defined at Section II.(d) above) in the account, the Access Person must direct their brokers to send the Compliance Officer duplicate confirmations and statements on the account if the account allows any trading in such Securities. (c) Whether or not one of the exemptions listed in Section IV. of the Code applies, each Access Person shall file with the Compliance Officer a written report (see Appendix C) containing the information described in Section V.(d) of the Code with respect to each transaction in any Security in which such Access Person by reason of such transaction acquires or disposes of any direct or indirect Beneficial Ownership in the Security; provided, however, that an Access Person shall not be required to make a report with respect to any transaction effected for any account over which he or she does not have any direct or indirect influence or control. Each such report may contain a statement that the report shall not be construed as an admission by the Access Person that he or she has any direct or indirect Beneficial Ownership in the Security to which the report relates. (d) Such report shall be made not later than 10 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall contain the following information: 6 8 (1) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares and the principal amount of each Security involved; (2) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition); (3) the price at which the Security transaction was effected; (4) the name of the broker, dealer or bank with or through whom the transaction was effected; and (5) the date that the report is submitted by the Access Person. For any report concerning a purchase or sale in which the Access Person relied upon one of the exemptions provided in Section IV. of the Code, the Access Person will provide a brief statement of the exemption relied upon and the circumstances of the transaction if requested by the Compliance Officer. In addition to such report, within 10 days after the end of the calendar quarter in which an Access Person opens any brokerage account, the Access Person provide the Compliance Officer with the following information: (1) the name of the broker, dealer or bank with whom the Access Person established the account; (2) the date the account was established; and (3) the date that the report is submitted by the Access Person. (e) The Securities transaction reporting requirements of Sections V.(c) and V.(d) of the Code may be satisfied by the Compliance Officer receiving all confirmations of Security transactions and/or periodic statements for each Access Person's Securities accounts. Confirmations of Security transactions and/or Security account statements received by the Compliance Officer will be distributed quarterly to Access Persons for their review to ensure that such confirmations/statements include all Security transactions required to be reported under this Code. (f) An Access Person will be deemed to have participated in, and must report under this Code, any Securities transactions participated in by: (1) The person's spouse; (2) The person's minor children; (3) Any other relatives sharing the person's household; (4) A trust in which the person has a beneficial interest, unless such person has no direct or indirect control over the trust; (5) A revocable trust as to which the person is a settler; or (6) A partnership of which the person is a partner (including most investment clubs) unless the person has no direct or indirect control over the partnership. VI. REVIEW The Compliance Officer shall review or supervise the review of the personal securities transactions reported pursuant to Section V. of the Code. Personal securities transactions and holdings reported by the Compliance Officer shall be reviewed by the Chief Investment Officer. 7 9 As part of this review, each such reported personal securities transaction shall be compared against the trading activity of the Berger Accounts to determine whether a violation of Section III. of the Code may have occurred. If the Compliance Officer determines that a violation may have occurred, he or she shall promptly submit the pertinent information regarding the transaction to Adviser management, who shall evaluate whether a violation of the Code has occurred, taking into account all the exemptions provided under Section IV. of the Code, and if so, whether such violation is material. The Adviser will consider all relevant facts and circumstances surrounding the transaction prior to making its determination. In addition, before making any determination that a material violation has occurred, Adviser management shall give the person involved an opportunity to supply additional information regarding the transaction in question. VII. SANCTIONS If a final determination is made that a material violation of this Code has occurred, the Adviser's management may require the Access Person to disgorge to the affected Berger Account(s) all or a portion of the profits gained or losses avoided as a result of the prohibited transaction. The Compliance Officer shall provide a written report of management's determination to the Board of Directors of the Adviser for such further action and sanctions as said Board deems appropriate, which sanctions may in the Board's discretion include, among other things, imposition of a monetary penalty and/or censure, suspension or termination of the Access Person. A copy of the report shall also be provided to Berger Associates, Inc. VIII. CERTIFICATION AND ANNUAL REPORTING (a) Within 45 days after the end of each calendar quarter, the Compliance Officer shall report to Berger Associates, Inc.