<PAGE> 1
- ------------------------------------------------------------------------------
As filed with the Securities and Exchange Commission
on December 29, 1999
Registration No. 333-447 811-7505
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X]
Pre-Effective Amendment No.
[ ]
Post-Effective Amendment No. 14
[X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
[X]
Amendment No. 17
[X]
(Check appropriate box or boxes)
INTRUST FUNDS TRUST
(Exact name of Registrant as specified in charter)
3435 Stelzer Road
Columbus, Ohio 43219
Address of Principal Executive Offices Zip Code)
Registrant's Telephone Number, including Area Code: (888) 266-8787
George Stevens, Esq.
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219
(Name and Address of Agent for Service)
Copy to:
Steven R. Howard, Esq.
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
It is proposed that this filing will become effective:
immediately upon filing pursuant to Rule 485(b)
---
--- on ________ pursuant to Rule 485(b)
60 days after filing pursuant to Rule 485(a)
--X-
75 days after filing pursuant to Rule 485(a)
---
on 1999 pursuant to Rule 485(a)
--- -------------,
Registrant has adopted a master-feeder operating structure for the
International Multi-Manager Stock Fund. In that regard, this Post-Effective
Amendment includes the signature pages for the AMR Investment Services Trust
with respect to the International Equity Portfolio, of which the International
Multi-Manager Stock Fund invests all of its investable assets.
This post-effective amendment no. 14 to the registration statement on
Form N-1A of INTRUST Fund Trust (the "Trust") relates only to the INTRUST Fund,
each a series of the Trust. The definitive form of the prospectus describing the
Service Class and the Premium Class of the NestEgg Funds series of the Trust as
filed pursuant to Rule 497 under the Securities Act of 1933 on June , 1999 (File
No. 333-447)is hereby incorporated by reference.
The International Equity Portfolio has also executed this
Registration Statement.
2
<PAGE> 2
QUESTIONS?
Call 888-266-8787 or your
investment representative.
INTRUST FUNDS
STOCK FUND
INTERNATIONAL MULTI-MANAGER STOCK FUND
SHORT-TERM BOND FUND
INTERMEDIATE BOND FUND
KANSAS TAX-EXEMPT BOND FUND
MONEY MARKET FUND
PROSPECTUS
MARCH 1, 2000
INTRUST
INTRUST FUNDS TRUST IS MANAGED BY
INTRUST FINANCIAL SERVICES, INC. ("INTRUST")
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED THE SHARES DESCRIBED
IN THIS PROSPECTUS OR DETERMINED
WHETHER THIS PROSPECTUS IS ACCURATE
OR COMPLETE. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C> <C>
RISK/RETURN SUMMARY AND FUND EXPENSES
Logo
Carefully review this 3 Stock Fund
important section, which 7 International Multi-Manager Stock Fund
summarizes each Fund's 11 Short-Term Bond Fund
investments, risks, past 15 Intermediate Bond Fund
performance, and fees. 19 Kansas Tax-Exempt Bond Fund
23 Money Market Fund
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Logo
Review this section for 27 Stock Fund
information on investment 29 International Multi-Manager Stock Fund
strategies and their risks. 31 Short-Term Bond Fund
33 Intermediate Bond Fund
35 Kansas Tax-Exempt Bond Fund
37 Money Market Fund
FUND MANAGEMENT
Logo
Review this section for 40 The Investment Adviser
details on the people and 40 INTRUST Portfolio Managers
organizations who oversee 41 Sub-Advisers
the Funds. 42 The Distributor
SHAREHOLDER INFORMATION
Logo
Review this section for 43 Pricing of Fund Shares
details on how shares are 44 Purchasing and Adding to Your Shares
valued, how to purchase, 47 Selling Your Shares
sell and exchange shares, 49 General Policies on Selling Shares
related charges and payments 51 Distribution Arrangements
of dividends and 52 Dividends, Distributions and Taxes
distributions. 53 Exchanging Your Shares
FINANCIAL HIGHLIGHTS
Logo
54
BACK COVER
Logo
Where to Learn More About the Funds
</TABLE>
2
<PAGE> 4
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY OF THE
STOCK FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund's goal is to provide investors with long-term
capital appreciation.
PRINCIPAL The Fund invests primarily in U.S. equity securities issued
INVESTMENT STRATEGIES by companies with large market capitalizations (over $5
billion) at the time of purchase. The equity securities in
which the Fund primarily invests include common stock,
securities convertible into common stock, preferred stock,
American Depositary Receipts ("ADRs"), and warrants. The
Fund's adviser uses a value oriented approach to selecting
stocks by identifying stocks that it considers undervalued
(i.e. priced less than its real worth). The Fund's adviser
also considers the company's soundness and earnings
prospects. If the Fund's adviser determines a company may no
longer benefit from the current market and economic
environment and shows declining fundamentals, it will
eliminate the Fund's holding of the company's stock.
PRINCIPAL The value of the Fund's investments, and the value of your
INVESTMENT RISKS investments in the Fund, will fluctuate with market
conditions. You may lose money on your investment in the
Fund, or the Fund could underperform other investments. Some
of the Fund's holdings may underperform its other holdings.
Other risks include:
INVESTMENT Investment style risk is the chance that returns from
STYLE RISK large-capitalization stocks, selected using a value oriented
approach, will trail returns from other asset classes or the
overall stock market.
MARKET RISK Market risk is the chance that the value of the Fund's
investments in stocks will decline due to drops in the stock
market.
FOREIGN INVESTING Overseas investing carries potential risks, including
currency, political and foreign issuer risks, not associated
with domestic investments.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - seeking a long-term goal such as retirement
- looking to add a value oriented component to your
portfolio
This Fund will not be appropriate for anyone:
- seeking monthly income
- pursuing a short-term goal or investing emergency reserves
- seeking safety of principal
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
3
<PAGE> 5
RISK/RETURN SUMMARY AND FUND EXPENSES
STOCK FUND
The chart on this page
shows how the Stock Fund
has performed during its
first two full calendar
years. The table below it
compares the Fund's
performance over time to
that of the Standard &
Poor's 500(R) Composite
Stock Index ("S&P 500(R)"),
a widely recognized,
unmanaged index of common
stocks. This table gives
some indication of the
risks of an investment in
the Fund by comparing the
Fund's performance with a
broad measure of market
performance.
Both the chart and the
table assume reinvestment
of dividends and
distributions and reflect
voluntary fee reductions.
Without voluntary fee
reductions, the Fund's
performance would have been
lower.
The returns for the Premium
Class will differ from the
Service Class returns
because of differences in
expenses of each class.
Premium Class has not yet
been offered to the public.
Of course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
TOTAL RETURN AS OF 12/31
FOR SERVICE CLASS SHARES
<TABLE>
<S> <C>
1998 9.85%
</TABLE>
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
<TABLE>
<CAPTION>
PAST SINCE
INCEPTION YEAR INCEPTION
<S> <C> <C> <C>
-----------------------------------
SERVICE CLASS 1/21/97 % %
-----------------------------------
S&P 500(R) INDEX 1/23/97 % %
- ---------------------------------------------------------------------------------
</TABLE>
4
<PAGE> 6
RISK/RETURN SUMMARY AND FUND EXPENSES
STOCK FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES
(FEES PAID BY
YOU DIRECTLY) SERVICE SHARES PREMIUM SHARES
None None
ANNUAL FUND
OPERATING EXPENSES
(FEES PAID FROM
FUND ASSETS) SERVICE SHARES PREMIUM SHARES
Management fee(1,3) 1.00% 1.00%
Distribution (12b-1) fee(2,3) 0.25% 0.75%
Other expenses 0.45% 0.95%
Total Fund operating expenses 1.70% 2.70%
Fee waivers(1,2,3) 0.38% 0.88%
Net Expenses(3) 1.32% 1.82%
</TABLE>
As an investor in the
Stock Fund, you will pay
the following fees and
expenses when you buy and
hold shares. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price.
(1) INTRUST Financial Services, Inc. is currently contractually limiting its
advisory fees paid by the Fund on an annual basis to 0.87%.
(2) BISYS is currently contractually waiving its entire Distribution Fee.
(3) The contractual expense limitations are in effect through March 1, 2001.
5
<PAGE> 7
RISK/RETURN SUMMARY AND FUND EXPENSES
STOCK FUND
USE THE TABLE AT RIGHT TO
COMPARE FEES AND EXPENSES
WITH THOSE OF OTHER MUTUAL
FUNDS. IT ILLUSTRATES THE
AMOUNT OF FEES AND EXPENSES
YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF
EACH PERIOD
- NO CHANGES IN THE FUND'S
EXPENSES EXCEPT THE
EXPIRATION OF THE CURRENT
CONTRACTUAL FEE WAIVERS
ON MARCH 1, 2001
BECAUSE THIS EXAMPLE IS
HYPOTHETICAL AND FOR
COMPARISON ONLY, YOUR ACTUAL
COSTS WILL BE DIFFERENT.
<TABLE>
EXPENSE EXAMPLE
<S> <C> <C> <C> <C>
1 3 5 10
STOCK FUND YEAR YEARS YEARS YEARS
SERVICE SHARES $ 134 $ 499 $ 887 $ 1,977
PREMIUM SHARES $ 185 $ 755 $ 1,352 $ 2,967
</TABLE>
6
<PAGE> 8
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY OF THE
INTERNATIONAL MULTI-MANAGER STOCK
FUND
The Fund operates under a master-feeder structure. This means that the Fund
seeks its investment objective by investing all of its investable assets in
another investment company. The Fund invests all of its assets in the
International Equity Portfolio (the "Portfolio"), a series of the AMR
Investment Services Trust ("AMR Trust"). The Portfolio is managed by AMR
Investment Services, Inc. (the "Manager"). The Portfolio's investment
objective is identical to the Fund's investment objective. The Fund may
withdraw its assets from the Portfolio at any time if the Board of Trustees
determines that it is in the best interest of the Fund and its shareholders
to do so. In such event, the Board would consider alternative arrangements
such as investing all of the Fund's assets in another investment company with
the same investment objective as the Fund or, alternatively, requesting that
INTRUST, as the investment adviser to the Fund, manage the Fund's assets
directly. The Board of Trustees may take such actions without shareholder
approval. Statements regarding investments by the Fund refer to investments
made by the Portfolio. For easier reading, the term "Fund" is used throughout
the Prospectus to refer to either the Fund or the Portfolio.
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund's goal is to provide investors with long-term
capital appreciation. The Fund seeks its objective by
investing in equity securities of issuers based outside of
the United States.
PRINCIPAL In attempting to achieve its investment objective, the Fund
INVESTMENT STRATEGIES invests, under ordinary circumstances, at least 65% of its
total assets are invested in common stocks and securities
convertible into common stocks of issuers in at least three
different countries located outside the United States.
However, the Fund generally invests in excess of 80% of its
net assets in such securities.
The Manager selects securities based upon a country's
economic outlook, market valuation and potential changes in
currency exchange rates. When purchasing equity securities,
primary emphasis will be placed on undervalued securities
with above average growth expectations.
PRINCIPAL INVESTMENT RISKS The value of the Fund's investments, and the value of your
investments in the Fund will fluctuate with market
conditions. You may lose money on your investment in the
Fund, or the Fund could underperform other investments. Some
of the Fund's holdings may underperform its other holdings.
Other risks include:
MARKET RISK Market risk is the chance that the value of the Fund's
investments in stocks will decline due to drops in the stock
market.
FOREIGN INVESTING Overseas investing carries potential risks, including
currency, political and foreign issuer risks, not associated
with domestic investments.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - Seeking a long-term goal such as retirement
- Looking to add a growth component to your portfolio
- Willing to accept higher risks of investing in the
international stock market
This Fund will not be appropriate for anyone:
- Seeking monthly income
- Pursuing a short-term goal or investing emergency reserves
- Seeking safety of principal
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
7
<PAGE> 9
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this
page show how the
International Multi-Manager
Stock Fund has performed from
year to year. This performance
includes the performance of
the Portfolio in which the
International Multi-Manager
Stock Fund currently invests
100% of its assets and the
American AAdvantage
International Equity Fund (the
"Predecessor"). The
Predecessor was organized on
August 7, 1991 and operated as
a stand alone fund until it
became one of the initial
feeder trusts of the Portfolio
when the American AAdvantage
Funds reorganized into a
master-feeder structure on
November 1, 1995. The
performance shown in the chart
and table represents: the
actual performance of the Fund
since January 20, 1997, (its
inception); the actual
performance of the Portfolio
from November 1, 1995 (its
inception) through January 19,
1997; and the performance of
the Predecessor from August 7,
1991 (its inception) through
October 31, 1995. This
performance would have been
significantly lower, taking
into account the current fees
of the International
Multi-Manager Stock Fund,
because the Portfolio's
performance reflects no fees
at the feeder level.
The bar chart provides some
indication of the risks of
investing in the Fund by
showing changes in the Fund's
performance from year to year.
The table below it compares
the Fund's performance over
time to that of the Morgan
Stanley Capital International
Europe, Australasia and Far
East (EAFE) Index, a widely
recognized, unmanaged
representative of the
aggregate performance of
international stock markets.
Both the chart and the table
assume reinvestment of
dividends and distributions
and reflect voluntary fee
reductions. Of course, past
performance does not indicate
how the Fund will perform in
the future.
INTERNATIONAL MULTI-MANAGER STOCK
FUND
PERFORMANCE BAR
CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR
SERVICE CLASS SHARES
<TABLE>
<S> <C>
1992 -11.13%
1993 42.51%
1994 0.86%
1995 17.86%
1996 20.12%
1997 8.93%
1998 11.29%
</TABLE>
Reflects total return for the Fund, the
Portfolio and the Predecessor. Returns
would have been lower had expense waivers
or reimbursements not been in effect.
The returns for the Premium Class will
differ from the Service Class returns
because of differences in expenses of each
class. Premium Class has not yet been
offered to the public.
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
<TABLE>
<CAPTION>
PAST PAST 5 SINCE
INCEPTION YEAR YEARS INCEPTION
<S> <C> <C> <C> <C>
---------------------------------------
SERVICE CLASS 8/7/91 % % %
---------------------------------------
EAFE INDEX 7/31/91 % % %
- -------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 10
RISK/RETURN SUMMARY AND FUND EXPENSES
INTERNATIONAL MULTI-MANAGER STOCK
FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES
(FEES PAID BY
YOU DIRECTLY) SERVICE SHARES PREMIUM SHARES
None None
ANNUAL FUND
OPERATING EXPENSES
(FEES PAID FROM
FUND ASSETS) SERVICE SHARES PREMIUM SHARES
Management fee(1,3) 0.88% 0.88%
Distribution (12b-1) fee(2,3) 0.25% 0.75%
Other expenses(3) 0.49% 0.99%
Total Fund operating expenses 1.62% 2.62%
Fee waivers(1,2,3) 0.33% 0.83%
Net Expenses(3) 1.29% 1.79%
</TABLE>
As an investor in the
International
Multi-Manager Stock Fund,
you will pay the following
fees and expenses when you
buy and hold shares.
Annual Fund operating
expenses are paid out of
Fund assets, and are
reflected in the share
price.
(1) INTRUST is entitled to receive 0.40% in advisory fees from the Fund.
INTRUST is currently contractually limiting its advisory fees paid by the
Fund on an annual basis to 0.35%. Because the Fund invests all of its assets
in the Portfolio, the Fund must pay its proportionate share of advisory fees
(0.48%) to the Portfolio. In the event the Fund does not invest all of its
assets in the Portfolio or in any other investment company, INTRUST may
receive up to 1.25% in advisory fees from the Fund.
(2) BISYS is currently contractually waiving its entire Distribution fee.
(3) The contractual expense limitations are in effect through March 1, 2001.
In addition to administration fees paid by the Fund to BISYS, the Fund must
pay its proportionate share of administration fees of the Portfolio. BISYS is
currently contractually limiting its administration fees to 0.12%. The Fund's
Board of Trustees believes that the aggregate per share expenses of the Fund
and the Portfolio will be approximately equal to the expenses that the Fund
would incur if its assets were invested directly in foreign securities.
9
<PAGE> 11
RISK/RETURN SUMMARY AND FUND EXPENSES
INTERNATIONAL MULTI-MANAGER STOCK
FUND
USE THE TABLE AT RIGHT TO
COMPARE FEES AND EXPENSES
WITH THOSE OF OTHER MUTUAL
FUNDS. IT ILLUSTRATES THE
AMOUNT OF FEES AND EXPENSES
YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF
EACH PERIOD
- NO CHANGES IN THE FUND'S
EXPENSES EXCEPT THE
EXPIRATION OF THE CURRENT
CONTRACTUAL FEE WAIVERS
ON MARCH 1, 2001
BECAUSE THIS EXAMPLE IS
HYPOTHETICAL AND FOR
COMPARISON ONLY, YOUR ACTUAL
COSTS WILL BE DIFFERENT.
<TABLE>
EXPENSE EXAMPLE
<S> <C> <C> <C> <C>
INTERNATIONAL MULTI-MANAGER 1 3 5 10
STOCK FUND YEAR YEARS YEARS YEARS
SERVICE SHARES $ 131 $ 479 $ 850 $ 1,894
PREMIUM SHARES $ 182 $ 736 $ 1,316 $ 2,892
</TABLE>
10
<PAGE> 12
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY OF THE
SHORT-TERM BOND FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Fund's goal is to provide investors with as high a level
of current income as is consistent with liquidity and safety
of principal.
PRINCIPAL The Fund invests primarily in investment grade short-term
INVESTMENT STRATEGIES debt obligations such as U.S. Government Securities,
corporate bonds and asset-backed securities (including
mortgage-backed securities).
The bonds maturities (i.e. the date when a bond issuer
agrees to return the bond's principal, or face value, to the
bond's buyer) will range from short-term (including
overnight) to 12 years. Under normal conditions, the Fund
intends to maintain an average maturity of between 1 and 3
years, when weighted according to the Fund's holdings. At
least 65% of the Fund's total assets will be invested in
bonds that are rated, at the time of purchase, within the
three highest long-term or two highest short-term rating
categories assigned by a nationally recognized statistical
rating organization, such as Moody's, Standard & Poor's or
Fitch Investors Services, Inc., or which are unrated and
determined by the Adviser to be of comparable quality.
PRINCIPAL The value of the Fund's investments, and the value of your
INVESTMENT RISKS investments in the Fund will fluctuate with market
conditions. You may lose money on your investment in the
Fund, or the Fund could underperform other investments. Some
of the Fund's holdings may underperform its other holdings.
Other risks include:
INTEREST RATE RISK Interest rate risk is the chance that the value of the bonds
the Fund holds will decline due to rising interest rates.
CREDIT RISK Credit risk is the chance that a bond issuer will fail to
repay interest and principal in a timely manner, reducing
the Fund's return.
PREPAYMENT RISK The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the
underlying mortgage may be repaid prior to the bond's
maturity date. Prepayment exposes the Fund to the risk of
lower return upon subsequent reinvestment of the principal.
INCOME RISK Income risk is the chance that falling interest rates will
cause the Fund's income to decline.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - looking to add a monthly income component to your
portfolio
- willing to accept the risks of price and dividend
fluctuations
This Fund will not be appropriate for anyone:
- investing emergency reserves
- seeking the highest assurance of safety of principal
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
11
<PAGE> 13
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart on this page
shows how the Short-Term
Bond Fund has performed
during its first two full
calendar years. The table
below it compares the
Fund's performance over
time to that of the Lehman
Brothers 1-3 Year
Government Bond Index, a
widely recognized,
unmanaged index generally
representative of
short-term government
bonds. The table also
compares the Fund's
performance to that of the
Lipper Short Investment
Grade Universe Average to
show how the Fund's
performance compares with
the returns of an index of
funds with investment
objectives similar to the
Fund's. This table gives
some indication of the
risks of an investment in
the Fund by comparing the
Fund's performance with a
broad measure of market
performance.
Both the chart and the
table assume reinvestment
of dividends and
distributions and reflect
voluntary fee reductions.
Without voluntary fee
reduction, the Fund's
performance would have been
lower.
The returns for the Premium
Class will differ from the
Service Class returns shown
in the bar chart because of
differences in expenses of
each class. Premium Class
has not yet been offered to
the public. Of course, past
performance does not
indicate how the Fund will
perform in the future.
SHORT-TERM BOND FUND
PERFORMANCE BAR CHART AND TABLE
TOTAL RETURNS AS OF 12/31 FOR
SERVICE CLASS SHARES
<TABLE>
<S> <C>
1998 6.63%
</TABLE>
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL RETURNS*
(for the periods ending
December 31, 1999)
<TABLE>
<CAPTION>
PAST SINCE
INCEPTION YEAR INCEPTION
<S> <C> <C> <C>
---------------------------------
SERVICE CLASS 1/21/97
---------------------------------
LEHMAN BROTHERS 1-3 YEAR GOVERNMENT BOND
INDEX 1/31/97
---------------------------------
LIPPER SHORT INVESTMENT GRADE UNIVERSE
AVERAGE 1/31/97
- -------------------------------------------------------------------------------
</TABLE>
* For current performance information, including the Fund's 30-day yield, call
1-888-266-8787.
12
<PAGE> 14
RISK/RETURN SUMMARY AND FUND EXPENSES
SHORT-TERM BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES
(FEES PAID BY
YOU DIRECTLY) SERVICE SHARES PREMIUM SHARES
None None
ANNUAL FUND
OPERATING EXPENSES
(FEES PAID FROM
FUND ASSETS) SERVICE SHARES PREMIUM SHARES
Management fee(1, 3) 0.40% 0.40%
Distribution (12b-1) fee(2, 3) 0.25% 0.75%
Other expenses 0.48% 0.98%
Total Fund operating expenses 1.13% 2.13%
Fee waivers(1,2,3) 0.46% 0.96%
Net expenses(3) 0.67% 1.17%
</TABLE>
As an investor in the
Short-Term Bond Fund, you
will pay the following
fees and expenses when you
buy and hold shares.
Annual Fund operating
expenses are paid out of
Fund assets, and are
reflected in the share
price.
(1) INTRUST is currently contractually limiting its advisory fees paid by the
Fund on an annual basis to 0.19%.
(2) BISYS is currently contractually waiving its entire Distribution fee.
(3) The contractual expense limitations are in effect through March 1, 2001.
13
<PAGE> 15
RISK/RETURN SUMMARY AND FUND EXPENSES
SHORT-TERM BOND FUND
USE THE TABLE AT RIGHT TO
COMPARE FEES AND EXPENSES
WITH THOSE OF OTHER MUTUAL
FUNDS. IT ILLUSTRATES THE
AMOUNT OF FEES AND EXPENSES
YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF
EACH PERIOD
- NO CHANGES IN THE FUND'S
EXPENSES EXCEPT THE
EXPIRATION OF THE CURRENT
CONTRACTUAL FEE WAIVERS
ON MARCH 1, 2001
BECAUSE THIS EXAMPLE IS
HYPOTHETICAL AND FOR
COMPARISON ONLY, YOUR ACTUAL
COSTS WILL BE DIFFERENT.
<TABLE>
EXPENSE EXAMPLE
<S> <C> <C> <C> <C>
1 3 5 10
SHORT-TERM BOND FUND YEAR YEARS YEARS YEARS
SERVICE SHARES $ 68 $ 313 $ 578 $ 1,333
PREMIUM SHARES $ 119 $ 574 $ 1,056 $ 2,386
</TABLE>
14
<PAGE> 16
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY OF THE
INTERMEDIATE BOND FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVE The Fund's goal is to provide investors with a competitive
total return. A high level of current income is an important
consideration in achieving the Fund's goal.
PRINCIPAL The Fund invests primarily in high quality fixed income
INVESTMENT STRATEGIES securities such as U.S. Government Securities, corporate
bonds and asset-backed securities (including mortgage-backed
securities). A minimum of 65% of the Fund's total assets
will be invested in securities that are rated, at the time
of purchase, "A" or better by a primary credit rating agency
and the Fund will seek to maintain a minimum average
portfolio quality rating of "AA."
Under normal conditions, the Fund intends to hold securities
with maturities primarily between 1 and 10 years with an
average maturity of between 3 and 5 years, when weighted
according to the Fund's holdings. The maturity is the date
when a bond issuer agrees to return the bond's principal, or
face value, to the bond's buyer. The Fund focuses on
maximizing income from bonds having strong credit qualities.
The Fund's adviser may sell a security if its fundamental
qualities deteriorate or to take advantage of more
attractive yield opportunities.
PRINCIPAL The value of the Fund's investments, and the value of your
INVESTMENT RISKS investments in the Fund will fluctuate with market
conditions. You may lose money on your investment in the
Fund, or the Fund could underperform other investments. Some
of the Fund's holdings may underperform its other holdings.
Other risks include:
INTEREST RATE RISK Interest rate risk is the chance that the market value of
the bonds that the Fund holds will decline due to rising
interest rates.
PREPAYMENT RISK The Fund's investments in mortgage-related securities are
subject to the risk that the principal amount of the
underlying mortgage may be repaid prior to the bond's
maturity date. Prepayment exposes the Fund to the risk of
lower return upon subsequent reinvestment of the principal.
CREDIT RISK Credit risk is the chance that a bond issuer will fail to
repay interest and principal in a timely manner, reducing
the Fund's return.
INCOME RISK Income risk is the chance that falling interest rates will
cause the Fund's income to decline.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - looking to add a monthly income component to your
portfolio
- willing to accept the risks of price and dividend
fluctuations
This Fund will not be appropriate for anyone:
- investing emergency reserves
- seeking the highest assurance of safety of principal
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
15
<PAGE> 17
RISK/RETURN SUMMARY AND FUND EXPENSES
INTERMEDIATE BOND FUND
The chart on this page
shows how the Intermediate
Bond Fund has performed
during its first two full
calendar years. The table
below it compares the
Fund's performance over
time to that of the Lehman
Brothers Intermediate
Government/ Corporate Bond
Index, a widely recognized,
unmanaged index generally
representative of
intermediate government and
corporate bonds. The table
also compares the Fund's
performance to that of the
Lipper Intermediate
Investment Grade Universe
Average to show how the
Fund's performance compares
with the returns of an
index of funds with
investment objectives
similar to the Fund's. This
table gives some indication
of the risks of an
investment in the Fund by
comparing the Fund's
performance with a broad
measure of market
performance.
Both the chart and the
table assume reinvestment
of dividends and
distributions and reflect
voluntary fee reductions.
Without voluntary fee
reductions, the Fund's
performance would have been
lower.
The returns for the Premium
Class will differ from the
Service Class returns shown
in the bar chart because of
differences in expenses of
each class. Premium Class
has not yet been offered to
the public. Of course, past
performance does not
indicate how the Fund will
perform in the future.
PERFORMANCE BAR CHART AND TABLE
TOTAL RETURN AS OF 12/31 FOR
SERVICE CLASS SHARES
<TABLE>
<S> <C>
1998 7.36%
</TABLE>
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL
RETURNS*
(for the periods ending
December 31, 1999)
<TABLE>
<CAPTION>
INCEPTION PAST YEAR SINCE INCEPTION
<S> <C> <C> <C>
-------------------------------------------
SERVICE CLASS 1/21/97
-------------------------------------------
LEHMAN BROTHERS INTERMEDIATE
GOVERNMENT/CORPORATE BOND INDEX 1/31/97
-------------------------------------------
LIPPER INTERMEDIATE INVESTMENT
GRADE UNIVERSE AVERAGE 1/31/97
- -----------------------------------------------------------------------------------------
</TABLE>
*For current performance information, including the Fund's 30-day yield, call
1-888-266-8787.
16
<PAGE> 18
RISK/RETURN SUMMARY AND FUND EXPENSES
INTERMEDIATE BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES
(FEES PAID BY
YOU DIRECTLY) SERVICE SHARES PREMIUM SHARES
None None
ANNUAL FUND
OPERATING EXPENSES
(FEES PAID FROM
FUND ASSETS) SERVICE SHARES PREMIUM SHARES
Management fee(1,3) 0.40% 0.40%
Distribution (12b-1) fee(2,3) 0.25% 0.75%
Other expenses 0.49% 0.99%
Total Fund operating expenses 1.14% 2.14%
Fee waivers(1,2,3) 0.36% 0.86%
Net expenses(3) 0.78% 1.28%
</TABLE>
As an investor in the
Intermediate Bond Fund,
you will pay the following
fees and expenses when you
buy and hold shares.
Annual Fund operating
expenses are paid out of
Fund assets, and are
reflected in the share
price.
(1) INTRUST is currently contractually limiting its advisory fees paid by the
Fund on an annual basis to 0.29%.
(2) BISYS is currently contractually waiving its entire Distribution fee.
(3) The contractual expense limitations are in effect through March 1, 2001.
17
<PAGE> 19
RISK/RETURN SUMMARY AND FUND EXPENSES
INTERMEDIATE BOND FUND
USE THE TABLE AT RIGHT TO
COMPARE FEES AND EXPENSES
WITH THOSE OF OTHER MUTUAL
FUNDS. IT ILLUSTRATES THE
AMOUNT OF FEES AND EXPENSES
YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF
EACH PERIOD
- NO CHANGES IN THE FUND'S
EXPENSES EXCEPT THE
EXPIRATION OF THE CURRENT
CONTRACTUAL FEE WAIVERS
ON MARCH 1, 2001
BECAUSE THIS EXAMPLE IS
HYPOTHETICAL AND FOR
COMPARISON ONLY, YOUR ACTUAL
COSTS WILL BE DIFFERENT.
<TABLE>
EXPENSE EXAMPLE
<S> <C> <C> <C> <C>
1 3 5 10
INTERMEDIATE BOND FUND YEAR YEARS YEARS YEARS
SERVICE SHARES $ 80 $ 327 $ 593 $ 1,354
PREMIUM SHARES $ 130 $ 587 $ 1,070 $ 2,405
</TABLE>
18
<PAGE> 20
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY OF THE
KANSAS TAX-EXEMPT BOND FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Kansas Tax-Exempt Bond Fund's goal is to preserve
capital while producing current income for the investor that
is exempt from both federal and Kansas state income taxes.
PRINCIPAL The Fund invests primarily in municipal obligations with
INVESTMENT STRATEGIES maturities ranging from 1 to 20 years. It is the intent of
the Adviser to maintain a dollar-weighted average portfolio
maturity between 7 and 12 years. Under normal conditions,
the Fund will invest at least 80% of its net assets in
municipal obligations which produce interest that is, in the
opinion of bond counsel, exempt from federal income tax and
at least 65% of its total assets in municipal obligations
which are exempt from Kansas state income taxes. Under
normal conditions, the Fund will invest at least 80% of its
net assets in securities the income from which is not
subject to the alternative minimum tax. The Fund will not
purchase securities which are rated, at the time of
purchase, below "BBB" by Moody's Investor Services, Inc. or
below "Baa" by Standard & Poors Corporation. The Fund is
managed to provide an attractive yield from municipal bonds
that have strong credit qualities. Municipalities with these
strong credit qualities are more likely to offer a reliable
stream of payments. The Fund's adviser may sell a security
if its fundamental qualities deteriorate or to take
advantage of more attractive yield opportunities.
PRINCIPAL The value of the Fund's investments, and the value of your
INVESTMENT RISKS investments in the Fund will fluctuate with market
conditions. You may lose money on your investment in the
Fund, or the Fund could underperform other investments. Some
of the Fund's holdings may underperform its other holdings.
Other risks include:
STATE SPECIFIC RISKS State specific risk is the chance that the Fund, because it
invests primarily in securities issued by Kansas and its
municipalities, is more vulnerable to unfavorable
developments in Kansas than funds that invest in municipal
bonds of many different states.
INTEREST RATE RISK Interest rate risk is the chance that the value of the bonds
the Fund holds will decline over short or even long periods
due to rising interest rates.
INCOME RISK Income risk is the chance that falling interest rates will
cause the Fund's income to decline.
CREDIT RISK Credit risk is the chance that a bond issuer will fail to
repay interest and principal in a timely manner, reducing
the Fund's return.
CALL RISK Call risk is the chance that during periods of falling
interest rates, a bond issuer will "call" -- or repay -- a
high-yielding bond before its maturity date.
WHO MAY Consider investing in the Fund if you are:
WANT TO INVEST? - seeking a long-term goal such as retirement
- looking to reduce federal and Kansas state taxes on
investment income
- seeking current income exempt from both federal and Kansas
state income taxes
This Fund will not be appropriate for anyone:
- investing through a tax-exempt retirement plan
- pursuing an aggressive high growth investment strategy
- seeking a stable share price
An investment in the Fund is not a bank deposit and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.
</TABLE>
19
<PAGE> 21
RISK/RETURN SUMMARY AND FUND EXPENSES
KANSAS TAX-EXEMPT BOND FUND
The chart and table on this
page show how the Kansas
Tax-Exempt Bond Fund and
its predecessor have
performed and how its
performance has varied from
year to year. The
information provides some
indication of the risks of
investing in the Fund by
showing changes in the
Fund's performance from
year to year and by showing
how the Fund's average
annual returns compare with
those of a broad measure of
market performance. The
table below it compares the
Fund's performance over
time to that of the Lehman
Brothers 7-Year General
Obligation Index, a widely
recognized, unmanaged index
generally representative of
intermediate-term municipal
bonds.
The Fund has been in
existence since December
10, 1990, but until
September 1, 1997 the Fund
was organized as the Kansas
Tax Free Income Portfolio
of the SEI Tax Exempt
Trust.
Both the chart and the
table assume reinvestment
of dividends and
distributions and reflect
voluntary fee reductions.
The returns for the Premium
Class will differ from the
Service Class returns
because of differences in
expenses of each class.
Premium Class has not yet
been offered to the public.
Of course, past performance
does not indicate how the
Fund will perform in the
future.
PERFORMANCE BAR CHART AND TABLE
YEAR-BY-YEAR TOTAL RETURNS AS OF
12/31 FOR
SERVICE CLASS SHARES
<TABLE>
<S> <C>
1991 8.84%
1992 9.03%
1993 10.00%
1994 -2.27%
1995 12.40%
1996 3.95%
1997 7.61%
1998 5.73%
</TABLE>
Reflects total return for the Kansas Tax
Free Income Portfolio and the Fund. Actual
returns would have been lower had expense
waivers or reimbursements not been in
effect. The Kansas Tax Free Income
Portfolio's performance reflects fees and
expenses that may be lower than fees for the
Kansas Tax-Exempt Bond Fund. This
performance would have been lower if higher
fees and expenses were in effect.
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)*
<TABLE>
<CAPTION>
SINCE
INCEPTION PAST YEAR PAST 5 YEARS INCEPTION
<S> <C> <C> <C> <C>
----------------------------------------------------------
SERVICE CLASS 12/10/90 % % %
----------------------------------------------------------
LEHMAN BROTHERS 7-YEAR GENERAL
OBLIGATION INDEX 12/31/90 % % %
- --------------------------------------------------------------------------------------------------------
</TABLE>
*For current performance information, including the Fund's 30-day yield, call
1-888-266-8787.
20
<PAGE> 22
RISK/RETURN SUMMARY AND FUND EXPENSES
KANSAS TAX-EXEMPT BOND FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES
(FEES PAID BY
YOU DIRECTLY) SERVICE SHARES PREMIUM SHARES
None None None
ANNUAL FUND
OPERATING EXPENSES
(FEES PAID FROM
FUND ASSETS) SERVICE SHARES PREMIUM SHARES
Management fee(1,3) 0.30% 0.30%
Distribution (12b-1) fee(2,3) 0.25% 0.75%
Other expenses(3) 0.45% 0.95%
Total Fund operating expenses 1.00% 2.00%
Fee waivers and reimbursements(1,2,3) 0.40% 0.90%
Net expenses(3) 0.60% 1.10%
</TABLE>
As an investor in the
Kansas Tax-Exempt Bond
Fund, you will pay the
following fees and
expenses when you buy and
hold shares. Annual Fund
operating expenses are
paid out of Fund assets,
and are reflected in the
share price.
(1) INTRUST is currently contractually waiving its advisory fees due from the
Fund and reimbursing other expenses such that total expenses after fee
waivers and expense limitations are limited to 0.60% for Service Shares and
1.10% for Premium Shares.
(2) BISYS is currently contractually waiving its entire Distribution fee.
(3) The contractual expense limitations are in effect through March 1, 2001.
21
<PAGE> 23
RISK/RETURN SUMMARY AND FUND EXPENSES
KANSAS TAX-EXEMPT BOND FUND
USE THE TABLE AT RIGHT TO
COMPARE FEES AND EXPENSES
WITH THOSE OF OTHER MUTUAL
FUNDS. IT ILLUSTRATES THE
AMOUNT OF FEES AND EXPENSES
YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF
EACH PERIOD
- NO CHANGES IN THE FUND'S
EXPENSES EXCEPT THE
EXPIRATION OF THE CURRENT
CONTRACTUAL FEE WAIVERS
ON MARCH 1, 2001
BECAUSE THIS EXAMPLE IS
HYPOTHETICAL AND FOR
COMPARISON ONLY, YOUR ACTUAL
COSTS WILL BE DIFFERENT.
<TABLE>
EXPENSE EXAMPLE
<S> <C> <C> <C> <C>
1 3 5 10
KANSAS TAX-EXEMPT BOND FUND YEAR YEARS YEARS YEARS
SERVICE SHARES $ 61 $ 279 $ 514 $ 1,188
PREMIUM SHARES $ 112 $ 540 $ 995 $ 2,255
</TABLE>
22
<PAGE> 24
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY OF THE
MONEY MARKET FUND
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES The Fund's objective is to provide investors current income,
liquidity and the maintenance of a stable net asset value of
$1.00 per share.
PRINCIPAL The Fund invests primarily in high quality, U.S.
INVESTMENT STRATEGIES dollar-denominated short- term obligations which present
minimal credit risks.
The Fund invests in commercial paper, asset-backed
securities, obligations of financial institutions and other
high-quality money market instruments that mature in
thirteen months or less. The Fund will invest more than 25%
of the Fund's total assets in the banking industry.
PRINCIPAL The Fund may not achieve as high a level of current income
INVESTMENT RISKS as other funds that do not limit their investments to the
high quality securities in which the Fund invests. Investors
in the Fund should also be aware of the following risks:
CREDIT RISK The securities in which the Fund invests are subject
generally to the credit risk that the issuer of a security
may be unable to make principal and interest payments when
they are due or may be unable to fulfill an obligation to
repurchase securities from the Fund.
CONCENTRATION RISK The Fund will invest more than 25% of its assets in
obligations issued by the banking industry. The Money Market
Fund's policy of concentrating in the banking industry could
increase the Fund's exposure to economic or regulatory
developments relating to or affecting banks. The financial
conditions of banks is largely dependent on the availability
and cost of capital funds, and can fluctuate significantly
when interest rates change.
INTEREST RATE RISK Interest rate risk is the chance that bond prices overall
will decline over short or even long periods due to rising
interest rates.
INCOME RISK Income risk is the chance that falling interest rates will
cause the Fund's income to decline.
ADDITIONAL RISKS An investment in the Fund is not a deposit of INTRUST Bank
or any other bank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible
to lose money by investing in the Fund
WHO MAY Consider investing in the Fund if you:
WANT TO INVEST? - Are seeking preservation of capital
- Have a low risk tolerance
- Are willing to accept lower potential returns in exchange
for a high degree of safety
- Are investing short-term reserves
This Fund will not be appropriate for anyone:
- Seeking high total returns
- Pursuing a long-term goal or investing for retirement
</TABLE>
23
<PAGE> 25
RISK/RETURN SUMMARY AND FUND EXPENSES
The chart and table on this
page show how the Money
Market Fund has performed
during its first two full
calendar years and the
table includes the Fund's
performance information
since its inception. This
information gives some
indication of the risks of
an investment in the Fund.
Both the table and the
chart assume reinvestment
of dividends and reflect
voluntary fee reductions.
Without voluntary fee
reductions, the Fund's
performance would have been
lower.
The returns for the Premium
Class will differ from the
Service Class returns shown
in the bar chart because of
differences in expenses of
each class. Premium Class
has not yet been offered to
the public.
Of course, past performance
does not indicate how the
Fund will perform in the
future.
MONEY MARKET FUND
PERFORMANCE BAR
CHART AND TABLE
TOTAL RETURN AS OF 12/31
FOR SERVICE CLASS SHARES
<TABLE>
<S> <C>
1998 5.09%
</TABLE>
Best quarter:
Worst quarter:
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)*
<TABLE>
<CAPTION>
FUND OR CLASS PAST SINCE
INCEPTION YEAR INCEPTION
<S> <C> <C> <C>
-----------------------------------
SERVICE CLASS 1/23/97 % %
-----------------------------------
</TABLE>
* For current yield information on the Fund, call 1-888-266-8787. The Money
Market Fund's yield appears in The Wall Street Journal each Thursday.
24
<PAGE> 26
RISK/RETURN SUMMARY AND FUND EXPENSES
MONEY MARKET FUND
FEES AND EXPENSES
<TABLE>
<S> <C> <C>
SHAREHOLDER FEES
(FEES PAID BY
YOU DIRECTLY) SERVICE SHARES PREMIUM SHARES
None None
ANNUAL FUND
OPERATING EXPENSES
(FEES PAID FROM
FUND ASSETS) SERVICE SHARES PREMIUM SHARES
Management fee(1,3) 0.25% 0.25%
Distribution (12b-1) fee(2,3) 0.25% 0.75%
Other expenses 0.52% 1.02%
Total Fund operating expenses 1.02% 2.02%
Fee waivers(1,2,3) 0.35% 0.85%
Net expenses(3) 0.67% 1.17%
</TABLE>
As an investor in the
Money Market Fund, you
will pay the following
fees and expenses when you
buy and hold shares.
Annual Fund operating
expenses are paid out of
Fund assets, and are
reflected in the share
price.
(1) INTRUST is currently contractually limiting its advisory fees paid by the
Fund on an annual basis to 0.15%.
(2) BISYS is currently contractually waiving its entire Distribution fee.
(3) The contractual expense limitations are in effect through March 1, 2001.
25
<PAGE> 27
RISK/RETURN SUMMARY AND FUND EXPENSES
MONEY MARKET FUND
USE THE TABLE AT RIGHT TO
COMPARE FEES AND EXPENSES
WITH THOSE OF OTHER MUTUAL
FUNDS. IT ILLUSTRATES THE
AMOUNT OF FEES AND EXPENSES
YOU WOULD PAY, ASSUMING THE
FOLLOWING:
- $10,000 INVESTMENT
- 5% ANNUAL RETURN
- REDEMPTION AT THE END OF
EACH PERIOD
- NO CHANGES IN THE FUND'S
EXPENSES EXCEPT THE
EXPIRATION OF THE CURRENT
CONTRACTUAL FEE WAIVERS
ON MARCH 1, 2001
BECAUSE THIS EXAMPLE IS
HYPOTHETICAL AND FOR
COMPARISON ONLY, YOUR ACTUAL
COSTS WILL BE DIFFERENT.
