<PAGE> 1
As filed with the Securities and Exchange Commission on January 31, 2000
File Nos. 333-32483 and 811-8305
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
PRE-EFFECTIVE AMENDMENT NO. [ ]
POST-EFFECTIVE AMENDMENT NO. 7 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 9 [X]
------------------
EUREKA FUNDS
------------
(Exact Name of Registrant as Specified in Charter)
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
(Address of Principal Business Office)
614-470-8000
------------
(Registrant's Telephone Number, including Area Code)
Martin R. Dean
3435 Stelzer Road, Columbus, Ohio 43219
---------------------------------------
(Name and Address of Agent for Service)
Copies of communications to:
Martin E. Lybecker, Esq. Eureka Funds
Ropes & Gray 3435 Stelzer Road
1301 K Street, N.W. Columbus, Ohio 43219
Suite 800 East
Washington, D.C. 20004
Approximate Date of Proposed Public Offering: Continuous.
It is proposed that this filing will become effective (check appropriate
box):
[ ] immediately upon filing pursuant to paragraph (b)
[X] on February 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii)
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered: Shares of Beneficial Interest
<PAGE> 2
The Securities and Exchange
Commission has not approved or
disapproved the shares
described in this prospectus
or determined whether this
prospectus is accurate or
complete. Any representation
to the contrary is a criminal
offense.
Questions?
Call 1-888-890-8121
or your investment representative
- ---------------------------------
EUR-0033 (2/00)
EUREKA(SM)
FUNDS
------------------------------
U.S. TREASURY OBLIGATIONS FUND
------------------------------
PRIME MONEY MARKET FUND
------------------------------
INVESTMENT GRADE BOND FUND
------------------------------
GLOBAL ASSET ALLOCATION FUND
------------------------------
EQUITY FUND
------------------------------
Prospectus Dated
February 1, 2000
-CLASS A SHARES-
NOT FDIC INSURED
<PAGE> 3
EUREKA FUNDS TABLE OF CONTENTS
HOW TO READ THIS PROSPECTUS
This prospectus is arranged into different sections so that you can easily
review this important information. The next page contains general information
you should know about investing in the Funds.
<TABLE>
<S> <C> <C> <C>
INTRODUCTION
3
FUND SUMMARY, INVESTMENT STRATEGY, RISK/RETURN SUMMARY,
PERFORMANCE INFORMATION, AND FEES AND EXPENSES
[Logo]
If you would like more 4 U.S. Treasury Obligations Fund
detailed information about 7 Prime Money Market Fund
each Fund, please see: 10 Investment Grade Bond Fund
14 Global Asset Allocation Fund
18 Equity Fund
SHAREHOLDER INFORMATION
[Logo]
If you would like more 22 Rule 12b-1 Fees
information about the 22 Multiple Class Structure
following topics, please 22 Opening an Account
see: 23 Buying Shares
25 Selling Shares
28 Exchanging Shares
28 Pricing of Fund Shares
30 Additional Investor Services
32 Dividends and Distributions
32 Taxes
INVESTMENT MANAGEMENT
[Logo]
34 Investment Adviser
38 Other Service Providers
FINANCIAL HIGHLIGHTS
[Logo]
39 Financial Highlights
ADDITIONAL INVESTMENT PRACTICES AND RISKS
[Logo]
44 Additional Investment Practices and Risks
</TABLE>
TO OBTAIN MORE INFORMATION ABOUT THE EUREKA FUNDS PLEASE REFER TO THE BACK COVER
OF THE PROSPECTUS.
2
<PAGE> 4
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities like stocks
and bonds. Before you invest, you should know a few things about investing in
mutual funds.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and
other events that affect securities markets generally, as well as those that
affect particular companies or governments. These price movements, sometimes
called volatility, will vary depending on the types of securities a Fund owns
and the markets where these securities trade.
LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR INVESTMENT IN A FUND.
YOUR INVESTMENT IN A FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK. IT IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY.
Each Fund has its own investment goal and strategies for reaching that goal.
However, it cannot be guaranteed that a Fund will achieve its goal. Before
investing, make sure that the Fund's goal matches your own.
The portfolio manager invests each Fund's assets in a way that the manager
believes will help the Fund achieve its goal. A manager's judgments about the
bond and stock markets, economy and companies, and his or her method of
investment selection, may cause a Fund to underperform other funds with
similar objectives.
3
<PAGE> 5
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
U.S. TREASURY OBLIGATIONS FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Current income with liquidity and stability of principal
Investment Focus U.S. Treasury securities and repurchase agreements
collateralized by U.S. Treasury securities
Principal Investment Strategy Invests in short-term U.S. Treasury securities
Share Price Volatility Low
Investor Profile Short-term or highly risk averse investors seeking current
income from a money market fund that invests in obligations
supported by the full faith and credit of the U.S.
government
INVESTMENT OBJECTIVE The U.S. Treasury Obligations Fund seeks current income
consistent with liquidity and stability of principal.
