The allegations read: The city alleges that respondents violated
the federal securities laws (sections 11 & 12 (2) of the
securities act of 1933, and section 10(b) of the securities
exchange act of `34) and the south dakota securities laws, and
committed acts of fraud & breach of fiduciary duty by
misrepresenting and failing to disclosed that: 1. The fund
violated its stated investment objective by being highly
speculative and invested principally in mortgage derivatives.
2. The fund misrepresented that it would sell and redeem shares
at its net asset value because the value of derivative
securities was not, and could not be, accurately reported. 3.
the fund misrepresented the percentage of each category of
assets it owned and the composition of its portfolio. 4. The
fund violated its investment restrictions by use of its forward
purchase commitments. 5. The fund misrepresented that the
portfolio had a projected average life of five years or less.
6. The fund failed to disclose that a substantial portion of
its investments was a so speculative that regulated financial
institutions could not purchase such investments. 7. The fund
misrepresented the meaning of standard & poor`s ratings of the
fund`s securities. The city seeks relief in the amount of
$20,000,000 for all losses sustained, including compensatory
damages, interest, attorney`s fees and punitive damages.