<TABLE>
<CAPTION>
EXPENSE EXAMPLE
<S> <C> <C> <C> <C>
1 3 5 10
MONEY MARKET FUND YEAR YEARS YEARS YEARS
SERVICE SHARES $ 68 $ 290 $ 529 $ 1,216
PREMIUM SHARES $ 119 $ 551 $ 1,010 $ 2,280
</TABLE>
26
<PAGE> 28
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INTRUST IS THE ADVISER TO INTRUST FUNDS.
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
This section of the prospectus provides a more complete description of the
Funds' principal investment objectives, strategies and risks. Additional
descriptions of the Funds' risks, strategies and investments, as well as
other strategies and investments not described below, may be found in the
Funds' Statement of Additional Information ("SAI"). The SAI also contains
descriptions of each of the securities which the Fund may purchase.
STOCK FUND
INVESTMENT OBJECTIVE
The Fund's goal is to provide investors with long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
To achieve this objective, the Fund invests primarily in U.S. equity
securities. Under ordinary market conditions, the Fund will invest at least
80% of its net assets in equity securities. The equity securities in which
the Fund will primarily invest include:
- COMMON STOCK
- CONVERTIBLE SECURITIES
- PREFERRED STOCK
- AMERICAN DEPOSITARY RECEIPTS ("ADRs"),
- WARRANTS
Descriptions of these and other securities which the Fund may purchase are
included in the SAI.
The Fund will invest at least 65% of its total assets in either common or
preferred stocks issued by companies with large market capitalizations at the
time of purchase. The market capitalization of a company is equal to the
number of outstanding shares of that company multiplied by the price of each
share. A company with a market capitalization of over $5 billion is
considered to have large market capitalization.
The Fund's investment strategy is to use a highly disciplined, bottom-up,
value approach that invests in large capitalization issues that sell at
reasonable prices relative to their objective earnings. The process intends
to generate excess returns primarily through stock selection, creating a
portfolio that will permit the Fund to participate in up markets while using
a valuation discipline (high price/earnings multiples are generally avoided)
that will cushion the Fund in a downturn.
By applying certain economic and quality criteria to the pool of large
capitalization issues, the portfolio managers establish a smaller set of
potential investments. The portfolio managers conduct a rigorous bottom-up
analysis. Target prices and 12 month expected total returns are calculated
for each stock. A risk/reward rationale is then considered, specifying
required rates of return for each stock to adjust for downside risk. The
stocks are ranked by the difference between expected total return less
required rate of return. Stock selection and later, position size
adjustments, are based on these rankings. The process is driven by stock
selection, but in an attempt to control risk, portfolio sector weights are
generally limited to plus or minus 100% of the S&P 500 Index sector weights.
27
<PAGE> 29
STOCK FUND
CONTINUED
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
Holdings have a closely monitored upside price objective and downside review
point. When a security approaches its upside objective, it is reviewed to
determine whether it has further appreciation potential. If so, a new upside
price is established and the downside review point is moved above the
original cost to attempt to prevent "winners" from turning into "losers." If
the security has reached fair valuation, it is sold.
The downside review point is set at a 20% price decline, relative to the
market, from its purchase price. At this point we reevaluate earnings
analysis, revisit historical valuation ranges and reexamine management's
strategy. Based on this review process, a decision will be made to sell or
hold the security.
RISK FACTORS
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. The Fund faces the following general risks:
INVESTMENT STYLE RISK
Investment style risk is the chance that returns from large-capitalization
growth stocks will trail returns from other asset classes or the overall
stock market.
MANAGER RISK
Manager risk is the chance that poor security selection will cause the Fund
to underperform other funds with similar investment objectives.
MARKET RISK
Market risk is the chance that the value of the Fund's investments in
stocks will decline due to drops in the stock market.
FOREIGN INVESTMENT RISK
Overseas investing carries potential risks not associated with domestic
investments. Such risks include, but are not limited to: (1) currency
exchange rate fluctuations, including adverse effects due to the euro
conversion (2) political and financial instability, (3) less liquidity and
greater volatility of foreign investments, (4) lack of uniform accounting,
auditing and financial reporting standards, (5) less government regulation
and supervision of foreign stock exchanges, brokers and listed companies,
(6) increased price volatility and (7) delays in transaction settlement in
some foreign markets.
ADDITIONAL RISKS
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. The value of an investment in the Fund will fluctuate up
and down, which means an investor could lose money. Additionally, there can
be no assurance that the Fund will achieve its investment objective.
28
<PAGE> 30
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INTERNATIONAL MULTI-MANAGER
STOCK FUND
INVESTMENT OBJECTIVE
The Fund's goal is to provide investors with long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
As mentioned in the "Risk/Return Summary", the Fund operates under a
master-feeder structure and seeks to achieve its investment objective by
investing all of its investable assets in the corresponding AMR Trust
Portfolio. The Portfolio's Manager is AMR Investment Services, Inc.
Statements regarding investments by the Fund refer to investments made by its
corresponding Portfolio. For easier reading, the term "Fund" is used
throughout the Prospectus to refer to either the Fund or the Portfolio.
Under ordinary circumstances, at least 65% of its total assets are invested
in common stocks and securities convertible into common stocks of issuers in
at least three different countries located outside the United States.
However, the Fund generally invests in excess of 80% of its net assets in
such securities.
The current countries in which the Fund may invest are:
<TABLE>
<S> <C> <C> <C> <C>
- - Australia - Finland - Italy - Norway - Sweden
- - Austria - France - Japan - Portugal - Switzerland
- - Belgium - Germany - Mexico - Singapore - United Kingdom
- - Canada - Hong Kong - Netherlands - South Korea
- - Denmark - Ireland - New Zealand - Spain
</TABLE>
The investment advisers select stocks which, in their opinion, have most or
all of the following characteristics:
- above-average earnings growth potential,
- selling at prices below their perceived economic value,
- low price to earnings ratio,
- low price to book value ratio, and
- generate above-average dividend yields.
The investment advisers will also consider potential changes in currency
exchange rates when choosing stocks. Each of the investment advisers
determines the growth prospects of companies based upon a combination of
internal and external research using fundamental analysis and considering
changing economic trends. The decision to sell a stock is typically based on
the belief that the company is no longer considered undervalued or shows
deteriorating fundamentals, or that better investment opportunities exist in
other stocks. The Manager believes that this strategy will help the Fund
outperform other investment styles over the longer term while minimizing
volatility and downside risk. The Fund may trade forward foreign currency
contracts to hedge currency fluctuations of underlying stock positions when
it is believed that a foreign currency may suffer a decline against the U.S.
dollar.
29
<PAGE> 31
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INTERNATIONAL MULTI-MANAGER
STOCK FUND
CONTINUED
INVESTMENT ADVISERS
AMR Investment Services, Inc. provides investment management services to the
Portfolio. The Manager allocates the assets of the Fund among the following
investment advisers:
Hotchkis and Wiley
Independence Investment Associates, Inc.
Lazard Asset Management
Templeton Investment Counsel, Inc.
RISK FACTORS
The International Multi-Manager Stock Fund's policy of investing directly or
indirectly in foreign issuers entails certain risks in addition to those
normally associated with investments in equity securities. The price per
share of the Fund will fluctuate with changes in value of the investments
held by the Portfolio. The Fund faces the following general risks.
MARKET RISK
Market risk is the chance that the value of the Fund's investments in
stocks will decline due to drops in the stock market.
FOREIGN INVESTMENT RISK
Overseas investing carries potential risks not associated with domestic
investments. Such risks include, but are not limited to: (1) currency
exchange rate fluctuations, including adverse effects due to the euro
conversion (2) political and financial instability, (3) less liquidity and
greater volatility of foreign investments, (4) lack of uniform accounting,
auditing and financial reporting standards, (5) less government regulation
and supervision of foreign stock exchanges, brokers and listed companies,
(6) increased price volatility and (7) delays in transaction settlement in
some foreign markets.
MANAGER RISK
Manager risk is the chance that poor security selection will cause the Fund
to under perform other funds with similar investment objectives.
ADDITIONAL RISKS
Investors should be aware that the Fund, unlike mutual funds that directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing all of its investable assets in the
Portfolio, which is a separate investment company. Since the Fund will invest
only in the Portfolio, the Fund's shareholders will acquire only an indirect
interest in the investments of the Portfolio. Other large investors also
invest in the Portfolio and may affect the Fund if they, for example, choose
to leave the Portfolio or to vote to change the investment objective of the
Portfolio. Additionally, there can be no assurance that the Fund will achieve
its investment objective.
30
<PAGE> 32
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
SHORT-TERM BOND FUND
INVESTMENT OBJECTIVE
The Fund's goal is to provide investors with as high a level of current
income as is consistent with liquidity and safety of principal.
PRINCIPAL INVESTMENT STRATEGIES
In attempting to achieve its investment objective, the Fund invests primarily
in investment grade short-term debt obligations. Under normal conditions, the
Fund will invest at least 65% of its total assets in bonds that are rated, at
the time of purchase, within the three highest long-term or two highest
short-term rating categories by a nationally recognized statistical rating
organization such as Moody's Investor Services, Inc. or Standard & Poor's
Corporation, or if unrated will be of comparable quality. For purposes of
this Fund, a "bond" is defined as a debt instrument with a fixed interest
rate.
The fixed income securities in which the Fund will primarily invest include:
- U.S. TREASURY OBLIGATIONS
- U.S. GOVERNMENT AGENCY SECURITIES
- COMMERCIAL PAPER
- CORPORATE DEBT SECURITIES
- MORTGAGE-RELATED SECURITIES
- ASSET-BACKED SECURITIES
- MUNICIPAL BONDS
- VARIABLE AND FLOATING RATE DEMAND OBLIGATIONS.
Descriptions of these and other securities which the Fund may purchase are
included in the SAI.
The debt obligations in which the Fund invests will have maturities (i.e. the
date when a bond issuer agrees to return the bond's principal, or face value,
to the bond's buyer) which range from short-term (including overnight) to 12
years. Under normal conditions, the Fund intends to maintain an average
maturity of between 1 and 3 years, when weighted according to the Fund's
holdings.
The Fund's overall investment philosophy emphasizes a fundamental approach to
managing fixed income assets with a goal of delivering consistent investment
returns. Strategies emphasize the use of high quality instruments, broad
diversification, and a targeted maturity which generally lines up very
closely to the Lipper Short Investment Grade Universe Average.
The Fund will not emphasize interest rate anticipation strategies to enhance
returns. Rather, value will be added using a disciplined investment process
for selecting undervalued securities, strategic diversification, effective
trade execution, and a rigorous oversight process. The Fund invests across
all sectors of the fixed-income market.
The Fund's maturity structure will generally be structured fairly evenly
across a shorter maturity spectrum with an average maturity of between two
and three years. The average credit quality of the portfolio will be
maintained at AA with all securities rated investment grade (rated "BBB" or
better by a primary credit rating agency) at time of purchase. Fixed income
securities downgrade to below BBB subsequent to purchase may be retained in
the portfolio when deemed by the portfolio manager to be in the best interest
of Fund shareholders.
31
<PAGE> 33
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
SHORT-TERM BOND FUND
CONTINUED
RISK FACTORS
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. The Fund faces the following general risks:
INTEREST RATE RISK
Interest rate risk is the chance that the value of the bonds the Fund holds
will decline due to rising interest rates. When interest rates rise, the
price of most bonds goes down. When interest rates go down, bond prices go
up. The price of a bond is also affected by its maturity. Bonds with longer
maturities generally have greater price sensitivity to changes in interest
rates.
CREDIT RISK
Credit risk is the chance that a bond issuer will fail to repay interest
and principal in a timely manner, reducing the Fund's return. Credit risk
is somewhat minimized by the Fund's policy of investing primarily in bonds
rated within the three highest long-term or two highest short-term rating
categories or comparable quality unrated securities and through adequate
diversification among different issuers and industries.
PREPAYMENT RISK
The Fund's investments in mortgage-related securities are subject to the
risk that the principal amount of the underlying mortgage may be repaid
prior to the bond's maturity date. Such repayments are common when interest
rates decline. When such a repayment occurs, no additional interest will be
paid on the investment. Prepayment exposes the Fund to potentially lower
return upon subsequent reinvestment of the principal.
INCOME RISK
Income risk is the chance that falling interest rates will cause the Fund's
income to decline. Income risk is generally higher for short-term bonds.
Additionally, there can be no assurance that the Short-Term Bond Fund will
achieve its investment objective or be successful in preventing or minimizing
the risk of loss that is inherent in investing in particular types of
securities. Such risks include:
- Asset-backed securities involve the risk that such securities do not
usually have the benefit of a complete security interest in the related
collateral.
- The sensitivity of the cash flows and yields of separately traded
interest and principal components of obligations to the rate of principal
payments (including prepayments).
- With respect to mortgage-backed securities, risks include a similar
sensitivity to the rate of prepayments in that, although the value of
fixed-income securities generally increases during periods of falling
interest rates, as a result of prepayments and other factors, this is not
always the case with respect to mortgage-backed securities.
MANAGER RISK
Manager risk is the chance that poor security selection will cause the Fund
to underperform other funds with similar investment objectives.
32
<PAGE> 34
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
INTERMEDIATE BOND FUND
INVESTMENT OBJECTIVE
The Fund's goal is to provide investors with a competitive total return. A
high level of current income is an important consideration in achieving the
Fund's overall goal.
PRINCIPAL INVESTMENT STRATEGIES
In attempting to achieve its investment objective, the Fund invests primarily
in high quality fixed income securities. Under normal conditions, the Fund
will invest a minimum of 65% its total assets in securities rated "A" or
better by a primary credit rating agency. The Fund will seek to maintain a
minimum average portfolio quality rating of "AA." All securities will be
rated "BBB" or better by a primary credit rating agency at the time of
purchase. Fixed income securities downgraded to below BBB subsequent to
purchase may be retained in the portfolio when deemed by the Adviser to be in
the best interest of Fund shareholders.
Under normal conditions, the Fund will invest a minimum of 65% of its total
assets in fixed income securities. The fixed income securities in which the
Fund will primarily invest include:
- U.S. TREASURY OBLIGATIONS
- U.S. GOVERNMENT AGENCY SECURITIES
- COMMERCIAL PAPER
- CORPORATE DEBT SECURITIES
- MORTGAGE-RELATED SECURITIES
- ASSET-BACKED SECURITIES
- MUNICIPAL BONDS
- VARIABLE AND FLOATING RATE DEMAND OBLIGATIONS.
Descriptions of these and other securities the Fund may purchase are included
in the SAI. For purposes of this Fund, a "bond" is defined as a debt
instrument with a fixed interest rate.
The debt obligations in which the Fund invests will have maturities (i.e. the
date when a bond issuer agrees to return the bond's principal, or face value,
to the bond's buyer) which range from one to ten years. Under normal
conditions, the Fund intends to maintain an average maturity of between three
and five years, when weighted according to the Fund's holdings.
The Fund's overall investment philosophy emphasizes a fundamental approach to
managing fixed income assets with a goal of delivering consistent investment
returns. Strategies emphasize the use of high quality instruments, broad
diversification, and a targeted maturity which generally lines up very
closely to the Lipper Intermediate Investment Grade Universe Average. The
Fund will not emphasize interest rate anticipation strategies to enhance
returns. Rather, value will be added using a disciplined investment process
for selecting undervalued securities, strategic diversification, effective
trade execution, and a rigorous oversight process.
The Fund's maturity structure will generally be balanced fairly evenly across
the intermediate maturity spectrum with an average maturity of between three
and five years.
33
<PAGE> 35
INTERMEDIATE BOND FUND
CONTINUED
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
RISK FACTORS
The price per share of the Fund will fluctuate with changes in value of the
investments held by the Fund. The Fund faces the following general risks:
INTEREST RATE RISK
Interest rate risk is the chance that the value of the bonds the Fund holds
will decline due to rising interest rates. When interest rates rise, the
price of most bonds goes down. When interest rates go down, bond prices go
up. The price of a bond is also affected by its maturity. Bonds with longer
maturities generally have greater price sensitivity to changes in interest
rates.
CREDIT RISK
Credit risk is the chance that a bond issuer will fail to repay interest
and principal in a timely manner, reducing the Fund's return. Credit risk
is somewhat minimized by the Fund's policy of investing primarily in bonds
rated "A" or better by a primary credit rating agency comparable quality
unrated securities and through adequate diversification among different
issuers and industries.
PREPAYMENT RISK
The Fund's investments in mortgage-related securities are subject to the
risk that the principal amount of the underlying mortgage may be repaid
prior to the bond's maturity date. Such repayments are common when interest
rates decline. When such a repayment occurs, no additional interest will be
paid on the investment. Prepayment exposes the Fund to potentially lower
return upon subsequent reinvestment of the principal.
INCOME RISK
Income risk is the chance that falling interest rates will cause the Fund's
income to decline. Income risk is generally higher for short-term bonds.
Additionally, there can be no assurance that the Intermediate Bond Fund will
achieve its investment objective or be successful in preventing or minimizing
the risk of loss that is inherent in investing in particular types of
securities. Such risks include:
- Asset-backed securities involve the risk that such securities do not
usually have the benefit of a complete security interest in the related
collateral.
- The sensitivity of the cash flows and yields of separately traded
interest and principal components of obligations to the rate of principal
payments (including prepayments).
- With respect to mortgage-backed securities, risks include a similar
sensitivity to the rate of prepayments in that, although the value of
fixed-income securities generally increases during periods of falling
interest rates, as a result of prepayments and other factors, this is not
always the case with respect to mortgage-backed securities.
MANAGER RISK
Manager risk is the chance that poor security selection will cause the Fund
to under perform other funds with similar investment objectives.
Additionally, there can be no assurance that the Fund will achieve its
investment objective.
34
<PAGE> 36
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
KANSAS TAX-EXEMPT BOND FUND
INVESTMENT OBJECTIVE
The investment objective of the Kansas Tax-Exempt Bond Fund is to preserve
capital while producing current income for the investor that is exempt from
both federal and Kansas state income taxes.
PRINCIPAL INVESTMENT STRATEGIES
In attempting to achieve this objective, the Fund invests primarily in
municipal obligations that are exempt from both federal and Kansas state
income taxes. Under normal conditions, the Fund will invest at least 80% of
its net assets in MUNICIPAL COMMERCIAL PAPER, MUNICIPAL LEASES, MUNICIPAL
NOTES AND MUNICIPAL BONDS (collectively "Municipal Obligations") which
produce interest that is, in the opinion of bond counsel, exempt from federal
income taxes. Descriptions of these and other securities which the Fund may
purchase are included in the SAI.
At least 65% of the Fund's total assets will be invested in Municipal
Obligations which are exempt from Kansas state income taxes. The remainder of
the Fund may be invested in Municipal Obligations of other states. Under
normal conditions, the Fund will also invest at least 80% of its net assets
in securities the income from which is not subject to the alternative minimum
tax.
The Fund generally invests in obligations with maturities (i.e. the date when
a bond issuer agrees to return the bond's principal, or face value, to the
bond's buyer) ranging from 1 to 20 years. It is the intent of the Adviser to
maintain a dollar weighted average portfolio maturity between 7 and 12 years.
However, when the Adviser determines that the market conditions so warrant,
the Kansas Tax-Exempt Bond Fund can maintain an average weighted maturity of
less than 7 years.
The Fund attempts to achieve its investment objective of capital preservation
with current income by maintaining a portfolio of securities with high credit
quality. To this end, the Fund generally purchases full coupon bonds rather
than zero coupon bonds. The Fund will not purchase securities which are
rated, at the time of purchase, below "Baa" by Moody's Investor Services,
Inc. ("Moody's") or below "BBB" by Standard & Poor's Corporation ("S&P"). The
Fund will may purchase non-rated securities if they have financial debt rates
similar to bonds which are rated "A" or better by either Moody's or S&P. The
Fund will not typically purchase industrial revenue bonds unless they have a
published rating of "A" or better.
When selecting securities, comparisons of the characteristics of available
bonds are made to other Kansas bonds. The Fund uses interest rate forecasting
for long-term trends rather than short-term purposes. Given the relatively
limited supply of the type of securities which the Fund purchases, the Fund
will not attempt to actively engage in short-term trading.
The Adviser manages duration and maturity through new purchases and sales of
existing positions.
The Adviser will attempt to keep any capital gains in the Fund to a minimum.
35
<PAGE> 37
KANSAS TAX-EXEMPT BOND FUND
CONTINUED
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
RISK FACTORS
The Fund is subject to several risks, any of which could cause investors to
lose money. These include:
STATE SPECIFIC RISK
State specific risk is the chance that the Fund, because it invests
primarily in securities issued by Kansas and its municipalities, is more
vulnerable to unfavorable developments in Kansas than funds that invest in
municipal bonds of many different states.
INTEREST RATE RISK
Interest rate risk is the chance that the value of the bonds the Fund holds
will decline over short or even long periods due to rising interest rates.
Interest rate risk is generally high for longer-term bonds.
INCOME RISK
Income risk is the chance that falling interest rates will cause the Fund's
income -- and thus its total return -- to decline. Income risk is generally
low for longer-term bonds.
CALL RISK
Call risk is the chance that during periods of falling interest rates, a
bond issuer will "call" -- or repay -- a high-yielding bond before its
maturity date. Forced to reinvest the unanticipated proceeds at lower
interest rates, the Fund would experience a decline in income and the
potential for taxable capital gains. Call risk is generally high for
longer-term bonds.
CREDIT RISK
Credit risk is the chance that bond issuers will fail to repay interest and
principal in a timely manner, reducing the Fund's return.
MANAGER RISK
Manager risk is the chance that poor security selection will cause the Fund
to underperform other funds with similar investment objectives.
ADDITIONAL RISKS
The price per share of the Kansas Tax-Exempt Bond Fund will fluctuate with
changes in value of the investments held by the Fund. Additionally, there can
be no assurance that a Fund will achieve its investment objective or be
successful in preventing or minimizing the risk of loss that is inherent in
investing in particular types of securities.
36
<PAGE> 38
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
MONEY MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide investors with current
income, liquidity and the maintenance of a stable net asset value of $1.00
per share.
PRINCIPAL STRATEGIES
In attempting to achieve its objective, the Fund invests in high quality,
U.S. dollar-denominated short-term money market instruments.
The securities the Fund may purchase include:
<TABLE>
<S> <C>
- U.S. GOVERNMENT OBLIGATIONS - YANKEE DOLLAR BANK CERTIFICATES OF
DEPOSIT
- COMMERCIAL PAPER - EURO DOLLAR BANK CERTIFICATES OF DEPOSIT
- MASTER DEMAND NOTES - TIME DEPOSITS
- LOAN PARTICIPATION INTERESTS - BANKERS' ACCEPTANCES
- MEDIUM-TERM NOTES - ASSET-BACKED SECURITIES
- FUNDING AGREEMENTS - REPURCHASE AGREEMENTS
</TABLE>
Descriptions of these and other securities which the Fund may purchase are
included in the SAI.
The Fund will only buy securities with the following credit qualities:
- rated in the highest short-term categories by two rating
organizations, such as "A-1" by S&P and "P-1" by Moody's at the time
of purchase;
- rated in the highest short-term category by one rating organization if
the securities are rated only by one rating organization; or
- unrated securities that are determined to be of equivalent quality by
the Adviser pursuant to guidelines approved by the Board and subject
to ratification by the Board.
The Fund invests more than 25% of its total assets in obligations issued by
the banking industry. However, for temporary defensive purposes during
periods when the Adviser believes that maintaining this concentration may be
inconsistent with the best interest of shareholders, the Fund will not
maintain this concentration. The Fund's policy of concentration in the
banking industry increases the Fund's exposure to market conditions
prevailing in that industry.
Securities purchased by the Fund generally have remaining maturities of 397
days or less, although instruments subject to repurchase agreements and
certain variable and floating rate obligations may bear longer final
maturities. The dollar-weighted average portfolio maturity of the Fund will
not exceed 90 days.
RISK FACTORS
The Money Market Fund attempts to maintain the net asset value of its shares
at a constant $1.00 per share, although there can be no assurance that the
Money Market Fund will always be able to do so.
37
<PAGE> 39
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
MONEY MARKET FUND
CONTINUED
The Money Market Fund may not achieve as high a level of current income as
other funds that do not limit their investments to the high quality
securities in which the Money Market Fund invests.
The Money Market Fund's policy of concentrating in the banking industry could
increase the Fund's exposure to economic or regulatory developments relating
to or affecting banks. Banks are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments they can make and the interest rates and fees they can charge.
The financial condition of banks is largely dependent on the availability and
cost of capital funds, and can fluctuate significantly when interest rates
change. In addition, general economic conditions may affect the financial
condition of banks.
The Money Market Fund may invest in foreign securities which will involve
certain additional risks. For example, foreign banks and companies generally
are not subject to regulatory requirements comparable to those applicable to
U.S. banks and companies. In addition, political developments and changes in
currency rates may adversely affect the value of the Fund's foreign
securities.
The Money Market Fund, like all investment funds, is subject to the chance
that poor security selection will cause the Money Market Fund to underperform
other funds with similar investment objectives.
INTEREST RATE RISK
Interest rate risk is the chance that the value of the bonds the Fund holds
will decline due to rising interest rates. When interest rates rise, the
price of most bonds goes down. When interest rates go down, bond prices go
up. The price of a bond is also affected by its maturity. Bonds with longer
maturities generally have greater sensitivity to changes in interest rates.
CREDIT RISK
Credit risk is the chance that a bond issuer will fail to repay interest
and principal in a timely manner or may be unable to fulfill an obligation
to repurchase securities from the Fund, reducing the Fund's return. Credit
risk is minimized by the Fund's policy of adequate diversification among
issuers and industries and minimum credit risk requirements as required by
Rule 2a-7 of the Investment Company Act of 1940.
PREPAYMENT RISK
The Fund's investments in mortgage-related securities are subject to the
risk that the principal amount of the underlying mortgage may be repaid
prior to the bond's maturity date. Such repayments are common when interest
rates decline. When such a repayment occurs, no additional interest will be
paid on the investment. Prepayment exposes the Fund to lower return upon
subsequent reinvestment of the principal.
INCOME RISK
Income risk is the chance that falling interest rates will cause the Fund's
income to decline. Income risk is generally higher for short-term bonds.
38
<PAGE> 40
INVESTMENT OBJECTIVES, STRATEGIES AND RISKS
ADDITIONAL RISKS TO THE FUNDS
Temporary Defensive Investments. In order to meet liquidity needs for
temporary defensive purposes, each Fund may invest up to 100% of its assets
in fixed income securities, money market securities, certificates of deposit,
bankers' acceptances, commercial paper or in equity securities which in the
Adviser's opinion are more conservative than the types of securities that the
Fund typically invests in. To the extent a Fund is engaged in temporary
defensive investments, it will not be pursuing, and may not achieve, its
investment objective.
39
<PAGE> 41
FUND MANAGEMENT
THE INVESTMENT ADVISER
INTRUST Financial Services, Inc. ("INTRUST"), 105 North Main Street, Box One,
Wichita, Kansas 67202 is the Adviser for the Funds. INTRUST is a wholly owned
subsidiary of INTRUST Bank, N.A. INTRUST Bank is a national banking
association which provides a full range of banking and trust services to
clients. As of December 31, 1999, total assets under management were
approximately $ billion. Through its portfolio management team, INTRUST Bank
continuously reviews, supervises and administers each of the Funds'
investment programs. INTRUST assumed responsibility as investment adviser
from INTRUST Bank on March 1, 2000 as a result of recent changes to
investment adviser regulations.
For these advisory services, the Funds paid INTRUST Bank as follows during
their fiscal year ended October 31, 1999:
<TABLE>
<CAPTION>
PERCENTAGE OF
AVERAGE NET ASSETS
AS OF 10/31/99
<S> <C>
------------------------------
Stock Fund %
------------------------------
International Multi-Manager
Stock Fund %
------------------------------
Short-Term Bond Fund %
------------------------------
Intermediate Bond Fund %
------------------------------
Kansas Tax-Exempt Bond Fund %
------------------------------
Money Market Fund %
---------------------------------------------------------------------
</TABLE>
INTRUST Bank waived a portion of its contractual fees with the Funds for the
most recent fiscal year. Contractual fees (without waivers) are: Stock Fund,
1.00%; International Multi-Manager Stock Fund, 0.40%; Short-Term Bond Fund,
0.40%; Intermediate Bond Fund, 0.40%; Kansas Tax-Exempt Bond Fund, 0.30%; and
Money Market Fund, 0.25%.
INTRUST PORTFOLIO MANAGERS
Under the International Multi-Manager Stock Fund's investment advisory
agreement, INTRUST Bank invests the Fund's assets in the Portfolio and
continuously reviews, supervises and monitors the Portfolio's investment
program.
John S. Maurer, Jr., Senior Vice President and Chief Investment Officer at
Intrust Bank, is responsible for the management activities carried out by
INTRUST Bank regarding the International Multi-Manager Stock Fund. Mr. Maurer
has over 22 years of experience in the investment and trust industry,
including the development of equity and fixed income investment services and
individual portfolio and relationship management. Mr. Maurer is also
responsible for the investment management oversight for INTRUST in its role
as adviser to the Stock Fund, Short-Term Bond Fund, Intermediate Bond Fund
and Money Market Fund. INTRUST Bank discharges its responsibilities subject
to the supervision of, and policies set by, the Trustees of the Trust.
Michael Colgan, Vice President and Trust Investment Officer for the Adviser
since 1985, is responsible for the day-to-day management of the Kansas
Tax-Exempt Bond Fund. Mr. Colgan has managed the Fund since December 1990.
40
<PAGE> 42
FUND MANAGEMENT
SUB-ADVISERS
Galliard Capital Management, Inc. Galliard, located at 800 LaSalle Avenue,
Suite 2060, Minneapolis, Minnesota 55479, is subadviser to the Short-Term
Bond Fund and the Intermediate Bond Fund. Galliard, a wholly-owned subsidiary
of Norwest Bank Minnesota, was formed July 1, 1995 to specialize in the
management of institutional fixed income portfolios. Karl Tourville and
Richard Merriam are co-managers of the Short-Term Bond Fund and the
Intermediate Bond Fund. Mr. Tourville has over ten years of investment
experience and Mr. Merriam has fourteen years of investment experience.
AMR Investment Services, Inc. AMR, located at 4333 Amon Carter Boulevard, MD
5645, Fort Worth, Texas 76155, a wholly-owned subsidiary of AMR Corporation,
the parent company of American Airlines, Inc., serves as the subadviser to
the Money Market Fund and the Stock Fund. AMR was organized in 1986 to
provide business management, advisory, administrative and asset management
consulting services. American Airlines, Inc. is not responsible for
investments made by AMR.
AMR has retained Barrow, Hanley, Mewhinney & Strauss, Inc. ("Barrow Hanley")
to provide portfolio investment management and related recordkeeping services
for the Stock Fund. Barrow Hanley, 3232 McKinney Avenue, 15th floor Dallas,
Texas 75204 is a wholly owned subsidiary of United Asset Management
Corporation, a Delaware corporation. Barrow Hanley is engaged in the business
of providing investment advice to institutional and individual client
accounts having assets of approximately $36.3 billion as of December 31,
1998.
INTERNATIONAL EQUITY PORTFOLIO
AMR also serves as investment manager and administrator to the Portfolio.
William F. Quinn has served as President of AMR since it was founded in 1986
and Nancy A. Eckl currently serves as Vice President-Trust Investments of
AMR. Ms. Eckl previously served as Vice President-Finance and Compliance of
AMR from December 1990 to May 1995. In these capacities, Mr. Quinn and Ms.
Eckl have primary responsibility for the day-to-day operations of the
Portfolio. The AMR Trust and AMR also entered into a Management Agreement
dated October 1, 1995, as amended July 25, 1997 and September 1, 1998, that
obligates AMR to provide or oversee all administrative, investment advisory
and portfolio management services for the AMR Trust.
Hotchkis and Wiley, Independence Investment Associates, Inc., Lazard Asset
Management and Templeton Investment Counsel, Inc., currently serve as
investment advisers to the Portfolio. None of these portfolio advisers
provide any services to the Portfolio except for portfolio investment
management and related recordkeeping services.
- Hotchkis and Wiley, 725 South Figueroa Street, Suite 4000, Los Angeles,
California 90017, is a professional investment counseling firm which was
founded in 1980 by John F. Hotchkis and George Wiley. Hotchkis and Wiley is
a division of Merrill Lynch Asset Mercury Management, L.P., a wholly-owned
indirect subsidiary of Merrill Lynch & Co., Inc.
- Independence Investment Associates, Inc., 53 State Street, Boston,
Massachusetts 02109, is a professional investment counseling firm which was
founded in 1982. The firm is a wholly owned subsidiary of John Hancock
Mutual Life Insurance Company.
41
<PAGE> 43
FUND MANAGEMENT
INTERNATIONAL EQUITY PORTFOLIO
CONTINUED
- Lazard Asset Management, 30 Rockefeller Plaza, New York, New York 10112, is
a division of Lazard Freres & Co. LLC, a registered investment adviser and
member of the New York, American and Midwest Stock Exchanges, providing its
clients with a wide variety of investment banking, brokerage and related
services.
- Templeton Investment Counsel, Inc., 500 East Broward Blvd., Suite 2100,
Fort Lauderdale, Florida 33394-3091, is a professional investment
counseling firm which has been providing investment services since 1979.
Templeton is indirectly owned by Franklin Resources, Inc.
The Statement of Additional Information has more detailed information about
the Investment Adviser and other service providers.
THE DISTRIBUTOR
BISYS Fund Services is the Funds' Distributor. Its address is 3435 Stelzer
Road, Columbus, Ohio 43219.
42
<PAGE> 44
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
---------------------------
HOW NAV IS CALCULATED
The NAV is calculated by
adding the total value of
the Fund's investments and
other assets, subtracting
its liabilities and then
dividing that figure by the
number of outstanding
shares of the Fund:
NAV =
Total Assets - Liabilities
----------------------------
Number of Shares
Outstanding
You can find most Funds'
NAV daily in The Wall
Street Journal and other
newspapers.
---------------------------
MONEY MARKET FUND
The Fund's net asset value, or NAV, is
expected to be constant at $1.00 per
share, although this value is not
guaranteed. The NAV is determined at 12
noon, Eastern time on days the New York
Stock Exchange is open. The Money Market
Fund values its securities at their
amortized cost. This method involves
valuing an instrument at its cost and
thereafter applying a constant
amortization to maturity of any discount
or premium, regardless of the impact of
fluctuating interest rates on the market
value of the instrument.
OTHER FUNDS
Per share net asset value (NAV) for each
non-Money Market Fund is determined and
its shares are priced at the close of
regular trading on the New York Stock
Exchange, normally at 4:00 p.m. Eastern
time on days the Exchange is open.
Your order for purchase, sale or exchange
of shares is priced at the next NAV
calculated after your order is received by
the Fund. This is what is known as the
offering price.
A Fund's securities are generally valued
at current market prices. If market
quotations are not available, prices will
be based on fair value as determined by
the Fund's Trustees.
Trading in securities on European, Far
Eastern and other international securities
exchanges and over-the-counter markets is
normally completed well before the close
of business of the Fund. Trading in
foreign securities in some countries may
not take place on all Fund business days
and may take place in various foreign
markets on days on which the International
Multi-Manager Stock Fund's NAV is not
calculated. The net asset value of the
Fund's shares may change on days when
shareholders will not be able to purchase
or redeem the Fund's shares. However,
unless the Fund's Manager determines that
the value of the already-priced foreign
securities would be materially affected
before the Fund's NAV is determined, no
adjustment will be made for the differing
times in pricing. Should an adjustment in
pricing be deemed necessary, then the fair
value of those securities will be
determined by consideration of other
factors by or under the direction of AMR
Trust's Board of Trustees.
All securities for which market quotations
are not readily available are valued at
fair value as determined in good faith by
or at the direction of the Funds' Board of
Trustees, or in the case of the
International Multi-Manager Stock Fund,
the AMR Trust's Board of Trustees.
43
<PAGE> 45
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
You may purchase shares
of the Funds through the
INTRUST Funds'
Distributor or through
banks, brokers and other
investment
representatives, which
may charge additional
fees and may require
higher minimum
investments or impose
other limitations on
buying and selling
shares. If you purchase
shares through an
investment
representative, that
party is responsible for
transmitting orders by
close of business and
may have an earlier
cut-off time for
purchase and sale
requests. Consult your
investment
representative or
institution for specific
information.
<TABLE>
<CAPTION>
MINIMUM MINIMUM
INITIAL SUBSEQUENT
ACCOUNT TYPE INVESTMENT INVESTMENT
<S> <C> <C>
Regular (non-retirement) $1,000 $50
----------------------------------------------------------
Retirement (IRA) $250 $50
----------------------------------------------------------
Automatic Investment Plan $1,000 $50
</TABLE>
All purchases must be in U.S. dollars. A
fee will be charged for any checks that do
not clear. Third-party checks are not
accepted.
A Fund may waive its minimum purchase
requirement and the Distributor may reject
a purchase order if it considers it in the
best interest of the Fund and its
shareholders.
-----------------------------------------------------------------------------
AVOID 31% TAX WITHHOLDING
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with
IRS rules. To avoid this, make sure you provide your correct Tax
Identification Number (Social Security Number for most investors) on your
account application.
-----------------------------------------------------------------------------
QUESTIONS?
Call 888-266-8787 or your
investment representative.
44
<PAGE> 46
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
INSTRUCTIONS FOR OPENING OR
ADDING TO AN ACCOUNT
BY REGULAR MAIL
Initial Investment:
1. Carefully read and complete the application. Establishing your account
privileges now saves you the inconvenience of having to add them later.
2. Make check, bank draft or money order payable to "INTRUST Funds Trust."
3. Mail to: INTRUST Funds Trust, P.O. Box 182498, Columbus, OH 43218-2499.
Subsequent:
1. Use the investment slip attached to your account statement.
Or, if unavailable,
2. Include the following information on a piece of paper:
- Fund name
- Share class
- Amount invested
- Account name
- Account number
Include your account number on your check.
3. Mail to: INTRUST Funds Trust,
P.O. Box 182498, Columbus, OH 43219-2498.
BY OVERNIGHT SERVICE
See instructions 1-2 above for subsequent investments.
3. Send to: INTRUST Funds,
c/o BISYS Fund Services,
Attn: T.A. Operations, 3435 Stelzer Road, Columbus, OH 43219.
ELECTRONIC PURCHASES
Your bank must participate in the Automated Clearing House (ACH) and must be
a United States bank. Your bank or broker may charge for this service.
Establish electronic purchase option on your account application or call
(888) 266-8787. Your account can generally be set up for electronic purchases
within 15 days.
Call (888) 266-8787 to arrange a transfer from your bank account.
ELECTRONIC VS. WIRE
TRANSFER
Wire transfers allow
financial institutions to
send funds to each other,
almost instantaneously.
With an electronic
purchase or sale, the
transaction is made
through the Automated
Clearing House (ACH) and
may take up to eight days
to clear. There is
generally no fee for ACH
transactions.
45
<PAGE> 47
SHAREHOLDER INFORMATION
PURCHASING AND ADDING TO YOUR SHARES
CONTINUED
BY WIRE TRANSFER
Note: Your bank may charge a wire transfer fee.
Please phone the Funds at (888) 266-8787 for instructions on opening an
account or purchasing additional shares by wire transfer.
You can add to your account by using the convenient options described below.
The Fund reserves the right to change or eliminate these privileges at any
time with 60 days notice.
AUTOMATIC INVESTMENT PLAN
You can make automatic investments in the Funds from your bank account.
Automatic investments can be as little as $50, once you've invested the
$1,000 minimum required to open the account.
To invest regularly from your bank account:
Complete the Automatic Investment Plan portion on your Account Application.
Make sure you note:
o Your bank name, address and account number
o The amount you wish to invest automatically (minimum $50)
o When you want to invest (on either the fifth or twentieth day of each
month)
o Attach a voided personal check.
-----------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
All dividends and distributions will be automatically reinvested unless you
request otherwise. There are no sales charges for reinvested distributions.
Dividends are higher for Service Class shares than for Premium Class shares,
because Premium Class shares are subject to higher shareholder servicing
expenses and Rule 12b-1 fees. Capital gains are distributed at least
annually.
Distributions are made on a per share basis regardless of how long you've
owned your shares. Therefore, if you invest shortly before a distribution
date, some of your investment will be returned to you in the form of a
distribution.
-----------------------------------------------------------------------------
46
<PAGE> 48
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
INSTRUCTIONS FOR SELLING SHARES
You may sell your shares
at any time. Your sales
price will be the next NAV
after your sell order is
received by the Fund, its
transfer agent, or your
investment representative.
Normally you will receive
your proceeds within a
week after your request is
received. See section on
"General Policies on
Selling Shares" below.
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
As a mutual fund shareholder, you are
technically selling shares when you request
a withdrawal in cash. This is also known as
redeeming shares or a redemption of shares.
BY TELEPHONE
(unless you have declined telephone sales privileges)
1. Call (888) 266-8787 with instructions as to how you wish to receive your
funds (mail, wire, and electronic transfer).
BY MAIL
1. Call (888) 266-8787 to request redemption forms or write a letter of
instruction indicating:
- your Fund and account number
- amount you wish to redeem
- address where your check should be sent
- account owner signature
2. Mail to: INTRUST Funds, P.O. Box 182498 Columbus, OH 43218-2499
BY OVERNIGHT SERVICE
See instruction 1 above.
2. Send to: INTRUST Funds, c/o BISYS Fund Services, Attn: T.A. Operations,
3435 Stelzer Road, Columbus, OH 43219
WIRE TRANSFER
You must indicate this option on your application.
Note: Your financial institution may also charge a wire transfer fee.
Call (888) 266-8787 to request a wire transfer. If you call by 4 p.m. Eastern
time, your payment will normally be wired to your bank on the next business
day.
47
<PAGE> 49
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
ELECTRONIC REDEMPTIONS
Your bank must participate in the Automated Clearing House (ACH) and must be
a U.S. bank.
Your bank may charge for this service.
Call (888) 266-8787 to request an electronic redemption.
If you call by 4 p.m. Eastern time, the NAV of your shares will normally be
determined on the same day and the proceeds credited within 8 days.
SYSTEMATIC WITHDRAWAL PLAN
You can receive automatic payments from your account on a monthly, quarterly,
semi-annual or annual basis. The minimum withdrawal is $100. To activate this
feature:
- Make sure you've checked the appropriate box on the Account Application.
Or call (888) 266-8787.
- Include a voided personal check.
- Your account must have a value of $10,000 or more to start withdrawals.
- If the value of your account falls below $500, you may be asked to add
sufficient funds to bring the account back to $500, or the Fund may close
your account and mail the proceeds to you.