INVESTMENT STRATEGY The Fund invests exclusively in bills, notes, and bonds
issued or guaranteed by the U.S. government, agency
obligations supported by the full faith and credit of the
U.S. government, and repurchase agreements collateralized by
U.S. Treasury securities. The Fund intends to maintain an
average weighted maturity of not greater than 60 days.
WHAT ARE THE MAIN RISKS OF Your investment in the Fund may be subject to the following
INVESTING IN THIS FUND? principal risks:
Interest Rate Risk -- Interest rate risk involves the
possibility that the Fund's yield will decrease due to a
decline in interest rates.
Net Asset Value Risk -- The risk that the Fund will be
unable to meet its goal of a constant $1 per share.
For more information about these risks please refer to the
section titled "Additional Investment Practices and Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY 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 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
4
<PAGE> 6
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
U.S. TREASURY OBLIGATIONS FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for its first full calendar year
of operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<S> <C>
'1999' 4.33
</TABLE>
Best Quarter: Q4
1999 1.15%
Worst Quarter: Q2
1999 1.01%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Lipper U.S. Treasury Money Market
Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (2/3/98)
<S> <C> <C>
----------------------------------
U.S. TREASURY OBLIGATIONS FUND 4.33% 4.49%
----------------------------------
LIPPER U.S. TREASURY MONEY MARKET FUNDS AVERAGE(1) 4.23% 4.43%
----------------------------------------------------------------------------------------------
</TABLE>
(1) The Lipper U.S. Treasury Money Market Funds Average is based on an
arithmetic average of the performance of U.S. Treasury money market funds
as reported by Lipper Inc.
YIELD
All mutual funds must use the same formulas to calculate yield and effective
yield. The Fund typically advertises performance in terms of a 7-day yield
and 7-day effective yield and may advertise total return. The 7-day yield
quotation more closely reflects current earnings of the Fund than the total
return quotation. The 7-day effective yield will be slightly higher than the
yield because of the compounding effect of the assumed reinvestment. Current
yields and effective yields fluctuate daily and will vary due to factors such
as interest rates and the quality, length of maturities, and type of
investments in the portfolio. The 7-day yield for the period ended December
31, 1999 was 4.21%.
You may obtain the most current yield information for the Fund by calling
(888) 890-8121.
5
<PAGE> 7
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
U.S. TREASURY OBLIGATIONS FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.20%*
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.61%*
Total Annual Fund Operating Expenses 1.06%*
</TABLE>
* During the last fiscal year, Sanwa Bank California (the "Adviser")
waived 0.10% of its Investment Advisory Fees and the Administrator
waived 0.25% of Other Expenses. These fee waivers may be terminated at
any time by the Adviser and the Administrator, respectively.
Accordingly, actual annual fund operating expenses were as follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.10%
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.35%
Total Annual Fund Operating Expenses 0.70%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$108 $337 $585 $1,294
</TABLE>
6
<PAGE> 8
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
PRIME MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Current income with liquidity and stability of principal
Investment Focus High quality money market instruments
Principal Investment Invests in high-quality, short-term debt instruments
Strategy
Share Price Volatility Low
Investor Profile Short-term or risk averse investors seeking current income
from a money market fund that invests in high quality
instruments
INVESTMENT OBJECTIVE The Prime Money Market Fund seeks as high a level of current
income as is consistent with maintaining liquidity and
stability of principal.
INVESTMENT STRATEGY The Fund invests primarily in U.S. government agency
securities, high-quality commercial paper, short-term
corporate debt obligations, and repurchase agreements. To be
considered high-quality, a security must be rated in one of
the two highest credit quality categories for short-term
securities or, if not rated, determined by the Fund's
Adviser to be of comparable quality. The Fund intends to
maintain an average weighted maturity of not greater than 60
days.
WHAT ARE THE MAIN RISKS OF Your investment in the Fund may be subject to the following
INVESTING IN THIS FUND? principal risks:
Credit Risk -- Credit risk is the possibility that an issuer
cannot make timely interest and principal payments on its
securities. Because the Fund will only invest in
securities believed to pose minimal credit risk, it is
unlikely that losses due to credit risk will cause a
decline in the value of your investment. However, even
if not severe enough to cause such a decline in
principal value, credit losses could reduce the Fund's
yield. In general, lower-rated securities have higher
credit risks.
Interest Rate Risk -- Interest rate risk involves the
possibility that the Fund's yield will decrease due to a
decline in interest rates.
Net Asset Value Risk -- The risk that the Fund will be
unable to meet its goal of a constant $1 per share.