("Berger") that PWM has complied with the requirements of Rule 17j-1 of the Investment Company Act of 1940 during the previous quarter, and that there has been no violation of this Code of Ethics or, if such a violation has occurred, that appropriate action was taken in response to such violation (both the violation and the action being summarily described). PWM shall further provide to Berger such other information concerning PWM's compliance with the Code of Ethics and the requirements of 17j-1 as Berger may reasonably request. (b) On an annual basis, the Compliance Officer shall prepare a written report to the President and the Board of Directors of the Adviser setting forth the following: (1) A summary of existing procedures to detect and prevent violations of the Code, (2) Full details of any investigation, either internal or by a regulatory agency, of any possible violations of the Code, the resolution of such investigations and the steps taken to prevent further violations, (3) An evaluation of the current compliance procedures and any recommendations for improvement. A report setting forth the above shall also be made annually to the board of directors/trustees of each Investment Company that is a Berger Account for which 8 10 the Adviser acts as sub-adviser, except that any information about violations of the Code may be limited to only material violations. In addition, the Adviser shall certify to each such Investment Company annually that it has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. In the event that a report includes a discussion of any material violation of the Code, the Adviser shall provide a copy of the report to Berger. In addition, the Adviser shall provide a copy of any or all other of these reports to Berger upon its request. After September 1, 2000, before being approved as a sub-adviser for any Investment Company that is a Berger Account, the Adviser is required to provide the Code to the Investment Company's directors/trustees for approval along with a certification that the Adviser has adopted procedures reasonably necessary to prevent Access Persons from violating the Code. Any material changes to the Code must be approved by the directors/trustees of each Investment Company that is a Berger Account within 6 months after adoption of the material change. (c) On an annual basis, all Directors, officers and employees of the Adviser are required to certify in writing that they have read and understand the Code of Ethics and Statement of Policies and recognize that they are subject thereto. In addition, all such persons are required to certify annually that they have complied with the requirements of the Code and that they have reported all personal securities transactions required to be reported pursuant to the Code (see Appendix D). If a Director, officer or employee of the Adviser has any questions pertaining to their responsibilities under the Code, they should discuss them with the Compliance Officer prior to completing their annual certification statement. IX. OTHER LEGAL AND REGULATORY MATTERS (a) Confidentiality. All account information concerning the Berger Accounts (e. g., name, account size, specific securities held, securities trades, etc.) is absolutely confidential. Therefore, access to Berger Accounts' information is limited to those individuals who must have such access to perform their duties, and such information shall not be communicated to any other person either within or outside the Adviser. The confidentiality of all Berger Accounts' information is critical to the Adviser's reputation for excellence and integrity and maintenance of the Adviser's competitive position, and any disclosure of confidential information can be expected to result in serious sanctions by the Adviser, including possible dismissal for cause. (b) Bankruptcy/Criminal Offenses. The Adviser is required to notify regulatory organizations when certain events occur regarding its Directors, officers and/or employees. Accordingly the Chief Operating Officer must be notified if any of the following occur with respect to a Director, officer or employee: o Personal bankruptcy. o The bankruptcy of a corporation in which any Director, officer or employee owns 10% or more of the securities. o Arrest, arraignment, indictment or conviction for, or the entry of a guilty or no contest plea for, any criminal offense (other than minor traffic violations). (c) Receipt of Legal Documents. On occasion, employees are served with legal documents (e.g., a subpoena) for the Adviser. Upon receipt of legal documents, the Adviser's Chief Operating Officer or Corporate Counsel is to be notified immediately. 