QUESTIONS?
Call 888-266-8787 or
your
investment
representative.
48
<PAGE> 50
SHAREHOLDER INFORMATION
SELLING YOUR SHARES
CONTINUED
REDEMPTION BY CHECK WRITING -- MONEY MARKET FUND
Each month you may write checks in amounts of $500 or more on your account in
the Money Market Fund. To obtain checks, complete the signature card section
of the Account Application or contact the Fund to obtain a signature card.
Dividends and distributions will continue to be paid up to the day the check
is presented for payment. The check writing feature may be modified or
terminated upon 30-days written notice. You must maintain the minimum
required account balance of $500 and you may not close your Money Market Fund
account by writing a check.
GENERAL POLICIES ON SELLING SHARES
REDEMPTIONS IN
WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs"). Please call
888-266-8787 to request an IRA redemption form.
2. Redemption requests requiring a signature guarantee which include each of
the following:
- Redemptions over $10,000
- Your account registration or the name(s) in your account has changed
within the last 15 days
- The check is not being mailed to the address on your account
- The check is not being made payable to the owner of the account
- The redemption proceeds are being transferred to another Fund account
with a different registration.
A signature guarantee can be obtained from a financial institution, such as a
bank, broker-dealer, credit union, clearing agency, or savings association.
QUESTIONS?
Call 888-266-8787 or
your
investment
representative.
49
<PAGE> 51
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
CONTINUED
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to insure that telephone redemptions are only
made by authorized shareholders. All telephone calls are recorded for your
protection and you will be asked for information to verify your identity.
Given these precautions, unless you have specifically indicated on your
application that you do not want the telephone redemption feature, you may be
responsible for any fraudulent telephone orders. If appropriate precautions
have not been taken, the Transfer Agent may be liable for losses due to
unauthorized transactions.
REDEMPTIONS WITHIN 15 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, the proceeds of your
redemption may be held up to 15 business days until the Transfer Agent is
satisfied that the check has cleared. You can avoid this delay by purchasing
shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the SEC in order to protect remaining shareholders.
REDEMPTION IN KIND
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund
operations (for example, more than 1% of the Fund's net assets). If the Fund
deems it advisable for the benefit of all shareholders, redemption in kind
will consist of securities equal in market value to your shares. When you
convert these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $500, the Fund may ask you to increase your
balance. If it is still below $500 after 30 days from written notice by the
Fund to you, the Fund may close your account and send you the proceeds at the
current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash: If
distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that
remain uncashed for six months will be canceled and the money reinvested in
the Fund.
50
<PAGE> 52
SHAREHOLDER INFORMATION
DISTRIBUTION ARRANGEMENTS
This section describes
the distribution and
service fees you will pay
as an investor in
different share classes
offered by the Fund.
<TABLE>
<S> <C> <C>
TYPES OF CHARGES SERVICE CLASS PREMIUM CLASS
Sales Charge (Load) None. None.
Distribution (12b-1) Fee Subject to annual distribution Subject to annual distribution
fees of up to 0.25% of the net fees of up to 0.75% of the net
assets of each Fund's Service assets of each Fund's Premium
Class shares. Class shares.
Service Organization Fee Subject to annual Service Subject to annual Service
Organization fees of up to 0.25% Organization fees of up to 0.25%
of the net assets of each Fund's of the net assets of each Fund's
Service Class shares. Premium Class shares.
Fund Expenses Lower annual expenses than Premium Higher annual expenses than
Class shares. Service Class shares.
</TABLE>
DISTRIBUTION (12B-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and
distribution of the Fund's shares and/or for providing shareholder services.
12b-1 fees are paid from Fund assets on an ongoing basis, and will increase
the cost of your investment.
Premium Class shares pay a 12b-1 fee of up to .75% of the average daily net
assets of a Fund. Service Class shares pay a 12b-1 fee of up to .25% of the
average daily net assets of a Fund.
Over time shareholders will pay more than the equivalent of the maximum
permitted front-end sales charge because 12b-1 distribution and service fees
are paid out of the Fund's assets on an on-going basis.
SERVICE ORGANIZATION FEES
Service Organization fees compensate various banks, trust companies,
broker-dealers and other financial organizations for administrative services
such as maintaining shareholder accounts and records for those investors
purchasing shares through these sales channels. Premium Class shareholders
may pay a service organization an additional fee of up to 0.25% of the daily
net assets of a Fund for services such as record keeping, communication with
and education of shareholders, and asset allocation services.
MASTER-FEEDER FUND ARRANGEMENTS
The International Multi-Manager Stock Fund operates under a master-feeder
structure. This means that the Fund seeks its investment objective by
investing all of its investable assets in another investment company with the
same investment objective. The Fund invests all of its assets in the
International Equity Portfolio (the "Portfolio"), a series of the AMR
Investment Services Trust. The Fund may withdraw its assets from the
Portfolio and invest its assets in another investment company or,
alternatively, it may hire an investment adviser to manage the Fund's assets
directly if the Fund's Board of Trustees determines that this action would be
in the shareholders' best interests.
51
<PAGE> 53
SHAREHOLDER INFORMATION
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income a Fund receives is paid out, less expenses, in the form of
dividends to its shareholders. Dividends on the Money Market Fund, the
Intermediate Term Bond Fund, the Short-Term Bond Fund and the Kansas
Tax-Exempt Bond Fund are paid monthly. Dividends on the Stock Fund and the
International Multi-Manager Stock Fund are paid annually. Capital gains for
all Funds are distributed at least annually.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
An exchange of shares is considered a sale, and any related gains may subject
to applicable taxes.
Dividends are taxable as ordinary income. Taxation on capital gains will vary
with the length of time the Fund has held the security -- not how long the
shareholder has been in the Fund.
Dividends are taxable in the year in which they are paid, even if they appear
on your account statement the following year.
The Kansas Tax-Exempt Bond Fund intends to distribute tax-exempt income,
however, any capital gains distributed by the Fund may be taxable. The Kansas
Tax-Exempt Bond Fund may invest a portion of its assets in securities that
generate income that is not exempt from federal or state income tax. Income
exempt from federal tax may be subject to state and local income tax.
You will be notified in January each year about the federal tax status of
distributions made by the Fund. Depending on your residence for tax purposes,
distributions also may be subject to state and local taxes, including
withholding taxes.
Foreign shareholders may be subject to special withholding requirements.
There is a penalty on certain pre-retirement distributions from retirement
accounts. Consult your tax adviser about the federal, state and local tax
consequences in your particular circumstances.
52
<PAGE> 54
SHAREHOLDER INFORMATION
EXCHANGING YOUR SHARES
Shares of any Fund in the
Trust may be exchanged for
shares of the same class in
any other Fund in the
Trust. You must meet the
minimum investment
requirements for the Fund
into which you are
exchanging. Exchanges from
one Fund to another are
taxable.
NOTES ON EXCHANGES
- The registration and
tax identification
numbers of the two
accounts must be
identical.
- The Exchange Privilege
may be changed or
eliminated at any time
after a 60-day notice
to shareholders.
- No transaction fees are
charged for exchanges.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by sending a
written request to INTRUST Funds,
P.O. Box 182498, Columbus OH
43218-2499, or by calling (888)
266-8787. Please provide the
following information:
- Your name and telephone number
- The exact name on your account
and account number
- Taxpayer identification number
(usually your Social Security
number)
- Dollar value or number of shares
to be exchanged
- The name of the Fund from which
the exchange is to be made
- The name of the Fund into which
the exchange is being made.
See "Selling your Shares" for
important information about
telephone transactions.
QUESTIONS?
Call 888-266-8787 or
your
investment
representative.
53
<PAGE> 55
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each of
the Fund's financial performance for the period of its operations. Certain
information reflects financial results for a single Fund share. The total
returns in the tables represent the rate than an investor would have earned
(or lost) on an investment in the Funds (assuming reinvestment of all
dividends and distributions). This financial information has been audited by
KPMG LLP, whose report, along with the Funds' financial statements, are
included in the INTRUST Funds Annual Report. You may obtain a free copy of
the Annual Report by calling 1-888-266-8787. Information for Premium Class is
not shown since the class was not in effect for the periods shown.
[1999 financial highlights to be furnished]
FINANCIAL HIGHLIGHTS
FISCAL YEAR ENDED OCTOBER 31, 1998
<TABLE>
<CAPTION>
SHORT-TERM INTERNATIONAL KANSAS
MONEY BOND INTERMEDIATE MULTI-MANAGER TAX-EXEMPT
MARKET FUND FUND BOND FUND STOCK FUND STOCK FUND BOND FUND
----------- ---------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD......................... $ 1.000 $ 10.08 $ 10.21 $ 11.31 $ 10.97 $ 10.73
INVESTMENT ACTIVITIES:
Net investment income........ 0.050 0.57 0.59 0.07 0.18 0.53
Net realized and unrealized
gains (losses) from
investments................ -- 0.12 0.22 1.28 0.21 0.20
Total from Investment
Activities............... 0.050 0.69 0.81 1.35 0.39 0.73
DISTRIBUTIONS
Net investment income........ (0.050) (0.57) (0.59) (0.05) (0.13) (0.53)
Net realized gains from
investments................ -- -- -- (0.54) (0.09) (0.03)
Total Distributions........ (0.050) (0.57) (0.59) (0.59) (0.22) (0.56)
NET ASSET VALUE, END OF
PERIOD....................... $ 1.000 $ 10.20 $ 10.43 $ 12.07 $ 11.14 $ 10.90
TOTAL RETURN(B)............ 5.13% 6.96% 8.16% 12.49% 3.61% 7.01%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000)...................... $50,746 $61,371 $52,993 $100,524 $55,505 $132,917
Ratio of expenses to average
net assets(c).............. 0.67% 0.67% 0.78% 1.32% 1.29% 0.21%
Ratio of net investment
income to average net
assets(c).................. 5.04% 5.59% 5.74% 0.66% 1.55% 4.90%
Ratio of expenses to average
net assets*(c)............. 1.03% 1.13% 1.14% 1.70% 1.59% 1.00%
Ratio of net investment
income to average net
assets*(c)................. 4.68% 5.13% 5.38% 0.28% 1.25% 4.11%
Portfolio turnover........... -- 55.75% 39.07% 102.36% -- 13.51%
</TABLE>
------------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
54
<PAGE> 56
FINANCIAL HIGHLIGHTS
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
INTERNATIONAL KANSAS
MONEY SHORT-TERM INTERMEDIATE MULTI-MANAGER TAX-EXEMPT
MARKET FUND BOND FUND BOND FUND STOCK FUND STOCK FUND BOND FUND
1/23/97 TO 1/21/97 TO 1/21/97 TO 1/21/97 TO 1/20/97 TO 9/1/97 TO
10/31/97(a) 10/31/97(a) 10/31/97(a) 10/31/97(a) 10/31/97(a) 10/31/97
----------- ----------- ------------ ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD....................... $ 1.000 $ 10.00 $ 10.00 $ 10.00 $ 10.00 $ 10.66
INVESTMENT ACTIVITIES:
Net investment income...... 0.038 0.42 0.45 0.04 0.11 0.09
Net realized and unrealized
gains (losses) from
investments.............. -- 0.08 0.21 1.27 0.86 0.07
Total from Investment
Activities............. 0.038 0.50 0.66 1.31 0.97 0.16
DISTRIBUTIONS
Net investment income...... (0.038) (0.42) (0.45) -- -- (0.09)
Total Distributions...... (0.038) (0.42) (0.45) -- -- (0.09)
NET ASSET VALUE, END OF
PERIOD..................... $ 1.000 $ 10.08 $ 10.21 $ 11.31 $ 10.97 $ 10.73
TOTAL RETURN(B).......... 3.86% 5.13% 6.77% 13.10% 9.70% 1.51%
RATIOS/SUPPLEMENTAL DATA:
Net Assets at end of period
(000).................... $55,566 $52,682 $46,492 $79,834 $41,135 $103,616
Ratio of expenses to
average net assets(c).... 0.71% 0.78% 0.90% 1.41% 1.42% 0.21%
Ratio of net investment
income to average net
assets(c)................ 4.92% 5.48% 5.83% 0.63% 1.91% 5.10%
Ratio of expenses to
average net assets*(c)... 1.11% 1.25% 1.27% 1.80% 1.75% 0.82%
Ratio of net investment
income to average net
assets*(c)............... 4.52% 5.01% 5.46% 0.24% 1.58% 4.49%
Portfolio turnover......... -- 84.41% 108.73% 71.76% -- 5.87%
</TABLE>
------------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
+ Formerly the Kansas Tax Free Income Portfolio of the SEI Tax-Exempt Trust.
Effective September 1, 1997, The Kansas Tax-Exempt Bond Fund changed its
fiscal year end from August 31 to October 31.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
55
<PAGE> 57
FINANCIAL HIGHLIGHTS
The financial highlights for the Kansas Tax-Exempt Bond Fund below include
audited financial information prepared by the Fund's previous independent
auditors for the fiscal years ending on August 31, 1994 through August 31,
1997. Information for Premium Class is not shown since the class was not in
effect for the periods shown.
<TABLE>
<CAPTION>
KANSAS TAX-EXEMPT BOND FUND(A)
----------------------------------------
YEARS ENDED AUGUST 31,
----------------------------------------
1997 1996 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period........................ $ 10.51 $ 10.63 $ 10.47 $ 10.91
Investment Activities:
Net investment income..................................... 0.55 0.56 0.57 0.57
Net realized and unrealized gains (losses) from
investments............................................. 0.19 (0.12) 0.16 (0.42)
Total from Investment Activities:................... 0.74 0.44 0.73 0.15
Distributions:
Net investment income..................................... (0.59) (0.56) (0.57) (0.57)
Net realized gains from investments....................... -- -- -- (0.02)
Total Distributions................................. (0.59) (0.56) (0.57) (0.59)
Net Asset Value, end of period.............................. $ 10.66 $ 10.51 $ 10.63 $ 10.47
Total Return........................................ 7.27% 4.23% 7.23% 1.41%
Ratios/Supplemental Data:
Net assets at end of period (000)......................... $96,780 $72,065 $65,834 $62,346
Ratio of expenses to average net assets................... 0.21% 0.21% 0.21% 0.21%
Ratio of net investment income to average net assets...... 5.20% 5.31% 5.47% 5.36%
Ratio of expenses to average net assets*.................. 0.62% 0.51% 0.51% 0.54%
Ratio of income to average net assets*.................... 4.79% 5.01% 5.17% 5.03%
Portfolio turnover.......................................... 8.78% 12.71% 17.60% 10.57%
</TABLE>
------------------
* During the period certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Formerly the Kansas Tax-Free Income Portfolio of the SEI Tax-Exempt
Trust. Effective September 1, 1997, the Fund changed its fiscal year end
from August 31 to October 31.
AMR INVESTMENT SERVICES INTERNATIONAL EQUITY PORTFOLIO
The following financial highlights for the AMR Investment Services International
Equity Portfolio in which the International Multi-Manager Stock Fund currently
invests (fiscal years ended October 31, 1998, 1997 and 1996) include information
audited by Ernst & Young LLP.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------
1999 1998 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET ASSETS:
End of period (in thousands)............................ $1,028,145 $761,673 $404,496
RATIOS:
Expenses to average net assets.......................... 0.53% 0.57% 0.56%
Net investment income to average net assets............. 2.29% 2.55% 2.50%
Portfolio turnover rate................................. 24% 15% 19%
</TABLE>
56
<PAGE> 58
For more information about the INTRUST Funds, the following documents are
available free upon request:
ANNUAL/SEMIANNUAL REPORTS:
The Funds' annual and semi-annual reports to shareholders contain detailed
information on each Fund's investments. The annual report includes a discussion
of the market conditions and investment strategies that significantly affected
the Funds' performance during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI):
The SAI provides more detailed information about the Funds, including operations
and investment policies. It is incorporated by reference and is legally
considered a part of this prospectus.
You can get free copies of Reports and the SAI, or request other information and
discuss your questions about the Funds, by contacting INTRUST or a broker that
sells the Funds. Or contact us at:
INTRUST FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
TELEPHONE: 1-888-266-8787
Address for
Trust Clients of INTRUST Bank, N.A.
105 North Main Street
Box One
Wichita, Kansas 67202
You can review the Funds' reports and SAI at the Public Reference Room of the
Securities and Exchange Commission. You can also get text-only copies:
o For a fee, by writing the Public Reference Section of the Commission,
Washington, D.C. 20549-6009 or calling 1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-7505.
<PAGE> 59
INTRUST FUNDS TRUST
3435 STELZER ROAD, COLUMBUS, OHIO 43219
GENERAL AND ACCOUNT INFORMATION: (888) 266-8787
INTRUST FINANCIAL SERVICES, INC.--INVESTMENT ADVISER
("INTRUST" OR THE "ADVISER")
BISYS FUND SERVICES
ADMINISTRATOR AND DISTRIBUTOR
("BISYS" OR THE "ADMINISTRATOR" OR THE "DISTRIBUTOR")
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information (the "SAI") describes one money
market fund (the "Money Market Fund") and five non-money market funds (the
"Non-Money Market Funds") (collectively, the "Funds"), all of which are managed
by INTRUST. The Funds are:
MONEY MARKET FUND
-- Money Market Fund
NON-MONEY MARKET FUNDS
-- Short-Term Bond Fund
-- Intermediate Bond Fund
-- Stock Fund
-- International Multi-Manager Stock Fund
-- Kansas Tax-Exempt Bond Fund
Each Fund constitutes a separate investment portfolio with distinct
investment objectives and policies. Shares of the Funds are sold to the public
by BISYS as an investment vehicle for individuals, institutions, corporations
and fiduciaries, including customers of INTRUST or its affiliates.
The International Multi-Manager Stock Fund seeks its investment objective
by investing all of its investable assets in the International Equity Portfolio
(the "Portfolio") of the AMR Investment Services Trust ("AMR Trust") that has an
identical investment objective to the International Multi-Manager Stock Fund.
This SAI is not a prospectus and is only authorized for distribution when
preceded or accompanied by a prospectus for the Funds dated March 1, 2000(the
"Prospectus"). This SAI contains additional and more detailed information than
that set forth in the Prospectus and should be read in conjunction with the
Prospectus. The Financial Statements included in the Funds' October 31, 1999
Annual Report to Shareholders are incorporated by reference into this SAI. The
Prospectus and Annual Report may be obtained without charge by writing the Funds
at the address above or calling 1-888-266-8787.
Shares of the Funds are not bank deposits or obligations of, or guaranteed
or endorsed by, INTRUST or any of its affiliates, and are not insured by,
guaranteed by, obligations of or otherwise supported by the U.S. Government, the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
governmental agency. An investment in the Funds involves risk, including the
possible loss of principal. The Money Market Fund seeks to maintain a net asset
value per share of $1.00 although there can be no assurance that they will be
able to do so.
<PAGE> 60
March 1, 2000
<PAGE> 61
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
THE INVESTMENT POLICIES AND PRACTICES OF THE FUNDS 3
INVESTMENT RESTRICTIONS 21
RISKS OF INVESTING IN THE FUNDS 25
MANAGEMENT 31
Trustees and Officers 31
Trustees and Officers of AMR Investment Services Trust 33
Investment Adviser 36
Subadvisers 37
Distribution of Fund Shares 44
Distribution Plan 44
Administration and Fund Accounting Services 45
Service Organizations 46
EXPENSES 47
DETERMINATION OF NET ASSET VALUE 47
PORTFOLIO TRANSACTIONS 48
Portfolio Turnover 49
TAXATION 49
Taxation of the Portfolio 54
OTHER INFORMATION 56
Capitalization 56
Voting Rights 59
Custodian, Transfer Agent and Dividend Disbursing Agent 59
Independent Auditors 59
Yield and Performance Information 59
Financial Statements 62
APPENDIX 63
</TABLE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THE PROSPECTUSES, OR IN THIS STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THE PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR
PRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY INTRUST
FUNDS. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFERING
BY INTRUST FUNDS IN ANY JURISDICTION IN WHICH SUCH AN OFFERING MAY NOT LAWFULLY
BE MADE.
iii
<PAGE> 62
THE INVESTMENT POLICIES AND
PRACTICES OF THE FUNDS
Each Fund is a separate investment fund or portfolio, commonly known as a
mutual fund. The Funds are separate portfolios of INTRUST Funds Trust, a
Delaware business trust, organized under the laws of Delaware on January 26,
1996 as an open-end, management investment company. The Trust's Board of
Trustees oversees the overall management of the Funds and elects the officers of
the Trust.
As a matter of fundamental policy, notwithstanding any limitation
otherwise, each Fund is authorized to seek to achieve its investment objective
by investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
- The investment objective of the Money Market Fund is to
provide investors with current income, liquidity and the
maintenance of a stable net asset value of $1.00 per share.
The Fund seeks to achieve its objective by investing primarily
in high quality, U.S. dollar denominated short-term
obligations which present minimal credit risks.
- The investment objective of the Short-Term Bond Fund is to
provide investors with as high a level of current income as is
consistent with liquidity and safety of principal. The Fund
seeks to achieve its objective by investing primarily in
investment grade short-term obligations.
- The investment objective of the Intermediate Bond Fund is to
provide investors with a competitive total return. The Fund
seeks to achieve its objective by investing in fixed income
securities.
- The investment objective of the Stock Fund is to provide
investors with long-term capital appreciation. The Fund seeks
to achieve its objective by investing in equity securities of
issuers with large market capitalizations.
- The investment objective of the International Multi-Manager
Stock Fund is to provide investors with long-term capital
appreciation. The Fund seeks to achieve its objective by
investing in equity securities of issuers based outside the
United States.
- The investment objective of the Kansas Tax-Exempt Bond Fund is
to preserve capital while producing current income for the
investor that is exempt from both federal and Kansas state
income taxes.
Each Fund follows its own investment objectives and policies, including
certain investment restrictions. Several of those restrictions and each of the
Funds' investment objectives are fundamental policies, which means that they may
not be changed without a majority vote of shareholders of the affected Fund.
Except for the objectives and those restrictions specifically identified as
fundamental, all other investment policies and practices described in this SAI
are not fundamental and may change solely by approval of the Board of Trustees.
References below to "All Funds" include the Portfolio, except where noted
otherwise.
<PAGE> 63
The following is a description of investment practices of the Funds and the
securities in which they may invest:
U.S. TREASURY OBLIGATIONS (ALL FUNDS). The Funds may invest in U.S.
Treasury obligations, which are backed by the full faith and credit of the
United States Government as to the timely payment of principal and interest.
U.S. Treasury obligations consist of bills, notes, and bonds and separately
traded interest and principal component parts of such obligations known as
STRIPS which generally differ in their interest rates and maturities. U.S.
Treasury bills, which have original maturities of up to one year, notes, which
have maturities ranging from one year to 10 years, and bonds, which have
original maturities of 10 to 30 years, are direct obligations of the United
States Government.
U.S. GOVERNMENT SECURITIES (ALL FUNDS). U.S. Government securities are
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. U.S. Government securities include debt securities issued or
guaranteed by U.S. Government-sponsored enterprises and federal agencies and
instrumentalities. Some types of U.S. Government securities are supported by the
full faith and credit of the United States Government or U.S. Treasury
guarantees, such as mortgage-backed certificates guaranteed by the Government
National Mortgage Association ("GNMA"). Other types of U.S. Government
securities, such as obligations of the Student Loan Marketing Association,
provide recourse only to the credit of the agency or instrumentality issuing the
obligation. In the case of obligations not backed by the full faith and credit
of the United States Government, the investor must look to the agency issuing or
guaranteeing the obligation for ultimate repayment.
The Funds may invest in obligations of agencies of the United States
Government. Such agencies include, among others, Farmers Home Administration,
Federal Farm Credit System, Federal Housing Administration, Government National
Mortgage Association, Maritime Administration, Small Business Administration,
and The Tennessee Valley Authority. The Funds may purchase securities issued or
guaranteed by the Government National Mortgage Association which represent
participations in Veterans Administration and Federal Housing Administration
backed mortgage pools. Obligations of instrumentalities of the United States
Government include securities issued by, among others, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal Land Banks, Federal National
Mortgage Association and the United States Postal Service. Some of these
securities are supported by the full faith and credit of the United States
Treasury (e.g., Government National Mortgage Association). Guarantees of
principal by agencies or instrumentalities of the U.S. Government may be a
guarantee of payment at the maturity of the obligation so that in the event of a
default prior to maturity there might not be a market and thus no means of
realizing the value of the obligation prior to maturity.
COMMERCIAL PAPER (ALL FUNDS). Commercial paper includes short-term
unsecured promissory notes, variable rate demand notes and variable rate master
demand notes issued by both domestic and foreign bank holding companies,
corporations and financial institutions and United States Government agencies
and instrumentalities. All commercial paper purchased by the Funds is, at the
time of investment, rated in one of the top two (top three with respect to
Short-Term Bond Fund) rating categories of at least one NRSRO, or, if not rated
is, in the opinion of the Adviser, of an investment quality comparable to rated
commercial paper in which the Funds may invest, or, with respect to the Money
Market Fund, (i) rated "P-1" by Moody's and "A-1" or better by S&P or in a
comparable rating category by any two NRSROs that have rated the commercial
paper or (ii) rated in a comparable category by only one such organization if it
is the only organization that has rated the commercial paper.
CORPORATE DEBT SECURITIES (ALL FUNDS EXCEPT KANSAS TAX-EXEMPT BOND
FUND--SEE "VARIABLE RATE DEMAND OBLIGATIONS"). The Funds may purchase corporate
debt securities, subject to the rating and quality requirements specified with
respect to each Fund. The Funds may invest in both rated commercial paper and
rated corporate debt obligations of foreign issuers that meet the same quality
<PAGE> 64
criteria applicable to investments by the Funds in commercial paper and
corporate debt obligations of domestic issuers. These investments, therefore,
are not expected to involve significant additional risks as compared to the
risks of investing in comparable domestic securities. Generally, all foreign
investments carry with them both opportunities and risks not applicable to
investments in securities of domestic issuers, such as risks of foreign
political and economic instability, adverse movements in foreign exchange rates,
the imposition or tightening of exchange controls or other limitations on
repatriation of foreign capital, changes in foreign governmental attitudes
toward private investment (possibly leading to nationalization, increased
taxation or confiscation of foreign assets) and added difficulties inherent in
obtaining and enforcing a judgment against a foreign issuer of securities should
it default.
MORTGAGE-RELATED SECURITIES (ALL FUNDS). The Funds are permitted to invest
in mortgage-related securities subject to the rating and quality requirements
specified with respect to each such Fund. In the case of the Kansas Tax-Exempt
Bond Fund, to the extent the Fund is permitted to invest in U.S. Government
securities, the Fund may invest in mortgage-related securities only. Mortgage
pass-through securities are securities representing interests in "pools" of
mortgages in which payments of both interest and principal on the securities are
made monthly, in effect, "passing through" monthly payments made by the
individual borrowers on the mortgage loans which underlie the securities (net of
fees paid to the issuer or guarantor of the securities). Early repayment of
principal on mortgage pass-through securities (arising from prepayments of
principal due to sale of the underlying property, refinancing, or foreclosure,
net of fees and costs which may be incurred) may expose a Fund to a lower rate
of return upon reinvestment of principal. Also, if a security subject to
prepayment has been purchased at a premium, in the event of prepayment the value
of the premium would be lost. Like other fixed-income securities, when interest
rates rise, the value of mortgage-related securities generally will decline;
however, when interest rates decline, the value of mortgage-related securities
with prepayment features may not increase as much as other fixed-income
securities. In recognition of this prepayment risk to investors, the Public
Securities Association (the "PSA") has standardized the method of measuring the
rate of mortgage loan principal prepayments. The PSA formula, the Constant
Prepayment Rate or other similar models that are standard in the industry will
be used by the Funds in calculating maturity for purposes of investment in
mortgage-related securities. The inverse relation between interest rates and
value of fixed income securities will be more pronounced with respect to
investments by the Funds in mortgage-related securities, the value of which may
be more sensitive to interest rate changes.
Payment of principal and interest on some mortgage pass-through securities
(but not the market value of the securities themselves) may be guaranteed by the
full faith and credit of the U.S. Government in the case of securities
guaranteed by GNMA or guaranteed by agencies or instrumentalities of the U.S.
Government (in the case of securities guaranteed by the Federal National
Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation
("FHLMC"), which are supported only by the discretionary authority of the U.S.
Government to purchase the agency's obligations). Mortgage pass-through
securities created by non-governmental issuers (such as commercial banks,
savings and loan institutions, private mortgage insurance companies, mortgage
bankers and other secondary market issuers) may be supported in various forms of
insurance or guarantees issued by governmental entities.
Collateralized Mortgage Obligations ("CMOs") are hybrid instruments with
characteristics of both mortgage-backed bonds and mortgage pass-through
securities. Similar to a bond, interest and prepaid principal on a CMO are paid,
in most cases, semi-annually. CMOs may be collateralized by whole mortgage loans
but are more typically collateralized by portfolios of mortgage pass-through
securities guaranteed by GNMA, FHLMC or FNMA. CMOs are structured in multiple
classes, with each class bearing a different stated maturity or interest rate.
The inverse relation between interest rates and value of fixed income securities
will be more pronounced with respect to investments by the Fund in
mortgage-related securities, the value of which may be more sensitive to
interest rate changes.
<PAGE> 65
Mortgage-related securities, for purposes of this SAI, represent pools of
mortgage loans assembled for sale to investors by various governmental agencies
such as the Government National Mortgage Association and government-related
organizations such as the Federal National Mortgage Association and the Federal
Home Loan Mortgage Corporation, as well as by nongovernmental issuers such as
commercial banks, savings and loan institutions, mortgage bankers, and private
mortgage insurance companies. Although certain mortgage-related securities are
guaranteed by a third party or otherwise similarly secured, the market value of
the security, which may fluctuate, is not so secured. If the Fund purchases a
mortgage-related security at a premium, that portion may be lost if there is a
decline in the market value of the security whether resulting from changes in
interest rates or prepayments in the underlying mortgage collateral. As with
other interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true since in periods of declining interest rates the mortgages
underlying the securities are prone to prepayment. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by unscheduled
prepayments on the underlying mortgages and, therefore, it is not possible to
predict accurately the security's return to the Fund. In addition, regular
payments received in respect of mortgage-related securities include both
interest and principal. No assurance can be given as to the return a Fund will
receive when these amounts are reinvested.
There are a number of important differences among the agencies and
instrumentalities of the U.S. Government that issue mortgage-related securities
and among the securities that they issue. Mortgage-related securities created by
the Government National Mortgage Association ("GNMA") include GNMA Mortgage
Pass-Through Certificates (also known as "Ginnie Maes") which are guaranteed as
to the timely payment of principal and interest and such guarantee is backed by
the full faith and credit of the United States. GNMA is a wholly-owned U.S.
Government corporation within the Department of Housing and Urban Development.
GNMA certificates also are supported by the authority of GNMA to borrow funds
from the U.S. Government to make payments under its guarantee. Mortgage-related
securities issued by the Federal National Mortgage Association ("FNMA") include
FNMA Guaranteed Mortgage Pass-Through Certificates (also known as "Fannie Maes")
which are solely the obligations of the FNMA and are not backed by or entitled
to the full faith and credit of the United States. The FNMA is a
government-sponsored organization owned entirely by private stock-holders.
Fannie Maes are guaranteed as to timely payment of the principal and interest by
FNMA. Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates (also
known as ("Freddie Macs" or "PCs"). The FHLMC is a corporate instrumentality of
the United States, created pursuant to an Act of Congress, which is owned
entirely by Federal Home Loan Banks. Freddie Macs are not guaranteed by the
United States or by any Federal Home Loan Banks and do not constitute a debt or
obligation of the United States or of any Federal Home Loan Bank. Freddie Macs
entitle the holder to timely payment of interest, which is guaranteed by the
FHLMC. The FHLMC currently guarantees timely payment of interest and either
timely payment of principal or eventual payment of principal, depending upon the
date of issue. When the FHLMC does not guarantee timely payment of principal,
FHLMC may remit the amount due on account of its guarantee of ultimate payment
of principal at any time after default on an underlying mortgage, but in no
event later than one year after it becomes payable.
ASSET-BACKED SECURITIES (MONEY MARKET FUND, SHORT-TERM BOND FUND AND
INTERMEDIATE BOND FUND). These Funds are permitted to invest in asset-backed
securities, subject to the rating and quality requirements specified with
respect to each such Fund. Through the use of trusts and special purpose
subsidiaries, various types of assets, primarily home equity loans and
automobile and credit card receivables, are being securitized in pass-through
structures similar to the mortgage pass-through structures described above.
Consistent with the Funds' investment objectives, policies and quality
<PAGE> 66
standards, a Fund may invest in these and other types of asset-backed securities
which may be developed in the future.
Asset-backed securities involve certain risks that are not posed by
mortgage-related securities, resulting mainly from the fact that asset-backed
securities do not usually contain the benefit of a complete security interest in
the related collateral. For example, credit card receivables generally are
unsecured and the debtors are entitled to the protection of a number of state
and Federal consumer credit laws, some of which may reduce the ability to obtain
full payment. In the case of automobile receivables, due to various legal and
economic factors, proceeds from repossessed collateral may not always be
sufficient to support payments on these securities. The risks associated with
asset-backed securities are often reduced by the addition of credit enhancements
such as a letter of credit from a bank, excess collateral or a third-party
guarantee.
MUNICIPAL COMMERCIAL PAPER (SHORT-TERM BOND FUND, INTERMEDIATE BOND FUND
AND KANSAS TAX-EXEMPT BOND FUND). Municipal commercial paper is a debt
obligation with a stated maturity of one year or less which is issued to finance
seasonal working capital needs or as short-term financing in anticipation of
longer-term debt. Investments in municipal commercial paper are limited to
commercial paper which is rated at the date of purchase: (i) "P-1" by Moody's
and "A-1" or "A-1+" by S&P, "P-2" (Prime-2) or better by Moody's and "A-2" or
better by S&P or (ii) in a comparable rating category by any two of the NRSROs
that have rated commercial paper or (iii) in a comparable rating category by
only one such organization if it is the only organization that has rated the
commercial paper or (iv) if not rated, is, in the opinion of the Adviser, of
comparable investment quality and within the credit quality policies and
guidelines established by the Board of Trustees. Issuers of municipal commercial
paper rated "P-1" have a "superior capacity for repayment of short-term
promissory obligations." The "A-1" rating for commercial paper under the S&P
classification indicates that the "degree of safety regarding timely payment is
either overwhelming or very strong." Commercial paper with "overwhelming safety
characteristics" will be rated "A-1+." Commercial paper receiving a "P-2" rating
has a strong capacity for repayment of short-term promissory obligations.
Commercial paper rated "A-2" has the capacity for timely payment although the
relative degree of safety is not as overwhelming as for issues designated "A-1."
See the Appendix for a more complete description of securities ratings.
MUNICIPAL LEASES. The Kansas Tax-Exempt Bond Fund may invest in
instruments, or participations in instruments, issued in connection with lease
obligations or installment purchase contract obligations of municipalities.
Although municipal lease obligations do not constitute general obligations of
the issuing municipality, a lease obligation is ordinarily backed by the
municipality's covenant to budget for, appropriate funds for, and make the
payments due under the lease obligation. However, certain lease obligations
contain "non-appropriation" clauses, which provide that the municipality has no
obligation to make lease or installment purchase payments in future years unless
money is appropriated for such purpose in the relevant years. Municipal lease
obligations will be treated as liquid only if they satisfy criteria set forth in
guidelines established by the Board of Trustees, and there can be no assurance
that a market will exist or continue to exist for any municipal lease
obligation.
MUNICIPAL NOTES (SHORT-TERM BOND FUND, INTERMEDIATE BOND FUND AND KANSAS
TAX-EXEMPT BOND FUND). Municipal notes are generally sold as interim financing
in anticipation of the collection of taxes, a bond sale or receipt of other
revenue. Municipal notes generally have maturities at the time of issuance of
one year or less. Investments in municipal notes are limited to notes which are
rated at the date of purchase: (i) MIG 1 or MIG 2 by Moody's and in a comparable
rating category by at least one other nationally recognized statistical rating
organization that has rated the notes, or (ii) in a comparable rating category
by only one such organization, including Moody's, if it is the only organization
that has rated the notes, or (iii) if not rated, are, in the opinion of the
Adviser, of comparable investment quality and within the credit quality policies
and guidelines established by the Board of Trustees.
<PAGE> 67
Notes rated "MIG 1" are judged to be of the "best quality" and carry the
smallest amount of investment risk. Notes rated "MIG 2" are judged to be of
"high quality, with margins of protection ample although not as large as in the
preceding group."
MUNICIPAL BONDS (SHORT-TERM BOND FUND, INTERMEDIATE BOND FUND AND KANSAS
TAX EXEMPT-BOND FUND). Municipal bonds generally have a maturity at the time of
issuance of more than one year. Municipal bonds may be issued to raise money for
various public purposes--such as constructing public facilities and making loans
to public institutions. There are generally two types of municipal bonds:
general obligation bonds and revenue bonds. General obligation bonds are backed
by the taxing power of the issuing municipality and are considered the safest
type of municipal bond. Revenue bonds are backed by the revenues of a project or
facility--tolls from a toll road, for example. Certain types of municipal bonds
are issued to obtain funding for privately operated facilities. Industrial
development revenue bonds (which are private activity bonds) are a specific type
of revenue bond backed by the credit and security of a private user, and
therefore investments in these bonds have more potential risk. Investments in
municipal bonds are limited to bonds which are rated at the time of purchase "A"
or better by a NRSRO. A maximum of 10% of the Kansas Tax-Exempt Bond Fund's
total assets may be invested in municipal bonds rated BBB by S&P or Baa by
Moody's. Bonds rated BBB by S&P have an adequate capacity to pay interest and
repay principal; bonds rated Baa by Moody's are considered to be medium-grade
obligations (i.e., neither highly protected nor poorly secured) and have
speculative characteristics. See the Appendix for a more complete description of
securities ratings.
COMMON STOCKS (STOCK FUND AND INTERNATIONAL MULTI-MANAGER STOCK FUND).
Common stock represents the residual ownership interest in the issuer after all
of its obligations and preferred stocks are satisfied. Common stock fluctuates
in price in response to many factors, including historical and prospective
earnings of the issuer, the value of its assets, general economic conditions,
interest rates, investor perceptions and market volatility.
PREFERRED STOCKS (SHORT-TERM BOND FUND, INTERMEDIATE BOND FUND, STOCK FUND,
AND INTERNATIONAL MULTI-MANAGER STOCK FUND). Preferred stock has a preference
over common stock in liquidation and generally in dividends as well, but is
subordinated to the liabilities of the issuer in all respects. Preferred stock
may or may not be convertible into common stock. As a general rule, the market
value of preferred stock with a fixed dividend rate and no conversion element
varies inversely with interest rates and perceived credit risk. Because
preferred stock is junior to debt securities and other obligations of the
issuer, deterioration in the credit quality of the issuer will cause greater
changes in the value of a preferred stock than in a more senior debt security
with similar stated yield characteristics.
AMERICAN DEPOSITORY RECEIPTS (SHORT-TERM BOND FUND, INTERMEDIATE BOND FUND
AND STOCK FUND). American Depository Receipts are U.S. dollar-denominated
receipts generally issued by domestic banks, which evidence the deposit with the
bank of the common stock of a foreign issuer and which are publicly traded on
exchanges or over-the-counter in the United States.
These Funds may each invest in both sponsored and unsponsored ADR programs.
There are certain risks associated with investments in unsponsored ADR programs.
Because the non-U.S. company does not actively participate in the creation of
the ADR program, the underlying agreement for service and payment will be
between the depository and the shareholder. The company issuing the stock
underlying the ADR pays nothing to establish the unsponsored facility, as fees
for ADR issuance and cancellation are paid by brokers. Investors directly bear
the expenses associated with certificate transfer, custody and dividend payment.
<PAGE> 68
In an unsponsored ADR program, there also may be several depositories with
no defined legal obligations to the non-U.S. company. The duplicate depositories
may lead to marketplace confusion because there would be no central source of
information to buyers, sellers and intermediaries. The efficiency of
centralization gained in a sponsored program can greatly reduce the delays in
delivery of dividends and annual reports. In addition, with respect to all ADRs
there is always the risk of loss due to currency fluctuations.
Investments in ADRs involve certain risks not typically involved in purely
domestic investments, including future foreign political and economic
developments, and the possible imposition of foreign governmental laws or
restrictions applicable to such investments. Securities of foreign issuers
through ADRs are subject to different economic, financial, political and social
factors. Individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resources, self-sufficiency and balance of
payments position. With respect to certain countries, there is the possibility
of expropriation of assets, confiscatory taxation, political or social
instability or diplomatic developments which could adversely affect the value of
the particular ADR. There may be less publicly available information about a
foreign company than about a U.S. company, and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. In addition, such companies may use different accounting and
financial standards (and certain currencies may become unavailable for transfer
from a foreign currency), resulting in a Fund's possible inability to convert
proceeds realized upon the sale of portfolio securities of the affected foreign
companies immediately into U.S. currency.
INVESTMENT IN FOREIGN SECURITIES (SHORT-TERM BOND FUND, INTERMEDIATE BOND
FUND, STOCK FUND AND INTERNATIONAL MULTI-MANAGER STOCK FUND). These Funds may
each invest in securities of foreign governmental and private issuers that,
except for the International Multi-Manager Stock Fund, are generally denominated
in and pay interest in U.S. dollars. Investments in foreign securities involve
certain considerations that are not typically associated with investing in
domestic securities. There may be less publicly available information about a
foreign issuer than about a domestic issuer. Foreign issuers also are not
generally subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to domestic issuers. In addition, with
respect to certain foreign countries, interest may be withheld at the source
under foreign income tax laws, and there is a possibility of expropriation or
confiscatory taxation, political or social instability or diplomatic
developments that could adversely affect investments in securities of issuers
located in those countries.
FOREIGN EXCHANGE CONTRACTS (INTERNATIONAL MULTI-MANAGER STOCK FUND).
Changes in foreign currency exchange rates will affect the U.S. dollar values of
securities denominated in currencies other than the U.S. dollar. The rate of
exchange between the U.S. dollar and other currencies fluctuates in response to
forces of supply and demand in the foreign exchange markets. These forces are
affected by the international balance of payments and other economic and
financial conditions, government intervention, speculation and other factors.
When investing in foreign securities, the Portfolio usually effects currency
exchange transactions on a spot (i.e., cash) basis at the spot rate prevailing
in the foreign exchange market. The Portfolio incurs foreign exchange expenses
in converting assets from one currency to another.