For more information about these risks please refer to the
section titled "Additional Investment Practices and Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY 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 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
7
<PAGE> 9
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
PRIME MONEY MARKET FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows changes in the Fund's performance from year to year.+
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<CAPTION>
'1990' 7.46
- ------ ----
<S> <C>
'1991' 6.70
'1992' 3.49
'1993' 2.32
'1994' 3.11
'1995' 5.00
'1996' 4.40
'1997' 4.58
'1998' 4.56
'1999' 4.57
</TABLE>
Best Quarter Q2
1990 1.93%
Worst Quarter Q3
1993 0.52%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Lipper Money Market Funds Average.+
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
--------------------------------------------------
PRIME MONEY MARKET FUND 4.57% 4.61% 4.60%
--------------------------------------------------
LIPPER MONEY MARKET FUNDS AVERAGE(1) 4.49% 4.95% 4.79%
------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Lipper Money Market Funds Average is based on an arithmetic average
of the performance of money market funds as reported by Lipper Inc.
+ The above-quoted performance data includes the performance of a predecessor
fund for the period before the Prime Money Market Fund commenced operations
(11/1/97) adjusted to reflect the deduction of fees and expenses applicable
to the Class A Shares of the Prime Money Market Fund as stated in this
prospectus in the Fees and Expenses section (i.e., adjusted to reflect
anticipated fees and expenses, absent any fee waivers). The predecessor
fund was not registered under the Investment Company Act of 1940 (1940 Act)
and therefore was not subject to certain investment restrictions,
limitations and diversification requirements imposed by the 1940 Act and
the Internal Revenue Code. If the predecessor fund had been registered
under the 1940 Act, its performance may have been adversely affected. The
investment objective, restrictions and guidelines of the Prime Money Market
Fund are substantially similar to its predecessor fund.
YIELD
All mutual funds must use the same formulas to calculate yield and effective
yield. The Fund typically advertises performance in terms of a 7-day yield
and 7-day effective yield and may advertise total return. The 7-day yield
quotation more closely reflects current earnings of the Fund than the total
return quotation. The 7-day effective yield will be slightly higher than the
yield because of the compounding effect of the assumed reinvestment. Current
yields and effective yields fluctuate daily and will vary due to factors such
as interest rates and the quality, length of maturities, and type of
investments in the portfolio. The 7-day yield for the period ended December
31, 1999 was 4.82%.
You may obtain the most current yield information for the Fund by calling
(888) 890-8121.
8
<PAGE> 10
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
PRIME MONEY MARKET FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged, by its financial institution,
account fees for automatic investments, exchanges, and other investment
services. Refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.30%*
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.62%*
Total Annual Fund Operating Expenses 1.17%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fees and the Administrator waived 0.31% of Other Expenses.
These fee waivers may be terminated at any time by the Adviser and the
Administrator, respectively. Accordingly, actual annual fund operating
expenses were as follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.20%
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.31%
Total Annual Fund Operating Expenses 0.76%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$119 $372 $644 $1,420
</TABLE>
9
<PAGE> 11
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal A high level of income, consistent with preservation of
capital
Investment Focus Investment grade debt obligations
Principal Investment Attempts to identify fixed income securities with high
Strategy expected returns using a quantitative securities selection
process
Share Price Volatility Low to Medium
Investor Profile Investors willing to accept low to medium price fluctuation
in order to receive income from their investment that is
typically higher than that of a money market fund
INVESTMENT OBJECTIVE The Investment Grade Bond Fund seeks a high level of income,
consistent with preservation of capital.
INVESTMENT STRATEGY The Fund invests in a broad range of fixed income
securities, including U.S. Treasury securities, U.S. agency
securities, mortgage related securities, and corporate
bonds. The Fund will invest at least 80% of its net assets
in bonds which are investment grade securities. To be
considered investment grade, a security must be rated in one
of the four highest credit quality categories or, if not
rated, determined by the Fund's Adviser to be of comparable
quality.
The Adviser uses its proprietary, quantitative security
selection strategy to determine the optimal combination of
investments in the portfolio. Quantitative investment models
and risk management systems assist the Adviser in
identifying the optimal choice of credit rating, maturity,
and coupon rate, among other factors. The Adviser seeks the
fixed income sectors and/or securities with high expected
relative return premiums, adjusted for risk. Fundamental
valuation, macroeconomic, technical and risk measures are
all employed to determine the expected relative return
premium for each sector and/or security. Once the
attractiveness of the various investment sector and
individual security alternatives is determined, the
portfolio is constructed so as to overweight those sectors
and/or securities with the most-favorable prospects,
according to the current quantitative analysis.
The Fund may invest up to 20% of its assets in
non-investment grade debt securities (rated B- and higher),
preferred stocks and convertible securities. In the event
that a security held by the Fund is downgraded, the Fund may
continue to hold such security until such time as the
Adviser deems it to be advantageous to dispose of the
security.
</TABLE>
10
<PAGE> 12
[LOGO]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
CONTINUED
<TABLE>
<S> <C>
In pursuing its investment objective, the Fund expects that
its portfolio will be characterized by investment risk that
is similar to that of a broadly diversified investment grade
bond portfolio, such as a portfolio structured to match the
Lehman Brothers Aggregate Bond Index or the Salomon Broad
Investment Grade Bond Index. The Fund seeks to maintain a
dollar-weighted average portfolio maturity of five to ten
years.