9 11 (d) Retention of Outside Counsel. Directors, officers and employees may not retain the services of outside counsel under circumstances such that the Adviser would be obligated to pay legal fees unless the Adviser's Corporate Counsel has granted approval for retention of such counsel in advance. (e) Contact with Industry Regulators. In the event of an inquiry from an industry regulator--whether via the telephone, mail or personal visit--Directors, officers and employees must contact the Adviser's Chief Operating Officer or Corporate Counsel as soon as possible for instructions. (f) Political Contributions. The use of funds or assets of the Adviser for any unlawful or improper purpose is prohibited. This prohibition includes any contribution to any public official, political candidate or political entity, except as may be expressly permitted by law. This shall also preclude unlawful contributions through consultants, customers or other third parties, including payments where Directors, officers or employees of the Adviser know or have reason to believe that payments made to such other third parties will be used as unlawful contributions. The above prohibitions relate only to the use of corporate funds and in no way are intended to discourage Directors, officers or employees from making personal contributions to political candidates or parties of their choice. No such individual contribution will be reimbursed by the Adviser in any manner, directly or indirectly. (g) Business Conduct. It is the policy of the Adviser to conduct business in accordance with the applicable laws and regulations of the United States and all other individual states and countries in which the Adviser operates or has any significant contacts. Unethical business practices will subject Directors, officers and employees to appropriate disciplinary action, including dismissal for cause if warranted, and may result in prosecution for violating federal, state or foreign laws. No payment (cash or otherwise) can be made (directly or indirectly) to any employee, official or representative of any domestic or foreign governmental agency, instrumentality, party, or candidate thereof, for the purpose of influencing any act, omission or decision. The Adviser's books, records and accounts must be maintained in sufficient detail as to accurately reflect the transactions and dispositions of its assets. No undisclosed or unrecorded fund or asset of the Adviser may be established for any purpose. Any Director, officer or employee with questions about or knowledge of violations of these policies must contact the Adviser's Corporate Counsel. X. MISCELLANEOUS PROVISIONS (a) The Adviser shall maintain records in the manner and to the extent set forth below, and make such records available for examination by representatives of the U.S. Securities and Exchange Commission: (1) A copy of this Code and any other code of ethics which is, or at any time within the past five years has been, in effect shall be preserved in an easily accessible place; (2) A record of any violation of the Code and of any action taken as a result of such violation shall be preserved in an easily accessible place for a period of not less 10 12 than five years following the end of the fiscal year in which the violation occurs; (3) A copy of each report made by an Access Person pursuant to the Code shall be preserved for a period of not less than five years from the end of the fiscal year in which it is made, the first two years in an easily accessible place; (4) A list of all persons who are, or within the past five years have been, required to make reports pursuant to the Code, and who are, or within the past five years have been, responsible for reviewing these reports, shall be maintained in an easily accessible place; and (5) A record of any decision, and the reasons supporting the decision, to approve the acquisition by any Investment Personnel of a Security pursuant to a Limited Offering shall be preserved for a period of not less than five years from the end of the fiscal year in which the approval was granted. (b) All reports of Securities transactions and any other information filed with the Adviser or furnished to any person pursuant to the Code shall be treated as confidential, but are subject to review as provided herein and by representatives of the U.S. Securities and Exchange Commission or any other regulatory or self-regulatory organization to the extent required by law or regulation. (c) The Board of Directors of the Adviser may from time to time adopt such interpretations of the Code and such exceptions to provisions of the Code as they deem appropriate. 11 13 APPENDIX A For purposes of the attached Code of Ethics, a "beneficial owner" shall mean any director, officer or employee who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect opportunity to profit or share in any profit derived from a transaction in the subject securities. The term "beneficial ownership" of securities would include not only ownership of securities held by a director, officer or employee for his or her own benefit, whether in bearer form or registered in their name or otherwise, but also ownership of securities held for his or her benefit by others (regardless of whether or how they are registered) such as custodians, brokers, executors, administrators, or trustees (including trusts in which he or she has only a remainder interest), and securities held for his or her account by pledgees, securities owned by a partnership in which he or she is a member if they may exercise