The Portfolio may enter into foreign currency forward contracts or currency
futures for the purchase or sale of foreign currency to "lock in" the U.S.
dollar price of the securities denominated in a foreign currency or the U.S.
dollar value of interest and dividends to be paid on such securities, or to
hedge against the possibility that the currency of a foreign country in which
the Portfolio has investments may suffer a decline against the U.S. dollar. A
forward currency contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time for the
contract. This method of attempting to hedge
<PAGE> 69
the value of the Portfolio's portfolio securities against a decline in the value
of a currency does not eliminate fluctuations in the underlying prices of the
securities. Although the strategy of engaging in foreign currency transactions
could reduce the risk of loss due to a decline in the value of the hedged
currency, it could also limit the potential gain from an increase in the value
of the currency. The Portfolio does not intend to maintain a net exposure to
such contracts where the fulfillment of the Portfolio's obligations under such
contracts would obligate the Portfolio to deliver an amount of foreign currency
in excess of the value of the Portfolio's portfolio securities or other assets
denominated in the currency. The Portfolio will not enter into these contracts
for speculative purposes and will not enter into non-hedging currency contracts.
These contracts involve a risk of loss if the Portfolio's Investment Advisers
("Portfolio Advisers") fail to predict currency values correctly.
FOREIGN CURRENCY OPTIONS AND RELATED RISKS (INTERNATIONAL MULTI-MANAGER
STOCK FUND). The Portfolio may take positions in options on foreign currencies
in order to hedge against the risk of foreign exchange fluctuation on foreign
securities the Portfolio holds in its portfolio or which it intends to purchase.
Options on foreign currencies are affected by the factors discussed in "Foreign
Exchange Contracts" above which influence foreign exchange sales and investments
generally.
The value of foreign currency options is dependent upon the value of the
foreign currency relative to the U.S. dollar and has no relationship to the
investment merits of a foreign security. Because foreign currency transactions
occurring in the interbank market involve substantially larger amounts than
those that may be involved in the use of foreign currency options, the Portfolio
may be disadvantaged by having to deal in an odd lot market (generally
consisting of transactions of less than $1 million) for the underlying foreign
currencies at prices that are less favorable than for round lots.
To the extent that the U.S. options markets are closed while the market for
the underlying currencies remains open, significant price and rate movements may
take place in the underlying markets that cannot be reflected in the options
markets.
CONVERTIBLE AND EXCHANGEABLE SECURITIES (SHORT-TERM BOND FUND, INTERMEDIATE
BOND FUND, STOCK FUND, AND INTERNATIONAL MULTI-MANAGER STOCK FUND). These Funds
are permitted to invest in convertible and exchangeable securities, subject to
the rating and quality requirements specified with respect to each such Fund.
Convertible securities generally offer fixed interest or dividend yields and may
be converted either at a stated price or stated rate for common or preferred
stock. Exchangeable securities may be exchanged on specified terms for common or
preferred stock. Although to a lesser extent than with fixed income securities
generally, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest rates
decline. In addition, because of the conversion or exchange feature, the market
value of convertible or exchangeable securities tends to vary with fluctuations
in the market value of the underlying common or preferred stock. Debt securities
that are convertible into or exchangeable for preferred or common stock are
liabilities of the issuer but are generally subordinated to senior debt of the
issuer.
DOMESTIC AND FOREIGN BANK OBLIGATIONS (ALL FUNDS). These obligations
include but are not restricted to certificates of deposit, commercial paper,
Yankee dollar certificates of deposit, bankers' acceptances, Eurodollar
certificates of deposit and time deposits, promissory notes and medium-term
deposit notes. The Funds will not invest in any obligations of their affiliates,
as defined under the 1940 Act. The Kansas Tax-Exempt Bond Fund's bank
obligations are limited to certificates of deposit and bankers' acceptances.
<PAGE> 70
EACH FUND LIMITS ITS INVESTMENT IN UNITED STATES BANK OBLIGATIONS TO
OBLIGATIONS OF UNITED STATES BANKS (INCLUDING FOREIGN BRANCHES). Each Fund
limits its investment in foreign bank obligations to United States
dollar-denominated obligations of foreign banks (including United States
branches of foreign banks) which in the opinion of the Adviser, are of an
investment quality comparable to obligations of United States banks which may be
purchased by the Funds. There is no limitation on the amount of the Funds'
assets which may be invested in obligations of foreign banks meeting the
conditions set forth herein.
Fixed time deposits may be withdrawn on demand by the investor, but may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. There are no
contractual restrictions on the right to transfer a beneficial interest in a
fixed time deposit to a third party, although there is no market for such
deposits. Investments in fixed time deposits subject to withdrawal penalties
maturing in more than seven days may not exceed 15% of the value of the net
assets of the Non-Money Market Funds and 10% of the value of the net assets of
the Money Market Fund.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of United States banks, including the
possibilities that their liquidity could be impaired because of future political
and economic developments, that the obligations may be less marketable than
comparable obligations of United States banks, that a foreign jurisdiction might
impose withholding taxes on interest income payable on those obligations, that
foreign deposits may be seized or nationalized, that foreign governmental
restrictions such as exchange controls may be adopted which might adversely
affect the payment of principal and interest on those obligations and that the
selection of those obligations may be more difficult because there may be less
publicly available information concerning foreign banks, or that the accounting,
auditing and financial reporting standards, practices and requirements
applicable to foreign banks may differ from those applicable to United States
banks. Foreign banks are not subject to examination by any United States
Government agency or instrumentality.
INVESTMENTS IN EURODOLLAR AND YANKEE DOLLAR OBLIGATIONS INVOLVE ADDITIONAL
RISKS. Most notably, there generally is less publicly available information
about foreign companies; there may be less governmental regulation and
supervision; they may use different accounting and financial standards; and the
adoption of foreign governmental restrictions may adversely affect the payment
of principal and interest on foreign investments. In addition, not all foreign
branches of United States banks are supervised or examined by regulatory
authorities as are United States banks, and such branches may not be subject to
reserve requirements.
STRIPS (ALL FUNDS EXCEPT INTERNATIONAL MULTI-MANAGER STOCK FUND). Each Fund
may invest in separately traded principal and interest components of securities
backed by the full faith and credit of the United States Treasury. The principal
and interests components of United States Treasury bonds with remaining
maturities of longer than ten years are eligible to be traded independently
under the Separate Trading of Registered Interest and Principal of Securities
("STRIPS") program. Under the STRIPS program, the principal and interest
components are separately issued by the United States Treasury at the request of
depository financial institutions, which then trade the component parts
separately. The interest component of STRIPS may be more volatile than that of
United States Treasury bills with comparable maturities. In accordance with Rule
2A-7, the Money Market Fund's investments in STRIPS are limited to those with
maturity components not exceeding thirteen months. The Funds will not actively
trade in STRIPS.
THE FUNDS MAY INVEST IN ZERO COUPON SECURITIES (ALL FUNDS EXCEPT
INTERNATIONAL MULTI-MANAGER STOCK FUND). A zero coupon security pays no interest
to its holder during its life and is sold at a discount to its face value at
maturity. The market prices of zero coupon securities generally are more
<PAGE> 71
volatile than the market prices of securities that pay interest periodically and
are more sensitive to changes in interest rates than non-zero coupon securities
having similar maturities and credit qualities.
OTHER MUTUAL FUNDS (ALL FUNDS). Each Fund may invest in shares of other
open-end, management investment companies, subject to the limitations of the
1940 Act and subject to such investments being consistent with the overall
objective and policies of the Fund making such investment, provided that any
such purchases will be limited to short-term investments in shares of
unaffiliated investment companies. The Kansas Tax-Exempt Bond Fund has adopted a
non-fundamental policy to limit its investment in investment companies to shares
of money market funds. The purchase of securities of other mutual funds results
in duplication of expenses such that investors indirectly bear a proportionate
share of the expenses of such mutual funds including operating costs, and
investment advisory and administrative fees.
OPTIONS ON SECURITIES (ALL FUNDS, EXCEPT MONEY MARKET FUND, INTERNATIONAL
MULTI-MANAGER STOCK FUND AND KANSAS TAX-EXEMPT BOND FUND). The Funds may
purchase put and call options and write covered put and call options on
securities in which each Fund may invest directly and that are traded on
registered domestic securities exchanges or that result from separate, privately
negotiated transactions (i.e., over-the-counter (OTC) options). The writer of a
call option, who receives a premium, has the obligation, upon exercise, to
deliver the underlying security against payment of the exercise price during the
option period. The writer of a put, who receives a premium, has the obligation
to buy the underlying security, upon exercise, at the exercise price during the
option period.
The Funds may write put and call options on securities only if they are
covered, and such options must remain covered as long as the Fund is obligated
as a writer. A call option is covered if a 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 if the underlying security is held in a segregated account by its
custodian) upon conversion or exchange of other securities held in its
portfolio. A put option is covered if a Fund maintains liquid assets with a
value equal to the exercise price in a segregated account with its custodian.
The principal reason for writing put and call options is to attempt to
realize, through the receipt of premiums, a greater current return than would be
realized on the underlying securities alone. In return for the premium received
for a call option, the Funds forego the opportunity for profit from a price
increase in the underlying security above the exercise price so long as the
option remains open, but retain the risk of loss should the price of the
security decline. In return for the premium received for a put option, the Funds
assume the risk that the price of the underlying security will decline below the
exercise price, in which case the put would be exercised and the Fund would
suffer a loss. The Funds may purchase put options in an effort to protect the
value of a security it owns against a possible decline in market value.
Writing of options involves the risk that there will be no market in which
to effect a closing transaction. An exchange-traded option may be closed out
only on an exchange that provides a secondary market for an option of the same
series. OTC options are not generally terminable at the option of the writer and
may be closed out only by negotiation with the holder. There is also no
assurance that a liquid secondary market on an exchange will exist. In addition,
because OTC options are issued in privately negotiated transactions exempt from
registration under the Securities Act of 1933, there is no assurance that the
Funds will succeed in negotiating a closing out of a particular OTC option at
any particular time. If a Fund, as covered call option writer, is unable to
effect a closing purchase transaction in the secondary market or otherwise, it
will not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.
The staff of the SEC has taken the position that purchased options not
traded on registered domestic securities exchanges and the assets used as cover
for written options not traded on such exchanges are
<PAGE> 72
generally illiquid securities. However, the staff has also opined that, to the
extent a mutual fund sells an OTC option to a primary dealer that it considers
creditworthy and contracts with such primary dealer to establish a formula price
at which the fund would have the absolute right to repurchase the option, the
fund would only be required to treat as illiquid the portion of the assets used
to cover such option equal to the formula price minus the amount by which the
option is in-the-money. Pending resolution of the issue, the Funds will treat
such options and, except to the extent permitted through the procedure described
in the preceding sentence, assets as subject to each such Fund's limitation on
investments in securities that are not readily marketable.
DOLLAR ROLL TRANSACTIONS (SHORT-TERM BOND FUND, INTERMEDIATE BOND FUND,
MONEY MARKET FUND AND INTERNATIONAL MULTI-MANAGER STOCK FUND). These Funds may
enter into dollar roll transactions wherein the Fund sells fixed income
securities, typically mortgage-backed securities, and makes a commitment to
purchase similar, but not identical, securities at a later date from the same
party. Like a forward commitment, during the roll period no payment is made for
the securities purchased and no interest or principal payments on the security
accrue to the purchaser, but the Fund assumes the risk of ownership. The Fund is
compensated for entering into dollar roll transactions by the difference between
the current sales price and the forward price for the future purchase, as well
as by the interest earned on the cash proceeds of the initial sale. Like other
when-issued securities or firm commitment agreements, dollar roll transactions
involve the risk that the market value of the securities sold by the Fund may
decline below the price at which a Fund is committed to purchase similar
securities. In the event the buyer of securities under a dollar roll transaction
becomes insolvent, the Fund's use of the proceeds of the transaction may be
restricted pending a determination by the other party, or its trustee or
receiver, whether to enforce the Fund's obligation to repurchase the securities.
The Fund will engage in roll transactions for the purpose of acquiring
securities for its portfolio and not for investment leverage. The Fund will
limit its obligations on dollar roll transactions to 35 percent of the Fund's
net assets.
SWAP AGREEMENTS (SHORT-TERM BOND FUND AND INTERMEDIATE BOND FUND). To
manage its exposure to different types of investments, the Fund may enter into
interest rate, currency and mortgage (or other asset) swap agreements and may
purchase and sell interest rate "caps," "floors" and "collars." In a typical
interest rate swap agreement, one party agrees to make regular payments equal to
a floating interest rate on a specified amount (the "notional principal amount")
in return for payments to a fixed interest rate on the same amount for a
specified period. If a swap agreement provides for payment in different
currencies, the parties may also agree to exchange the notional principal
amount. Mortgage swap agreements are similar to interest rate swap agreements,
except that the notional principal amount is tied to a reference pool of
mortgages. In a cap or floor, one party agrees, usually in return for a fee, to
make payments under particular circumstances. For example, the purchaser of an
interest rate cap has the right to receive payments to the extent a specified
interest rate exceeds an agreed upon level; the purchaser of an interest rate
floor has the right to receive payments to the extent a specified interest rate
falls below an agreed upon level. A collar entitles the purchaser to receive
payments to the extent a specified interest rate falls outside an agreed upon
range.
Swap agreements may involve leverage and may be highly volatile; depending
on how they are used, they may have a considerable impact on the Fund's
performance. Swap agreements involve risks depending upon the counterparties
creditworthiness and ability to perform as well as the Fund's ability to
terminate its swap agreements or reduce its exposure through offsetting
transactions. The Adviser monitors the creditworthiness of counterparties to
these transactions and intends to enter into these transactions only when they
believe the counterparties present minimal credit risks and the income expected
to be earned from the transaction justifies the attendant risks.
FUTURES, RELATED OPTIONS AND OPTIONS ON STOCK INDICES (STOCK FUND). The
Fund may attempt to reduce the risk of investment in equity securities by
hedging a portion of its portfolio through the use of
<PAGE> 73
certain futures transactions, options on futures traded on a board of trade and
options on stock indices traded on national securities exchanges. The Fund may
hedge a portion of its portfolio by purchasing such instruments during a market
advance or when the Adviser anticipates an advance. In attempting to hedge a
portfolio, the Fund may enter into contracts for the future delivery of
securities and futures contracts based on a specific security, class of
securities or an index, purchase or sell options on any such futures contracts,
and engage in related closing transactions. The Fund will use these instruments
primarily as a hedge against changes resulting from market conditions in the
values of securities held in its portfolio or which it intends to purchase.
A stock index assigns relative weighing to the common stocks in the index,
and the index generally fluctuates with changes in the market values of these
stocks. A stock index futures contract is an agreement in which one party agrees
to deliver to the other an amount of cash equal to a specific dollar amount
times the difference between the value of a specific stock index at the close of
the last trading day of the contract and the price at which the agreement is
made. The Fund will sell stock index futures only if the amount resulting from
the multiplication of the then current level of the indices upon which such
futures contracts are based, and the number of futures contracts which would be
outstanding, do not exceed one-third of the value of the Fund's net assets.
When a futures contract is executed, each party deposits with a broker or
in a segregated custodial account up to 5% of the contract amount, called the
"initial margin," and during the term of the contract, the amount of the deposit
is adjusted based on the current value of the futures contract by payments of
variation margin to or from the broker or segregated account.
In the case of options on stock index futures, the holder of the option
pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to assume the option writer's position
in a stock index futures contract. If the option is exercised by the holder
before the last trading day during the option period, the option writer delivers
the futures position, as well as any balance in the writer's futures margin
account. If it is exercised on the last trading day, the option writer delivers
to the option holder cash in an amount equal to the difference between the
option exercise price and the closing level of the relevant index on the date
the option expires. In the case of options on stock indexes, the holder of the
option pays a premium and receives the right, upon exercise of the option at a
specified price during the option period, to receive cash equal to the dollar
amount of the difference between the closing price of the relevant index and the
option exercise price times a specified multiple, called the "multiplier."
During a market decline or when the Adviser anticipates a decline, the Fund
may hedge a portion of its portfolio by selling futures contracts or purchasing
puts on such contracts or on a stock index in order to limit exposure to the
decline. This provides an alternative to liquidation of securities positions and
the corresponding costs of such liquidation. Conversely, during a market advance
or when the Adviser anticipates an advance, each Fund may hedge a portion of its
portfolio by purchasing futures, options on these futures or options on stock
indices. This affords a hedge against a Fund not participating in a market
advance at a time when it is not fully invested and serves as a temporary
substitute for the purchase of individual securities which may later be
purchased in a more advantageous manner. Each Fund will sell options on futures
and on stock indices only to close out existing positions.
INTEREST RATE FUTURES CONTRACTS (ALL FUNDS, EXCEPT INTERNATIONAL
MULTI-MANAGER STOCK FUND AND KANSAS TAX-EXEMPT BOND FUND). These Funds may, to a
limited extent, enter into interest rate futures contracts--i.e., contracts for
the future delivery of securities or index-based futures contracts--that are, in
the opinion of the Adviser, sufficiently correlated with the Fund's portfolio.
These investments will be made primarily in an attempt to protect a Fund against
the effects of adverse changes in interest rates (i.e., "hedging"). When
interest rates are increasing and portfolio values are falling, the sale of
futures
<PAGE> 74
contracts can offset a decline in the value of a Fund's current portfolio
securities. The Funds will engage in such transactions primarily for bona fide
hedging purposes.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS (ALL FUNDS, EXCEPT INTERNATIONAL
MULTI-MANAGER STOCK FUND AND KANSAS TAX-EXEMPT BOND FUND). These Funds may
purchase put and call options on interest rate futures contracts, which give a
Fund the right to sell or purchase the underlying futures contract for a
specified price upon exercise of the option at any time during the option
period. Each Fund may also write (sell) put and call options on such futures
contracts. For options on interest rate futures that a Fund writes, such Fund
will receive a premium in return for granting to the buyer the right to sell to
the Fund or to buy from the Fund the underlying futures contract for a specified
price at any time during the option period. As with futures contracts, each Fund
will purchase or sell options on interest rate futures contracts primarily for
bona fide hedging purposes.
RISKS OF OPTIONS AND FUTURES CONTRACTS. One risk involved in the purchase
and sale of futures and options is that a Fund may not be able to effect closing
transactions at a time when it wishes to do so. Positions in futures contracts
and options on futures contracts may be closed out only on an exchange or board
of trade that provides an active market for them, and there can be no assurance
that a liquid market will exist for the contract or the option at any particular
time. To mitigate this risk, each Fund will ordinarily purchase and write
options only if a secondary market for the options exists on a national
securities exchange or in the over-the-counter market. Another risk is that
during the option period, if a Fund has written a covered call option, it will
have given up the opportunity to profit from a price increase in the underlying
securities above the exercise price in return for the premium on the option
(although the premium can be used to offset any losses or add to a Fund's
income) but, as long as its obligation as a writer continues, such Fund will
have retained the risk of loss should the price of the underlying security
decline. Investors should note that because of the volatility of the market
value of the underlying security, the loss from investing in futures
transactions is potentially unlimited. In addition, a Fund has no control over
the time when it may be required to fulfill its obligation as a writer of the
option. Once a Fund has received an exercise notice, it cannot effect a closing
transaction in order to terminate its obligation under the option and must
deliver the underlying securities at the exercise price.
The Funds' successful use of stock index futures contracts, options on
such contracts and options on indices depends upon the ability of the Adviser to
predict the direction of the market and is subject to various additional risks.
The correlation between movements in the price of the futures contract and the
price of the securities being hedged is imperfect and the risk from imperfect
correlation increases in the case of stock index futures as the composition of
the Funds' portfolios diverge from the composition of the relevant index. Such
imperfect correlation may prevent the Funds from achieving the intended hedge or
may expose the Funds to risk of loss. In addition, if the Funds purchase futures
to hedge against market advances before they can invest in common stock in an
advantageous manner and the market declines, the Funds might create a loss on
the futures contract. Particularly in the case of options on stock index futures
and on stock indices, the Funds' ability to establish and maintain positions
will depend on market liquidity. The successful utilization of options and
futures transactions requires skills different from those needed in the
selection of the Funds' portfolio securities. The Funds believe that the Adviser
possesses the skills necessary for the successful utilization of such
transactions.
The Funds are permitted to engage in bona fide hedging transactions (as
defined in the rules and regulations of the Commodity Futures Trading
Commission) without any quantitative limitations. Futures and related option
transactions which are not for bona fide hedging purposes may be used provided
the total amount of the initial margin and any option premiums attributable to
such positions does not exceed 5% of each Fund's liquidating value after taking
into account unrealized profits and unrealized losses, and excluding any
in-the-money option premiums paid. The Funds will not market, and are not
marketing,
<PAGE> 75
themselves as commodity pools or otherwise as vehicles for trading in futures
and related options. The Funds will segregate liquid assets to cover the futures
and options.
"WHEN-ISSUED" AND "FORWARD COMMITMENT" TRANSACTIONS (ALL FUNDS). The Funds
may purchase securities on a when-issued and delayed-delivery basis and may
purchase or sell securities on a forward commitment basis. When-issued or
delayed-delivery transactions arise when securities are purchased by a Fund with
payment and delivery taking place in the future in order to secure what is
considered to be an advantageous price and yield to the Fund at the time of
entering into the transaction. A forward commitment transaction is an agreement
by a Fund to purchase or sell securities at a specified future date. When a Fund
engages in these transactions, the Fund relies on the buyer or seller, as the
case may be, to consummate the sale. Failure to do so may result in the Fund
missing the opportunity to obtain a price or yield considered to be
advantageous. When-issued and delayed-delivery transactions and forward
commitment transactions may be expected to occur a month or more before delivery
is due. However, no payment or delivery is made by a Fund until it receives
payment or delivery from the other party to the transaction. While the Funds
normally enter into these transactions with the intention of actually receiving
or delivering the securities, they may sell these securities before the
settlement date or enter into new commitments to extend the delivery date into
the future, if the Adviser or Sub-Adviser considers such action advisable as a
matter of investment strategy. A separate account containing only liquid assets
equal to the value of purchase commitments will be maintained until payment is
made. Such securities have the effect of leverage on the Funds and may
contribute to volatility of a Fund's net asset value.
REPURCHASE AGREEMENTS (ALL FUNDS). The Funds may enter into repurchase
agreements with any bank and broker-dealer which, in the opinion of the
Trustees, presents a minimal risk of bankruptcy. Under a repurchase agreement a
Fund acquires securities and obtains a simultaneous commitment from the seller
to repurchase the securities at a specified time and at an agreed upon yield.
The agreements will be fully collateralized and the value of the collateral,
including accrued interest, marked-to-market daily. The agreements may be
considered to be loans made by the purchaser, collateralized by the underlying
securities. If the seller should default on its obligation to repurchase the
securities, a Fund may experience a loss of income from the loaned securities
and a decrease in the value of any collateral, problems in exercising its rights
to the underlying securities and costs and time delays in connection with the
disposition of securities. The Money Market Fund and Kansas Tax-Exempt Bond Fund
may not each invest more than 10% and the other Non-Money Market Funds may not
invest more than 15% of its respective net assets in repurchase agreements
maturing in more than seven business days or in securities for which market
quotations are not readily available. For more information about repurchase
agreements, see "Investment Policies".
REVERSE REPURCHASE AGREEMENTS (ALL FUNDS). The Funds may also enter into
reverse repurchase agreements to avoid selling securities during unfavorable
market conditions to meet redemptions. Pursuant to a reverse repurchase
agreement, a Fund will sell portfolio securities and agree to repurchase them
from the buyer at a particular date and price. Whenever a Fund enters into a
reverse repurchase agreement, it will establish a segregated account in which it
will maintain liquid assets in an amount at least equal to the repurchase price
marked to market daily (including accrued interest), and will subsequently
monitor the account to ensure that such equivalent value is maintained. The Fund
pays interest on amounts obtained pursuant to reverse repurchase agreements.
Reverse repurchase agreements are considered to be borrowings by a Fund under
the 1940 Act.
SMALL CAPITALIZATION STOCKS (STOCK FUND). Small capitalization stocks are
more volatile than larger capitalization stocks. The Fund may invest in
relatively new or unseasoned companies, which are in their early stages of
development, or small companies positioned in new and emerging industries.
Securities of small and unseasoned companies present greater risks than
securities of larger, more established
<PAGE> 76
companies. The companies in which the Fund may invest may have relatively small
revenues and limited product lines, and may have a small share of the market for
their products or services. Small companies may lack depth of management. They
may be unable to internally generate funds necessary for growth or potential
development or to generate such funds through external financing on favorable
terms. They may be developing or marketing new products or services for which
markets are not yet established and may never become established. Due to these
and other factors, small companies may incur significant losses, and investments
in such companies are therefore speculative.
COMMERCIAL PAPER (ALL FUNDS). Commercial paper includes short-term unsecured
promissory notes, variable rate demand notes and variable rate master demand
notes issued by domestic and foreign bank holding companies, corporations and
financial institutions and similar taxable instruments issued by government
agencies and instrumentalities. All commercial paper purchased by the Funds is,
at the time of investment, rated in one of the top two (top three with respect
to the Short-Term Bond Fund) rating categories of at least one Nationally
Recognized Statistical Rating Organization ("NRSRO") or, if not rated, are, in
the opinion of the Adviser or the Portfolio Advisers, as applicable, of an
investment quality comparable to rated commercial paper in which the Funds may
invest, or, with respect to the Money Market Fund, (i) rated "P-1" by Moody's
Investors Service, Inc. ("Moody's") and "A-1" or better by Standard & Poor's
Corporation ("S&P") or in a comparable rating category by any two NRSROs that
have rated the commercial paper or (ii) rated in a comparable category by only
one such organization if it is the only organization that has rated the
commercial paper (and provided the purchase is approved or ratified by the
Fund's Board of Trustees or the AMR Trust's Board of Trustees, as applicable).
CORPORATE DEBT SECURITIES (ALL FUNDS, EXCEPT KANSAS TAX-EXEMPT BOND FUND).
Fund investments in these securities are limited to corporate debt securities
(corporate bonds, debentures, notes and similar corporate debt instruments)
which meet the rating criteria established for each Fund.
After purchase by a Fund, a security may cease to be rated or its rating
may be reduced below the minimum required for purchase by the Fund. Neither
event will require a sale of such security by the Fund. However, the Fund's
Adviser or Portfolio Advisers, as applicable, will consider such event in its
determination of whether the Fund should continue to hold the security. To the
extent the ratings given by a NRSRO may change as a result of changes in such
organizations or their rating systems, the Fund will attempt to use comparable
ratings as standards for investments in accordance with the investment policies
contained in the Prospectus and in this SAI.
VARIABLE AND FLOATING RATE DEMAND AND MASTER DEMAND OBLIGATIONS (ALL
FUNDS). The Funds may, from time to time, buy variable rate demand obligations
issued by corporations, bank holding companies and financial institutions and
similar taxable and tax-exempt instruments issued by government agencies and
instrumentalities. These securities will typically have a maturity of 397 days
or less with respect to the Money Market Fund or five to twenty years with
respect to the Non-Money Market Funds, but carry with them the right of the
holder to put the securities to a remarketing agent or other entity on short
notice, typically seven days or less. The obligation of the issuer of the put to
repurchase the securities may or may not be backed by a letter of credit or
other obligation issued by a financial institution. The purchase price is
ordinarily par plus accrued and unpaid interest.
THE FUNDS MAY ALSO BUY VARIABLE RATE MASTER DEMAND OBLIGATIONS. The terms
of these obligations permit the investment of fluctuating amounts by the Funds
at varying rates of interest pursuant to direct arrangements between a Fund, as
lender, and the borrower. They permit weekly, and in some instances, daily,
changes in the amounts borrowed. The Funds have the right to increase the amount
under the obligation at any time up to the full amount provided by the note
agreement, or to decrease the amount, and the borrower may prepay up to the full
amount of the obligation without penalty. The obligations may or may not be
backed by bank letters of credit. Because the obligations are direct lending
<PAGE> 77
arrangements between the lender and the borrower, it is not generally
contemplated that they will be traded, and there is no secondary market for
them, although they are redeemable (and thus, immediately repayable by the
borrower) at principal amount, plus accrued interest, upon demand. The Funds
have no limitations on the type of issuer from whom the obligations will be
purchased. The Funds will invest in variable rate master demand obligations only
when such obligations are determined by the Adviser or Portfolio Advisers, as
applicable or, pursuant to guidelines established by the Board of Trustees or
the AMR Trust Board, as applicable, to be of comparable quality to rated issuers
or instruments eligible for investment by the Funds.
LOANS OF PORTFOLIO SECURITIES (ALL FUNDS). The Funds may lend their
portfolio securities in an amount up to 33-1/3% of each Fund's total assets to
brokers, dealers and financial institutions, provided: (1) the loan is secured
continuously by collateral consisting of U.S. Government securities or cash or
approved bank letters of credit maintained on a daily mark-to-market basis in an
amount at least equal to the current market value of the securities loaned; (2)
the Funds may at any time call the loan and obtain the return of the securities
loaned within five business days; (3) the Funds will receive any interest or
dividends paid on the loaned securities; and (4) the aggregate market value of
securities loaned will not at any time exceed 33-1/3% of the total assets of a
particular Fund.
The Funds will earn income for lending their securities because cash
collateral pursuant to these loans will be invested in short-term money market
instruments. In connection with lending securities, the Funds may pay reasonable
finders, administrative and custodial fees. Loans of securities involve a risk
that the borrower may fail to return the securities or may fail to provide
additional collateral.
Securities loans will be made in accordance with the following conditions:
(1) the Funds or the Portfolio must receive at least 100% collateral in the form
of cash or cash equivalents, securities of the U.S. Government and its agencies
and instrumentalities, and approved bank letters of credit; (2) the borrower
must increase the collateral whenever the market value of the loaned securities
(determined on a daily basis) rises above the level of collateral; (3) the Funds
or the Portfolio must be able to terminate the loan after notice, at any time;
(4) the Funds or the Portfolio must receive reasonable interest on the loan or a
flat fee from the borrower, as well as amounts equivalent to any dividends,
interest or other distributions on the securities loaned, and any increase in
market value of the loaned securities; (5) the Funds or the Portfolio may pay
only reasonable custodian fees in connection with the loan; and (6) voting
rights on the securities loaned may pass to the borrower, provided, however,
that if a material event affecting the investment occurs, the Board of Trustees
or AMR Trust Board, as applicable, must be able to terminate the loan and vote
proxies or enter into an alternative arrangement with the borrower to enable the
Board of Trustees or AMR Trust Board, as applicable, to vote proxies.
GUARANTEED INVESTMENT CONTRACTS (SHORT-TERM BOND FUND). The Fund may
invest in guaranteed investment contracts ("GICs") issued by insurance
companies. Pursuant to such contracts, the Fund makes cash contributions to a
deposit fund of the insurance company's general account. The insurance company
then credits to the deposit fund on a monthly basis guaranteed interest at a
rate based on an index. The GICs provide that this guaranteed interest will not
be less than a certain minimum rate. The insurance company may assess periodic
charges against a GIC for expense and service costs allocable to it, and these
charges will be deducted from the value of the deposit fund. The Fund will
purchase a GIC only when the Adviser has determined that the GIC presents
minimal credit risks to the Fund and is of comparable quality to instruments in
which the Fund may otherwise invest. Because the Fund may not receive the
principal amount of a GIC from the insurance company on seven days' notice or
less, a GIC may be considered an illiquid investment. The term of a GIC will be
one year or less.
In determining the average weighted portfolio maturity of the Fund, a GIC
will be deemed to have a maturity equal to the period of time remaining until
the next readjustment of the guaranteed interest rate.
<PAGE> 78
The interest rate on a GIC may be tied to a specified market index and is
guaranteed not to be less than a certain minimum rate.
ILLIQUID SECURITIES (ALL FUNDS). Each Fund, except for the International
Multi-Manager Stock Fund, has adopted a fundamental policy with respect to
investments in illiquid securities. The International Multi-Manager Stock Fund
has adopted a non-fundamental policy with respect to investments in illiquid
securities. Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended ("Securities Act"),
securities that are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities that have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act, including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on
either an efficient institutional market in which the unregistered security can
be readily resold or on the issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.
Each Fund may also invest in restricted securities issued under Section
4(2) of the Securities Act, which exempts from registration "transactions by an
issuer not involving any public offering." Section 4(2) instruments are
restricted in the sense that they can only be resold through the issuing dealer
and only to institutional investors; they cannot be resold to the general public
without registration. Restricted securities issued under Section 4(2) of the
Securities Act (other than certain commercial paper issued pursuant to Section
4(2) as discussed below) will be treated as illiquid and subject to the Fund's
investment restriction on illiquid securities.
Pursuant to procedures adopted by the Board of Trustees, the Funds may
treat certain commercial paper issued pursuant to Section 4(2) as a liquid
security and not subject to the Funds' investment restruction on illiquid
investments. Section 4(2) commercial paper may be considered liquid only if all
of the following conditions are met: (i) the Section 4(2) commercial paper must
not be traded flat (i.e. without accrued interest) or be in default as to
principal or interest; and (ii) the Section 4(2) commercial paper must be rated
in one of the two highest rating categories by at least two NRSROs, or if only
NRSRO rates the security, by that NRSRO, or if the security is unrated, the
security has been determined to be of equivalent quality.
The Commission has adopted Rule 144A, which allows a broader institutional
trading market for securities otherwise subject to restrictions on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act applicable to resales of certain securities
to qualified institutional buyers. It is the intent of the Funds' to invest,
pursuant to procedures established by the Board of Trustees or the AMR Trust
Board, as applicable, and subject to applicable investment restrictions, in
securities eligible for resale under Rule 144A which are determined to be liquid
based upon the trading markets for the securities.
<PAGE> 79
Pursuant to guidelines set forth by and under the supervision of the
Board of Trustees or the AMR Trust Board, as applicable, the Adviser or the
Portfolio Advisers, will monitor the liquidity of restricted securities in a
Fund's portfolio. In reaching liquidity decisions, the Adviser will consider,
among other things, the following factors: (1) the frequency of trades and
quotes for the security over the course of six months or as determined in the
discretion of the Adviser or the Portfolio Advisers, as applicable; (2) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers over the course of six months or as determined in the
discretion of the Investment Adviser; (3) dealer undertakings to make a market
in the security; (4) the nature of the security and the marketplace in which it
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer); and (5) other factors, if
any, which the Adviser deems relevant. The Adviser will also monitor the
purchase of Rule 144A securities to assure that the total of all Rule 144A
securities held by a Fund does not exceed 10% of the Fund's average daily net
assets. Rule 144A securities and Section 4(2) commercial paper which are
determined to be liquid based upon their trading markets will not, however, be
required to be included among the securities considered to be illiquid for
purposes of Investment Restriction No. 1. Investments in Rule 144A securities
and Section 4(2) commercial paper could have the effect of increasing Fund
illiquidity.
FOREIGN CURRENCY TRANSACTIONS (INTERNATIONAL MULTI-MANAGER STOCK FUND;
INTERMEDIATE BOND FUND; STOCK FUND). Investments by the Portfolio in securities
of foreign companies will usually involve the currencies of foreign countries.
In addition, the Portfolio may temporarily hold funds in bank deposits in
foreign currencies pending the completion of certain investment programs.
Accordingly, the value of the assets of the Portfolio, as measured in U.S.
dollars, may be affected by changes in foreign currency exchange rates and
exchange control regulations. In addition, the Portfolio may incur costs in
connection with conversions between various currencies. The Portfolio may
conduct foreign currency exchange transactions either on a spot (i.e., cash)
basis at the spot rate prevailing in the foreign currency exchange market or by
entering into foreign currency forward basis at the spot rate prevailing in the
foreign currency exchange market or by entering into foreign currency forward
contracts ("forward contracts") to purchase or sell foreign currencies. A
forward contract involves an obligation to purchase or sell a specific currency
at a future date, which may be any fixed number of days (usually less than one
year) from the date of the contract agreed upon by the parties, at a price at
the time of the contract. Forward contracts in the principal foreign currencies
are traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers and involve the risk that
the other party to the contract may fail to deliver currency when due, which
could result in losses to the Portfolio. A forward contract generally has no
requirement, and no commissions are charged at any stage for trades. Foreign
exchange dealers realize a profit based on the difference between the price at
which they buy and sell various currencies.
The Portfolio may enter into forward contracts under two circumstances.
First, with respect to specific transactions, when the Portfolio enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale, for a fixed amount of
dollars, of the amount of foreign currency involved in the underlying security
transactions, the Portfolio may be able to protect itself against a possible
loss resulting from an adverse change in the relationship between the U.S.
dollar and the subject foreign currency during the period between the date the
security is purchased or sold and the date on which payment is made or received.
Second, the Portfolio may enter into forward contracts in connection with
existing portfolio positions. For example, when the Portfolio Advisers of the
Portfolio believes that the currency of a particular foreign country may suffer
a substantial decline against the U.S. dollar, the Portfolio may enter into a
forward contract to sell, for a fixed amount of dollars, the amount of foreign
currency
<PAGE> 80
approximating the value of some or all of the Portfolio's investment securities
denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. The projection of short-term currency
market movement is extremely difficult, and the successful execution of a
short-term hedging strategy is highly uncertain. Forward contracts involve the
risk of inaccurate predictions of currency price movements, which may cause the
Portfolio to incur losses on these contracts and transaction costs. The
Portfolio Advisers do not intend to enter into forward contracts on a regular or
continuous basis.
There is no systematic reporting of last sale information for foreign
currencies, and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Quotation information available is generally representative of very large
transactions in the interbank market. The interbank market is foreign currencies
in a global around-the-clock market.
When required by applicable regulatory guidelines, the Portfolio will set
aside cash, U.S. Government Securities or other liquid, high-grade debt
securities in a segregated account with its custodian in the prescribed amount.
INVESTMENT RESTRICTIONS
The following restrictions apply to each Fund except the International
Multi-Manager Stock Fund. Unless otherwise indicated, only Investment
Restriction Nos. 2, 3, 4, 7, 8, 12 and 16 are fundamental policies of the Funds,
which can be changed only when permitted by law and approved by a majority of
the Funds' outstanding voting securities. The non-fundamental investment
restrictions can be changed by approval of a majority of the Board of Trustees.
A "majority of the outstanding voting securities" means the lesser of (i) 67% of
the shares represented at a meeting at which more than 50% of the outstanding
shares are represented in person or by proxy or (ii) more than 50% of the
outstanding shares.
Each Fund, except as indicated, may not:
(1) Invest more than 15% (10% with respect to the Money Market Fund
and Kansas Tax-Exempt Bond Fund) of the value of its net assets in
investments which are illiquid (including repurchase agreements
having maturities of more than seven calendar days, variable and
floating rate demand and master demand notes not requiring receipt
of principal note amount within seven days notice and securities
of foreign issuers which are not listed on a recognized domestic
or foreign securities exchange);
(2) Borrow money or pledge, mortgage or hypothecate its assets, except
that a Fund may enter into reverse repurchase agreements or borrow
from banks up to 33-1/3% (10% for Kansas Tax-Exempt Bond Fund) of
the current value of its net assets for temporary or emergency
purposes or to meet redemptions. Each Fund (except Kansas
Tax-Exempt Bond Fund) has adopted a non-fundamental policy to
limit such borrowing to 10% of its net assets and those borrowings
may be secured by the pledge of not more than 15% of the current
value of its total net assets (but investments may not be
purchased by the Fund while any such borrowings exist). With
respect to the Kansas Tax-Exempt Bond Fund, all borrowings in
excess of 5% will be repaid before additional investments are
made. The Short-Term Bond Fund has adopted a non-fundamental
policy to limit its borrowings for other than temporary
<PAGE> 81
or defensive purpose or to meet redemptions to an amount not
to exceed an amount equal to 5% of its net assets;
(3) Issue senior securities, except insofar as a Fund may be
deemed to have issued a senior security in connection with any
repurchase agreement or any permitted borrowing;
(4) Make loans, except loans of portfolio securities and except
that a Fund may enter into repurchase agreements with respect
to its portfolio securities and may purchase the types of debt
instruments described in its Prospectus or the SAI;
(5) Invest in companies for the purpose of exercising control or
management. This restriction is a fundamental policy of the
KansasTax-Exempt Bond Fund;
(6) Invest more than 10% of its net assets in shares of other
investment companies, except that the Kansas Tax-Exempt Bond
Fund may only purchase money market fund securities and that
each Fund may invest all of its assets in another investment
company;
(7) Invest in real property (including limited partnership
interests but excluding real estate investment trusts and
master limited partnerships, debt obligations secured by real
estate or interests therein, and securities issued by other
companies that invest in real estate or interest therein),
commodities, commodity contracts, or oil, gas and other
mineral resource, exploration, development, lease or arbitrage
transactions. The Kansas Tax-Exempt Bond Fund's policy with
respect to oil, gas and other mineral resource, exploration,
development or leases is a non-fundamental policy;
(8) Engage in the business of underwriting securities of other
issuers, except to the extent that the disposal of an
investment position may technically cause it to be considered
an underwriter as That term is defined under the Securities
Act of 1933;
(9) Sell securities short, except to the extent that a Fund
contemporaneously owns or has the right to acquire at no
additional cost securities identical to those sold short. The
Kansas Tax-Exempt Bond Fund may not sell securities short;
(10) Purchase securities on margin, except that a Fund may obtain
such short-term credits as may be necessary for the clearance
of purchases and sales of securities;
(11) Purchase or retain the securities of any issuer, if those
individual officers and Trustees of the Trust, the Adviser, or
the Distributor, each owning beneficially more than 1/2 of 1%
of the securities of such issuer, together own more than 5% of
the securities of such issuer;
(12) Purchase a security if, as a result, more than 25% of the
value of its total assets would be invested in securities of
one or more issuers conducting their principal business
activities in the same industry (except that this restriction
does not apply to the Money Market Fund which will concentrate
its investments in obligations issued by the banking
industry), provided that (a) this limitation shall not apply
to obligations issued or guaranteed by the U.S. Government or
its agencies and instrumentalities; (b) wholly-owned finance
companies will be considered to be in the industries of their
parents; and (c) utilities will be divided according to their
services. For example, gas, gas transmission, electric and
gas, electric, and telephone will each be considered a
separate industry;
<PAGE> 82
(13) Invest more than 5% of its net assets in warrants which are
unattached to securities, included within that amount, no more
than 2% of the value of the Fund's net assets, may be warrants
which are not listed on the New York or American Stock
Exchanges. The Kansas Tax-Exempt Bond Fund may not purchase
warrants, straddles, or spreads;
(14) Write, purchase or sell puts, calls or combinations thereof,
except that the Funds may purchase or sell puts and calls as
otherwise described in the Prospectus or SAI; however, no Fund
will invest more than 5% of its total assets in these classes
of securities for purposes other than bona fide hedging;
(15) Invest more than 5% of the current value of its total assets
in the securities of companies which, including predecessors,
have a record of less than three years' continuous operation
(except (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities or (ii)
municipal securities which are rated by at least two NRSRO's
or determined by the Adviser to be of comparable quality)
provided each Fund may invest all or a portion of its assets
in another open end management investment company with
substantially the same investment objective, policies and
investment restrictions as the Fund; or
(16) With respect to 75% of its assets, purchase a security if as a
result, (1) more than 5% of its total assets would be invested
in any one issuer other than the U.S. Government or its
agencies or instrumentalities, or (2) the Fund would own more
than 10% of the outstanding voting securities of such issues.