The Fund may, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal
investment strategies in attempting to respond to adverse
market, economic, political, or other conditions. In these
and in other cases, the Fund may not achieve its investment
objective.
WHAT ARE THE MAIN RISKS OF Loss of money is a risk of investing in the Fund. In
INVESTING IN THIS FUND? addition, your investment in the Fund may be subject to the
following principal risks:
Credit Risk -- Credit risk is the possibility that an issuer
cannot make timely interest and principal payments on its
debt obligations, such as bonds. In general,
lower-rated bonds have higher credit risks. However,
because the Fund invests primarily in investment grade
debt obligations, credit risk is minimized.
Interest Rate Risk -- Interest rate risk involves the
possibility that the value of the Fund's investments will
decline due to an increase in interest rates. In
general, the longer a security's maturity, the greater
the interest rate risk.
Prepayment/Call Risk -- Prepayment risk is the chance that
the repayment of mortgages backing a security will occur
sooner than expected. Call risk is the possibility that
during periods of falling interest rates, a bond issuer
will "call" -- or repay -- its high-yielding bond
before the bond's maturity date. In each case, the Fund
may be forced to reinvest in securities with a lower
yield. It may also lose any premium paid for the bond.
Changes in prepayment/call rates can result in greater
price and yield volatility.
The Fund may trade securities actively, which could increase
its transaction costs (thus lowering performance) and may
increase the amount of taxes that you pay.
For more information about these risks please refer to the
section titled "Additional Investment Practices and Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK, AND IT IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
11
<PAGE> 13
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for its first full calendar year
of operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<CAPTION>
'1999' -2.29
- ------ -----
<S> <C>
</TABLE>
Best Quarter: Q3
1999 0.42%
Worst Quarter: Q2
1999 -1.46%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Lehman Brothers Aggregate Bond
Index, the Salomon Broad Investment Grade Bond Index, and the Lipper
Intermediate Investment Grade Debt Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (2/3/98)
<S> <C> <C>
----------------------------------
INVESTMENT GRADE BOND FUND -2.29% 2.65%
----------------------------------
LEHMAN BROTHERS AGGREGATE BOND INDEX(1) -0.83% 3.29%
----------------------------------
SALOMON BROAD INVESTMENT GRADE BOND INDEX(2) -0.83% 3.31%
----------------------------------
LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS AVERAGE(3) -1.31% 2.35%
-----------------------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the performance of intermediate-term government bonds,
investment grade corporate debt securities and mortgage-backed
securities.
(2) The Salomon Broad Investment Grade Bond Index is an unmanaged index
generally representative of the performance of U.S. investment grade
bonds with over one year to maturity.
(3) The Lipper Intermediate Investment Grade Debt Funds Average is based on
an arithmetic average of the performance of intermediate investment grade
debt funds as reported by Lipper Inc.
12
<PAGE> 14
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.60%*
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.60%*
Total Annual Fund Operating Expenses 1.45%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fees, and the Administrator waived 0.25% of Other Expenses.
These fee waivers may be terminated at any time by the Adviser and the
Administrator, respectively. Accordingly, actual annual fund operating
expenses were as follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.50%
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.35%
Total Annual Fund Operating Expenses 1.10%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$148 $459 $792 $1,735
</TABLE>
13
<PAGE> 15
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Income and long-term capital appreciation
Investment Focus Common stocks and bonds of U.S. and foreign issuers
Principal Investment Attempts to diversify investments across countries,
Strategy currencies, and asset classes using a quantitative
securities selection process
Share Price Volatility Medium
Investor Profile Investors seeking current income and capital appreciation
with higher current income and lower volatility than the
average stock fund
INVESTMENT OBJECTIVE The Global Asset Allocation Fund seeks a balance of income
and long-term capital appreciation.
INVESTMENT STRATEGY Through the use of a disciplined asset allocation approach,
the Fund intends to invest in, and assume a level of risk
commensurate with, a globally diversified portfolio of
medium to large capitalization stocks, investment grade
bonds, and cash equivalents. The Adviser will use a variety
of quantitative investment models to identify the country,
sector, and asset classes with the highest expected
risk-adjusted return. Once the relative attractiveness of
the various investment class alternatives is determined, the
portfolio is constructed so as to overweight those
countries, currencies, sectors, and asset classes with the
most favorable prospects, according to the current
quantitative analysis. The Fund seeks to outperform a
blended 70% stock and 30% bond benchmark as part of its
investment approach. The Fund reserves the right to vary its
stock exposure from 50% to 75% of its assets and its bond
exposure from 25% to 50% of its assets.
The Fund will invest in a varying combination of stocks,
bonds, and cash equivalents selected primarily from major
markets such as: the United States, Japan, the U.K.,
Germany, France, Switzerland, Spain, Canada, and Australia.