a controlling influence over the purchase, sale or voting of such securities, and securities owned by any corporation that he or she should regard as a personal holding corporation. Correspondingly, this term would exclude securities held by a director, officer or employee for the benefit of someone else. Ordinarily, this term would not include securities held by executors or administrators in estates in which a director, officer or employee is a legatee or beneficiary unless there is a specific legacy to such person of such securities or such person is the sole legatee or beneficiary and there are other assets in the estate sufficient to pay debts ranking ahead of such legacy, or the securities are held in the estate more than a year after the decedent's death. Securities held in the name of another should be considered as "beneficially" owned by a director, officer or employee where such person enjoys "benefits substantially equivalent to ownership". The U.S. Securities and Exchange Commission has said that although the final determination of beneficial ownership is a question to be determined in the light of the facts of the particular case, generally a person is regarded as the beneficial owner of securities held in the name of his or her spouse and their minor children. Absent special circumstances such relationship ordinarily results in such person obtaining benefits substantially equivalent to ownership, e.g., application of the income derived from such securities to maintain a common home, to meet expenses that such person otherwise would meet from other sources, or the ability to exercise a controlling influence over the purchase, sale or voting of such securities. A director, officer, or employee also may be regarded as the beneficial owner of securities held in the name of another person, if by reason of any contract, understanding, relationship, agreement, or other arrangement, he or she obtains therefrom benefits substantially equivalent to those of ownership. Moreover, the fact that the holder is a relative or relative of a spouse and sharing the same home as a director, officer or employee may in itself indicate that the director, officer or employee would obtain benefits substantially equivalent to those of ownership from securities held in the name of such relative. Thus, absent countervailing facts, it is expected that securities held by relatives of the director, officer or employee or his or her spouse who share the same home as the director, officer or employee will be treated as being beneficially owned by the director, officer or employee. A director, officer or employee also is regarded as the beneficial owner of securities held in the name of a spouse, minor children or other person, even though he or she does not obtain therefrom the aforementioned benefits of ownership, if they can vest or revest title in themselves at once or at some future time. 14 I acknowledge that I have read the Code Of Ethics Of Perkins, Wolf, McDonnell & Company As Investment Adviser To The Berger Accounts (a copy of which has been supplied to me, which I will retain for future reference) and agree to comply in all respects with the terms and provisions thereof. I recognize that I have been deemed to be an Access Person under the Code until I receive further written notice to the contrary from the Compliance Officer. Dated: ------------------------------- By: ------------------------------- 15 APPENDIX B APPROVAL FORM FOR THE PURCHASE/SALE OF SECURITIES - -------------------------------------------------------------------------------- PROPOSED TRANSACTION TO BE COMPLETED BY THE ACCESS PERSON (1),(2) Security Description: ---------------------------------------------------------- Security Symbol: Security Exchange ----------------- ------------------- Type of Transaction: Purchase Sale ------ ------- Maximum Number of Shares/Principal Amount of Debt: ----------------------------- Except as follows, I am not aware of any factors that pertain to this proposed personal security transaction that would be relevant to the determination of whether such transaction could be in conflict with the interests of a Berger Account (See Section III (b) of the Code): - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - ---------------------------------- -------------------------------- ------------ Access Person (please print) Signature of Access Person Date 1. See Code of Ethics of Perkins, Wolf, McDonnell & Company As Investment Adviser To The Berger Accounts (the "Code") for the definition of "Access Person." 2. As described in Section IV. Exempted Transactions of the Code, certain transactions involving the purchase or sale of Securities are not prohibited and therefore do not require pre-clearance. IT IS THE RESPONSIBILITY OF THE ACCESS PERSON TO CORRECTLY DETERMINE WHETHER THEIR PROPOSED PERSONAL SECURITY TRANSACTION IS AN EXEMPTED TRANSACTION UNDER THE CODE. ANY ACCESS PERSON WHO HAS QUESTIONS REGARDING THIS DETERMINATION SHOULD CONSULT WITH THE COMPLIANCE OFFICER PRIOR TO ENGAGING IN THE PROPOSED PERSONAL SECURITY TRANSACTION. - -------------------------------------------------------------------------------- APPROVAL / DISAPPROVAL TO BE COMPLETED BY THE COMPLIANCE OFFICER The above proposed transaction has been:_____ Approved for execution within 3 business days after the date of this approval Approved for execution between and ----- ----------- ----------- Disapproved -----