The Money Market Fund is subject to the above restriction with
respect to 100% of its assets. The Kansas Tax-Exempt Bond Fund
will not purchase more than 10% of the voting securities of
any one issuer.
The following restrictions apply to the International Multi-Manager
Stock Fund. All fundamental investment policies and non-fundamental policies of
the Fund and the Portfolio are identical. Therefore, although the following
discusses the investment policies of the Portfolio and the AMR Trust Board, it
applies equally to the Fund and the Trust's Board of Trustees.
The following nine restrictions have been adopted by the Portfolio and
may be changed with respect to the Portfolio only by the majority vote of the
Portfolio's outstanding interests, which as used herein means the lesser of (a)
67% of the interests of the Portfolio present at the meeting if the holders of
more than 50% of the interests are present and represented at the interest
holders' meeting or (b) more than 50% of the interests of the Portfolio.
Whenever the Fund is requested to vote on a change in the investment
restrictions of the Portfolio, the Fund will hold a meeting of its shareholders
and will cast its votes as instructed by its shareholders.
The Portfolio may not:
(1) With respect to 75% of its total assets purchase a security if
as a result, (1) more than 5% of its total assets would be
invested in securities of any one issuer other than
obligations issued by the U.S. Government, its agencies and
instrumentalities, or (2) the Fund would own more than 10% of
the voting securities of any one issuer;
(2) Invest more than 25% of its total assets in the securities of
companies primarily engaged in any one industry other than the
U.S. Government, its agencies and instrumentalities. In
addition, finance companies as a group are not considered a
single industry for purposes of
<PAGE> 83
this policy. Wholly-owned finance companies will be considered
to be in the industries of their parent companies if their
activities are primarily related to financing the activities
of their parent companies;
(3) Purchase or sell real estate or real estate limited
partnership interests, provided, however, that the Portfolio
may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or
interests therein when consistent with the other policies and
limitations described in the Prospectus;
(4) Purchase or sell commodities (including direct interests
and/or leases in oil, gas or minerals) or commodities
contracts, except with respect to forward foreign currency
exchange contracts, foreign currency futures contracts,
futures contracts, options on futures contracts and
"when-issued" securities when consistent with the other
policies and limitations described in the Prospectus;
(5) Engage in the business of underwriting securities issued by
others, except to the extent that, in connection with the
disposition of securities, the Portfolio may be deemed an
underwriter under federal securities law;
(6) Make loans to any person or firm, provided, however, that the
making of a loan shall not be construed to include (i) the
acquisition for investment of bonds, debentures, notes or
other evidences of indebtedness of any corporation or
government which are publicly distributed or (ii) the entry
into repurchase agreements and further provided, however, that
the Portfolio may lend its portfolio securities to
broker-dealers or other institutional investors in accordance
with the guidelines stated in the Prospectus;
(7) Purchase from or sell portfolio securities to its officers,
Trustees or other "interested persons," as defined under the
1940 Act, of the AMR Trust, including its investment advisers
and their affiliates, except as permitted by the 1940 Act and
exemptive rules or orders thereunder;
(8) Issue senior securities except that the Portfolio may engage
in when-issued securities and forward commitment transactions
and may engage in currency futures and forward currency
contracts; or
(9) Borrow money, except that the Fund may for temporary purposes,
engage in reverse repurchase agreements and borrow money from
the Fund's investment adviser, any of its affiliates or banks
in an aggregate amount not to exceed 10% of the value of the
Fund's total assets at the time of borrowing. In addition,
although not a fundamental policy, the Portfolio intends to
repay any money borrowed before any additional portfolio
securities are purchased.
The following non-fundamental investment restrictions apply to the
Portfolio and may be changed with respect to the Portfolio by a majority vote of
the AMR Trust Board. The Portfolio may not:
(1) Purchase securities on margin, effect short sales (except that
the Portfolio may obtain such short-term credits as may be
necessary for the clearance of purchases or sales of
securities) or purchase or sell call options or engage in the
writing of such options; or
(2) Invest more than 15% of its net assets in illiquid securities.
<PAGE> 84
The Portfolio may invest up to 10% of its total assets in the securities of
other investment companies to the extent permitted by law; however, pursuant to
exemptive relief granted by the SEC, the Portfolio may invest up to 25% of its
total assets in the aggregate of the Money Market, Municipal Money Market, and
U.S. Government Money Market Portfolios of the AMR Trust. The Portfolio may
incur duplicate advisory or management fees when investing in another mutual
fund.
As a matter of fundamental policy, notwithstanding any limitation otherwise
noted, each Fund is authorized to seek to achieve its investment objective by
investing all of its investable assets in an investment company having
substantially the same investment objective and policies as the Fund.
If a percentage restriction on investment policies or the investment or use
of assets set forth in the Prospectus are adhered to at the time a transaction
is effected, later changes in percentage resulting from changing asset values
will not be considered a violation.
The Money Market Fund's diversification tests are measured at the time of
initial purchases, and are calculated as specified in Rule 2a-7 of the 1940 Act
which may allow the Fund to exceed limits specified herein or in the Prospectus
for certain securities subject to guarantees or demand features. The Fund will
be deemed to satisfy the maturity requirements described herein or in the
Prospectus to the extent it satisfies Rule 2a-7 maturity requirements.
It is the intention of the Funds, unless otherwise indicated, that with
respect to the Funds' policies that are the result of the application of law
(for example, Rule 2a-7 of the 1940 Act with respect to the Money Market Fund)
the Funds will take advantage of the flexibility provided by rules or
interpretations of the SEC currently in existence or promulgated in the future
or changes to such laws.
RISKS OF INVESTING IN THE FUNDS
CERTAIN RISK CONSIDERATIONS
The Money Market Fund attempts to maintain a constant net asset value of
$1.00 per share, although there can be no assurance that the Money Market Fund
will always be able to do so. The Money Market Fund may not achieve as high a
level of current income as other funds that do not limit their investment to the
high quality securities in which the Money Market Fund invests.
The Money Market Fund's Policy of concentrating in the banking industry
could increase the Fund's exposure to economic or regulatory developments
relating to or affecting banks. Banks are subject to extensive governmental
regulation which may limit both the amounts and types of loans and other
financial commitments they can make and the interest rates and fees they can
charge. The financial condition of banks is largely dependent on the
availability and cost of capital funds, and can fluctuate significantly when
interest rates change. In addition, general economic conditions may affect the
financial condition of banks.
The price per share of each of the Non-Money Market Funds will fluctuate
with changes in value of the investments held by the Fund. For example, the
value of a bond Fund's shares will generally fluctuate inversely with the
movements in interest rates and a stock Fund's shares will generally fluctuate
as a result of numerous factors, including but not limited to investors'
expectations about the economy and corporate earnings and interest rates.
Shareholders of a Fund should expect the value of their shares to fluctuate with
changes in the value of the securities owned by that Fund. Additionally, a
Fund's investment in smaller companies may involve greater risks than
investments in large companies due to such factors as
<PAGE> 85
limited product lines, markets and financial or managerial resources, and less
frequently traded securities that may be subject to more abrupt price movements
than securities of larger companies.
There is, of course, no assurance that a Fund will achieve its investment
objective or be successful in preventing or minimizing the risk of loss that is
inherent in investing in particular types of investment products. In order to
attempt to minimize that risk, the Adviser monitors developments in the economy,
the securities markets, and with each particular issuer. Also, as noted earlier,
each diversified Fund is managed within certain limitations that restrict the
amount of a Fund's investment in any single issuer.
RISKS OF TECHNIQUES INVOLVING LEVERAGE. Use of leveraging involves special
risks and may involve speculative investment techniques. Certain Funds may
borrow for other than temporary or emergency purposes, lend their securities,
enter reverse repurchase agreements, and purchase securities on a when issued or
forward commitment basis. In addition, certain Funds may engage in dollar roll
transactions. Each of these transactions involve the use of "leverage" when cash
made available to the Fund through the investment technique is used to make
additional portfolio investments. The Funds use these investment techniques only
when the Adviser or Portfolio Advisers, as applicable, believe that the
leveraging and the returns available to the Fund from investing the cash will
provide shareholders a potentially higher return.
Leverage exists when a Fund achieves the right to a return on a capital
base that exceeds the investment the Fund has invested. Leverage creates the
risk of magnified capital losses which occur when losses affect an asset base,
enlarged by borrowings or the creation of liabilities, that exceeds the equity
base of the Fund. Leverage may involve the creation of a liability that requires
the Fund to pay interest (for instance, reverse repurchase agreements) or the
creation of a liability that does not entail any interest costs (for instance,
forward commitment transactions).
The risks of leverage include a higher volatility of the net asset value of
a Fund's shares and the relatively greater effect on the net asset value of the
shares caused by favorable or adverse market movements or changes in the cost of
cash obtained by leveraging and the yield obtained from investing the cash. So
long as a Fund is able to realize a net return on its investment portfolio that
is higher than interest expense incurred, if any, leverage will result in higher
current net investment income being realized by such Fund than if the Fund were
not leveraged. On the other hand, interest rates change from time to time as
does their relationship to each other depending upon such factors as supply and
demand, monetary and tax policies and investor expectations. Changes in such
factors could cause the relationship between the cost of leveraging and the
yield to change so that rates involved in the leveraging arrangement may
substantially increase relative to the yield on the obligations in which the
proceeds of the leveraging have been invested. To the extent that the interest
expense involved in leveraging approaches the net return on a Fund's investment
portfolio, the benefit of leveraging will be reduced, and, if the interest
expense on borrowings were to exceed the net return to shareholders, such Fund's
use of leverage would result in a lower rate of return than if the Fund were not
leveraged. Similarly, the effect of leverage in a declining market could be a
greater decrease in net asset value per share than if a Fund were not leveraged.
In an extreme case, if a Fund's current investment income were not sufficient to
meet the interest expense of leveraging, it could be necessary for such Fund to
liquidate certain of its investments at an inappropriate time. The use of
leverage may be considered speculative.
CERTAIN RISKS OF INVESTING IN THE INTERNATIONAL MULTI-MANAGER STOCK FUND
The International Multi-Manager Stock Fund's investment in the Portfolio
may be affected by the actions of other large investors in the Portfolio, if
any. For example, if the Portfolio had a large investor other than the
International Multi-Manager Stock Fund that redeemed its interest in the
Portfolio, the
<PAGE> 86
Portfolio's remaining investors (including the International Multi-Manager Stock
Fund) might, as a result, experience higher pro rata operating expenses, thereby
producing lower returns.
The International Multi-Manager Stock Fund may withdraw its entire
investment from the Portfolio at any time if the Board determines that it is in
the best interest of the International Multi-Manager Stock Fund and its
shareholders to do so. The International Multi-Manager Stock Fund might
withdraw, for example, if there were other investors in the Portfolio with power
to, and who did by a vote of the shareholders of all investors (including the
International Multi-Manager Stock Fund), change the investment objective or
policies of the Portfolio in a manner not acceptable to the Board. A withdrawal
could result in a distribution in kind of portfolio securities (as opposed to a
cash distribution) by the Portfolio. That distribution could result in a less
diversified portfolio of investments for the International Multi-Manager Stock
Fund and could affect adversely the liquidity of the International Multi-Manager
Stock Fund's portfolio. If the International Multi-Manager Stock Fund decided to
convert those securities to cash, it usually would incur brokerage fees or other
transaction costs. If the International Multi-Manager Stock Fund withdrew its
investment from the Portfolio, the Board would consider what action might be
taken, including the management of the International Multi-Manager Stock Fund's
assets in accordance with its investment objective and policies by the Adviser
or the investment of all of the International Multi-Manager Stock Fund's
investable assets in another pooled investment entity having substantially the
same investment objective as the International Multi-Manager Stock Fund. The
inability of the International Multi-Manager Stock Fund to find a suitable
replacement investment, in the event the Board decided not to permit the Adviser
to manage the International Multi-Manager Stock Fund's assets, could have a
significant impact on shareholders of the International Multi-Manager Stock
Fund.
Each investor in the Portfolio, including the International Multi-Manager
Stock Fund, will be liable for all obligations of the Portfolio, but not any
other portfolio of AMR Trust. The risk to an investor in the Portfolio of
incurring financial loss on account of such liability, however, would be limited
to circumstances in which the Portfolio was unable to meet its obligations. Upon
liquidation of the Portfolio, investors would be entitled to share pro rata in
the net assets of the Portfolio available for distribution to investors.
Investors should be aware that the International Multi-Manager Stock Fund,
unlike mutual funds that directly acquire and manage their own portfolios of
securities, seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which is a separate investment company.
Since the Fund will invest only in the Portfolio, the Fund's shareholders will
acquire only an indirect interest in the investments of the Portfolio.
In addition to selling its interests to the International Multi-Manager
Stock Fund, the Portfolio may sell its interests to other non-affiliated
investment companies and/or other institutional investors. All institutional
investors in the Portfolio will pay a proportionate share of the Portfolio's
expenses and will invest in that Portfolio on the same terms and conditions.
However, if another investment company invests all of its assets in the
Portfolio, it would not be required to sell its shares at the same public
offering price as the International Multi-Manager Stock Fund and would be
allowed to charge different sales commissions. Therefore, investors in the
International Multi-Manager Stock Fund may experience different returns from
investors in another investment company that invests exclusively in the
Portfolio. Shareholders may obtain further information concerning other funds
that invest in the Portfolio by contacting their sales representative or by
calling (800) 967-9009.
RISK OF INVESTING IN KANSAS MUNICIPAL OBLIGATIONS
Because the Kansas Tax-Exempt Bond Fund will concentrate its investment in
Kansas Municipal Obligations, it may be affected by political, economic or
regulatory factors that may impair the ability of Kansas issuers to pay interest
on or to repay the principal of their debt obligations. Kansas Municipal
<PAGE> 87
Obligations may be subject to greater price volatility than municipal
obligations in general as a result of the effect of supply and demand for these
securities which, in turn, could cause greater volatility in the value of the
shares of the Fund.
The following information as to certain Kansas risk factors is only a brief
summary of the factors affecting the financial condition of the State of Kansas,
it does not purport to be a complete description and is based on information
from official statements relating to municipal obligations issued by the State
of Kansas.
Kansas ranks as the 14th largest state in terms of size with an area in
excess of 82,000 square miles. As of 1998, the population is estimated to be
2,583,745, which is a 1.01% increase from 1997. In comparison, the growth in
population in the U.S. was 4.7%.
Growth in the State's trade, services and manufacturing sectors has
decreased the historical dominance of agriculture on the State economy. Economic
performance in 1996 and into 1997 has been significantly better than 1995, due
largely to gains in aircraft manufacturing and recovery in agriculture. Personal
income grew at 6.2% in 1996 to $23,281. Per capita income stands at about 96% of
the national median. Household income reflects more of the recent strength at
110% of the U.S. average.
The State's average monthly unemployment rate dropped to 3.6% in June 1998
from its peak of 5.5% in 1993. Labor force participation is high at 67% versus
62.9% for the U.S.
The Kansas State Treasury does not issue general obligation debt. The state
instead relies on revenue and lease financing through the Department of
Transportation (KDOT) and the Development Finance Authority (KDFA). KDFA
provides financing for various public purpose projects including prison
construction, state offices, energy conservation and university facilities. The
KDOT bonds are rated Aa/AA by Moody's and Standard & Poor's, respectively. KDFA
ratings vary across underlying purpose and when not insured are generally rated
A or better by the major rating agencies.
Obligations of issuers of Kansas Municipal Obligations are subject to the
provisions of bankruptcy, insolvency and other laws affecting the rights and
remedies of creditors, such as the Federal Bank Reform Act of 1978. In addition,
the obligations of such issuers may become subject to the laws enacted in the
future by Congress or the Kansas legislatures or by referenda extending the time
for payment of principal and/or interest, or imposing other constraints upon
enforcement of such obligations or upon municipalities to levy taxes. There is
also the possibility that, as a result of legislation, litigation involving the
taxation of municipal obligations or the rights of municipal obligation holders,
or other conditions, the power or ability of any issuer to pay, when due, the
principal of and interest on its Kansas Municipal Obligations may be materially
affected.
KANSAS RISK FACTORS
The following information is a brief summary of particular Kansas state
factors effecting the Kansas Tax-Exempt Bond Fund and does not purport to be a
complete description of such factors. The financial condition of the state, its
public authorities and local governments could affect the market values and
marketability of, and therefore the net asset value per share and the interest
income of the Fund, or result in the default of existing obligations, including
obligations which may be held by the Fund. Further, the state faces numerous
forms of litigation seeking significant damages which, if awarded, may adversely
affect the financial situation of the state or issuers located in such state. It
should be noted that the creditworthiness of obligations issued by local issues
may be unrelated to the creditworthiness of a state, and there is no obligation
on the part of the state to make payment on such local obligations in the event
of default in the absence of a specific guarantee or pledge provided by a state.
The information contained
<PAGE> 88
below is based primarily upon information derived from state official
statements, Certified Annual Financial Reports, state and industry trade
publications, newspaper articles, other public documents relating to securities
offerings of issuers of such states, and other historically reliable sources. It
has not been independently verified by the Fund. The Fund makes no
representation or warranty regarding the completeness or accuracy of such
information. The market value of shares of the Fund may fluctuate due to factors
such as change in interest rates, matters affecting a particular state, or for
other reasons.
GENERAL ECONOMIC CONDITIONS. Kansas is the 14th largest state in terms of
size with an area in excess of 82,000 square miles. It is rectangular in shape
and is 411 miles long from east to west and 208 miles wide. The geographic
center of the 48 contiguous states lies within its borders. Kansas became the
34th state in 1861 and Topeka was chosen to be the capitol later that year. The
population of the State of Kansas has grown from 2,477,588 in 1990 to 2,583,745
in 1998. This represents a percentage increase of 4.2%. In comparison, the
growth in population of the United States was 4.7%.
The performance of the Kansas economy remained steady in 1998. This
stability was due largely to the continued expansion in aircraft manufacturing
and the recovery of the farm economy. The major economic trends indicate that
nominal personal income in Kansas grew at a 4.7 percent rate during 1998. This
compared to 6.0 percent in 1997. Employment by place of residence grew by 3.1
percent in 1998 compared to 4.4 percent in 1997, while employment by place of
work increased by 3.8 percent in 1998. The state unemployment rate of 3.6
percent for 1998 was down from 3.8 percent in 1997.
BUDGETARY PROCESS. The Governor is statutorily mandated to present spending
recommendations to the Legislature. "The Governor's Budget Report" reflects
expenditures for both the current and upcoming fiscal years and identifies the
sources of financing for those expenditures. The Legislature uses "The
Governor's Budget Report" as a guide as it appropriates the money necessary for
state agencies to operate. Only the Legislature can authorize expenditures by
the State of Kansas. The Governor recommends spending levels, while the
Legislature chooses whether to accept or modify those recommendations. The
Governor may veto legislative appropriations, although the Legislature may
override any veto by two-thirds majority vote.
The state "fiscal year" runs from July 1 to the following June 30 and is
numbered for the calendar year in which it ends. The "current fiscal year" is
the one which ends the coming June. The "actual fiscal year" is the year which
concluded the previous June. The "budget year" refers to the next fiscal year,
which begins the July following the Legislature's adjournment.
In "The FY 1999 Governor's Budget Report," the actual fiscal year is fiscal
year 1997, the current fiscal year is fiscal year 1999, and the budget year is
fiscal year 2000. By law, "The Governor's Budget Report" must reflect actual
year spending, the Governor's revised spending recommendations for the current
fiscal year, state agency spending requests for the budget year, and the
Governor's spending recommendations for the budget year. The budget
recommendations cannot include the expenditure of anticipated income
attributable to proposed legislation.
REVENUES AND EXPENDITURES. The State General Fund is the largest of the
"uncommitted" revenue sources available to the state. It is also the fund to
which most general tax receipts are credited. The Legislature may spend State
General Fund dollars for any purpose. All revenues coming into the state
treasury not specifically authorized by statute or the constitution to be placed
in a separate fund are deposited in the State General Fund.
<PAGE> 89
FISCAL YEAR 1999
For FY 1999, the Governor recommends a revised total budget of $8.8
billion, with $4.22 billion from the State General Fund. Previously approved
amounts totaled $8.56 billion, with $4.19 billion from the State General Fund.
The Governor proposes revisions to the FY 1999 budget primarily because of
increases in available federal funds, shifts in expenditure authority from FY
1998 to FY 1999, adjustments for SRS caseloads, and a recalculation of public
school finance needs.
FISCAL YEAR 2000
For fiscal year 2000 that begins July 1, 1999, the Governor proposes a
total budget of $9.03 billion, of which $4.42 billion is from the State General
Fund. The State General Fund portion of the budget grows by 4.6 percent over FY
1999. Property tax replacement and increases in demand transfers account for the
majority of that increase. All other expenditures cause the State General Fund
budget to grow by 1.7 percent.
For classified state employees the Governor recommends full funding for
step movement and longevity as well as a 1.0 percent base salary adjustment. For
unclassified employees, the Governor recommends a 3.5 percent funding pool to be
awarded on the basis of merit. In addition $2.5 million is proposed as a special
funding pool to help retain excellent faculty at Regents institutions, $800,000
is budget to raise the salaries of district judges, and expenditures are allowed
for correctional officer and juvenile justice youth service worker salary
upgrades.
The Governor's recommendation provides for a total of 40,274.5 full time
positions, including 16.0 new troopers for the Highway patrol. The total
position count is down from 42,116.2 full time positions in FY 1999, principally
because of retirement reductions and the privatization of the KU Medical Center
Hospital.
The budge recommendations direct over $80.0 million in new spending toward
public education. The per pupil base rises from $3,720 to $3,755 and special
education appropriations increase by 5.6 percent. The Governor adds money to
fund Juvenile Justice Authority community plans. The recommendations fully cover
expected caseloads in SRS in the medical, welfare (TAF), and foster care
programs, as well as in the nursing home program at the Department on Aging.
Potential revenues from the settlement of litigation against tobacco
companies total $20.0 million in FY 1999 and $53.0 million in FY 2000. Because
the federal government will likely be able to claim 60.0 percent of the
settlement, the Governor recommends planning for the use of only 40.0 percent of
the expected revenues--$8.0 million in FY 1999 and $21.2 million in FY 2000.
Over the two fiscal years, $14.6 million will be placed in the State General
Fund and $14.6 million in the Children's Health Care Programs Fund.
CHILDREN'S INITIATIVES. The Children's Budget, outlines funding of $3.2
billion that is targeted toward children and families - an increase of over
$170.0 million from FY 1999. Included in those expenditures are 13 initiatives
funded from tobacco settlement monies. Initiatives include expanding the Healthy
Start/Home Visitor Program, grants for innovative child health programs, grants
for smoking prevention programs, improved newborn health screening, and juvenile
delinquency prevention programs.
TAX RELIEF. Building on the extensive tax reductions already enacted over
the last four years, the Governor again recommends tax reductions in several
areas. As promised, the Governor proposes a complete phase-out of property taxes
on cars and small trucks. Under the proposal, the final phase-out occurs over
four years and begins immediately after already scheduled car tax reductions are
completed.
<PAGE> 90
In addition, the Governor proposes to increase the adoption income tax credit,
raise the machinery and equipment property tax credit, eliminate severance taxes
on oil and begin a new grain storage sales tax exemption.
COMPREHENSIVE TRANSPORTATION PROGRAM. To address the needs of the large
Kansas transportation infrastructure the Governor proposes an eight-year $2.4
billion comprehensive transportation program. For highway construction and
maintenance, the governor's proposal is larger than the Comprehensive Highway
Program of 1989, but raised no new taxes. The proposal also provides funds for
aviation, rail transportation, and public transit. The Governor recommends a
financing package that includes bonds, existing resources, federal monies, and
an increase in the State Highway Fund demand transfer. The demand transfer
increase goes from the current 7.6 percent of sales tax revenue to 9.0 percent
in FY 2000, and then to 10.0 percent for succeeding fiscal years.
Enhancements are provided for elementary and secondary education programs
and for the Regents institutions. The Governor's recommendations fully fund the
second year of welfare reform and provides both long-term care and nutrition
services for Kansas' elderly citizens.
DEBT ADMINISTRATION AND LIMITATION. The State of Kansas finances a portion
of its capital expenditures with various debt instruments. of capital
expenditures that are debt-financed, revenue bonds and loans from the Pooled
Money Investment Board finance most capital improvements for buildings, and
certificates of participation and "third-party" financing pay for most capital
equipment. The Kansas Constitution makes provision for the issuance of general
obligation bonds subject to certain restrictions; however, no bonds have been
issued under this provision for many years. No other provision of the
Constitution or state statute limits the amount of debt that can be issued.
Although the State of Kansas has no general obligation debt rating, some
recent bond issues have been rated. The underlying ratings for the most recently
issued revenue bonds were A1 and AA -- from Moodys and Fitch, respectively. The
ratings for the most recently issued fixed rate bonds issued by the Kansas
Department of Transportation were Aa and AA from Moodys and Standard and Poor's,
respectively.
In October 1997, Standard & Poor's assigned an issue credit rating of AA+
to the State of Kansas. Standard and Poor's credit rating reflects the state's
credit quality in the absence of general obligation debt. Other credit factors
include a very low debt burden with no significant future capital needs, a
broadening and diversified economy that has demonstrated strong performance and
declining unemployment, and conservative fiscal management and sound financial
operations, with ample statutorily mandated cash reserves.
The Kansas Department of Transportation issues debt to finance highway
projects. The Comprehensive Highway Program began during fiscal year 1989. The
20-year bonds will be retired with motor fuel taxes, motor vehicle registration
fees, retail sales and compensating use taxes, and accrued interest. During
fiscal years 1995 and 1996, the state sold bonds totaling approximately $167.1
million and $61.1 million, respectively. Again, the largest use of the bond
proceeds was $140 million of the FY 1995 amount for the Comprehensive Highway
Program.
Other State of Kansas debt is issued by the Kansas Development Finance
Authority (KDFA), an independent instrumentality of the state which was created
in 1987 for this purpose.
<PAGE> 91
MANAGEMENT
TRUSTEES AND OFFICERS
The Trust is governed by a Board of Trustees. The Board of Trustees is
composed of persons experienced in financial matters who meet throughout the
year to oversee the activities of the Funds. In addition, the Trustees review
contractual arrangements with companies that provide services to the Funds and
review the Funds' performance.
The age, address and principal occupations for the past five years of each
Trustee and executive officers of the Trust are listed below. The address of
each, unless otherwise indicated, is 3435 Stelzer Road, Columbus, Ohio 43219.
G.L. Best, Age: 52, Trustee. Vice President, Finance and Administration, of
Williams Energy Services Company; Treasurer of The Williams Companies
(1992-1995).
Terry L. Carter, Age: 52, Trustee. Senior Vice President of QuikTrip
Corporation.
Thomas F. Kice, Age: 49, Trustee. President of Kice Industries, Inc.
George Mileusnic, Age: 46, Trustee. Executive Vice President of Operations
of North American Division of The Coleman Co., Inc.
John J. Pileggi, Age: 47, Chairman of the Board of Trustees. Director of
Furman Selz LLC since 1994; Senior Managing Director of Furman Selz LLC
(1992-1994); Managing Director of Furman Selz LLC (1984-1992).
David Bunstine, Age 34, President. Director, BISYS Fund Services, Inc.,
since 1987.
Steve Pierce, Age: 34, Treasurer. Director of Financial Services of BISYS
Fund Services since 1998; Manager of Financial Operations at CNA Insurance from
1996-1998; Trust Officer of First Chicago NBD Corporation from 1994-1996; Senior
Financial Accountant at Kemper Financial Services from 1989-1994.
George Stevens, Age: 48, Secretary. Vice President of Legal Services of
BISYS Fund Services since 1998.
<PAGE> 92
COMPENSATION TABLE
11/1/98 THROUGH 10/31/99
[figures below may need updated]
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS ACCRUED ESTIMATED TOTAL
AGGREGATE AS PART ANNUAL BENEFITS COMPENSATION
COMPENSATION FROM OF FUND UPON FROM
THE FUND EXPENSES RETIREMENT THE FUND COMPLEX
----------------- ------------------ ----------------- ----------------
<S> <C> <C> <C>
G.L. Best, Trustee $3750 0 N/A $3750
Terry L. Carter, Trustee $3750 0 N/A $3750
Thomas F. Kice, Trustee $3750 0 N/A $3750
George Mileusnic, Trustee $3750 0 N/A $3750
John J. Pileggi, Trustee $3750 0 N/A $3750
</TABLE>
Trustees of the Trust not affiliated with the Sponsor receive from the
Trust an annual retainer of $1,000 and a fee of $1,000 for each Board of
Trustees meeting and $1,000 for each Board committee meeting of the Trust
attended and are reimbursed for all out-of-pocket expenses relating to
attendance at such meetings. Trustees who are affiliated with the Sponsor do not
receive compensation from the Trust.
As of________________, officers and Trustees of the Trust, as a group, own
less than 1% of the outstanding shares of the Funds.
TRUSTEES AND OFFICERS OF AMR INVESTMENT SERVICES TRUST ("AMR TRUST")
The following information relates to the principal occupations of each
Trustee and executive officer of the AMR Trust during the past five years.
Unless otherwise indicated, the address of each person listed below is 4333
Amon Carter Boulevard, MD 5645, Fort Worth, Texas 76155.
<PAGE> 93
<TABLE>
<CAPTION>
DURING POSITION WITH PRINCIPAL OCCUPATION
NAME, AGE AND ADDRESS AMR TRUST PAST 5 YEARS
- -------------------------------------- ---------------------- ------------------------------------
<S> <C> <C>
William F. Quinn* (52) Trustee and President, AMR Investment
President Services, Inc. (1986-Present);
Chairman, American Employees
Federal Credit Union (1989-
Present); Trustee, American
Performance Funds (1990- 1994)
Director, Crescent Real Equities,
Inc. (1994- Present) Trustee,
American AAdvantage Funds
(1987-Present); Trustee, American
AAdvantage Mileage Funds(1995-
Present); and Trustee, American
Select Funds (1999-Present).
Alan D. Feld (63) Trustee Partner, Akin, Gump, Strauss,
1700 Pacific Ave., Hauer & Feld LLP (1960-
Suite 4100 Present)**, Director, Clear
Dallas, TX 75201-4618 Channel Communications (1984 -
Present); Director, CenterPoint
Properties, Inc. (1994 - Present);
Trustee, American AAdvantage
Funds and American Aadvantage
Mileage Funds (1996- Present);
and Trustee, American Select
Funds (1999-Present).
Ben J. Fortson (67) Trustee President and CEO, Fortson Oil
301 Commerce St., Company (1958-Present);
Suite 3301 Director, Kimbell Art Foundation
Fort Worth, TX 76102 (1964-Present); Director, Burnett
Foundation (1987-Present);
Honorary Trustee, Texas Christian
University (1986-Present); Trustee,
American Aadvantage Funds and
American AAdvantage Mileage
Funds (1996-Present); and Trustee,
American Select Funds (1999-
Present).
John S. Justin (83) Trustee Chief Executive officer
2821 West Seventh Street (Emeritus), Justin Industries, Inc.
Fort Worth, TX 76107 (a diversified holding company)
(1969-Present); Executive Board
Member, Blue Cross/Blue Shield
of Texas (1985-Present); Board
Member, Zale Lipshy Hospital
(1993-Present); Trustee, Texas
Christian University (1980-
Present); Director and Executive
Board Member,
</TABLE>
<PAGE> 94
<TABLE>
<S> <C> <C>
Moncrief Radiation Center
(1985-Present); Director, Texas
New Mexico Enterprises (1984-1993);
Director, Texas New Mexico Power
Company (1979-1993); Trustee,
American AAdvantage Funds
(1989-Present); Trustee, American
AAdvantage Mileage Funds (1995-
Present); and Trustee, American
Select Funds (1999-Present).
Stephen D. O'Sullivan* (64) Trustee Consultant (1994-Present); Vice
President and Controller, American
Airlines, Inc. (1985- 1994);
Trustee, American Aadvantage
Funds (1987-Present); Trustee,
American AAdvantage Mileage
Funds (1995- Present); and
Trustee, American Select Funds
(1999-Present).
Roger T. Staubach (58) Trustee Chairman of the Board and Chief
6750 LBJ Freeway Executive officer and President of
Dallas, Texas 75240 The Staubach Company (a
commercial real estate company)
(1982-Present); Director,
Halliburton Company (1991-
present); Director, Brinker
International (1993- present);
Director, International Home
Foods, Inc. (1997-present);
National Advisory Board, The
Salvation Army; Trustee, Institute
for Aerobics Research; Member of
Executive Council, Daytop/Dallas;
former quarterback of the Dallas
Cowboys professional football
team; Trustee, American
AAdvantage Funds and American
AAdvantage Mileage Funds
(1995- Present); and Trustee,
American Select Funds (1999-
Present).
Kneeland Youngblood (44) Trustee Managing Partner, Pharos Capital
100 Crescent Court Group, LLC Enterprises, (a private
Suite 1740 business management firm) (1998-
Dallas, TX 75201 Present); Trustee, Teachers
Retirement System of Texas (1993-
Present); Director, United States
Enrichment Corporation (1993-
Present); Director, Just For the
Kids (1995-Present); Director,
Starwood Financial Trust (1998-
Present) Member, Council on
</TABLE>
<PAGE> 95
<TABLE>
<S> <C> <C>
Foreign Relations (1995- Present);
Trustee, American AAdvantage
Funds and American Aadvantage
Mileage Funds (1996- Present);
and Trustee, American Select
Funds (1999-Present).
Nancy A. Eckl (37) Vice President Vice President, AMR Investment
Services, Inc. (1990-Present).
Michael W. Fields (46) Vice President Vice President, AMR Investment
Services, Inc. (1998-Present).
Barry Y. Greenberg (36) Vice President Vice President, AMR Investment
and Assistant Services, Inc. (1995-Present);
Secretary Branch Chief (1992-1995) and
Staff Attorney (1988-1992),
Securities and Exchange
Commission.
Rebecca L. Harris (33) Treasurer Vice President Finance (1995-
Present), Controller (1991-1995),
AMR Investment Services, Inc.
John B. Roberson (41) Vice President Vice President, AMR Investment
Services, Inc. (1991-Present).
Robert J. Zutz (47) Secretary Partner, Kirkpatrick & Lockhart
1800 Massachusetts Ave. NW LLP (law firm).
Washington, D.C. 20036
</TABLE>
* Messrs. Quinn and O'Sullivan, by virtue of their current positions with AMR
Investment Services, sub-adviser to the Money Market Fund and adviser to
the Portfolio, are each deemed to be an "interested person" of the AMR
Trust as defined by the 1940 Act.
** The law firm of Akin, Gump, Strauss, Hauer & Feld LLP ("Akin, Gump")
provides legal services to American Airlines, Inc., an affiliate of AMR
Investment Services, Inc. Mr. Feld has advised the AMR Trust that he has
had no material involvement in the services provided by Akin, Gump to
American Airlines, Inc. and that he has received no material benefit in
connection with these services. Akin, Gump does not provide legal services
to AMR Investment Services, Inc. or AMR Corporation.
All Trustees and officers as a group own less than 1% of the outstanding
shares of the AMR Trust.
As compensation for their service to the AMR Trust, the Independent
Trustees and their spouses receive free air travel from American Airlines, Inc.,
an affiliate of AMR. The AMR Trust pays American Airlines the flight service
charges incurred for these travel arrangements. However, AMR Trust compensates
each Trustee with payments in an amount equal to the Trustees' income tax on the
value of this free airline travel. Mr. O'Sullivan, as a retire of American
Airlines, Inc. already receives flight benefits. AMR Trust compensates Mr.
O'Sullivan annual up to $10,000 to cover his personal flight service charges and
the charges of his three adult children, as well as any income tax charged on
the value of these flight benefits. Trustees are also reimbursed for any
expenses incurred in attending Board meetings. These amounts (excluding
reimbursements) are reflected in the following table for the fiscal
<PAGE> 96
year ended October 31, 1999. The compensation amounts below include the flight
service charges paid by the AMR Trust to American Airlines.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL COMPENSATION
BENEFITS ACCRUED FROM
AGGREGATE AS PART ESTIMATED AMERICAN ADVANTAGE
COMPENSATION FROM OF AMR TRUST ANNUAL BENEFITS FUNDS COMPLEX
AMR TRUST EXPENSES UPON RETIREMENT (30 FUNDS)
----------------- ------------------ ----------------- ----------------------
<S> <C> <C> <C> <C>
William F. Quinn $0 $0
Alan D. Feld $0 $0
Ben J. Fortson $0 $0
John S. Justin $0 $0
Stephen D. O'Sullivan $0 $0
Roger T. Staubach $0 $0
Kneeland Youngblood, M.D. $0 $0
</TABLE>
INVESTMENT ADVISER
INTRUST Financial Services, Inc. ("INTRUST") and its parent INTRUST Bank,
N.A. ("INTRUST Bank") have provided investment advisory services to the Funds
since inception pursuant to an Advisory Agreement with the Trust (the "Advisory
Agreement"). Subject to such policies as the Trust's Board of Trustees may
determine, INTRUST makes investment decisions for the Funds. The Advisory
Agreement provides that, as compensation for services thereunder, INTRUST is
entitled to receive from each Fund it manages a monthly fee at an annual rate
based upon average daily net assets of the Fund as set forth in the table of
Fund Expenses in the Prospectus.
To accommodate pending changes to the regulatory requirements applicable to
banks which serve as investment advisers to registered investment companies
contained in the Investment Advisers Act of 1940 as amended, the
responsibilities of INTRUST Bank as adviser to the Stock Fund will be assumed by
INTRUST Financial Services, Inc., a wholly owned subsidiary of INTRUST Bank,
N.A., on March 1, 2000. The assumption of these investment advisory
responsibilities by INTRUST will not result in any changes in staff or resources
presently employed to render advisory services.
INTRUST is a wholly-owned subsidiary of INTRUST Bank which in turn is a
majority-owned subsidiary of INTRUST Financial Corporation, a bank holding
company. INTRUST Bank is a national banking association which provides a full
range of banking and trust services to clients. As of December 31, 1999, total
assets under management were approximately $_____ billion. The principal place
of business address of the Adviser is 105 North Main Street, Box One, Wichita,
Kansas 67201.
The Investment Advisory Agreements for the Funds will continue in effect
for a period beyond two years from the date of their execution only as long as
such continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Funds or by the Board of Trustees and (ii)
by a majority of the Trustees who are not parties to such Contract or
"interested persons" (as defined in the 1940 Act) of any such party. The
Contracts may be terminated without penalty by vote of the Trustees or the
shareholders of the Funds, or by the Adviser, on 60 days' written notice by
either party to the Contract and will terminate automatically if assigned.
<PAGE> 97
SUBADVISERS
Each of the Sub-advisers has entered into a Sub-Advisory Contract dated
November 25, 1996, (except in the case of the Stock Fund, dated December 31,
1999) with INTRUST Bank. The Sub-Advisory Contracts will continue in effect for
a period beyond two years from the date of their execution only as long as such
continuance is approved annually (i) by the holders of a majority of the
outstanding voting securities of the Funds or by the Board of Trustees and (ii)
by a majority of the Trustees who are not parties to such Contract or
"interested persons" (as defined in the 1940 Act) of any such party. The
Contracts may be terminated without penalty by vote of the Trustees or the
shareholders of the Funds, or by the Adviser, or the Sub-Adviser, on 60 days'
written notice by either party to the Contract and will terminate automatically
if assigned.
<PAGE> 98
SHORT-TERM AND INTERMEDIATE BOND FUNDS
Galliard Capital Management, Inc. ("Galliard") serves as sub-adviser to the
Short-Term Bond Fund and the Intermediate Bond Fund. Galliard, a wholly-owned
subsidiary of Norwest Bank Minnesota, was formed July 1, 1995 to specialize in
the management of institutional fixed income portfolios. As of December 31,
1999, Galliard managed approximately $_____billion in assets. . For the
subadvisory services it provides to the Short-Term Bond Fund and Intermediate
Bond Fund, Galliard receives from the Adviser and not the Funds, monthly fees
based upon daily net assets at the annual rate of 0.125% and 0.125%,
respectively.
MONEY MARKET FUND
AMR Investment Services, Inc. ("AMR") serves as sub-adviser to the Money
Market Fund. AMR, located at 4333 Amon Carter Boulevard, Fort Worth, Texas
76155, is a wholly-owned subsidiary of AMR Corporation, the parent company of
American Airlines, Inc. AMR was organized in 1986 to provide business
management, advisory, administrative and asset management consulting services.
American Airlines, Inc. is not responsible for investments made by AMR. As of
December 31, 1999, AMR provides investment advice with respect to approximately
$____ billion in assets, including approximately $____ billion of assets on
behalf of AMR Corporation and its primary subsidiary, American Airlines, Inc.
For the subadvisory services it provides to the Money Market Fund, AMR receives
from the Adviser and not the Funds monthly fees based upon average daily net
assets at the annual rate of 0.20%.
The Money Market Fund is substantially identical to other pooled accounts,
including investment companies advised by AMR. Set forth below are certain
performance data for all such pooled accounts with similar investment
objectives, policies and strategies to the Money Market Fund. The Money Market
Composite consists of the American AAdvantage Money Market Fund (from September
1987 to present), the American Performance Cash Management Fund (from October
1990 to April 1999 ), the FUNDS IV Cash Reserve Fund (from September 1994
through September 1996), the American Advantage Money Market Mileage Fund (from
November 1995 to present) and the AMR Investment Services Strategic Cash
Business Trust (from July 1996 to present) and the INTRUST Money Market Fund
(from February 1997 to present). Expenses of the portfolios in the Money Market
Composite range
<PAGE> 99
from approximately 0.11% for the AMR Investment Services Strategic Cash Business
Trust to approximately 0.85% for the American Performance Cash Management Fund.
The Strategic Business Trust is an unregistered pooled account and as such is
not subject to certain requirements that apply to mutual funds under the
applicable securities, tax and other laws that, if applicable, may have
adversely affected performance. The data shown below reflects total return for
the periods shown, reduced by the actual expense ratio for such funds. To the
extent such funds had expense waivers or reimbursements in effect during the
periods indicated below, such funds' actual performance would have been lower
had such expense waivers or reimbursements not been in effect. INTRUST Fund fees
and expenses may be higher than such expenses and if applied would have reduced
the performance below. This performance information is deemed relevant since the
AMR accounts have been managed using the same investment objectives, policies
and restrictions and portfolio managers as those used by INTRUST Money Market
Fund. However, this performance data is not necessarily indicative of the past
or future performance of any of the INTRUST Funds. The AMR pooled accounts and
the INTRUST Money Market Fund are separate funds. This performance does not
represent the past performance of the INTRUST Money Market Fund.