The Fund may also invest in other markets, including
emerging markets. By diversifying across countries,
currencies, and asset classes (stocks and bonds), the Fund
pursues its capital appreciation goals while seeking to
control portfolio risk. The Fund will normally invest at
least 65% of its net assets in securities representing at
least three different countries, including the United
States.
The Fund's equity exposure typically will not deviate by
more than 20% from the market capitalization weights of the
respective individual equity markets as determined by that
market's representation in the Salomon Smith Barney Primary
Market Index -- World or the Morgan Stanley Capital
International World Index. For example, if the Japanese
equity market represents 30% of the Salomon Smith Barney
Primary Market Index -- World, then Japanese equities will
typically represent not less than 10% nor more than 50% of
the Fund's equity exposure.
Bonds in the Fund's portfolio are expected to range in
maturity from one to thirty years. The Fund's bond portfolio
will seek to maintain a risk level, yield, maturity and
other characteristics commensurate with that of the Lehman
Brothers U.S. Treasury Index.
In order to execute its strategy in an efficient manner, the
Adviser may utilize equity index, bond index, and currency
futures contracts in the various countries. The Fund may use
futures contracts to provide an
</TABLE>
14
<PAGE> 16
[LOGO]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
CONTINUED
<TABLE>
<S> <C>
efficient means of achieving broad market exposure to the
stock, fixed income and currency markets of a particular
country, to provide liquidity, and to facilitate asset
allocation shifts.
The Fund may, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal
investment strategies in attempting to respond to adverse
market, economic, political, or other conditions. In these
and in other cases, the Fund may not achieve its investment
objective.
WHAT ARE THE MAIN RISKS OF Loss of money is a risk of investing in the Fund. In
INVESTING IN THIS FUND? addition, your investment in the Fund may be subject to the
following principal risks:
Foreign Securities Risk -- Investing in foreign markets
involves greater risk than investing in the United States.
Foreign securities may be affected by such factors as
fluctuations in currency exchange rates, incomplete or
inaccurate financial information on companies, social
upheavals and political actions ranging from tax code
changes to governmental collapse. Emerging market
securities may be even more susceptible to these risks.
Market Risk -- Market risk is the possibility that the
Fund's investments in equity securities will decline because
of drops in the stock market. Stock markets tend to
move in cycles, with periods of either rising or
falling prices. The value of your investment will go up
or down in response to these movements.
Investment Style Risk -- Investment style risk is the
possibility that returns from medium to large capitalization
stocks will trail returns from other asset classes or
the overall stock market.
Credit Risk -- Credit risk is the possibility that an issuer
cannot make timely interest and principal payments on its
debt obligations, such as bonds. In general,
lower-rated bonds have higher credit risks.
Interest Rate Risk -- Interest rate risk involves the
possibility that the value of the Fund's investments will
decline due to an increase in interest rates. In
general, the longer a security's maturity, the greater
the interest rate risk.
The Fund may trade securities actively, which could increase
its transaction costs (thus lowering performance) and may
increase the amount of taxes that you pay.
For more information about these risks please refer to the
section titled "Additional Investment Practices and Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK, AND IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
15
<PAGE> 17
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for its first full calendar year
of operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<CAPTION>
'1999' 12.09
- ------ -----
<S> <C>
</TABLE>
Best Quarter: Q4
1999 9.46%
Worst Quarter: Q3
1999 -1.65%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Salomon Smith Barney Primary Market
Index -- World, the Lehman Brothers U.S. Treasury Index, and the Lipper
Global Flexible Portfolio Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (2/3/98)
<S> <C> <C>
----------------------------------
GLOBAL ASSET ALLOCATION FUND 12.09% 13.19%
----------------------------------
SALOMON SMITH BARNEY PRIMARY MARKET INDEX - WORLD(1) 24.51% 24.05%
----------------------------------
LEHMAN BROTHERS U.S. TREASURY INDEX(2) -2.53% 2.90%
----------------------------------
LIPPER GLOBAL FLEXIBLE PORTFOLIO FUNDS AVERAGE(3) 21.18% 15.32%
----------------------------------------------------------------------------------------------
</TABLE>
(1) The Salomon Smith Barney Primary Market Index - World is an unmanaged
index generally representative of the performance of the international
and domestic stock market.
(2) The Lehman Brothers U.S. Treasury Index is an unmanaged index generally
representative of the performance of the domestic Treasury market.
(3) The Lipper Global Flexible Portfolio Funds Average is based on an
arithmetic average of the performance of global funds as reported by
Lipper Inc.
16
<PAGE> 18
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Please refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.90%*
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.73%*
Total Annual Fund Operating Expenses 1.88%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fee and the Administrator waived 0.25% of other expenses.