Comments: ---------------------------------------------------------------------- - -------------------------------------------------------------------------------- - ------------------------------------- --------------------------------- Signature of Compliance Officer Date 16 APPENDIX C PERSONAL SECURITIES TRANSACTIONS REPORT PERKINS, WOLF, MCDONNELL & CO. NAME: FOR THE QUARTER ENDED: ------------------------------- ---------------------------- (Please Print) - ---------- - Confirmations for all of my reportable ---------- - Confirmations for all of my reportable personal securities personal securities transactions for transactions for the quarter are attached to this report - ---------- the quarter are attached to this report. ---------- EXCEPT AS DESCRIBED BELOW:
- ------------------------------------------------------------------------------------------------------------------------------------ Transaction Number Principal Nature of Name of Broker, Date Security Description Symbol of Shares Amount Transaction Price Dealer or Bank - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ DEFINITIONS: Principal Amount - Total amount received or paid for the security. Nature of Transaction - Purchase, sale or other acquisition or disposition. Price - Price per share at which transaction was effected. Broker, Dealer or Bank - Name of broker, dealer or bank with or through whom the transaction was effected. NOTE: Transactions in open-end mutual funds, direct obligations of the U.S. Government, bank certificates of deposit, commercial paper, banker's acceptances, and high quality short-term debt instruments, including repurchase agreements, are not required to be reported. STATEMENT: THIS REPORT IS NOT TO BE CONSTRUED AS AN ADMISSION BY ME THAT I HAVE ANY DIRECT OR INDIRECT BENEFICIAL OWNERSHIP IN THE SECURITIES TO WHICH THIS REPORT RELATES. ----------------------------------------- ----------------------------------- (Signature) (Date)
17 APPENDIX D ANNUAL CONFIRMATION FOR THE CODE OF ETHICS OF PERKINS, WOLF, MCDONNELL & COMPANY AS INVESTMENT ADVISER TO THE BERGER ACCOUNTS (THE CODE") I have carefully read and understand the Code. I recognize that I must comply with the Code and that I am subject to the policies and procedures contained therein. I understand that the policies and procedures stated in this Code are subject to change and that, from time to time, I may receive information about changes in the policies and procedures contained therein. I recognize that I have / have not (Compliance Officer to circle one) been deemed to be an Access Person under the Code until I receive further written notice from the Compliance Officer. In addition (please check the appropriate line below): _____________- I have complied with the requirements of the Code at all times since my last Confirmation for the Code, and I have reported all of my personal securities transactions since my last Confirmation which are required to be reported pursuant to the Code. _____________- I have complied with the requirements of the Code at all times since my last Confirmation for the Code, except in certain instances during the period, a description of which is attached hereto, which the Compliance Officer is aware of and which have been addressed by Adviser management. I have reported all of my personal securities transactions since my last Confirmation for the Code which are required to be reported pursuant to the Code. As required to be reported annually by all Access Persons under the Code, attached (if applicable) is a complete listing, as of the date of this Confirmation, of all of my Security holdings in which I have any direct or indirect Beneficial Ownership. - ------------------------------- ------------------------------------ Date of Confirmation Covered Person's Name (please print) ------------------------------------ Covered Person's Signature 18 APPENDIX E PERSONAL SECURITIES HOLDINGS REPORT (1), (2) PERKINS, WOLF, MCDONNELL & CO. NAME: DATE: -------------------------- ------------------------- (Please Print)
- ------------------------------------------------------------------------------------------------------------------------------------ Number of Shares or Security Description Symbol Principal Amount of Debt - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ (1) Pursuant to the provisions of Section V.(a) of the Code of Ethics of Perkins, Wolf, McDonnell & Company as Investment Adviser to the Berger Accounts (the "Code"), this report shall include a complete listing of the Access Person's Security holdings (see (2) below) in which they have any direct or indirect Beneficial Ownership. (2) The term "Security" as defined in the Code excludes shares of registered open-end investment companies (i.e., mutual funds), direct obligations of the Government of the United States (e.g., U.S. Treasury Securities), banker's acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements. Therefore, holdings by Access Persons in these types of investments are not required to be included on this report. ------------------------------------------- (Signature)
-----END PRIVACY-ENHANCED MESSAGE-----