AMR INVESTMENT SERVICES, INC.
MONEY MARKET COMPOSITE
ANNUALIZED TOTAL
RETURN FOR THE PERIOD ENDED
DECEMBER 31, 1999
<TABLE>
<CAPTION>
Money Market Money Lipper Institutional
Composite Market Fund Money Market Index
--------- ----------- ------------------
<S> <C> <C> <C>
1 Year
3 Years N/A
5 Years N/A
10 Years N/A
Since Inception*
</TABLE>
* The inception date of the Money Market Fund is January 23, 1997; the
inception date for the AMR Money Market Composite is September 1, 1987.
Since inception returns for the Lipper Institutional Money Market Index is
calculated using September 1, 1987 as the inception date.
INTERNATIONAL MULTI-MANAGER STOCK FUND
AMR oversees all administrative, investment advisory and portfolio
management services to the Portfolio. The assets of the Portfolio are allocated
by AMR among one or more investment advisers. AMR also acts as investment
adviser to the Portfolio and is required to furnish at its expense all services,
facilities and personnel necessary in connection with managing and administering
the Portfolio's investments and effecting portfolio transactions for the
Portfolio. AMR provides the Portfolio with office space, office equipment and
personnel necessary to manage and administer the Portfolio's operations. This
includes complying with reporting requirements; corresponding with shareholders;
maintaining internal bookkeeping, accounting and auditing services and records;
and supervising the provision of services to the Portfolio by third parties. AMR
also develops the investment program for the Portfolio, selects and changes
investment advisers (subject to approval by the AMR Trust Board and appropriate
interest holders), allocates assets among investment advisers, monitors the
investment advisers'
<PAGE> 100
investment programs and results, and coordinates the investment activities of
the investment advisers to ensure compliance with regulatory restrictions.
AMR also may receive up to 25% of the net annual interest income or up to
25% of loan fees in regards to securities lending activities. Currently, AMR
receives 10% of the net annual interest income from the investment of cash
collateral or 10% of the loan fees posted by borrowers. The Securities and
Exchange Commission ("SEC") has granted exemptive relief that permits AMR Trust
to invest cash collateral received from securities lending transactions in
shares of one or more private or registered investment companies managed by AMR.
AMR serves as investment manager and administrator to the Portfolio.
Hotchkis, Independence, Lazard and Templeton currently serve as investment
advisers to the Portfolio.
The investment advisory fees payable to AMR by the AMR Trust are 0.10% of
the average daily net assets of the Portfolio plus all fees payable by AMR to
the Portfolio Advisers. With respect to INTRUST's advisory fee, INTRUST has
undertaken not to charge advisory fees in excess of 0.40% of average daily net
assets with respect to the International Multi-Manager Stock Fund as long as the
Fund remains completely invested in the Portfolio or any other investment
company. INTRUST has contractually agreed not to charge its advisory fee to the
Fund in an amount in excess of 0.35% of the average daily net assets of the Fund
through____________. The investment advisory agreement for the International
Multi-Manager Stock Fund provides for an investment advisory fee payable to
INTRUST by the Fund of 1.25% of the average annual daily net assets of the Fund,
if the Fund does not invest all of its assets in the Portfolio or another
investment company. All investment advisory fees are accrued daily and paid
monthly.
None of the Portfolio Advisers provide any services to the Portfolio except
for portfolio investment management and related recordkeeping services.
AMR receives compensation for administrative and oversight functions
relating to securities lending of the Portfolio. Currently AMR receives 10% of
the net annual interest income from the investment of each collateral or 10% of
the loan fees posted by borrowers.
AMR may enter into new or modified advisory agreements with existing or new
investment advisers without approval of International Multi-Manager Stock Fund
shareholders or Portfolio interest holders, but subject to approval of the Board
and the AMR Trust Board. The SEC issued an exemptive order which eliminates the
need for shareholder/interest holder approval, subject to compliance with
certain conditions. These conditions include the requirement that within 90 days
of hiring a new adviser or implementing a material change with respect to an
advisory contract, the Portfolio send a notice to shareholders containing
information about the change that would be included in a proxy statement.
The Advisory Agreement between the Portfolio and AMR will continue in
effect only if such continuance is specifically approved at least annually by
the Board of Trustees of the AMR Trust or by vote of the holders of beneficial
interest of the Portfolio, and in either case by a majority of the Trustees of
the AMR Trust who are not parties to the Advisory Agreement or interested
persons of any such party, at a meeting called for the purpose of voting on the
Advisory Agreement.
The Advisory Agreement with respect to the Portfolio is terminable without
penalty by the Portfolio on 60 days' written notice when authorized either by
vote of the Portfolio's shareholders or by a vote of a majority of the Board of
Trustees of the AMR Trust, or by AMR on not more than 60 days' nor less than
<PAGE> 101
30 days' written notice, and will automatically terminate in the event of its
assignment. The Advisory Agreement also provides that, with respect to the
Portfolio, neither AMR nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the performance if its
or their duties to the Portfolio, except for willful misfeasance, bad faith or
gross negligence in the performance of AMR's or their duties or by reason of
reckless disregard of its or their obligations and duties under the Advisory
Agreement. The Advisory Agreement provides that AMR may render services to
others.
The advisory fees are accrued daily and paid monthly. The Adviser, in its
sole discretion, may waive all or any portion of its advisory fee with respect
to the Portfolio.
Following is a description of the Portfolio Advisers, each of which has
been retained by AMR, on behalf of the Portfolio, to provide advisory services
to the Portfolio.
Hotchkis and Wiley, 725 South Figueroa, Suite 4000, Los Angeles, California
90017, is a professional investment management firm which was founded in 1980 by
John F. Hotchkis and George Wiley. Hotchkis and Wiley is a division of Merrill
Lynch Asset Management, L.P., a wholly-owned indirect subsidiary of Merrill
Lynch & Co., Inc. Assets under management as of December 31, 1999 were
approximately ______billion, which included approximately _______billion of
assets of AMR and its subsidiaries and affiliated entities. Hotchkis and Wiley
also serves as an investment adviser to the Balanced Portfolio and Large Cap
Value Portfolio of the AMR Trust. The advisory contract provides for AMR to pay
Hotchkis and Wiley an annualized fee equal to 0.60% of the first $10 million of
assets under its discretionary management, 0.50% of the next $140 million of
assets 0.30% on the next $50 million of assets 0.20% of the next $800 million of
assets and 0.15% of all excess AMR Trust assets managed by Hotchkis and Wiley.
Lazard Asset Management ("Lazard"), 30 Rockefeller Plaza, New York, New
York 10112, is a division of Lazard Freres, a New York limited liability
company, which is registered as an investment adviser with the SEC and is a
member of the New York, American and Midwest Stock Exchanges, providing its
clients with a wide variety of investment banking, brokerage and related
services. Lazard provides investment management services to client discretionary
accounts with assets totaling approximately $___ billion as of December 31,
1999. For its services, AMR pays Lazard an annual fee equal to 0.50% of the
first $100 million in AMR Trust assets under its discretionary management,
0.325% of the next $400 million in assets and 0.20% on all excess assets.
Independence Investment Associates, Inc. ("IIA"), 53 State Street, Boston,
Massachusetts 02109, is a professional investment counseling firm which was
founded in 1982. The firm is a wholly owned subsidiary of John Hancock Mutual
Life Insurance Company. IIA's investment philosophy that "Any stock that
combines cheapness and improving fundamentals is attractive," is put into
practice through the use of a quantitative, multi-factor stock-ranking model
fueled by earnings and growth rates. Assets under management as of December 31,
1999, including funds managed for its parent company were approximately $____
billion, which included approximately $___ billion of assets of AMR and its
subsidiaries and affiliated entities. IIA also serves as an investment adviser
to the Balanced and Large Cap Value Portfolios. For its services, AMR pays IIA
an annual fee equal to 0.50% of the first $30 million in assets of AMR Trust and
other accounts under discretionary management by AMR, 0.25% of the next $70
million in assets and 0.20% on all excess assets.
Templeton Investment Counsel, Inc. ("Templeton"), 500 East Broward Blvd.,
Suite 2100, Fort Lauderdale, Florida 33394-3091, is a professional investment
counseling firm which has been providing investment services since 1979.
Templeton is indirectly owned by Franklin Resources, Inc. As of
<PAGE> 102
December 31, 1999, Templeton had discretionary investment management authority
with respect to approximately $____ billion of assets, including approximately
$____ million of assets of AMR and its subsidiaries and affiliated entities. For
its services, AMR pays Templeton an annualized fee equal to 0.50% of the first
$100 million in AMR Trust assets under its discretionary management, 0.35% of
the next $50 million in assets, 0.30% of the next $250 million in assets and
0.25% on assets over $400 million.
Lazard and IIA have been retained by AMR, on behalf of the Portfolio, to
provide advisory services to the Portfolios as of March 1, 1999. Prior to that
time, Morgan Stanley Asset Management Inc. provided advisory services to the
Portfolio, along with Hotchkis and Wiley and Templeton.
The AMR Trust and AMR also entered into a Management Agreement dated
October 1, 1995, as amended July 25, 1997, that obligates AMR to provide or
oversee all administrative, investment advisory and portfolio management
services for the AMR Trust.
STOCK FUND
Effective December 31, 1999, AMR replaced ARK Asset Management Co., Inc. ("ARK")
as sub-adviser to the Stock Fund. For the subadvisory services it provides to
the Stock Fund, AMR receives, from the Adviser and not the Funds, monthly fees
based upon average daily net assets at the annual rate of up to 0.45%.
Effective December 31, 1999, AMR retained Barrow, Hanley, Mewhinney & Strauss,
Inc. ("Barrow Hanley") to manage the Stock Fund's investments. Barrow Hanley is
a wholly owned subsidiary of United Asset Management Corporation, a Delaware
corporation, whose main office is at 3232 McKinney Avenue, 15th Floor, Dallas,
TX 75204. Barrow Hanley provides sub-advisory investment services to certain
mutual fund companies, including Vanguard Windsor II Fund, and as of June 30,
1999 had sub-advisory relationships totalling over $20 billion in assets.
KANSAS TAX-EXEMPT BOND FUND
The Kansas Tax-Exempt Bond Fund is the successor to the Kansas Tax Free
Income Portfolio of the SEI Tax Exempt Trust (the "SEI Fund") a registered
investment company for which the Adviser was the investment adviser. The SEI
Fund was reorganized into the Kansas Tax-Exempt Bond Fund. The Kansas Tax-Exempt
Bond Fund has the same investment objectives and policies as the SEI Fund.
Investors in the SEI Fund were invited to invest in the Kansas Tax Exempt Bond
Fund at its inception. Set forth below are certain performance data for the Fund
which for periods prior to the Fund's reorganization includes the performance of
the SEI Fund. The data shown below reflects total return for the periods shown,
reduced by the actual expenses of the Fund, and the SEI Fund, as applicable. To
the extent expense waivers or reimbursements were in effect during the periods
indicated below, actual returns would have been lower had such expense waivers
or reimbursements not been in effect. However, this performance data is not
necessarily indicative of the future performance of the Funds. The SEI Fund
performance reflects fees and expenses that may be lower than fees for the
Kansas Tax-Exempt Bond Fund after its first year of operation. The performance
shown would have been lower if such higher fees and expenses were in effect.
<PAGE> 103
KANSAS TAX-EXEMPT BOND FUND
<TABLE>
<CAPTION>
AVERAGE ANNUAL
RETURN
FOR PERIODS ENDING
DECEMBER 31,
1999
-----------------------------------------
LEHMAN 7 - YEAR
G.O. INDEX
------------------------
<S> <C> <C>
1 Year.............................................
5 Years............................................
Since Inception (December 10, 1990)................ (December 31, 1990)
</TABLE>
The Kansas Tax-Exempt Bond Fund may also advertise its "taxable equivalent
yield." Taxable equivalent yield is the yield that an investment, subject to
Federal and Kansas personal income taxes, would need to earn in order to equal,
on an after-tax basis, the yield on an investment exempt from such taxes
(normally calculated assuming the maximum combined Federal and Kansas marginal
tax rate). A taxable equivalent yield quotation for the Fund will be higher than
the yield or the effective yield quotations for the Fund.
The following table shows how to translate the yield of an investment that
is exempt from both Federal and Kansas personal income taxes into a taxable
equivalent yield for the 1999 taxable year. The last four columns of the table
show approximately how much a taxable investment would have to yield in order to
generate an after-tax (Federal and Kansas personal income taxes) yield of 5%,
6%, 7% or 8%. For example, the table shows that a married taxpayer filing a
joint return with taxable income of $50,000 would have to earn a yield of
approximately 10.37% before Federal and Kansas personal income taxes in order to
earn a yield after such taxes of 7%.
1999 TAXABLE YEAR
[to be updated for 1999]
TAXABLE EQUIVALENT YIELD TABLE--FEDERAL AND KANSAS PERSONAL
INCOME TAXES*
<TABLE>
<CAPTION>
TO EQUAL HYPOTHETICAL TAX-FREE YIELD OF
5%, 6%, 7% OR 8% A TAXABLE INVESTMENT
SINGLE COMBINED WOULD HAVE TO YIELD APPROXIMATELY
TAXABLE INCOME (1) MARGINAL ------------------------------------------------
FROM TO TAX RATE(2)(3) 5.00% 6.00% 7.00% 8.00%
- ---- -- -------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
0 15,000 17.98% 6.10% 7.31% 8.53% 9.75%
15,000 25,350 20.31% 6.27% 7.53% 8.78% 10.04%
25,350 30,000 32.50% 7.41% 8.89% 10.37% 11.85%
30,000 61,400 32.64% 7.42% 8.91% 10.39% 11.88%
61,400 128,100 35.45% 7.75% 9.30% 10.84% 12.39%
128,100 278,450 40.13% 8.35% 10.02% 11.69% 13.36%
over 278,450 43.50% 8.85% 10.62% 12.39% 14.16%
</TABLE>
<PAGE> 104
<TABLE>
<CAPTION>
TO EQUAL HYPOTHETICAL TAX-FREE YIELD OF
MARRIED 5%, 6%, 7% OR 8% A TAXABLE INVESTMENT
FILING JOINTLY COMBINED WOULD HAVE TO YIELD APPROXIMATELY
TAXABLE INCOME (1) ------------------------------------------------
MARGINAL
FROM TO TAX RATE(2)(3) 5.00% 6.00% 7.00% 8.00%
- ---- -- -------------- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
0 30,000 17.98% 6.10% 7.31% 8.53% 9.75%
30,000 42,350 20.31% 6.27% 7.53% 8.78% 10.04%
42,350 60,000 32.50% 7.41% 8.89% 10.37% 11.85%
60,000 102,300 32.64% 7.42% 8.91% 10.39% 11.88%
102,300 155,950 35.45% 7.75% 9.30% 10.84% 12.39%
155,950 278,450 40.13% 8.35% 10.02% 11.69% 13.36%
over 278,450 43.50% 8.85% 10.62% 12.39% 14.16%
</TABLE>
(1) Assuming the Federal alternative minimum tax is not applicable.
(2) The combined marginal rates were calculated using Federal tax rate tables
for the 1998 taxable year and Kansas tax rates for the 1998 taxable year.
The Federal tax rate table is indexed each year to reflect changes in the
Consumer Price Index and the Kansas tax rate table is constant until
changed by statute.
(3) The combined Federal and Kansas personal income tax marginal rates assume
that Kansas income taxes are fully deductible for Federal income tax
purposes as an itemized deduction. However, the ability to deduct itemized
deductions (including state income taxes) for Federal income tax purposes
is limited for those taxpayers whose Federal adjusted gross income for 1998
exceeds $124,500 ($62,250 in the case of a married individual filing a
separate return).
* This chart is prepared for general information purposes only. Tax
equivalent yields are a useful tool in determining the benefits of a tax-exempt
investment; however, tax equivalent yields should not be regarded as
determinative of the desirability of such an investment. In addition, this chart
is based on a number of assumptions which may not apply in each individual case.
An investor should therefore consult a competent tax adviser regarding tax
equivalent yields in individual circumstances.
ADVISORY FEES. For the fiscal years ended OCTOBER 31, 1999, 1998 and 1997,
the Advisers and Subadvisers to the separate Funds were entitled to advisory
fees in the following amounts:
<TABLE>
<CAPTION>
ADVISORY FEES ADVISORY FEES ADVISORY FEES
FYE 10/31/99 FYE 10/31/98 FYE 10/31/97
EARNED WAIVED EARNED WAIVED EARNED WAIVED
<S> <C> <C> <C> <C> <C> <C>
AMR Investment Services, Inc. $ _______ $ _______
Money Market Fund (a) $103,167 $ 28,651 $ 71,919 $ 35,959
Galliard Capital Management, Inc. $ _______ $ _______
Short-Term Bond Fund (b) $ 72,852 -- $ 34,041 --
Intermediate Bond Fund (b) $ _______ $ _______ $ 62,434 -- $ 28,136 --
Ark Asset Management Co., Inc. $ _______ $ _______
Stock Fund (b) $417,777 -- $166,057 --
INTRUST Bank, N.A $ _______ $ _______
Kansas Tax-Exempt Bond Fund (d) $ _______ $ _______ $360,231 $360,231 $ 50,811 $ 50,811
Money Market Fund (a) $ _______ $ _______ $128,959 $ 25,792 $120,772 $ 72,463
Short-Term Bond Fund (b) $ _______ $ _______ $233,125 $122,390 $129,156 $ 67,807
Intermediate Bond Fund (b) $ _______ $ _______ $199,787 $ 54,941 $108,244 $ 29,767
Stock Fund (b) $ _______ $ _______ $928,393 $120,690 $423,540 $ 55,060
International Multi-Manager Stock Fund (c) $ _______ $ _______ $255,903 $ 28,239 $ 87,171 $ 10,897
</TABLE>
(a) Commenced operations on January 23, 1997.
(b) Commenced operations on January 21, 1997.
(c) Commenced operations on January 20, 1997.
(d) For the period from September 1, 1997 through October 31, 1997. Effective
September 1, 1997, the Kansas Tax-Exempt Bond Fund changed its fiscal year
end to October 31.
<PAGE> 105
For the fiscal year ended August 31, 1997, INTRUST Bank, N.A., as Adviser
to the Kansas Tax-Exempt Bond Fund, was entitled to advisory fees in the amount
of $241,317 from the Fund but waived these fees in their entirety.
DISTRIBUTION OF FUND SHARES
The Trust retains BISYS to serve as principal underwriter for the shares of
the Funds pursuant to a Distribution Contract. The Distribution Contract
provides that the Distributor will use its best efforts to maintain a broad
distribution of the Funds' shares among bona fide investors and may enter into
selling group agreements with responsible dealers and dealer managers as well as
sell the Funds' shares to individual investors. The Distributor is not obligated
to sell any specific amount of shares.
DISTRIBUTION PLAN
The Trustees of the Funds have voted to adopt a 12b-1 Distribution Plan
for the Service Class and a 12b-1 Distribution Plan for the Premium Class (the
"Plans") pursuant to Rule l2b-1 of the Investment Company Act of 1940 (the "1940
Act") after having concluded that there is a reasonable likelihood that the
Plans will benefit the Funds and its shareholders. The Plans provide for a
monthly payment by the Funds to the Distributor in such amounts that the
Distributor may request or for direct payment by the Funds, for certain costs
incurred under the Plans, subject to periodic Board approval, provided that each
such payment is based on the average daily value of each Fund's net assets
during the preceding month and is calculated at an annual rate not to exceed
0.25% of the Service Class average daily net assets and 0.75% of the Premium
Class average daily net assets. The Distributor will use all amounts received
under the Plans for payments to broker-dealers or financial institutions for
their assistance in distributing shares of the Funds and otherwise promoting the
sale of Fund shares, including payments in amounts based on the average daily
value of Fund shares owned by shareholders in respect of which the broker-dealer
or financial institution has a distributing relationship. The Distributor may
also use all or any portion of such fees to pay Fund expenses such as the
printing and distribution of prospectuses sent to prospective investors; the
preparation, printing and distribution of sales literature and expenses
associated with media advertisements.
The Plans provide for the Distributor to prepare and submit to the Board of
Trustees on a quarterly basis written reports of all amounts expended pursuant
to the Plans and the purpose for which such expenditures were made. The Plans
provide that they may not be amended to increase materially the costs which the
Funds may bear pursuant to the Plans without shareholder approval and that other
material amendments of the Plans must be approved by the Board of Trustees, and
by the Trustees who neither are "interested persons" (as defined in the 1940
Act) of the Trust nor have any direct or indirect financial interest in the
operation of the Plans or in any related agreement, by vote cast in person at a
meeting called for the purpose of considering such amendments. The selection and
nomination of the Trustees of the Trust has been committed to the discretion of
the Trustees who are not "interested persons" of the Trust. The Plans have been
approved, and are subject to annual approval, by the Board of Trustees and by
the Trustees who neither are "interested persons" nor have any direct or
indirect financial interest in the operation of the Plans, or by vote cast in
person at a meeting called for the purpose of voting on the Plans. The Plans are
terminable with respect to the Funds at any time by a vote of a majority of the
Trustees who are not "interested persons" of the Trust and who have no direct or
indirect financial interest in the operation of the Plans or by vote of the
holders of a majority of the shares of the Funds. The Adviser and the
Administrator from time to time may use a portion of its revenues to
<PAGE> 106
pay certain distribution related costs. As shown below, no payments have been
made pursuant to the Plans.
DISTRIBUTION FEES. For the fiscal year ended OCTOBER 31, 1999, BISYS, as
Distributor to the Funds, was entitled to, however waived entirely, distribution
fees pursuant to the Plan in the following amounts:
<TABLE>
<CAPTION>
DISTRIBUTION FEES
FYE 10/31/99
EARNED WAIVED
<S> <C> <C>
Money Market Fund $ $
Short-Term Bond Fund
Intermediate Bond Fund
Stock Fund
International Multi-Manager Stock Fund
Kansas Tax-Exempt Bond Fund
</TABLE>
ADMINISTRATION AND FUND ACCOUNTING SERVICES
BISYS provides management and administrative services necessary for the
operation of the Funds, including, among other things: (i) preparation of
shareholder reports and communications; (ii) regulatory compliance, such as
reports to and filings with the SEC and state securities commissions; and (iii)
general supervision of the operation of the Funds, including coordination of the
services performed by the Adviser, the Distributor, transfer agent, custodians,
independent accountants, legal counsel and others. In addition, BISYS furnishes
office space and facilities required for conducting the business of the Funds
and pays the compensation of the Funds' officers, employees and Trustees
affiliated with BISYS. For these services, BISYS receives from each Fund a fee,
payable monthly, at the annual rate of 0.20% (15% for International
Multi-Manager Fund, while invested in the Portfolio) of each Fund's average
daily net assets.
The Administration Agreement is for a one year term and is subject to
annual approval by a majority of the Trustees who are not "interested persons"
of the Trust and who have no direct or indirect financial interest in the
operation of the Administration Agreement. The Administration Agreement will
terminate automatically in the event of its assignment.
ADMINISTRATION FEES. For the fiscal years ended October 31, 1999, 1998 and,
1997, BISYS, as Administrator to the Funds was entitled to administration fees
in the following amounts:
<TABLE>
<CAPTION>
ADMINISTRATION FEES ADMINISTRATION FEES ADMINISTRATION FEES
FYE 10/31/99 FYE 10/31/98 FYE 10/31/97
EARNED WAIVED EARNED WAIVED EARNED WAIVED
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund $_______ $_______ $103,167 $ -- $ 96,617 $ --
Short-Term Bond Fund _______ _______ 116,563 -- 64,579 2,840
Intermediate Bond Fund _______ _______ 99,894 -- 54,123 2,945
Stock Fund _______ _______ 185,680 -- 84,709 2,942
International Multi-Manager Stock Fund _______ _______ 84,714 -- 32,690 7,743
Kansas Tax-Exempt Bond Fund _______ _______ 240,155 120,076 33,874 33,874
</TABLE>
<PAGE> 107
Additionally, BISYS Fund Services, Inc. ("BFSI"), an affiliate of BISYS,
serves as the Fund Accounting Agent to the Trust pursuant to a Fund Accounting
Agreement. For the fiscal years ended October 31, 1999, 1998 and 1997 BFSI, as
Fund Accountant for the Funds was entitled to fees in the following amounts:
<TABLE>
<CAPTION>
FUND ACCOUNTING FEES FUND ACCOUNTING FEES FUND ACCOUNTING FEES
FYE 10/31/99 FYE 10/31/98 FYE 10/31/97
EARNED WAIVED EARNED WAIVED EARNED WAIVED
<S> <C> <C> <C> <C> <C> <C>
Money Market Fund $ _______ $ _______ $ 30,352 $ -- $ 24,065 $ --
Short-Term Bond Fund _______ _______ 39,973 -- 27,504 --
Intermediate Bond Fund _______ _______ 38,652 -- 27,711 --
Stock Fund _______ _______ 33,828 -- 26,079 --
International Multi-Manager Stock _______ _______ 30,020 -- 23,303 --
Fund
Kansas Tax-Exempt Bond Fund _______ _______ 41,161 -- 17,492 --
</TABLE>
SERVICE ORGANIZATIONS
The Trust also contracts with banks (including the Adviser), trust
companies, broker-dealers (other than BISYS) or other financial organizations
("Service Organizations") to provide certain administrative services for the
Funds. Services provided by Service Organizations may include among other
things: providing necessary personnel and facilities to establish and maintain
certain shareholder accounts and records; assisting in processing purchase and
redemption transactions; arranging for the wiring of funds; transmitting and
receiving funds in connection with shareholders orders to purchase or redeem
shares; verifying and guaranteeing client signatures in connection with
redemption orders, transfers among and changes in shareholders designating
accounts; providing periodic statements showing a shareholder's account balance
and, to the extent practicable, integrating such information with other client
transactions; furnishing periodic and annual statements and confirmations of all
purchases and redemptions of shares in a shareholder's account; transmitting
proxy statements, annual reports, and updating prospectuses and other
communications from the Funds to shareholders; and providing such other services
as the Funds or a shareholder reasonably may request, to the extent permitted by
applicable statute, rule or regulation. BISYS will not be a Service Organization
or receive fees for servicing. With respect to the Kansas Tax-Exempt Bond Fund,
shareholder service fees for the period September 1, 1997 through October 31,
1998 amounted to $96,062, but such fees were waived in their entirety. No
shareholder service fees were paid with respect to the other INTRUST Funds.
Some Service Organizations may impose additional or different conditions on
their clients, such as requiring their clients to invest more than the minimum
initial or subsequent investments specified by the Funds or charging a direct
fee for servicing. If imposed, these fees would be in addition to any amounts
which might be paid to the Service Organization by the Funds. Each Service
Organization has agreed to transmit to its clients a schedule of any such fees.
Shareholders using Service Organizations are urged to consult them regarding any
such fees or conditions.
The Glass-Steagall Act and other applicable laws, among other things,
prohibit banks from engaging in the business of underwriting, selling or
distributing securities. There currently is no precedent prohibiting banks from
performing administrative and shareholder servicing functions as Service
Organizations. However, judicial or administrative decisions or interpretations
of such laws, as well as changes in either Federal or state statutes or
regulations relating to the permissible activities of banks and
<PAGE> 108
their subsidiaries or affiliates, could prevent a bank from continuing to
perform all or a part of its servicing activities. In addition, state securities
laws on this issue may differ from the interpretations of federal law expressed
herein and banks and financial institutions may be required to register as
dealers pursuant to state law.
If a bank were prohibited from so acting, its shareholder clients would be
permitted to remain shareholders of the Trust and alternative means for
continuing the servicing of such shareholders would be sought. In that event,
changes in the operation of the Trust might occur and a shareholder serviced by
such a bank might no longer be able to avail itself of any services then being
provided by the bank. It is not expected that shareholders would suffer any
adverse financial consequences as a result of any of these occurrences.
EXPENSES
Except for the expenses paid by INTRUST and BISYS, the Funds bear all costs
of their operations.
DETERMINATION OF NET ASSET VALUE
The Money Market Fund uses the amortized cost method to determine the value
of its portfolio securities pursuant to Rule 2a-7 under the 1940 Act. The
amortized cost method involves valuing a security at its cost and amortizing any
discount or premium over the period until maturity regardless of the impact of
fluctuating interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods during which
the value, as determined by amortized cost, is higher or lower than the price
which the Fund would receive if the security were sold. During these periods,
the yield to a shareholder may differ somewhat from that which could be obtained
from a similar fund which utilizes a method of valuation based upon market
prices. Thus, during periods of declining interest rates, if the use of the
amortized cost method resulted in lower value of a Fund's portfolio on a
particular day, a prospective investor in the Fund would be able to obtain a
somewhat higher yield than would result from an investment in a fund utilizing
solely market values and existing Fund shareholders would receive
correspondingly less income. The converse would apply during periods of rising
interest rates.
Rule 2a-7 provides that in order to value its portfolio using the
amortized cost method, the Money Market Fund must maintain a dollar-weighted
average portfolio maturity of 90 days or less, purchase securities having
remaining maturities of 397 days or less and invest only in U.S. dollar
denominated eligible securities determined by the Trust's Board of Trustees to
be of minimal credit risks and which (1) have received the highest short-term
rating by at least two Nationally Recognized Statistical Rating Organizations
("NRSROs"), such as "A-1" by Standard & Poor's and "P-1" by Moody's; (2) are
single rated and have received the highest short-term rating by a NRSRO; or (3)
are unrated, but are determined to be of comparable quality by the Adviser or
the Adviser pursuant to guidelines approved by the Board and subject to the
ratification of the Board.
In addition, the Fund will not invest more than 5% of its total assets in
the securities (including the securities collateralizing a repurchase agreement)
of, or subject to puts issued by, a single issuer, except that, the Fund may
invest in U.S. Government securities or repurchase agreements that are
collateralized by U.S. Government securities without any such limitation, and
the limitation with respect to puts does not apply to unconditional puts if no
more than 10% of a Fund's total assets are invested in securities issued or
guaranteed by the issuer of the unconditional put. Investments in rated
securities not rated in the highest category by at least two rating
organizations (or one rating organization if the instrument was rated by only
one such organization), and unrated securities not determined by the Board of
Trustees to be comparable to those rated in the highest rating category, will be
limited to 5% of a Fund's total assets,
<PAGE> 109
with investment in any one such issuer being limited to no more than the greater
of 1% of a Fund's total assets or $1,000,000.
Pursuant to Rule 2a-7, the Board of Trustees is also required to establish
procedures designed to stabilize, to the extent reasonably possible, the price
per share of the Funds, as computed for the purpose of sales and redemptions, at
$1.00. Such procedures include review of the Fund's portfolio holdings by the
Board of Trustees, at such intervals as it may deem appropriate, to determine
whether the net asset value of the Funds calculated by using available market
quotations deviates from $l.00 per share based on amortized cost. The extent of
any deviation will be examined by the Board of Trustees. If such deviation
exceeds 1/2 of 1%, the Board of Trustees will promptly consider what action, if
any, will be initiated. In the event the Board of Trustees determines that a
deviation exists which may result in material dilution or other unfair results
to investors or existing shareholders, the Board of Trustees will take such
corrective action as it regards as necessary and appropriate, which may include
selling portfolio instruments prior to maturity to realize capital gains or
losses or to shorten average portfolio maturity, withholding dividends or
establishing a net asset value per share by using available market quotations.
The Non-Money Market Funds value their portfolio securities in accordance
with the procedures described in the Prospectus.
PORTFOLIO TRANSACTIONS
Investment decisions for the Funds and the Portfolio and for the other
investment advisory clients of the Adviser and the Portfolio Advisers are made
with a view to achieving their respective investment objectives. Investment
decisions are the product of many factors in addition to basic suitability for
the particular client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or sold for other
clients at the same time. Likewise, a particular security may be bought for one
or more clients when one or more clients are selling the security. In some
instances, one client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously purchase or sell the
same security, in which event each day's transactions in such security are,
insofar as possible, averaged as to price and allocated between such clients in
a manner which in the opinion of the Adviser and the Portfolio Advisers, is
equitable to each and in accordance with the amount being purchased or sold by
each. There may be circumstances when purchases or sales of portfolio securities
for one or more clients will have an adverse effect on other clients.
The Funds and the Portfolio have no obligation to deal with any dealer or
group of dealers in the execution of transactions in portfolio securities.
Subject to policies established by the Trust's Board of Trustees and the AMR
Trust Board, the Adviser and Portfolio Advisers, as appropriate, are primarily
responsible for portfolio decisions and the placing of portfolio transactions.
In placing orders, it is the policy of the Funds and the Portfolio to obtain the
best results taking into account the broker-dealer's general execution and
operational facilities, the type of transaction involved and other factors such
as the dealer's risk in positioning the securities. While the Adviser and
Portfolio Advisers generally seek reasonably competitive spreads or commissions,
the Funds will not necessarily be paying the lowest spread or commission
available.
Purchases and sales of securities will often be principal transactions in
the case of debt securities and equity securities traded otherwise than on an
exchange. The purchase or sale of equity securities will frequently involve the
payment of a commission to a broker-dealer who effects the transaction on behalf
of a Fund. Debt securities normally will be purchased or sold from or to issuers
directly or to dealers serving as market makers for the securities at a net
price. Generally, money market securities are traded on a net basis and do not
involve brokerage commissions.
<PAGE> 110
The cost of executing portfolio securities transactions for the Money
Market Fund primarily consists of dealer spreads and underwriting commissions.
Under the 1940 Act, persons affiliated with the Funds or the Sponsor are
prohibited from dealing with the Funds as a principal in the purchase and sale
of securities unless a permissive order allowing such transactions is obtained
from the SEC.
The Adviser and Portfolio Advisers may, in circumstances in which two or
more broker-dealers are in a position to offer comparable results, give
preference to a dealer which has provided statistical or other research services
to the Adviser or Portfolio Advisers. By allocating transactions in this manner,
the Adviser and the Portfolio Advisers are able to supplement their research and
analysis with the views and information of securities firms. These items, which
in some cases may also be purchased for cash, include such matters as general
economic and securities market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities.
Some of these services are of value to the Adviser and Portfolio Advisers
in advising various of their clients (including the Funds), although not all of
these services are necessarily useful and of value in managing the Funds. The
management fees paid by the Funds and the Portfolio are not reduced because the
Adviser or Portfolio Advisers or their affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934 (the
"Act"), the Adviser and Portfolio Advisers may cause the Funds to pay a
broker-dealer which provides "brokerage and research services" (as defined in
the Act) to the Adviser and Portfolio Advisers an amount of disclosed commission
for effecting a securities transaction for the Funds in excess of the commission
which another broker-dealer would have charged for effecting that transaction.
Consistent with the Rules of Fair Practice of the National Association of
Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine, the
Adviser and Portfolio Adviser may consider sales of shares of the Funds as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Funds.
For the fiscal years ended October 31, 1999, 1998, and , 1997, purchase and
sale transactions by Short Term Bond Fund, Intermediate Bond Fund, Money Market
Fund, International Multi-Manager Stock Fund and Kansas Tax Exempt Fund did not
involve brokerage commissions. The total brokerage commissions paid by Stock
Fund for the fiscal years ended October 31, 1999, 1998 and 1997 were
$___________, $ $200,637.44, and $160,871.28 respectively.
PORTFOLIO TURNOVER
Changes may be made in the portfolio consistent with the investment
objectives and policies of the Funds whenever such changes are believed to be in
the best interests of the Funds and their shareholders. It is anticipated that
the annual portfolio turnover rate normally will not exceed the amounts stated
in the Funds' Prospectuses and financial statements. The portfolio turnover rate
is calculated by dividing the lesser of purchases or sales of portfolio
securities by the average monthly value of the Fund's portfolio securities. For
purposes of this calculation, portfolio securities exclude all securities having
a maturity when purchased of one year or less.
For the fiscal year ended October 31, 1999, portfolio turnover rates for
each of the Funds were ____%, _____%, _____% and ______% for the Short-Term Bond
Fund, Intermediate Bond Fund and Stock Fund and Kansas Tax-Exempt Bond Fund,
respectively.
<PAGE> 111
For the fiscal year ended October 31, 1998, portfolio turnover rates for
each of the Funds were 55.75%, 39.07% and 102.36% for the Short-Term Bond Fund,
Intermediate Bond Fund and Stock Fund, respectively.
TAXATION
The Funds have qualified and intend to qualify and elect annually to be
treated as regulated investment companies under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). To qualify as a regulated
investment company, a Fund must (a) distribute to shareholders at least 90% of
its investment company taxable income (which includes, among other items,
dividends, taxable interest and the excess of net short-term capital gains over
net long-term capital losses); (b) derive in each taxable year at least 90% of
its gross income from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stock, securities or
foreign currencies or other income derived with respect to its business of
investing in such stock, securities or currencies; (c) diversify its holdings so
that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash and cash items
(including receivables), U.S. Government securities, the securities of other
regulated investment companies and other securities, with such other securities
of any one issuer limited for the purposes of this calculation to an amount not
greater than 5% of the value of the Fund's total assets and not greater than 10%
of the outstanding voting securities of such issuer, and (ii) not more than 25%
of the value of its total assets is invested in the securities of any one issuer
(other than U.S. Government securities or the securities of other regulated
investment companies). In addition, a Fund earning tax-exempt interest must, in
each year, distribute at least 90% of its net tax-exempt income. By meeting
these requirements, the Funds generally will not be subject to Federal income
tax on their investment company taxable income and net capital gains which are
distributed to shareholders. If the Funds do not meet all of these Code
requirements, they will be taxed as ordinary corporations and their
distributions will be taxed to shareholders as ordinary income.
Amounts, other than tax-exempt interest, not distributed on a timely
basis in accordance with a calendar year distribution requirement are subject to
a nondeductible 4% excise tax. To prevent imposition of the excise tax, each
Fund must distribute for each calendar year an amount equal to the sum of (1) at
least 98% of its ordinary income (excluding any capital gains or losses) for the
calendar year, (2) at least 98% of the excess of its capital gains over capital
losses (adjusted for certain ordinary losses) for the one-year period ending
October 31 of such year, and (3) all ordinary income and capital gains net
income (adjusted for certain ordinary losses) for previous years that were not
distributed during such years. As of the Fiscal year ended October 31, 1999,
Short Term Bond Fund and International Multi-Manager Stock Fund have capital
loss carry forwards of $______ and $_________, respectively. A distribution,
including an "exempt-interest dividend," will be treated as paid on December 31
of a calendar year if it is declared by a Fund during October, November or
December of that year to shareholders of record on a date in such a month and
paid by the Fund during January of the following year. Such distributions will
be taxable to shareholders in the calendar year in which the distributions are
declared, rather than the calendar year in which the distributions are received.
Some Funds and the Portfolio may invest in stocks of foreign companies that
are classified under the Code as passive foreign investment companies ("PFICs").
In general, a foreign company is classified as a PFIC under the Code if at least
one-half of its assets constitutes investment-type assets or 75% or more of its
gross income is investment-type income. Under the PFIC rules, an "excess
distribution" received with respect to PFIC stock is treated as having been
realized ratably over the period during which the Fund or the Portfolio held the
PFIC stock. A Fund itself will be subject to tax on the portion, if any, of the
excess distribution that is allocated to the Fund's or, in the case of the
International Multi-Manager Stock Fund, the Portfolio's holding period in prior
taxable years (and an interest factor will be added to the tax, as if
<PAGE> 112
the tax had actually been payable in such prior taxable years) and the
International Multi-Manager Stock Fund will be taxed on its proportionate share
of the Portfolio's excess distributions allocated to that holding period even
though the Fund distributes the corresponding income to shareholders. Excess
distributions include any gain from the sale of PFIC stock as well as certain
distributions from a PFIC. All excess distributions are taxable as ordinary
income.
A Fund or the Portfolio may be able to elect alternative tax treatment with
respect to PFIC stock. Under an election that currently may be available, a Fund
or the Portfolio generally would be required to include in its gross income its
share of the earnings of a PFIC on a current basis, regardless of whether any
distributions are received from the PFIC. If this election is made, the special
rules, discussed above, relating to the taxation of excess distributions, would
not apply. In addition, other elections may become available that would affect
the tax treatment of PFIC stock held by a Fund. Each Fund's and the Portfolio's
intention to qualify annually as a regulated investment company may limit its
elections with respect to PFIC stock.
Because the application of the PFIC rules may affect, among other things,
the character of gains, the amount of gain or loss and the timing of the
recognition of income with respect to PFIC stock, as well as subject a Fund
itself or the Portfolio to tax on certain income from PFIC stock, the amount
that must be distributed to shareholders, and which will be taxed to
shareholders as ordinary income or long-term capital gain, may be increased or
decreased substantially as compared to a fund that did not invest in PFIC stock.
Investors should consult their own tax advisors in this regard. The Portfolio
does not intend to acquire stock of issuers that are considered PFICs.
Distributions of investment company taxable income generally are taxable to
shareholders as ordinary income. Distributions from certain of the Funds may be
eligible for the dividends-received deduction available to corporations. To the
extent dividends received by a Fund are attributable to foreign corporations, a
corporation that owns shares will not be entitled to the dividends-received
deduction with respect to its pro rata portion of such dividends, since the
dividends-received deduction is generally available only with respect to
dividends paid by domestic corporations. Proposed legislation, if enacted, would
reduce the dividends received deduction from 70 to 50 percent.
Distributions of net long term capital gains, if any, designated by the
Funds as long term capital gain dividends are taxable to shareholders as
long-term capital gain, regardless of the length of time the Funds' shares have
been held by a shareholder. All distributions are taxable to the shareholder in
the same manner whether reinvested in additional shares or received in cash.
Shareholders will be notified annually as to the Federal tax status of
distributions.
Distributions by a Fund reduce the net asset value of the Fund's
shares. Should a distribution reduce the net asset value below a shareholder's
cost basis, such distribution, nevertheless, would be taxable to the shareholder
as ordinary income or capital gain as described above, even though, from an
investment standpoint, it may constitute a partial return of capital. In
particular, investors should be careful to consider the tax implications of
buying shares just prior to a distribution by the Funds. The price of shares
purchased at that time includes the amount of the forthcoming distribution.
Those purchasing just prior to a distribution will receive a distribution which
will nevertheless generally be taxable to them.