These fee waivers may be terminated at any time by the Adviser and the
Administrator, respectively. Accordingly, actual annual fund operating
expenses were as follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.80%
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.48%
Total Annual Fund Operating Expenses 1.53%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$191 $591 $1,016 $2,201
</TABLE>
17
<PAGE> 19
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Long-term capital growth
Investment Focus U.S. common stocks
Principal Investment Attempts to identify medium to large capitalization stocks
Strategy of undervalued companies and/or growth companies using a
quantitative securities selection process
Share Price Volatility Medium to high
Investor Profile Investors with long-term investment goals who are looking
primarily for growth of capital
INVESTMENT OBJECTIVE The Equity Fund seeks long-term capital growth.
INVESTMENT STRATEGY The Fund attempts to identify medium to large capitalization
stocks of both undervalued companies and growth companies
using a quantitative securities selection process. The Fund
intends to invest at least 65% of its net assets in the
common stocks of corporations representing a broad cross
section of the U.S. economy. Common stocks are chosen based
upon the Adviser's quantitative stock selection models which
rank a universe of approximately 1,000 U.S. common stocks
according to their valuation, growth, return, and risk
measures. The stocks assigned the highest ratings are those
deemed to have a greater potential for price appreciation
over a short-to-intermediate term horizon.
The portfolio is constructed so that the aggregate
investment characteristics of the Fund are similar to those
of the S&P 500 Index. These characteristics include such
measures as weighted average market value, economic sector
diversification, P/E ratio, dividend yield, and market
"beta" (or sensitivity). However, while maintaining
aggregate investment characteristics similar to those of the
S&P 500 Index, the Fund seeks to invest in individual common
stocks -- including stocks which may not be part of that
Index -- which the Adviser believes hold a greater potential
for price appreciation. As of the date of this Prospectus,
the S&P 500 Index statistics were as follows: the weighted
average market value was $143 billion, the mean market value
was $25 billion, the smallest company had a market value of
$361 million, and the largest company had a market value of
$602 billion.
Although the Fund normally intends to be fully invested in
common stocks, it may invest temporarily in certain
short-term fixed income securities, investment company
securities, and money market instruments. Such securities
may be used to invest uncommitted cash balances or to
maintain liquidity in order to meet shareholder redemptions.
</TABLE>
18
<PAGE> 20
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
CONTINUED
<TABLE>
<S> <C>
The Fund may, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal
investment strategies in attempting to respond to adverse
market, economic, political, or other conditions. In these
and in other cases, the Fund may not achieve its investment
objective.
WHAT ARE THE MAIN RISKS OF Loss of money is a risk of investing in the Fund. In
INVESTING IN THIS FUND? addition, your investment in the Fund may be subject to the
following principal risks:
Market Risk -- Market risk is the possibility that the
Fund's investments in equity securities will decline because
of drops in the stock market. Stock markets tend to
move in cycles, with periods of either rising or
falling prices. The value of your investment will go up
or down in response to these movements.
Investment Style Risk -- Investment style risk is the
possibility that returns from medium to large capitalization
stocks will trail returns from other asset classes or
the overall stock market.
The Fund may trade securities actively, which could increase
its transaction costs (thus lowering performance) and may
increase the amount of taxes that you pay.
For more information about these risks please refer to the
section titled "Additional Investment Practices and Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK, AND IT IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
19
<PAGE> 21
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for its first full calendar year
of operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<CAPTION>
'1999' 15.73
- ------ -----
<S> <C>
</TABLE>
Best Quarter: Q4
1999 13.27%
Worst Quarter: Q3
1999 -7.43%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the S&P 500 Index and Lipper U.S.
Diversified Equity Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (2/3/98)
<S> <C> <C>
----------------------------------
EQUITY FUND 15.73% 20.03%
----------------------------------
S&P 500 INDEX(1) 21.04% 25.24%
----------------------------------
LIPPER U.S. DIVERSIFIED EQUITY FUNDS AVERAGE(2) 27.17% 21.19%
----------------------------------------------------------------------------------------------
</TABLE>
(1) The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market.
(2) The Lipper U.S. Diversified Equity Funds Average is based on an
arithmetic average of the performance of U.S. diversified equity funds as
reported by Lipper Inc.
20
<PAGE> 22
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Please refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.75%*
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.58%*
Total Annual Fund Operating Expenses 1.58%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fees and the Administrator waived 0.25% of Other Expenses.
These fee waivers may be terminated at any time by the Adviser and the
Administrator, respectively. Accordingly, actual annual fund operating
expenses were as follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.65%
Distribution/Service (12b-1) Fees 0.25%
Other Expenses 0.33%
Total Annual Fund Operating Expenses 1.23%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$161 $499 $860 $1,878
</TABLE>
21
<PAGE> 23
[Logo]
SHAREHOLDER INFORMATION
DISTRIBUTION/SERVICE (12B-1) FEES AND SHAREHOLDER SERVICING FEES
The Funds have adopted a Distribution and Shareholder Services Plan under
Rule 12b-1 that allows Class A shares of each Fund to pay distribution and
service fees for the sale and distribution of its shares and for services
provided to shareholders. The Funds have also adopted a Service Plan that
allows Class A shares of each Fund to compensate financial institutions for
providing shareholder services to their customers and account holders.