Upon the taxable disposition (including a sale or redemption) of shares of
a Fund, a shareholder may realize a gain or loss depending upon his basis in his
shares. Such gain or loss generally will be treated as capital gain or loss if
the shares are capital assets in the shareholders hands. Such gain or loss will
be long-term or short-term, generally depending upon the shareholder's holding
period for the shares. However, a loss realized by a shareholder on the
disposition of Fund shares with respect to which capital
<PAGE> 113
gain dividends have been paid will, to the extent of such capital gain
dividends, be treated as long-term capital loss if such shares have been held by
the shareholder for six months or less. A loss realized on the redemption, sale
or exchange of Fund shares will be disallowed to the extent an exempt-interest
dividend was received with respect to those shares if the shares have been held
by the shareholder for six months or less. Further, a loss realized on a
disposition will be disallowed to the extent the shares disposed of are replaced
(whether by reinvestment of distributions or otherwise) within a period of 61
days beginning 30 days before and ending 30 days after the shares are disposed
of. In such a case, the basis of the shares acquired will be adjusted to reflect
the disallowed loss. Shareholders receiving distributions in the form of
additional shares will have a cost basis for Federal income tax purposes in each
share received equal to the net asset value of a share of the Funds on the
reinvestment date.
The taxation of equity options is governed by Code section 1234. Pursuant
to Code section 1234, the premium received by a Fund for selling a put or call
option is not included in income at the time of receipt. If the option expires,
the premium is short-term capital gain to the Fund. If the Fund enters into a
closing transaction, the difference between the amount paid to close out its
position and the premium received is short-term capital gain or loss. If a call
option written by a Fund is exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the amount realized upon the sale
of such security and any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term depending upon the holding period of the
security. With respect to a put or call option that is purchased by a Fund, if
the option is sold, any resulting gain or loss will be a capital gain or loss,
and will be long-term or short-term, depending upon the holding period of the
option. If the option expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the option. If the
option is exercised, the cost of the option, in the case of a call Option, is
added to the basis of the purchased security and, in the case of a put option,
reduces the amount realized on the underlying security in determining gain or
loss.
Certain of the options, futures contracts, and forward foreign currency
exchange contracts that several of the Funds and the Portfolio may invest in are
so-called "section 1256 contracts." With certain exceptions, gains or losses on
section 1256 contracts generally are considered 60% long-term and 40% short-term
capital gains or losses ("60/40"). Also, section 1256 contracts held by a Fund
or the Portfolio at the end of each taxable year (and, generally, for purposes
of the 4% excise tax, on October 31 of each year) are "marked-to-market" with
the result that unrealized gains or losses are treated as though they were
realized and the resulting gain or loss is treated as 60/40 gain or loss.
Investors should contact their own tax advisors in this regard.
Generally, the hedging transactions undertaken by a Fund or the Portfolio
may result in "straddles" for Federal income tax purposes. The straddle rules
may affect the character of gains (or losses) realized by a Fund or the
Portfolio. In addition, losses realized by a Fund or the Portfolio on a position
that are part of a straddle may be deferred under the straddle rules, rather
than being taken into account in calculating the taxable income for the taxable
year in which such losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences to a
Fund or the Portfolio of hedging transactions are not entirely clear. Hedging
transactions may increase the amount of short-term capital gain realized by a
Fund or Portfolio which is taxed as ordinary income when distributed to
stockholders.
A Fund or the Portfolio may make one or more of the elections available
under the Code which are applicable to straddles. If a Fund or the Portfolio
makes any of the elections, the amount, character and timing of the recognition
of gains or losses from the affected straddle positions will be determined under
rules that vary according to the election(s) made. The rules applicable under
certain of the elections may operate to accelerate the recognition of gains or
losses from the affected straddle positions.
<PAGE> 114
Because application of the straddle rules may affect the character of gains
or losses, defer losses and/or accelerate the recognition of gains or losses
from the affected straddle positions, the amount which must be distributed to
shareholders, and which will be taxed to shareholders as ordinary income or
long-term capital gain, may be increased or decreased substantially as compared
to a Fund that did not engage in such hedging transactions. Investors should
contact their own tax advisors in this regard.
Certain requirements that must be met under the Code in order for a Fund to
qualify as a regulated investment company may limit the extent to which a Fund
or, in the case of the International Multi-Manager Stock Fund, the Portfolio
will be able to engage in transactions in options, futures, and forward
contracts.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Fund or the Portfolio accrues interest,
dividends or other receivables, or accrues expenses or other liabilities
denominated in a foreign currency, and the time the Fund or the Portfolio
actually collects such receivables, or pays such liabilities, generally are
treated as ordinary income or ordinary loss. Similarly, on disposition of debt
securities denominated in a foreign currency and on disposition of certain
options and forward and futures contracts, gains or losses attributable to
fluctuations in the value of foreign currency between the date of acquisition of
the security or contract and the date of disposition also are treated as
ordinary gain or loss. These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase, decrease, or eliminate the amount
of a Fund's investment company taxable income to be distributed to its
shareholders as ordinary income. Investors should contact their own tax advisors
in this regard.
Income received by a Fund or the Portfolio from sources within foreign
countries may be subject to withholding and other similar income taxes imposed
by the foreign country. If more than 50% of the value of a Fund's total assets
at the close of its taxable year consists of securities of foreign governments
and corporations, the Fund will be eligible and intends to elect to
"pass-through" to its shareholders the amount of such foreign taxes paid by the
Fund or, in the case of the International Multi-Manager Stock Fund, its
proportionate share of such taxes paid by the Portfolio. Pursuant to this
election, a shareholder would be required to include in gross income (in
addition to taxable dividends actually received) his pro rata share of the
foreign taxes paid (or deemed paid) by a Fund, and would be entitled either to
deduct his pro rata share of foreign taxes in computing his taxable income or to
use it as a foreign tax credit against his U.S. Federal income tax liability,
subject to limitations. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions, but such a shareholder may be
eligible to claim the foreign tax credit (see below). Each shareholder will be
notified within 60 days after the close of a Fund's taxable year whether the
foreign taxes paid by a Fund or the Portfolio will "pass-through" for that year
and, if so, such notification will designate (a) the shareholder's portion of
the foreign taxes paid to each such country and (b) the portion of the dividend
which represents income derived from foreign sources.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his total foreign
source taxable income. For this purpose, if a Fund makes the election described
in the preceding paragraph, the source of the Fund's income flows through to its
shareholders. Gains from the sale of securities will be treated as derived from
U.S. sources and certain currency fluctuations gains, including fluctuation
gains from foreign currency-denominated debt securities, receivables and
payables, will be treated as ordinary income derived from U.S. sources. The
limitation on the foreign tax credit is applied separately to foreign source
passive income as defined for purposes of the foreign tax credit) including
foreign source passive income of a Fund (including, in the case of the
International Multi-Manager Stock Fund, its proportionate share of the
Portfolio's foreign source passive income). The foreign tax credit may offset
only 90% of the alternative minimum tax
<PAGE> 115
imposed on corporations and individuals, and foreign taxes generally may not be
deducted in computing alternative minimum taxable income.
The Funds are required to report to the IRS all distributions except in the
case of certain exempt shareholders. All such distributions generally are
subject to withholding of Federal income tax at a rate of 31% ("backup
withholding") in the case of non-exempt shareholders if (1) the shareholder
fails to furnish the Funds with and to certify the shareholder's correct
taxpayer identification number or social security number, (2) the IRS notifies
the Funds or a shareholder that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he is not subject to backup withholding. If the withholding provisions are
applicable, any such distributions, whether reinvested in additional shares or
taken in cash, will be reduced by the amounts required to be withheld. Backup
withholding is not an additional tax. Any amount withheld may be credited
against the shareholders U.S. Federal income tax liability. Investors may wish
to consult their tax advisors about the applicability of the backup withholding
provisions.
The foregoing discussion relates only to Federal income tax law as
applicable to U.S. persons (i.e., U.S. citizens and residents and U.S.
corporations, partnerships, trusts and estates). Distributions by the Funds also
may be subject to state and local taxes and their treatment under state and
local income tax laws may differ from the Federal income tax treatment.
Distributions of a Fund which are derived from interest on obligations of the
U.S. Government and certain of its agencies and instrumentalities may be exempt
from state and local taxes in certain states. Shareholders should consult their
tax advisors with respect to particular questions of Federal, state and local
taxation. Shareholders who are not U.S. persons should consult their tax
advisers regarding U.S. and foreign tax consequences of ownership of shares of
the Funds including the likelihood that distributions to them would be subject
to withholding of U.S. tax at a rate of 30% (or at a lower rate under a tax
treaty).
TAXATION OF THE PORTFOLIO
The Portfolio should be classified as a separate partnership for federal
income tax purposes and is not a "publicly traded partnership." As a result, the
Portfolio is not subject to federal income tax; instead, each investor in the
Portfolio, such as the International Multi-Manager Stock Fund (the "Fund"), is
required to take into account in determining its federal income tax liability
its share of the Portfolio's income, gains, losses, deductions, credits and tax
preference items, without regard to whether it has received any cash
distributions from the Portfolio.
The Fund will be deemed to own a proportionate share of the Portfolio's
assets and income for purposes of determining whether the Fund satisfies the
requirements to qualify as a Regulated Investment Company. Accordingly, the
Portfolio intends to conduct its operations so that its corresponding Fund will
be able to satisfy all those requirements.
Distributions to the Fund from the Portfolio (whether pursuant to a partial
or complete withdrawal or otherwise) will not result in the Fund's recognition
of any gain or loss for federal income tax purposes, except that (1) gain will
be recognized to the extent any cash that is distributed exceeds the Fund's
basis for its interest in the Portfolio before the distribution, (2) income or
gain will be recognized if the distribution is in liquidation of the Fund's
entire interest in the Portfolio and includes a disproportionate share of any
unrealized receivables held by the Portfolio and (3) loss will be recognized if
a liquidation distribution consists solely of cash and/or unrealized
receivables. The Fund's basis for its interest in the Portfolio generally will
equal the amount of cash and the basis of any property the Fund invests in the
Portfolio, increased by the Fund's share of the Portfolio's net income and gains
and decreased by (a) the
<PAGE> 116
amount of cash and the basis of any property the Portfolio distributes to the
Fund and (b) the Fund's share of the Portfolio's losses.
KANSAS TAX-EXEMPT BOND FUND. This Fund intends to manage its portfolio so
that it will be eligible to pay "exempt-interest dividends" to shareholders. The
Fund will so qualify if, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consists of state, municipal, and
certain other securities, the interest on which is exempt from the regular
Federal income tax. To the extent that the Fund's dividends distributed to
shareholders are derived from such interest income and are designated as
exempt-interest dividends by the Fund, they will be excludable from a
shareholder's gross income for Federal income tax purposes. Exempt-interest
dividends, however, must be taken into account by shareholders in determining
whether their total incomes are large enough to result in taxation of up to 85%
of their Social Security benefits and certain railroad retirement benefits. The
Fund will inform shareholders annually as to the portion of the distributions
from the Fund which constitute exempt-interest dividends. In addition, for
corporate shareholders of the Fund, exempt interest dividends may comprise part
or all of an adjustment to alternative minimum taxable income. Exempt-interest
dividends that are attributable to certain private activity bonds, while not
subject to the regular Federal income tax, may constitute an item of tax
preference for purposes of the alternative minimum tax.
To the extent that the Fund's dividends are derived from its investment
company taxable income (which includes interest on its temporary taxable
investments and the excess of net short-term capital gain over net long-term
capital loss), they are considered ordinary (taxable) income for Federal income
tax purposes. Such dividends will not qualify for the dividends-received
deduction for corporations. Distributions, if any, of net long-term capital
gains (the excess of net long-term capital gain over net short-term capital
loss) designated by a Fund as long-term capital gain dividends are taxable to
shareholders as long-term capital gain regardless of the length of time the
shareholder has owned shares of the Fund.
Upon redemption, sale or exchange of shares in this Fund, a shareholder
will realize a taxable gain or loss, depending on whether the gross proceeds are
more or less than the shareholder's tax basis for the shares. The discussion
above provides additional detail about the income tax consequences of disposing
of Fund shares.
Deductions for interest expense incurred to acquire or carry shares of the
Fund may be subject to limitations that reduce, defer, or eliminate such
deductions. This includes limitations on deducting interest on indebtedness
properly allocable to investment property (which may include shares of the
Fund). In addition, a shareholder may not deduct a portion of interest on
indebtedness incurred or continue to purchase or carry shares of an investment
company (such as this Fund) paying exempt-interest dividends. Such disallowance
would be in an amount which bears the same ratio to the total of such interest
as the exempt-interest dividends bear to the total dividends, excluding net
capital gain dividends received by the shareholder. Under rules issued by the
IRS for determining when borrowed funds are considered used for the purposes of
purchasing or carrying particular assets, the purchase of shares may be
considered to have been made with borrowed funds even though the borrowed funds
are not directly traceable to the purchase of shares.
Certain of the debt securities acquired by the Fund may be treated as debt
securities that were originally issued at a discount. Original issue discount
can generally be defined as the difference between the price at which a security
was issued and its stated redemption price at maturity. Although no cash income
is actually received by the Fund, original issue discount on a taxable debt
security earned in a given year generally is treated for Federal income tax
purposes as interest and, therefore, such income would be subject to the
distribution requirements of the Code. Original issue discount on an obligation,
<PAGE> 117
the interest from which is exempt from Federal income tax, generally will
constitute tax-exempt interest income.
Some of the debt securities may be purchased by the Fund at a discount
which exceeds the original issue discount on such securities, if any. This
additional discount represents market discount for Federal income tax purposes.
The gain realized on the disposition of any debt security having market discount
will be treated as ordinary taxable income to the extent it does not exceed the
accrued market discount on such debt security. Generally, market discount
accrues on a daily basis for each day the debt security is held by the Fund at a
constant rate over the time remaining to the debt security's maturity or, at the
election of the Fund, at a constant yield to maturity which takes into account
the semi-annual compounding of interest.
Under Kansas law, a mutual fund which qualifies as a regulated investment
company generally must have at least 50% of its total assets in Kansas state and
local issues at the end of each quarter of its taxable year in order to be
eligible to pay dividends which will be exempt from Kansas personal income tax.
Generally, shareholders who are Kansas residents will not incur Kansas personal
income tax on the amount of exempt-interest dividends received by them from the
Fund and derived from Kansas state and local issues, whether taken in cash or
paid in additional shares. Gain on the sale or redemption of Fund shares is
subject to Kansas personal income tax.
Shareholders will normally be subject to Kansas personal income tax on
dividends paid from income derived from taxable securities and other taxable
investments, and from securities issued by states other than Kansas and on
distribution of capital and other taxable gains.
The Fund will be required to report to the IRS all distributions of
investment company taxable income and net capital gains and gross proceeds from
the redemption or exchange of the Fund's shares, except in the case of certain
exempt shareholders. All such distributions and proceeds from the redemption or
exchange of the Fund's shares may be subject to withholding of Federal income
tax at the rate of 31% in the case of non-exempt shareholders who fail to
furnish a Fund with their taxpayer identification numbers and with required
certifications regarding their status under Federal income tax laws.
A deductible "environmental tax" of 0.12% is imposed on a corporation's
modified alternative minimum taxable income in excess of $2 million. The
environmental tax will be imposed even if the corporation is not required to pay
an alternative minimum tax because the corporation's regular income tax
liability exceeds its minimum tax liability. To the extent that exempt-interest
dividends paid by a Fund are included in alternative minimum taxable income,
corporate shareholders may be subject to the environmental tax.
Opinions relating to the validity of municipal securities and the exemption
of interest thereon from Federal income tax are rendered by bond counsel to the
issuers. The Fund, the Adviser and its affiliates, and the Funds' counsel make
no review of proceedings relating to the issuance of state or municipal
securities on the basis of such opinions.
Persons who may be "substantial users" (or "related persons" to substantial
users) of facilities financed by private activity bonds should consult their tax
advisers before purchasing shares of this Fund since the acquisition of shares
of the Fund may result in adverse tax consequences to them. In addition, all
shareholders of a Fund should consult their tax advisers about the tax
consequences to them of their investments in the Fund.
<PAGE> 118
Changes in the tax law, including provisions relating to tax-exempt income,
frequently come under consideration. If such changes are enacted, the tax
consequences arising from an investment in Kansas Tax-Exempt Bond Fund may be
affected. Since the Trust does not undertake to furnish tax advice, it is
important for shareholders to consult their tax advisers regularly about the tax
consequences to them of investing in one or more of the INTRUST Funds.
OTHER INFORMATION
CAPITALIZATION
The Trust is a Delaware business trust established under a Declaration of
Trust dated January 26, 1996 and currently consists of eleven separately managed
portfolios. Five of the eleven portfolios of the Trust (the NestEgg Portfolios)
are not described in this Statement, but file a separate registration statement
and Statement of Additional Responsibility. Each portfolio is comprised of two
classes of shares -- the Service Class and the Premium Class. The two classes
are identical with the exception that the shareholders in the Service Class and
the Premium Class may pay 12b-1 distribution fees in amounts up to 0.25% and
0.75%, respectively of the daily net asset value of the respective class'
shares. The capitalization of the Trust consists solely of an unlimited number
of shares of beneficial interest with a par value of $0.001 each. The Board of
Trustees may establish additional Funds (with different investment objectives
and fundamental policies) at any time in the future. Establishment and offering
of additional Funds will not alter the rights of the Trust's shareholders. When
issued, shares are fully paid, non-assessable, redeemable and freely
transferable. Shares do not have preemptive rights or subscription rights. In
any liquidation of a Fund, each shareholder is entitled to receive his pro rata
share of the net assets of that Fund.
Expenses incurred in connection with each Fund's organization and the
public offering of its shares have been deferred and are being amortized on a
straight-line basis over a period of not more than five years.
As of_______________, 1999, no person owned of record, or to the knowledge
of management beneficially owned five percent or more of the outstanding shares
of the respective Fund or classes except as set forth below. Please note that as
of___________, 1999, there were no Premium Class shareholders of record for any
of the Funds.
<TABLE>
<CAPTION>
MONEY MARKET FUND
SERVICE CLASS SHARES OWNED PERCENTAGE
OWNED
- -------------------------------- ------------ ----------
<S> <C> <C>
Transco & Company
Cash Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
</TABLE>
<TABLE>
<CAPTION>
SHORT-TERM BOND FUND
SERVICE CLASS SHARES OWNED PERCENTAGE
OWNED
<S> <C> <C>
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
- -------------------------------- ------------ ----------
<S> <C> <C>
Transco & Company
Reinvest Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
Transco & Company
Cash Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
</TABLE>
<TABLE>
<CAPTION>
INTERMEDIATE BOND FUND
SERVICE CLASS SHARES OWNED PERCENTAGE
OWNED
- -------------------------------- ------------ ----------
<S> <C> <C>
Transco & Company
Reinvest Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
Transco & Company
Cash Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
</TABLE>
<TABLE>
<CAPTION>
STOCK FUND
SERVICE CLASS SHARES OWNED PERCENTAGE
OWNED
- -------------------------------- ------------ ----------
<S> <C> <C>
Transco & Company
Reinvest Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
Transco & Company
Cash Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
</TABLE>
<TABLE>
<CAPTION>
INT'L MULTI-MANAGER STOCK FUND
SERVICE CLASS SHARES OWNED PERCENTAGE
OWNED
- -------------------------------- ------------ ----------
<S> <C> <C>
Transco & Company
Reinvest Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
</TABLE>
<PAGE> 120
<TABLE>
<S> <C> <C>
Transco & Company
Cash Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
</TABLE>
<TABLE>
<CAPTION>
KANSAS TAX-EXEMPT BOND FUND
SERVICE CLASS SHARES OWNED PERCENTAGE
OWNED
- -------------------------------- ------------ ----------
<S> <C> <C>
Transco & Company
Reinvest Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
Transco & Company
Cash Account
c/o INTRUST Bank/Trust Division
105 N. Main
Wichita, KS 67201
</TABLE>
The Funds do not know the extent to which other holders of record were
beneficial owners of shares indicated.
VOTING RIGHTS
Under the Declaration of Trust, the Trust is not required to hold annual
meetings of each Fund's shareholders to elect Trustees or for other purposes.
When certain matters affect only one class of shares but not another, the
shareholders would vote as a class regarding such matters. It is not anticipated
that the Trust will hold shareholders' meetings unless required by law or the
Declaration of Trust. In this regard, the Trust will be required to hold a
meeting to elect Trustees to fill any existing vacancies on the Board if, at any
time, fewer than a majority of the Trustees have been elected by the
shareholders of the Trust. In addition, the Declaration of Trust provides that
the holders of not less than two-thirds of the outstanding shares of the Trust
may remove persons serving as Trustee either by declaration in writing or at a
meeting called for such purpose. The Trustees are required to call a meeting for
the purpose of considering the removal of persons serving as Trustee if
requested in writing to do so by the holders of not less than 10% of the
outstanding shares of the Trust. To the extent required by applicable law, the
Trustees shall assist shareholders who seek to remove any person serving as
Trustee.
The Trust's shares do not have cumulative voting rights, so that the
holders of more than 50% of the outstanding shares may elect the entire Board of
Trustees, in which case the holders of the remaining shares would not be able to
elect any Trustees.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
INTRUST Bank, N.A. acts as custodian of the Trust's assets. BFSI acts as
transfer agent for the Funds. The Trust compensates BISYS for providing
personnel and facilities to perform transfer agency related services for the
Trust at a rate intended to represent the cost of providing such services. The
International Multi-Multi-Manager Stock Fund pays no custodian fees as long as
all of its assets are invested in another mutual fund, but incurs its pro-rata
portion of the custody fees of Chase Manhattan Bank, N.A. as Portfolio
Custodian. The AMR Trust Board has reviewed and approved custodial
<PAGE> 121
arrangements for securities held outside of the United States in accordance with
Rule 17f-5 of the 1940 Act.
<PAGE> 122
INDEPENDENT AUDITORS
KPMG LLP has been selected as the independent auditors for the Trust. KPMG
LLP provides audit services, tax return preparation and assistance and
consultation in connection with certain SEC filings. KPMG LLP is located at Two
Nationwide Plaza, Columbus, Ohio, 43215.
YIELD AND PERFORMANCE INFORMATION
The Funds may, from time to time, include their yield, effective yield, tax
equivalent yield and average annual total return in advertisements or reports to
shareholders or prospective investors. For the Kansas Tax-Exempt Bond Fund, such
amounts may include returns from its predecessor Fund, the SEI Kansas Tax Free
Income Portfolio.
Current yield for the Money Market Fund will be based on the change in
the value of a hypothetical investment (exclusive of capital changes such as
gains or losses from the sale of securities and unrealized appreciation and
depreciation) over a particular seven-day period, less a pro-rata share of each
Fund's expenses accrued over that period (the "base period"), and stated as a
percentage of the investment at the start of the base period (the "base period
return"). The base period return is then annualized by multiplying by 365/7,
with the resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the Money Market Fund assumes that all dividends
received during the base period have been reinvested. Calculation of "effective
yield" begins with the same "base period return" used in the calculation of
yield, which is then annualized to reflect weekly compounding pursuant to the
following formula:
Effective Yield = [(Base Period Return + 1)[RAISED TO THE (365/7) POWER]] -- 1.
For the seven-day period ended October 31, 1999, the seven-day effective
yield for the Money Market Fund was 5.33%.
Quotations of yield for the Non-Money Market Fund will be based on the
investment income per share earned during a particular 30-day period, less
expenses accrued during a period ("net investment income") and will be computed
by dividing net investment income by the maximum offering price per share on the
last day of the period, according to the following formula:
YIELD = 2[(a-b+ 1)-l][RAISED TO THE 6TH POWER]
cd
where a = dividends and interest earned during the period, b = expenses accrued
for the period (net of any reimbursements), c = the average daily number of
shares outstanding during the period that were entitled to receive dividends,
and d = the maximum offering price per share on the last day of the period.
For the 30-day period ended October 31, 1999, the yield for the Short-Term
Bond Fund and Intermediate Bond Fund were 5.39% and 5.78%, respectively.
Quotations of tax-equivalent yield for the Kansas Tax-Exempt Bond Fund will
be calculated according to the following formula:
TAX EQUIVALENT YIELD = ( E )
1-p
<PAGE> 123
E = Tax-Exempt yield
p = stated income tax rate
For the 30-day period ended October 31, 1999, the yield for the Kansas
Tax-Exempt Bond Fund was 4.56% and tax equivalent yield, assuming a 39.6%
federal tax rate, was ____%. Such yield information includes the prior yield of
the SEI Kansas Tax Free Income Portfolio.
Quotations of average annual total return will be expressed in terms of the
average annual compounded rate of return of a hypothetical investment in a Fund
over periods of 1, 5 and 10 years and since inception (up to the life of the
Fund), calculated pursuant to the following formula:
P (1 + T)[RAISED TO THE NTH POWER] = ERV
(where P = a hypothetical initial payment of $l,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 will reflect the deduction of the maximum sales charge and a
proportional share of Fund expenses (net of certain reimbursed expenses) on an
annual basis, and will assume that all dividends and distributions are
reinvested when paid.
For the fiscal year ended October 31, 1999, the total return for the
International Multi-Manager Stock Fund, Short-Term Bond Fund, Intermediate Bond
Fund and Stock Fund was 19.61%, 2.35%, .11% and .56%, respectively.
For the period since inception and ended October 31, 1999, the average
annual total returns were for the following Funds and inception dates:
International Multi-Manager Stock Fund (1/20/97), 11.69%; Short-Term Bond Fund
(1/21/97), 5.20%; Intermediate Bond Fund (1/21/97), 5.37%; and Stock Fund
(1/21/97), 9.28%.
For the one year, three year, five year periods ended October 31, 1999, and
the period from commencement of operations (December 10, 1990) through October
31, 1999, the average annual total returns for the Kansas Tax-Exempt Bond Fund
were -2.51%, 3.74%, 5.27% and 5.72%, respectively. Such performance includes
the prior performance of the SEI Kansas Tax Free Income Portfolio. of course,
past performance is no guarantee as to future performance.
For the one year, three year, five year periods ended October 31, 1999 and
the period since inception (August 7, 1991), the average annual total returns
for the International Multi-Manager Stock Fund were ____%, _____%, _____% and
_____%, respectively. Such performance includes the performance of the
International Equity Portfolio, the services of the AMR Investment Service Trust
in which all of the International Multi-Manager Stock Fund's assets are
invested, from November 1, 1995 (its inception) through January 19, 1997. Such
performance also includes the performance of the American AAdvantage
International Equity Fund, a predecessor fund of the International Equity
Portfolio, from August 7, 1991 (its inception) through October 31, 1995.
Quotations of yield and total return will reflect only the performance of a
hypothetical investment in the Funds during the particular time period shown.
Yield and total return for the Funds will vary based on changes in the market
conditions and the level of the Fund's expenses, and no reported performance
figure should be considered an indication of performance which may be expected
in the future.
<PAGE> 124
In connection with communicating its yields or total return to current or
prospective unit holders, the Funds also may compare these figures to the
performance of other mutual funds tracked by mutual fund rating services or to
other unmanaged indexed which may assume reinvestment of dividends but generally
do not reflect deductions for administrative and management costs.
Performance information for the Funds may be compared, in reports and
promotional literature, to: (i) the Standard & Poor's 500 Stock Index, Dow Jones
Industrial Average, or other unmanaged indices so that investors may compare the
Funds' results with those of a group of unmanaged securities widely regarded by
investors as representative of the securities markets in general; (ii) other
groups of mutual funds tracked by Lipper Analytical Services, a widely used
independent research firm which ranks mutual funds by overall performance,
investment objectives, and assets, or tracked by other services, companies,
publications, or persons who rank mutual funds on overall performance or other
criteria; and (iii) the Consumer Price Index (measure for inflation) to assess
the real rate of return from an investment of dividends but generally do not
reflect deductions for administrative and management costs and expenses.
Investors who purchase and redeem shares of the Funds through a customer
account maintained at a Service Organization may be charged one or more of the
following types of fees as agreed upon by the Service Organization and the
investor, with respect to the customer services provided by the Service
Organization: account fees (a fixed amount per month or per year); transaction
fees (a fixed amount per transaction processed); compensating balance
requirements (a minimum dollar amount a customer must maintain in order to
obtain the services offered); or account maintenance fees (a periodic charge
based upon a percentage of the assets in the account or of the dividends paid on
those assets). Such fees will have the effect of reducing the yield and average
annual total return of the Funds for those investors. Investors who maintain
accounts with the Trust as transfer agent will not pay these fees.
FINANCIAL STATEMENTS
The Report of Independent Auditors and Financial Statements of the Funds
for period ended October 31, 1999 are incorporated herein by reference to the
Trust's Annual Report, such Financial Statements having been audited by KPMG
LLP, independent auditors, and is so included and incorporated by reference in
reliance upon the report of said firm, which report is given upon their
authority as experts in auditing and accounting. The Independent Auditors of the
AMR Investment Services International Equity Portfolio is Ernst & Young LLP.
Copies of such Annual Report are available without charge upon request by
writing to INTRUST Funds Trust, 3435 Stelzer Road, Columbus, Ohio 43219-8006 or
telephoning (888) 266-8787.
<PAGE> 125
<PAGE> 126
APPENDIX
DESCRIPTION OF MOODY'S BOND RATINGS:
Excerpts from Moody's description of its four highest bond ratings are
listed as follows: Aaa--judged to be the best quality and they carry the
smallest degree of investment risk; Aa--judged to be of high quality by all
standards. Together with the Aaa group, they comprise what are generally known
as high grade bonds; A--possess many favorable investment attributes and are to
be considered as "upper medium grade obligations"; Baa--considered to be 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. Other Moody's bond descriptions
include: Ba--judged to have speculative elements, their future cannot be
considered as well assured; B--generally lack characteristics of the desirable
investment; 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--speculative in a high degree, often in default; C--lowest rated class of
bonds, regarded as having extremely poor prospects.
Moody's also supplies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; the modifier 2 indicates a mid-range ranking; and modifier 3 indicates
a ranking toward the lower end of the category.
DESCRIPTION OF S&P'S BOND RATINGS:
Excerpts from S&P's description of its four highest bond ratings are listed
as follows: AAA--highest grade obligations, in which capacity to pay interest
and repay principal is extremely strong; AA--also qualify as high grade
obligations, having a very strong capacity to pay interest and repay principal,
and differs from AAA issues only in a small degree; A--regarded as upper medium
grade, having a strong capacity to pay interest and repay principal, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories;
BBB--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: Debt rated in these categories is regarded as having
predominantly speculative characteristics with respect to capacity to pay
interest and repay principal. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or major
risk exposures to adverse conditions.
CI: The "CI" rating is reserved for income bonds on which no interest is
being paid.
S&P applies indicators "+, -," no character, and relative standing within
the major rating categories.
DESCRIPTION OF MOODY'S RATINGS OF NOTES AND VARIABLE RATE DEMAND INSTRUMENTS:
Moody's ratings for state and municipal short-term obligations will be
designated Moody's Investment Grade or MIG. Such ratings recognize the
differences between short-term credit and long-term risk. Short-term ratings on
issues with demand features (variable rate demand obligations) are
differentiated by the use of the VMIG symbol to reflect such characteristics as
payment upon periodic demand rather than fixed maturity dates and payments
relying on external liquidity.
<PAGE> 127
MIG 1/VMIG 1: This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2: This denotes high quality. Margins of protection are ample
although not as large as in the preceding group.
<PAGE> 128
PART C. OTHER INFORMATION
Item 23. Exhibits:
(a) Trust Instrument.(2)
(b) Bylaws of Registrant.(2)
(c) None.
(d)(1)(i) Form of Master Investment Advisory
Agreement and Supplements between
Registrant and Adviser relating to
Money Market Fund, Short-Term Bond
Fund, Intermediate Bond Fund, Stock
Fund, International Multi-Manager Stock
Fund and the Kansas Tax-Exempt Bond
Fund.(1)
(d)(1)(ii) Form of Assumption Agreement between
INTRUST Bank, N.A. and INTRUST
Financial Services, Inc. filed
herewith.
(d)(2) Form of Master Investment Advisory
Agreement and Supplements between
Registrant and Adviser relating to the
NestEgg Funds.(5)
(d)(3)(i) Form of Sub-Advisory Agreements between
Adviser and Sub-Advisers.(1)
(d)(3)(ii) Form of Sub-Advisory Agreement between
INTRUST Bank, N.A. and AMR Investment
Services, Inc. relating to the Stock
Fund filed herewith.
(d)(3)(iii) Form of Advisory Agreement between AMR
Investment Services, Inc. and Barrow
Hanley, Mewhinney & Strauss, Inc.
relating to the Stock Fund filed
herewith.
(d)(4) Form of Master Administration Agreement
and Supplements between Registrants and
Administrator.(1)
(d)(5) Agreement among AMR Investment Services
Trust, AMR Investment Services, Inc.,
INTRUST Funds Trust and BISYS Fund
Services, dated January 17, 1997.(5)
(d)(6) Investment Advisory Contracts by and
among BZW Barclays Global Fund Advisors
and Master Investment Portfolio, each
dated January 1, 1996, on behalf of
each of the LifePath 2000 Master
Portfolio,
<PAGE> 129
LifePath 2010 Master Portfolio,
LifePath 2020 Master Portfolio,
LifePath 2030 Master Portfolio, and
LifePath 2040 Master Portfolio, are
incorporated by reference to Master
Investment Portfolio Amendment No. 3 to
Registration Statement on Form POS-AMI
(1940 Act File No. 811-08162) filed
with the Commission on January 5, 1996.
(d)(7) Form of Third Party Feeder Fund
Agreement between Registrant and Master
Investment Portfolio with respect to
NestEgg Funds.(5)
(e) Form of Master Distribution Contract
and Supplements between Registrant and
Distributor.(1)
(f) None.
(g)(1) Form of Custodian Contract between
Registrant and Custodian.(1)
(g)(2) Custody Agreement with Investors Bank &
Trust, N.A. with respect to the Master
Portfolios incorporated by reference to
Master Investment Portfolio Amendment
No. 5 to Registration Statement on Form
POS-AMI (1940 Act File No. 811-08162)
filed with the Commission on June 30,
1997.
(h)(1) Form of Transfer Agency and Service
Agreement between Registrant and
Transfer Agent.(1)
(h)(2) Form of Service Organization Agreement
to be filed herewith.
(h)(3) Form of Fund Accounting Agreement
between Registrant and Investors Bank &
Trust Company with respect to NestEgg
Funds.(5)
(i) Consent of Paul, Weiss, Rifkind,
Wharton & Garrison, counsel to
Registrant.*
(j)(1) Consent of KPMG LLP to be filed by Post
Effective Amendment.
(j)(2) Consent of Ernst & Young LLPto be filed
by Post Effective Amendment.
<PAGE> 130
(k) None.
(l) Subscription Agreement.(1)
(m) Amended Form of Rule 12b-1 Distribution
Plan and Agreement between Registrant
and Distributor(5)
(n) Financial Data Schedules for INTRUST to
be filed by Post Effective Amendment.
(o) Rule 18f-3 Plan.(1)
Other Exhibits:
(A) Power of Attorney.(1)
(B) Power of Attorney dated February 9,
1998.(4)
(C) Powers of Attorney dated August 11,
1998 for Master Investment
Portfolio(5)* filed herewith
(1) Previously filed on December 23, 1996 as part of Pre-Effective
Amendment No. 3 and incorporated by reference herein.
(2) Previously filed with Post-Effective Amendment No. 1 on June 27, 1997,
and incorporated by reference herein.
(3) Previously filed with Post-Effective Amendment No. 2 on December 22,
1997, and incorporated by reference herein.
(4) Previously filed with Post-Effective Amendment No. 3 on February 27,
1998, and incorporated by reference herein.
(5) Previously filed with Post-Effective Amendment No. 7 on November 30,
1998, and incorporated by reference herein.
Item 24. Persons Controlled by or under Common Control with Registrant.
None.
Item 25. Indemnification.
As permitted by Section 17(h) and (i) of the Investment
Company Act of 1940 (the "1940 Act") and pursuant to Article X of the
Registrant's Trust Instrument (Exhibit 1 to the Registration Statement), Section
4 of the Master
Investment Advisory Contract between Registrant and the Adviser (Exhibit 5(a) to
this Registration Statement), and Section 14 of the Master Distribution Contract
between Registrant and the Distributor (Exhibit 6 to this Registration
Statement) officers, trustees, employees and agents of the Registrant will not
<PAGE> 131
be liable to the Registrant, any shareholder, officer, trustee, employee, agent
or other person for any action or failure to act, except for bad faith, willful
misfeasance, gross negligence or reckless disregard of duties, and those
individuals may be indemnified against liabilities in connection with the
Registrant, subject to the same exceptions.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant understands that in the option of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a trustee, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such trustee, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The Registrant will purchase an insurance policy insuring its
officers and trustees against liabilities, and certain costs of defending claims
against such officers and trustees, to the extent such officers and trustees are
not found to have committed conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard in the performance of their duties. The
insurance policy also insures the Registrant against the cost of indemnification
payments to officers under certain circumstances.
Section 4 of the Master Investment Advisory Contract between
Registrant and the Adviser and Section 9 of the Master Distribution Contract
between Registrant and the Distributor limit the liability of the Adviser, and
the distributor to liabilities arising from willful misfeasance, bad faith or
gross negligence in the performance of their respective duties or from reckless
disregard by them of their respective obligations and duties under the
agreements.
The Registrant hereby undertakes that it will apply the
indemnification provisions of its Declaration of Trust, By-Laws, Investment
Advisory Contracts and Distribution Contract in a manner consistent with Release
No. 11330 of the Securities and Exchange Commission under the 1940 Act so long
as the interpretations of Section 17(h) and 17(i) of such Act remain in effect
and are consistently applied.
Item 26. Business and Other Connections of INTRUST Financial Services,
Inc.
INTRUST Financial Services, Inc. is a wholly-owned subsidiary
of INTRUST Bank, N.A. INTRUST Bank, N.A. is a national banking association which
provides a full range of banking and trust services to clients. As of December
31, 1999 total assets under management were approximately $___ billion. The
principal place of business address of the Adviser is 105 North Main Street, Box
One, Wichita, Kansas 67201. The executive officers of INTRUST Bank, N.A. and
INTRUST Financial Services, Inc. and such executive officers' positions during
the past two years are as follows:
<PAGE> 132
INTRUST Bank, N.A.
<TABLE>
<CAPTION>
Name Position and Office
- ---- -------------------
<S> <C>
C.Q. Chandler, IV Chairman, President and Chief
Executive Officer (Vice Chairman prior
to February, 1996)
J.V. Lentell Vice Chairman
Ron Baldwin Vice Chairman
(Hired February, 1996; Executive Vice
President Fourth Financial Corporation
prior to February, 1996)
Phillip J. Owings Executive Vice President(Senior Vice
President prior to March 1998)
</TABLE>
INTRUST Financial Services, Inc.
-----------------------------
Name Position and Office
- ---- -------------------
Business and Other Connections of BGFA
The LifePath 2000, LifePath 2010, LifePath 2020, LifePath 2030,
LifePath 2040 Master Portfolios are advised by Barclays Global Fund Advisors
("BGFA"), a wholly-owned subsidiary of Barclays Global Investors, N.A.
("BGI", formerly, Wells Fargo Institutional Trust Company).
BGFA's business is that of a registered investment adviser to certain
open-end, management investment companies and various other institutional
investors. Wells Fargo Bank's business is that of a national banking association
with respect to which it conducts a variety of commercial banking and trust
activities, including acting as investment adviser and/or sub-adviser to certain
open-end management investment companies and various other institutional
investors.
The directors and officers of BGFA consist primarily of persons who
during the past two years have been active in the investment management business
of the former sub-adviser to the Registrant, Wells Fargo Nikko Investment
Advisors ("WFNIA") and, in some cases, the service business of BGI. Each of the
directors and executive officers of BGFA will also have substantial
responsibilities as directors and/or officers of BGI. To the knowledge of the
Registrant, except as set forth below, none of the directors or executive
officers of BGFA is or has been at any time during the past two fiscal years
engaged in any other business, profession, vocation or employment of a
substantial nature.
<PAGE> 133
<TABLE>
<CAPTION>
Name and Position Principal Business(es) During at
at BGFA Least the Last Two Fiscal Years
- ----------------- -------------------------------
<S> <C>
Frederick L.A. Grauer Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Patricia Dunn Director of BGFA and Co-Chairman and Director of BGI
Director 45 Fremont Street, San Francisco, CA 94105
Lawrence G. Tint Chairman of the Board of Directors of BGFA and Chairman
Chief Executive Officer of BGI and Director; 45 Fremont Street, San Francisco, CA 94105
Geoffrey Fletcher Chief Financial Officer of BGFA and BGI since May 1997 45
Fremont Street, San Francisco, CA 94105 Managing Director and
Principal Accounting Officer at Bankers Trust Company from 1988 -
1997 505 Market Street, San Francisco, CA 94111
</TABLE>
Item 27. Principal Underwriter
(a) BISYS acts as Distributor/Underwriter for other
registered investment companies:
BISYS FUND SERVICES LIMITED PARTNERSHIP
---------------------------------------
Alpine Equity Trust
American Performance Funds
AmSouth Mutual Funds
The BB&T Mutual Funds Group
The Coventry Group
ESC Strategic Funds, Inc.
The Eureka Funds
Governor Funds
Fifth Third Funds
Hirtle Callaghan Trust
HSBC Funds Trust and HSBC Mutual Funds Trust
INTRUST Funds Trust
The Infinity Mutual Funds, Inc.
Magna Funds
Mercantile Mutual Funds, Inc.
Metamarkets.com
Meyers Investment Trust
MMA Praxis Mutual Funds
M.S.D.&T. Funds
Pacific Capital Funds
<PAGE> 134
Republic Advisor Funds Trust
Republic Funds Trust
SsgA International Liquidity Fund
Summit Investment Trust
USAllianz Funds
USAllianz Funds Variable Insurance Products
Trust
Valenzuela Capital Trust
Variable Insurance Funds
The Victory Portfolios
The Victory Variable Insurance Funds
Vintage Mutual Funds, Inc.
(b) Officers and Directors.
<TABLE>
<CAPTION>
Name and Principal Positions and Position
Business Address Offices with Registrant with Underwriter
- ------------------ ----------------------- ----------------
<S> <C> <C>
BISYS Fund Services, Inc. None Sole General Partner
3435 Stelzer Road
Columbus, Ohio 43219
WC Subsidiary Corporation None Sole Limited Partner
150 Clove Road
Little Falls, New Jersey 07424
</TABLE>
(c) Not applicable.
Item 28. Location of Accounts and Records
(a) All accounts, books and other documents required to be
maintained by Section 31(a) of the Investment Company Act of 1940 and the rules
thereunder are maintained at the offices of BISYS (as administrator, transfer
agent, fund accountant(except for NestEgg funds) and distributor) located at
3435 Stelzer Road, Columbus, Ohio 43219 and INTRUST (as adviser and custodian)
at 105 North Main Street, Box One, Wichita, Kansas 63201 and AMR Investment
Services, Inc., at 4333 Amon Carter Boulevard, MD, 5645, Fort Worth, Texas
76155.