Because these fees are paid out of a Fund's assets continuously, over time
these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges. The maximum distribution/service
(12b-1) fee is 0.25% of the average daily net assets of Class A shares of a
Fund. The maximum shareholder servicing fee is 0.25% of the average daily net
assets of Class A shares of a Fund.
Over time shareholders may pay more than the equivalent of the maximum
permitted front-end sales charge under the NASD rules because distribution
and service fees are paid out of a Fund's assets on an ongoing basis.
MULTIPLE CLASS STRUCTURE
The Eureka Funds offer two classes of shares: Class A shares and Trust
shares. Class A shares are offered to the general public and are subject to a
distribution/ service (12b-1) fee and a shareholder servicing fee. Trust
shares are offered to Sanwa Bank California and its affiliates and certain
other financial service providers approved by the Distributor. Trust shares
are not subject to a distribution/service (12b-1) fee or a shareholder
servicing fee.
OPENING AN ACCOUNT
1. Read this prospectus carefully.
2. Determine how much you want to invest. The minimum investment for the
Eureka Funds is as follows:
- INITIAL PURCHASE: $1,000 for each Fund
- ADDITIONAL PURCHASES: $50 for each Fund
The minimum initial investment amount is $50 if purchases are made in
connection with qualified retirement plans (401(k) and 403(b)
accounts only), systematic investment plans or payroll deduction
plans.
A Fund may waive its minimum purchase requirement. The Distributor
may reject an order if it is considered to be in the best interest of
the Fund.
3. Complete the appropriate parts of the Account Registration Form, carefully
following the instructions. You must submit additional documentation when
opening trust, corporate or power of attorney accounts. For additional
information or for an Account Registration Form, please contact your local
Sanwa Bank California office or call Eureka Funds at (888) 890-8121.
22
<PAGE> 24
[Logo]
SHAREHOLDER INFORMATION
BUYING SHARES
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY MAIL OR BY OVERNIGHT MAIL
- If purchasing through your financial - If adding to your account through your
adviser or brokerage account, simply tell financial adviser or brokerage account,
your adviser or broker that you wish to simply tell your adviser or broker that
purchase shares of the Funds and he will you wish to purchase shares of the Funds
take care of the necessary documentation. and he will take care of the necessary
For all other purchases, follow the documentation. For all other purchases,
instructions below: follow the instructions below:
- Make out a check, bank draft, or money - Make out a check, bank draft, or money
order for the investment amount (at least order for the investment amount payable (at
$1,000), payable to the Eureka Funds. least $50) to the Eureka Funds.
- Deliver the check, bank draft, or money - Deliver the check, bank draft, or money
order and your completed Account order and investment slip attached to your
Registration Form to: account statement (or, if unavailable,
BY MAIL: provide the Fund name, share class,
Eureka Funds amount invested, account name, and account
P.O. Box 182792 number) to
Columbus, Ohio 43218-2792 BY MAIL:
BY OVERNIGHT MAIL: Eureka Funds
Eureka Funds P.O. Box 182792
c/o BISYS Fund Services Columbus, Ohio 43218-2792
Attn: T.A. Operations BY OVERNIGHT MAIL:
3435 Stelzer Road Eureka Funds
Columbus, Ohio 43219 c/o BISYS Fund Services
Attn: T.A. Operations
3435 Stelzer Road
Columbus, Ohio 43219
All purchases by check should be in U.S. dollars.
Third party checks, credit cards or cash will not be accepted.
</TABLE>
23
<PAGE> 25
[Logo]
SHAREHOLDER INFORMATION
BUYING SHARES
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY WIRE TRANSFER
- To place an order by wire transfer call
the Funds at (888) 890-8121 to obtain
wiring instructions regarding the bank
account number into which funds should be
wired and other pertinent information.
Your bank may charge a fee to wire funds.
AUTOMATED CLEARING HOUSE
- Your bank must participate in the - Call (888) 890-8121 to arrange an
Automated Clearing House and must be a electronic purchase.
U.S. bank.
- Establish the electronic purchase option
on your Account Registration Form.
- Call (888) 890-8121 to arrange an
electronic purchase.
Your bank may charge a fee to send funds by Automated Clearing House.
</TABLE>
24
<PAGE> 26
[Logo]
SHAREHOLDER INFORMATION
SELLING SHARES
<TABLE>
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY MAIL
- Accounts of any type. - Write a letter of instruction indicating
- Sales of any amount. the fund name, your account number, the
name(s) in which the account is registered
and the dollar value or number of shares
you wish to sell.
- Include the account owner signature(s).
- Mail the materials to the Eureka Funds,
P.O. Box 182792, Columbus, Ohio 43218-2792.
Or by overnight mail to the Eureka Funds,
c/o BISYS Fund Services, Attn: T.A.