(b) BGFA maintains all records relating to their services as
adviser for the Master Investment Portfolio at 45 Fremont Street, San Francisco,
California 94105.
(c) Investors Bank & Trust Company maintains all records relating
to its services as fund accountant and custodian to the NestEgg Funds and Master
Portfolios at 89 South Street, Boston, Massachusetts 02111.
<PAGE> 135
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
(a) Registrant undertakes to call a meeting of
shareholders for the purpose of voting upon the
removal of a trustee if requested to do so by the
holders of at least 10% of the Registrant's
outstanding shares.
(b) Registrant undertakes to provide the support to
shareholders specified in Section 16(c) of the 1940
Act as though that section applied to the Registrant.
(c) Registrant undertakes to furnish each person to whom
a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders
upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, as amended, INTRUST Funds Trust has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Columbus, and State of Ohio, on
December 29, 1999.
INTRUST FUNDS TRUST
By:
----------------------------
David Bunstine, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Terry L. Carter* Trustee December 29, 1999
- ------------------------------
Terry L. Carter
</TABLE>
<PAGE> 136
<TABLE>
<S> <C> <C>
/s/ Thomas F. Kice* Trustee December 29, 1999
- ------------------------------
Thomas F. Kice
/s/ George Mileusnic* Trustee December 29, 1999
- ------------------------------
George Mileusnic
/s/ John J. Pileggi* Trustee December 29, 1999
- ------------------------------
John J. Pileggi
/s/ G.L. Best* Trustee December 29, 1999
- ------------------------------
G.L. Best
/s/ David Bunstine President December 29, 1999
- ------------------------------
David Bunstine
/s/ Steve Pirece Treasurer December 29, 1999
- ------------------------------ (Principal Financial
Steve Pierce and Accounting Officer)
*By: /s/ David Bunstine December 29, 1999
- ------------------------------
David Bunstine
Attorney-in-Fact
</TABLE>
<PAGE> 137
SIGNATURES
AMR Fund Investment Services Trust has duly caused this
Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A of
the INTRUST Funds Trust to be signed on its behalf by the undersigned only with
respect to disclosures relating to the International Equity Portfolio, a series
of the AMR Investment Services Trust, hereunto duly authorized, in the City of
Fort Worth and the State of Texas on December 29, 1999.
AMR INVESTMENT SERVICES TRUST.
By:
------------------------------
William F. Quinn, President
Attest:
By:
-----------------------------------
Barry Y. Greenberg, Vice President
and Assistant Secretary
This Post-Effective Amendment No. 14 to the Registration
Statement on Form N-1A of the INTRUST Funds Trust has been signed below by the
following persons in the capacities and on the dates indicated only with respect
to disclosures relating to the International Equity Portfolio, a series of the
AMR Investment Services Trust.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
By: President December 29, 1999
-------------------------- and Trustee
William F. Quinn
By: /s/ Alan D. Feld* Trustee December 29, 1999
--------------------------
Alan D. Feld
By: /s/ Ben J. Fortson* Trustee December 29, 1999
--------------------------
Ben J. Fortson
</TABLE>
<PAGE> 138
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
By: /s/ John S. Justin* Trustee December 29, 1999
--------------------------
John S. Justin
By: /s/ Stephen D. O'Sullivan* Trustee December 29, 1999
--------------------------
Stephen D. O'Sullivan
By: /s/ Roger T. Staubach* Trustee December 29, 1999
--------------------------
Roger T. Staubach
By: /s/ Kneeland Youngblood* Trustee December 29, 1999
--------------------------
Kneeland Youngblood
By:
-------------------------- December 29, 1999
William F. Quinn
Attorney-in-Fact
</TABLE>
<PAGE> 1
EXHIBIT (d)(1)(ii)
ASSUMPTION AGREEMENT
This assumption agreement (the "Agreement") is made as of this ____ day
of December, 1999 by and between INTRUST Financial Services, Inc., a Kansas
corporation ("INTRUST Financial"), INTRUST Bank, N.A., a national banking
association, ("INTRUST Bank") and INTRUST Funds Trust, a Delaware business trust
registered as an investment company under the Investment Company Act of 1940, as
amended ("INTRUST Funds").
WHEREAS, INTRUST Bank and INTRUST Funds, are parties to a Master
Investment Advisory Contract dated as of November 26, 1996, as amended (the
"Advisory Contract"); and
WHEREAS, INTRUST Financial Services, Inc. wishes to assume INTRUST
Bank's duties and obligations under the Advisory Contract.
NOW, THEREFORE, based on the foregoing, the parties agree as follows:
1. Assumption. INTRUST Financial, intending to be legally
bound, hereby agrees to assume and perform all duties
and obligations of INTRUST Bank under the Advisory
Contract.
2. Guaranty and Indemnity. INTRUST Bank hereby irrevocably
and unconditionally guarantees to INTRUST Funds the
full performance of all of the obligations of INTRUST
Financial under the provisions of the Advisory Contract
hereby assumed by INTRUST Financial.
INTRUST Bank agrees to indemnify, defend and hold
harmless the INTRUST Funds from and against any and all
loss, cost, damage or expense (including reasonable
fees of counsel) whatsoever resulting from or arising
out of any breach by INTRUST Financial of any
obligation of the Advisory Contract hereby assumed by
INTRUST Financial.
INTRUST Bank hereby waives any requirement that INTRUST
Funds exhaust any right or remedy or proceed or take
any action against INTRUST Financial or any other
person or entity before exercising any right or remedy
against INTRUST Bank under this Agreement.
The obligations of INTRUST Bank hereunder are absolute
and unconditional. INTRUST Bank's guaranty and
indemnity shall be a continuing guaranty and indemnity
and shall continue in full force and effect until all
of the obligations hereby assumed by INTRUST Financial
shall have been satisfied in full.
<PAGE> 2
IN WITNESS WHEREOF, INTRUST Financial, INTRUST Bank and INTRUST Funds
hereby execute this Agreement as of the day and year first above written.
INTRUST FINANCIAL SERVICES, INC.
By:
-------------------------------
Name: Phillip J. Owings
Title: President
INTRUST BANK, N.A.
By:
-------------------------------
Name:
Title:
INTRUST FUNDS TRUST
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT (d)(3)(ii)
INVESTMENT SUB-ADVISORY AGREEMENT
AGREEMENT made this ________ day of ________________, 1999 by and
between AMR Investment Services, Inc., a Delaware Corporation (the "Adviser"),
and Barrow, Hanley, Mewhinney & Strauss, Inc. (the "Sub-Adviser");
WHEREAS, the INTRUST Funds Trust (the "Trust"), a Delaware business
trust, is an open-end, diversified management investment company registered
under the Investment Company Act of 1940, as amended ("1940 Act"), consisting of
several Funds of shares, each having its own investment policies; and
WHEREAS, the Trust has retained INTRUST Bank, N.A. ("INTRUST") to
provide the Trust with business and asset management services for the INTRUST
Stock Fund (the "Fund"), subject to the control of the Trust's Board of
Trustees;
WHEREAS, INTRUST has retained the Adviser to provide the Trust with
business and asset management services for the Fund;
WHEREAS, INTRUST's agreement with the Adviser permits the Adviser to
delegate to other parties certain of its asset management responsibilities; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to render
investment management services to the Fund, and the Sub-Adviser is willing to
render such services;
NOW THEREFORE, in consideration of mutual covenants herein contained,
the parties hereto agree as follows:
1. DUTIES OF SUB-ADVISER. The Adviser employs the Sub-Adviser to manage
the investment and reinvestment of the Fund's assets and, with respect to such
assets, to continuously review, supervise, and administer the investment program
of the Fund, to determine in the Sub-Adviser's discretion the securities to be
purchased or sold, to provide the Adviser and the Trust with records concerning
the Sub-Adviser's activities which the Trust is required to maintain, and to
render regular reports to the Adviser and to the Trust's officers and Trustees
concerning the Sub-Adviser's discharge of the foregoing responsibilities. The
Sub-Adviser shall discharge the foregoing responsibilities subject to the
Adviser's oversight and the control of the officers and the Trustees of the
Trust and in compliance with such policies as the Trustees may from time to time
establish, and in compliance with the objectives, policies, and limitations for
such Fund
<PAGE> 2
set forth in the Trust's current registration statement as amended from time to
time, and applicable laws and regulations. The Sub-Adviser accepts such
employment and agrees to render the services for the compensation specified
herein and to provide at its own expense the office space, furnishings and
equipment and the personnel required by it to perform the services on the terms
and for the compensation provided herein. The Adviser will instruct the Trust's
Custodian(s) to hold and/or transfer the Fund's assets in accordance with Proper
Instructions received from the Sub-Adviser. (For this purpose, the term "Proper
Instructions" shall have the meaning(s) specified in the applicable agreement(s)
between the Trust and its custodians.) The Sub-Adviser will not be responsible
for Trust expenses except as specified in this Agreement.
2. FUND TRANSACTIONS. The Sub-Adviser is authorized to select the
brokers or dealers (including, to the extent permitted by law and applicable
Trust guidelines, the Sub-Adviser or any of its affiliates) that will execute
the purchases and sales of Fund securities for the Fund and is directed to use
its best efforts to obtain the best net results with respect to brokers'
commissions and discounts as described in the Trust's current registration
statement as amended from time to time. In selecting brokers or dealers, the
Sub-Adviser may give consideration to factors other than price, including, but
not limited to, research services and market information. Any such services or
information which the Sub-Adviser receives in connection with activities for the
Trust may also be used for the benefit of other clients and customers of the
Sub-Adviser or any of its affiliates. The Sub-Adviser will promptly communicate
to the Adviser and to the officers and the Trustees of the Trust such
information relating to Fund transactions as they may reasonably request.
3. COMPENSATION OF THE SUB-ADVISER. For the services to be rendered by
the Sub-Adviser as provided in Sections 1 and 2 of this Agreement, the Adviser
shall pay to the Sub-Adviser compensation at the rate specified in Schedule A
attached hereto and made a part of this Agreement. Such compensation shall be
paid to the Sub-Adviser quarterly in arrears, and shall be calculated by
applying the annual percentage rate(s) as specified in the attached Schedule A
to the average month-end assets of the specified Funds during the relevant
quarter. Solely for the purpose of calculating the applicable annual percentage
rates specified in the attached Schedule(s), there shall be included such other
assets as are specified in said Schedule(s).
4. OTHER SERVICES. At the request of the Trust or the Adviser, the
Sub-Adviser in its discretion may make available to the Trust office facilities,
equipment, personnel, and other services. Such office facilities, equipment,
personnel and services shall be provided
<PAGE> 3
for or rendered by the Sub-Adviser and billed to the Trust or the Adviser at a
price to be agreed upon by the Sub-Adviser and the Trust or the Adviser.
5. REPORTS. The Adviser (on behalf of the Trust) and the Sub-Adviser
agree to furnish to each other, if applicable, current prospectuses, proxy
statements, reports to shareholders, certified copies of their financial
statements, and such other information with regard to their affairs as each may
reasonably request.
6. STATUS OF SUB-ADVISER. The services of the Sub-Adviser to the Trust
are not to be deemed exclusive, and the Sub-Adviser and its directors, officers,
employees and affiliates shall be free to render similar services to others so
long as its services to the Trust are not impaired thereby. The Sub-Adviser
shall be deemed to be an independent contractor and shall, unless otherwise
expressly provided or authorized, have no authority to act for or represent the
Adviser or the Trust in any way or otherwise be deemed an agent to the Adviser
or the Trust.
7. CERTAIN RECORDS. Any records required to be maintained and preserved
pursuant to the provisions of Rule 31a-1 and Rule 31a-2 promulgated under the
1940 Act which are prepared or maintained by the Sub-Adviser on behalf of the
Adviser or the Trust are the property of the Adviser or the Trust and will be
surrendered promptly to the Adviser or Trust on request.
8. LIABILITY OF SUB-ADVISER. No provision of this Agreement shall be
deemed to protect the Sub-Adviser against any liability to the Trust or its
shareholders to which it might otherwise be subject by reason of any willful
misfeasance, bad faith, or gross negligence in the performance of its duties or
the reckless disregard of its obligations under this Agreement.
9. PERMISSIBLE INTERESTS. To the extent permitted by law, Trustees,
agents, and shareholders of the Trust are or may be interested in the
Sub-Adviser (or any successor thereof) as directors, partners, officers, or
shareholders, or otherwise; directors, partners, officers, agents, and
shareholders of the Sub-Adviser are or may be interested in the Trust as
Trustees, shareholders or otherwise; and the Sub-Adviser (or any successor
thereof) is or may be interested in the Trust as a shareholder or otherwise;
provided that all such interests shall be fully disclosed between the parties on
an ongoing basis and in the Trust's registration statement as required by law.
10. DURATION AND TERMINATION. This Agreement, unless sooner terminated
as provided herein, shall continue for two years after its initial approval and
thereafter for
<PAGE> 4
periods of one year for so long as such continuance thereafter is specifically
approved at least annually (a) by the vote of a majority of those Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Fund; provided, however, that if the
shareholders of the Fund fail to approve the Agreement as provided herein, the
Sub-Adviser may continue to serve hereunder in the manner and to the extent
permitted by the 1940 Act and rules thereunder. The foregoing requirement that
continuance of this Agreement be "specifically approved at least annually" shall
be construed in a manner consistent with the 1940 Act and the rules and
regulations thereunder. This Agreement may be terminated at any time, without
the payment of any penalty, by the Adviser, by vote of a majority of the
Trustees of the Trust or by vote of a majority of the outstanding voting
securities of the Fund on not less than 30 days' nor more than 60 days' written
notice to the Sub-Adviser, or by the Sub-Adviser at any time without the payment
of any penalty, on 60 days' written notice to the Adviser and the Trust. This
Agreement will automatically and immediately terminate in the event of its
assignment. Any notice under this Agreement shall be given in writing, addressed
and delivered, or mailed postpaid, to the other party at the primary office of
such party, unless such party has previously designated another address.
As used in this Section 10, the terms "assignment," "interested
persons," and a "vote of a majority of the outstanding voting securities" shall
have the respective meanings set forth in the 1940 Act and the rules and
regulations thereunder, subject to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.
11. SEVERABILITY. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
A copy of the Declaration of Trust of the Trust is on file with the
Secretary of the State of Delaware, and notice is hereby given that this
instrument is not binding upon any of the Trustees, officers, or shareholders of
the Trust individually.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
<PAGE> 5
Barrow, Hanley, Mewhinney, & Strauss AMR Investment Services,Inc.
By: By:
------------------------ ------------------------
------------------------ ------------------------
Title: Title:
------------------------ ------------------------
<PAGE> 6
Schedule A
to the
Investment Sub-Advisory Agreement
between
AMR Investment Services, Inc.
and
Barrow, Hanley, Mewhinney & Strauss, Inc.
AMR Investment Services, Inc. shall pay compensation to Barrow, Hanley,
Mewhinney & Strauss, Inc. pursuant to section 3 of the Investment Sub-Advisory
Agreement between said parties in accordance with the following annual
percentage rates:
0.30% per annum on the first $200 million
0.20% per annum on the next $300 million
0.15% per annum on the next $500 million
0.125% per annum on the excess over $1 billion.
In calculating the amount of assets under management solely for the
purpose of determining the applicable percentage rate, there shall be included
all other assets or trust assets of the AMR Investment Services Trust and
American Airlines, Inc. also under management by the Sub-Adviser (except assets
managed by the Sub-Adviser under the HALO Bond Program).
DATED:
----------------------, 1999
<PAGE> 7
SCHEDULE 1
DEFINITIONS
In this Contract the following expressions shall have the following
meaning unless the context otherwise requires:
"Applicable Law"
means applicable laws and regulations of the jurisdiction in
which the Adviser is domiciled and of the Securities and
Exchange Commission of the United States of America, and of
any governmental or self-regulatory organization of which the
Adviser is a member, each as from time to time amended;
"Assets"
means Investments of the Fund deposited by or on behalf of the
Adviser pursuant to which this Sub-Advisory Contract relates;
"Fund"
means the separate portfolio of Assets of the Trust on whose
behalf the Adviser has entered into this Sub-Advisory
Contract;
"Investment"
means any asset, right or interest in respect of property of
any kind held by the Fund;
"Registered Office"
means One New York Plaza, 29th Floor, New York, New York 10004
Telephone: ____________. Facsimile: ___________. Telex: N/A_.
<PAGE> 8
"Series"
means the series of shares of beneficial interest representing
undivided interests in the Trust's investment portfolios,
including the Fund.
____________, 1999
<PAGE> 9
APPENDIX I
AUTHORIZED SIGNATORY LIST
The following persons are authorized to give instructions on behalf of the
Sub-Adviser to the Adviser:
NAME SIGNATURE POSITION
---- --------- --------
Bryant M. Hanley, Jr. President
James P. Barrow Principal
Richard A. Englander Principal
J. Ray Nixon, Jr. Principal
Robert J. Chambers Principal
Timothy J. Culler Principal
M. Jane Gilday Principal
<PAGE> 1
(d)(3)(iii)
STOCK FUND
SUB-ADVISORY CONTRACT
____________, 1999
AMR Investment Services, Inc.
4333 Amon Carter Blvd., MD 5645
Fort Worth, TX 751655
Dear Sirs:
The Stock Fund (the "Fund") is one of the investment portfolios of
INTRUST Funds Trust (the "Trust"), an open-end management investment company,
which was organized as a business trust under the laws of the State of Delaware.
The Trust's shares of beneficial interest may be classified into series in which
each series represents the entire undivided interests of a separate portfolio of
assets. This Sub-Advisory Contract regards certain services to be provided in
connection with the management of the Fund, on whose behalf INTRUST Bank, N.A.
("the Adviser") enters into this Contract.
The Trustees of the Trust have selected the Adviser to provide
overall investment advice and management for the Fund and to provide certain
other services, under the terms and conditions provided in the Advisory Contract
between the Trust and the Adviser (the "Advisory Contract"). The Adviser and the
Trustees have selected AMR Investment Services, Inc. (the "Sub-Adviser") to
provide the Adviser and the Fund with the advice and services set forth below,
either directly or through its delegate, and the Sub-Adviser is willing to
provide the Adviser and the Fund with the advice and services, subject to the
review of the Trustees and overall supervision of the Adviser, under the terms
and conditions hereinafter set forth. Accordingly, the Adviser agrees with the
Sub-Adviser as follows:
1. DEFINITIONS AND DELIVERY OF DOCUMENTS. All references herein to
this Contract shall be deemed to be references to this Contract as it may from
time to time be amended. The Trust engages in the business of investing and
reinvesting the assets of the Fund in the manner and in accordance with the
investment objective and restrictions specified in the Trust's declaration of
Trust, dated January 26, 1996 (the "Declaration of Trust"), and the currently
effective Prospectus (the "Prospectus") relating to the Fund included in the
Trust's Registration Statement, as
<PAGE> 2
amended from time to time (the "Registration Statement"), filed by the Trust
under the Investment Company Act of 1940 (the "1940 Act") and the Securities Act
of 1933 (the "1933 Act"). Copies of the documents referred to in the preceding
sentence have been furnished to the Sub-Adviser. Any amendments to those
documents shall be furnished to the Sub-Adviser promptly.
2. REPRESENTATIONS. The Sub-Adviser is registered with the
Securities and Exchange Commission (the "SEC") as an investment adviser pursuant
to Section 203 of the Investment Advisers Act of 1940, as amended (the "Advisers
Act"), and agrees to maintain such registration during the term of this
agreement.
3. SUB-ADVISORY SERVICES.
(i) The Sub-Adviser shall act as sub-adviser under the terms
of this Contract and will use its best efforts to provide to the Fund a
continuing and suitable investment program consistent with the investment
policies, objectives and restrictions of the Fund, as set forth in the Trust's
Declaration of Trust, the Registration Statement, the applicable law and
provisions of the Internal Revenue Code of 1986, as amended, relating to
regulated investment companies, subject to policy decisions adopted by the
Trust's Board of Trustees, and will take any such actions as it may in its
opinion deem necessary or desirable for or incidental to any such purposes.
(ii) The Sub-Adviser will also, at its own expense:
(a) furnish the Trust and the Adviser with advice and
recommendations, consistent with the investment policies,
objectives and restrictions of the Fund;
(b) subject to such consultation as the Adviser may
request for a written response, determine which Investments of
the Fund should be purchased, held or disposed of and what
portion of such Assets, if any, should be held in cash or cash
equivalents, and the rationale for those determinations;
(c) furnish the Adviser with a monthly commentary and
a quarterly report concerning market overview, performance
analysis and trading activity;
(d) subject to the supervision of the Adviser,
maintain and preserve certain records including this
Sub-Advisory Contract and any research provided to the
Adviser. The Sub-Adviser agrees that such Trust records are
the property of the Trust and that such Trust records
<PAGE> 3
or copies thereof will be surrendered to the Trust promptly
upon request therefor;
(e) give instructions in the form of trade tickets
representing purchases and sales of the Fund's portfolio
securities to the Adviser via facsimile transmission no later
than trade date plus one; and
(f) cooperate generally with the Trust and the
Adviser so far as the Sub-Adviser is able to provide
information necessary for the operation of the Fund, including
data processing, clerical and bookkeeping services required in
connection with maintaining the financial accounts and records
for the Fund and the Trust, providing information necessary
for the preparation of registration statements and periodic
reports to be filed with the SEC, including Forms N-1A and
N-SAR, periodic statements, shareholder communications and
proxy materials furnished to holders of shares of the Fund,
filings with state "blue sky" authorities and with United
States and foreign agencies responsible for tax matters, and
other reports and filings of like nature.
(iii) No provision of this Contract may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought, and no amendment, transfer, assignment, sale,
hypothecation or pledge of this Contract shall be effective until approved by
(a) the Trustees of the Trust, including a majority of the Trustees who are not
interested persons of the Adviser, of the Sub-Adviser or of the Trust (other
than as Trustees), cast in person at a meeting called for the purpose of voting
on such approval, and (b) a majority of the outstanding voting securities of the
Fund; provided, however, that the approval required in subsection (a) above,
shall be evidenced by a resolution of the entire Board of Trustees and of the
Trustees who are not interested persons of the Adviser, of the Sub-Adviser or of
the Trust (other than as Trustees); and provided further that such resolutions
shall be sent to the Sub-Adviser by facsimile and confirmed in writing by
letter.
(iv) All transactions in Investments shall be subject to the
rules, regulations and customs of the exchange or market and/or clearing house
through which the transactions are executed and to all Applicable Law, and, if
there is any conflict between any such rules, customs, law and the provisions of
this Contract the former shall prevail.
(v) The Sub-Adviser may not, without specific instruction in
writing (and compliance with applicable policies and restrictions of the Fund
set forth in its
<PAGE> 4
Registration Statement), borrow on the Fund or Adviser's behalf or commit the
Fund or Adviser to a contract (other than a trade ticket).
(vi) The Sub-Adviser has the right under this Contract to act
for more than one client collectively (including the Adviser) in any one
transaction or series of transactions without prior reference to the Adviser.
4. THE SUB-ADVISER.
(i) The Sub-Adviser shall act as agent for the Adviser and
shall be entitled to instruct such brokers and other agents as it may decide.
The Sub-Adviser may (and any such broker or sub-agent may) execute transactions
on the Adviser's behalf without prior disclosure to the Adviser of the fact that
in doing so, it is or may be dealing with or in circumstances involving an
affiliate of the Sub-Adviser; provided, however, that (a) the Sub-Adviser will
not do business with nor pay commissions to any affiliate in any portfolio
transaction where an affiliate acts as principal; (b) in purchasing Investments
for the Funds, neither the Sub-Adviser nor any of its directors, officers or
employees will act as principal or agent or receive any commissions; and (c) the
Sub-Adviser shall use its best efforts to obtain execution and pricing within
the policy guidelines, if any, determined by the Trustees and set forth in the
Prospectus and Statement of Additional Information of the Funds. The Sub-Adviser
shall not be under any duty to account to the Adviser for any profits or other
benefits received by the Sub-Adviser or any affiliate as a result of such
transactions.
(ii) Should the Sub-Adviser deem it appropriate to match one
client's order with that of another client by acting as agent for each party,
prior written consent from both parties will be obtained before the transaction
is effected.
(iii) The Sub-Adviser may effect transactions with or through
the agency of another person with whom it has an arrangement under which that
person will from time to time provide to, or procure for, the Sub-Adviser
services or other benefits the nature of which are such that their provision
results, or is designed to result, in an improvement of the Sub-Adviser's
performance in providing services for its clients and for which the Sub-Adviser
makes no direct payment but instead undertakes to place business (including
business on behalf of the Adviser) with that person. All such transactions
effected for the Adviser will, however, secure best execution, disregarding any
benefit which might accrue to the Sub-Adviser from the arrangement.
<PAGE> 5
(iv) The Sub-Adviser shall not knowingly recommend that the
Fund purchase, sell or retain securities of any issue in which the Sub-Adviser
or any of its affiliated persons has a financial interest, except in instances
in which the Sub-Adviser fully discloses in writing to the Adviser the nature of
its financial interest prior to purchase, sale or retention. It shall be the
duty of the Adviser to notify the Trustees of the Fund of these financial
interests.
(v) The Adviser authorizes the Sub-Adviser to disclose any
information which it may be required to disclose under this Contract, the
Applicable Law, the rules and regulations of the SEC or of any market on which
an Investment is acquired.
(vi) Nothing herein contained shall prevent the Sub-Adviser or
any of its affiliated persons or associates from engaging in any other business
or from acting as investment adviser or Sub-Adviser for any other person or
entity, whether or not having investment policies similar to the Fund.
(vii) The Sub-Adviser will pay the cost of maintaining the
staff and personnel necessary for it to perform its obligations under this
Contract, the expenses of office rent, telephone and other facilities it is
obligated to provide in order to perform the services specified in Sections 3
and 4 and any other expenses incurred by it in connection with the performance
of its duties hereunder, including, but not limited to, attendance in person at
a minimum of one meeting each year with the Board of Trustees of the Trust and
the Adviser.
(viii) The Sub-Adviser will not be required to pay any
expenses which this Contract does not expressly state shall be payable by it. In
particular, and without limiting the generality of the foregoing but subject to
the provisions of Section 4(vii), the Sub-Adviser will not be required to pay;
(a) the compensation and expenses of Trustees of the
Trust, and of independent advisers, independent contractors,
consultants, managers, and other agents employed by the Trust
other than through the Sub-Adviser;
(b) legal, accounting and auditing fees and expenses
of the Fund;
(c) the fees or disbursements of the custodian, the
transfer agent and the dividend disbursing agent;
<PAGE> 6
(d) stamp and other duties, taxes, impositions,
governmental fees, and fiscal charges of any nature
whatsoever, assessed against the Fund's assets and payable by
the Trust;
(e) the cost of preparing and mailing dividends,
distributions, reports, notices and proxy materials to
shareholders, except that the Sub-Adviser shall bear the costs
of providing the services referred to in Sections 3 and 4;
(f) brokers' commissions and underwriting fees; and
(g) the expense of periodic calculations of the net
asset value of the Fund's shares.
5. FURTHER PROVISIONS.
(i) The Sub-Adviser enters into this Contract for itself. The
Adviser includes the Adviser's successors in title or personal representatives
as the case may be.
(ii) This Contract shall automatically terminate in the event
of its assignment or upon the termination of the Advisory Contract with the
Fund, and the Adviser shall immediately notify the Sub-Adviser of such
termination. No assignment of this Contract shall be made by the Sub-Adviser
without the consent of the Adviser.
(iii) If any provision of this Contract is or becomes invalid
or contravenes any applicable law, the remaining provisions shall remain in full
force and effect.
6. CLIENT MONEY AND CUSTODY.
The Sub-Adviser will not hold any client money on behalf of the
Adviser.
The Sub-Adviser shall not be the registered holder, or custodian,
of Investments or documents of title relating thereto.
7. INSTRUCTIONS AND COMMUNICATIONS. Instructions may be given by
the Adviser in writing (by letter or facsimile or telex with correct
answer-back) or by telephone unless it is required under an express provision of
this Contract for instructions to be given in writing. The Adviser shall give
written instructions to the Sub-Adviser at the Sub-Adviser's Registered Office.
The Sub-Adviser shall communicate with the Adviser in writing or by telephone
except when it is required to communicate in writing (by letter or facsimile or
telex with
<PAGE> 7
correct answer-back) either under this Contract or in accordance with applicable
law. The Sub-Adviser shall be required to communicate instructions in the form
of trade tickets by facsimile in accordance with Section 3(ii)(e) hereof. The
Sub-Adviser shall communicate with the Adviser at the Adviser's address last
notified to the Sub-Adviser. The Adviser shall be entitled to rely on the
instructions of any person who is listed on Appendix I and may assume the
genuineness of all signatures and the authenticity of all instructions and
communications unless the Adviser had reason to know such signatures,
instructions or communications were unauthorized. All trade tickets representing
purchases and sales of the Fund's portfolio securities shall be signed by at
least two such persons listed on Appendix I.
8. FEES AND EXPENSES. In consideration of the services to be
rendered, facilities furnished and expenses paid or assumed by the Sub-Adviser
under this Contract, the Adviser shall pay the Sub-Adviser a monthly fee at the
annual rate of up to 0.45% of the average net assets of the Fund managed by the
Sub-Adviser.
If the fees payable to the Sub-Adviser pursuant to this paragraph 8
begin to accrue before the end of any month or if this Contract terminates
before the end of any month, the fees for the period from that date to the end
of that month or from the beginning of that month to the date of termination, as
the case may be, shall be prorated according to the proportion which the period
bears to the full month in which the effectiveness or termination occurs. For
purposes of calculating the monthly fees, the value of the net assets of the
Fund shall be computed in the manner specified in the Prospectus for the
computation of net asset value.
Notwithstanding the foregoing, if, after consultation with the
Sub-Adviser, the Adviser determines to waive any part of the fee paid to it by
the Fund, the fee paid to the Sub-Adviser hereunder may be reduced
proportionately.
9. FORCE MAJEURE. The Sub-Adviser shall not be in breach of this
Contract if there is any total or partial failure of performance of its duties
and obligations occasioned by any act of God, fire, act of government or state,
war, civil commotion, insurrection, embargo, inability to communicate with
market makers for whatever reason, failure of any computer dealing system,
prevention from or hindrance in obtaining any raw materials, energy or other
supplies, labor disputes of whatever nature or any other reason (whether or not
similar in kind to any of the above) beyond the Sub-Adviser's control, provided
the Sub-Adviser has made every reasonable effort to overcome such difficulties.
10. NO PARTNERSHIP OR JOINT VENTURE. The Trust, the Adviser and the
Sub-Adviser are not partners of or joint venturers with each other and nothing
<PAGE> 8
herein shall be construed so as to make them such partners or joint ventures or
impose any liability as such on any of them.
11. TERMINATION.
(i) This Contract shall become effective upon the above date,
and shall thereafter continue in effect; provided that this Contract shall
continue in effect for a period of more than two years only as so long as the
continuance is specifically approved at least annually by (a) a majority of the
Trustees of the Trust who are not interested persons of the Adviser, the
Sub-Adviser or the Trust (other than as Trustees), cast in person at meeting
called for the purpose of voting on such approval, and (b) either (i) the
Trustees of the Trust, or (ii) a majority of the outstanding voting securities
of the Fund. This Contract may, on 60 days' written notice, be terminated at any
time, without the payment of any penalty, by the Trustees of the Trust, by vote
of a majority of the outstanding voting securities of the Trust, by the Adviser
or by the Sub-Adviser. Termination shall not affect any action taken by the
Sub-Adviser permitted under this Contract prior to the date of termination or
any warranty or indemnity given by the Adviser under this Contract or implied by
law.
(ii) On termination by either party the Sub-Adviser shall be
entitled to receive from the Adviser all fees, costs, charges and expenses
accrued or incurred under this Contract up to the date of termination including
any additional expenses or losses necessarily incurred in settling outstanding
obligations or terminating this Contract, whether they occur before or after the
date of termination.
(iii) If the Adviser terminates this Contract, it shall be
subject to a proportion of the annual fee corresponding to the proportion of the
year that has expired when this Contract is terminated.
12. CAPTIONS. The captions in this Contract are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Contract may be executed simultaneously 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.
13. GOVERNING LAW. This Contract shall be construed in accordance
with laws of the State of New York and the applicable provision for the
Investment Company Act of 1940, as amended (the "1940 Act") and the Advisers
Act. As used herein the Terms "affiliated person", "assignment", "interested
person", and "vote of majority of the outstanding voting securities" shall have
the meaning set forth in the 1940 Act.
<PAGE> 9
14. PERSONAL LIABILITY. The Trust's Declaration of Trust is on file
with the Secretary of State of the State of Delaware. The obligations of the
Trust are not personally binding upon, nor shall resort be had to the private
property of, any of the Trustees, shareholders, officers, employee or agents of
the Trust, but only the Trust's property shall be bound.
Yours very truly,
INTRUST BANK N.A.
By: _______________________
Title:
The foregoing Contract
is hereby agreed to as
of the date hereof
By: _____________________
Title: President
<PAGE> 1
(h)(2)
SERVICING ORGANIZATION AGREEMENT
SERVICE ORGANIZATION AGREEMENT, dated as of ________________
_______, 1998, by and between INTRUST FUNDS Trust (the "Trust"), a Delaware
business trust, and _______________________________ (the "Financial
Institution"), as a shareholder servicing agent hereunder (the "Agent") relating
to transactions in shares of capital stock, $.001 par value (the "Shares"), of
any of the existing investment portfolios offered by the Trust (the "Funds"). In
the event that the Trust establishes one or more portfolios other than the Funds
with respect to which it decides to retain the Financial Institution hereunder,
the Trust shall promptly notify the Financial Institution in writing. If the
Financial Institution is willing to render such services, it shall notify the
Trust in writing whereupon such portfolio shall become a Fund hereunder.
The Trust and the Financial Institution hereby agree as
follows:
1. Appointment. The Financial Institution, as Agent, hereby
agrees to perform certain services for its customers (the "Customers") as
hereinafter set forth. The Agent's appointment hereunder is non-exclusive, and
the parties recognize and agree that, from time to time, the Trust may enter
into other shareholder servicing agreements, in writing, with other financial
institutions.
2. Services to be Performed. The Agent, as agent for its
Customers, shall be responsible for performing shareholder administrative
support services, which will include the following: (i) answering customer
inquiries regarding account status and history, the manner in which purchases,
exchanges and redemptions of shares of the Funds may be effected and certain
other matters pertaining to the Funds; (ii) assisting shareholders in
designating and changing dividend options, account designations and addresses;
(iii) providing necessary personnel and facilities to establish and maintain
shareholder accounts and records; (iv) assisting in aggregating and processing
purchase, exchange and redemption transactions; (v) placing net purchase and
redemption orders with the Trust's distributor; (vi) arranging for wiring of
funds; (vii) transmitting and receiving funds in connection with customer orders
to purchase or redeem shares; (viii) processing dividend payments; (ix)
verifying and guaranteeing shareholder signatures in connection with redemption
orders and transfers and changes in shareholder-designated accounts, as
necessary; (x) providing periodic statements showing a customer's account
balance and, to the extent practicable, integrating such information with other
customer transactions otherwise effected through or with the Shareholder
Servicing Agent; (xi) furnishing (either separately or on an integrated basis
with other reports sent to a shareholder by a Shareholder Servicing Agent)
monthly and year-end statement and confirmations of purchases, exchanges and
redemptions; (xii) transmitting on behalf of the Trust, proxy statements annual
reports, updating prospectuses and other communications from the Trust to the
shareholders of the Funds; (xiii) receiving, tabulating and transmitting to the
Trust proxies executed by shareholders with respect to meetings of shareholders
of the Funds; and (xiv) providing such other related services as the Trust or a
shareholder may request.
1
<PAGE> 2
The Agent shall provide all personnel and facilities necessary
in order for it to perform the functions described in this paragraph with
respect to its Customers.
3. Fees.
3.1 Fees from the Trust. In consideration for the services
described in Section 2 hereof and the incurring of expenses in connection
therewith, the Agent shall receive a fee, computed daily and payable monthly, at
the annual rate of 0.25% of the daily net asset value of Shares of the
Institutional Service Class and Institutional Premium Class of each Fund.
3.2 Fees from Customers. It is agreed that the Financial
Institution may impose certain conditions on Customers, in addition to or
different from those imposed by the Trust, such as requiring a minimum initial
investment or imposing limitations on the amounts of transactions. It is also
understood that the Financial Institution may directly credit or charge fees to
Customers in connection with an investment in the Funds. The Financial
Institution shall credit or bill customers directly for such credits or fees. In
the event the Financial Institution charges customers such fees, it shall make
appropriate prior written disclosure (such disclosure to be in accordance with
all applicable laws) to Customers both of any direct fees charged to the
Customer and of the fees received or to be received by it from the Trust
pursuant to Section 3.1 of this Agreement. It is understood, however, that in no
event shall the Financial Institution have recourse or access as Agent or
otherwise to the account of any shareholder of the Trust except to the extent
expressly authorized by law or by such shareholder,or to any assets of the
Trust, for payment of any direct fees referred to in this Section 3.2
4. Approval of Materials to be Circulated. Advance copies or
proofs of all materials which are to be generally circulated or disseminated by
the Agent to Customers or prospective Customers which identify or describe the
Trust shall be provided to the Trust at least 10 days prior to such circulation
or dissemination (unless the Trust consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Trust shall have given written notice to the
Agent of any objection thereto.
Nothing in this Section 4 shall be construed to make the Trust
liable for the use of any information about the Trust which is disseminated by
the Agent.
5. Compliance with Laws, etc. The Agent shall comply with all
applicable federal and state laws and regulations in the performance of its
duties under this Agreement, including securities laws.
6. Limitation of Agent's Liability, In consideration of the
Agent's undertaking to render the services described in this Agreement, the
Trust agrees that the Agent shall not be liable under this Agreement for any
error of judgment or mistake of
2
<PAGE> 3
law or for any loss suffered by the Trust in connection with the performance of
this Agreement, provided that nothing in this Agreement shall be deemed to
protect or purport to protect the Agent against any liability to the Trust or
its shareholders to which the Agent would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of the
Agent's duties under this Agreement or by reason of the Agent's reckless
disregard of its obligations and duties hereunder.
7. Indemnification. The Trust agrees to indemnify and hold
harmless the Agent from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the Investment Trust Act of 1940, as amended, and any state and foreign
securities and blue sky laws, all as or to be amended from time to time) and
expenses, including attorneys' fees and disbursements arising directly or
indirectly from (i) any misstatements or omissions in the Trust's Prospectus, or
(ii) any action or thing which the Agent takes or does or omits to take or do
reasonably believed by the Agent to be at the request or direction or in
reliance on the advice or instructions, whether oral or written, of the Trust
provided, that the Agent shall not be indemnified against any liability to the
Trust or to its shareholders (or any expenses incident to such liability)
arising out of the Agent's own willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder or by reason of its
reckless disregard of its obligations and duties hereunder. In order that the
indemnification provision contained in this paragraph shall apply, it is
understood that if in any case the Trust may be asked to indemnify or save the
Agent harmless, the Trust shall be fully and promptly advised of all pertinent
facts concerning the situation in question, and it is further understood that
the Agent will use all reasonable care to identify and notify the Trust promptly
concerning any situation which presents or appears likely to present the
probability of such a claim for indemnification against the Trust. The Trust
shall have the option to defend the Agent against any claim which may be the
subject of this indemnification and, in the event that the Trust so elects, it
will so notify the Agent and thereupon the Trust shall take over complete
defense for the claim, and the Agent shall in such situation incur no further
legal or other expenses for which it shall seek indemnification under this
paragraph. The Agent shall in no case confess any claim or make any compromise
or settlement in any case in which the Trust will be asked to indemnify the
Agent, except with the Trust's prior written consent.
8. Limitation of Shareholder Liability, etc.. The Agent hereby
agrees that obligations assumed by the Trust pursuant to this Agreement shall be
limited in all cases to the Trust and its assets and that the Agent shall not
seek satisfaction of any such obligation from the shareholders or any
shareholder of the Trust. It is further agreed that the Agent shall not seek
satisfaction of any such obligations from the Board of Trustees or any
individual Trustee of the Trust.
9. Notices. All notices or other communications hereunder to
either party shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notices shall be addressed (a) if to the Trust, at the
address of the Trust, or (b) if to the Agent, at 3435 Stelzer Road, Columbus,
Ohio 43219.
3
<PAGE> 4
10. Further Assurances. Each party agrees to perform such
further acts and execute such further documents as are necessary to effectuate
the purposes hereof.
11. Termination. This Agreement will continue in effect with
respect to a particular Fund automatically for successive one-year terms,
provided such Agreement is not terminated. This Agreement may be terminated at
any time, without the payment of any penalty, by a vote of a majority of the
Trust's outstanding voting securities (as defined in the 1940 Act) or by a vote
of a majority of the Trust's entire Board of Trustees on 60 days' written notice
to the Agent or by the Agent on (60) days' written notice to the Trust.
12. Changes; Amendments. This Agreement may be changed or
amended only by written instrument signed by both Parties.
13. Reports. The Agent will provide the Trust or its designees
such information as the Trust or its designees may reasonably request
(including, without limitation, periodic certifications confirming the provision
to Customers of the services described herein), and will otherwise cooperate
with the Trust and its designees (including, without limitation, any auditors
designated by the Trust), in connection with the preparation of reports to its
Board of Trustees concerning this Agreement and the monies paid or payable under
this Agreement, as well as any other reports or filings that may be required by
law.
14. Subcontracting by Agent. the Agent may subcontract for the
performance of the Agent's obligations hereunder with any one or more persons,
including but not limited to any one or more persons which is an affiliate of
the Agent; provided, however, that the Agent shall be as fully responsible to
the Trust for the acts and omissions of any subcontractor as it would be for its
own acts or omissions. The Agent shall notify the Trust of any such arrangements
no later than the next meeting of the Trust's Board of Trustees following the
entry by the Agent into such arrangements. Notwithstanding this paragraph or
paragraph 11 of this Agreement, the Trust reserves the right to terminate this
Agreement immediately or upon such notice as the Trust, in its sole discretion,
determines to give, and without payment of any penalty, if the Trust notifies
the Agent that any subcontractor or the Agent is unacceptable to the Trust for
any reason and that the Agent does not terminate its arrangements with such
subcontractor as promptly as reasonably practicable.
15. Governing Law. This Agreement shall be governed by the
laws of the State of New York.
16. Miscellaneous. The captions in this Agreement are included
for convenience of reference only and in no way define or limit any of the
provisions hereof
4
<PAGE> 5
otherwise affect their construction or effect. This Agreement has been executed
on behalf of the Trust by the undersigned not individually, but in the capacity
indicated.
INTRUST FUNDS TRUST
By: ___________________________
Title: ___________________________
FINANCIAL INSTITUTION
By: ___________________________
Title: ___________________________
5