Operations, 3435 Stelzer Road, Columbus,
Ohio 43219.
- A check will be mailed to the name(s) and
address in which the account is
registered, or otherwise according to
your letter of instruction.
BY TELEPHONE - Call (888) 890-8121 with instructions as
- Accounts of any type. to how you wish to receive your funds
- Sales of any amount. (mail, wire, electronic transfer).
This option is not available if you have declined telephone privileges.
</TABLE>
25
<PAGE> 27
[Logo]
SHAREHOLDER INFORMATION
SELLING SHARES
<TABLE>
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY WIRE
- Accounts of any type which have elected - Call (888) 890-8121 to request a wire
the wire option on the Account transfer.
Registration Form. - If you call by 4 p.m. Eastern time, your
- Sales of any amount. payment will normally be wired to your
bank on the next business day.
The Fund may charge a wire fee.
Your bank may charge a fee receive funds by wire.
BY AUTOMATED CLEARING HOUSE (ACH)
- Accounts of any type. - Call (888) 890-8121 to request an
- Sales of any amount. electronic sale.
- Shareholders with accounts at a U.S. - If you call by 4 p.m. Eastern time, the
bank which participates in the NAV of your shares will normally be
Automated Clearing House. determined on the same day and the
proceeds will be created within 8 days.
Your bank may charge a fee to receive funds by Automated Clearing House.
</TABLE>
26
<PAGE> 28
[Logo]
SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
SELLING SHARES IN WRITING. In certain circumstances, you may need to include
a signature guarantee, which protects you against fraudulent orders. You will
need a signature guarantee unless:
- the redemption check is payable to the shareholder(s) of record, and
- the check is mailed to the shareholder(s) of record and mailed to the
address of record.
You should be able to obtain your signature guarantee from a bank, broker,
dealer, credit union, securities exchange or association, clearing agency, or
savings association. A notary public CANNOT provide a signature guarantee.
RECEIVING YOUR MONEY. Normally, payment of your redemption proceeds will be
made as promptly as possible and, in any event, within seven calendar days
after the redemption order is received. At various times, however, a Fund may
be requested to redeem shares for which it has not yet received good payment;
collection of payment may take fifteen days or more. If you have made your
initial investment by check, you cannot receive the proceeds of that check
until it has cleared. You can avoid this delay by purchasing shares with a
certified check or wire transfer.
INVOLUNTARY SALES OF YOUR SHARES. Due to the relatively high costs of
handling small investments, each Fund reserves the right to redeem your
shares at net asset value if your account balance drops below $1,000 due to
redemptions. Before a Fund exercises its right to redeem your shares, you
will be given 60 days written notice to give you time to increase the value
of your account to at least $1,000.
POSTPONEMENT OF REDEMPTION REQUEST. The Funds may postpone payment for shares
at times when the New York Stock Exchange is closed or under any emergency
circumstances as determined by the Securities and Exchange Commission. If you
experience difficulty making a telephone redemption during periods of drastic
economic or market change, you can send the Funds your request by regular or
express mail. Follow the instructions above under "Selling Your Shares" in
this section.
REDEMPTION IN KIND. The Funds reserve the right to make payment in securities
rather than cash, known as a "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 a 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.
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 undeliverable or uncashed for six months will be
canceled and will be redeposited in your account at the current net asset
value.
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SHAREHOLDER INFORMATION
EXCHANGING SHARES
HOW TO EXCHANGE YOUR SHARES. Class A Shares of each Fund may be exchanged for
Class A Shares of the other Funds, provided that the Shareholder making the
exchange is eligible on the date of the exchange to purchase Class A Shares
(with certain exceptions and subject to the terms and conditions described in
this prospectus). Class A Shares of each Fund may be exchanged for Trust
Shares in instances where the Shareholder becomes eligible to purchase Trust
Shares.
A shareholder wishing to exchange Class A Shares purchased through a
financial adviser or brokerage account may do so by contacting their adviser
or broker. A fee may be charged by the adviser or broker with regard to such
an exchange. Information about such charges will be supplied by your adviser
or broker.
The exchange will be made on the basis of the relative net asset value of the
shares exchanged.
An exchange from one Fund to another Fund is considered a sale of shares and
will result in a capital gain or loss for federal income tax purposes.
Any shareholder who wishes to make an exchange must have received a current
Prospectus of the Fund in which he or she wishes to invest before the
exchange will be effected.
A shareholder wishing to exchange Class A Shares purchased directly from the
Eureka Funds may do so by contacting the Eureka Funds at (888) 890-8121 or by
providing written instructions to the Eureka Funds, P.O. Box 182792,
Columbus, Ohio 43218-2792 with the following information:
- your name and telephone number;
- the exact account name and account number;
- the taxpayer identification number;
- the dollar value or number of shares to be exchanged;
- the name of the Fund from which the exchange is to be made; and
- the name of the Fund into which the exchange is to be made. If the exchange
will be made into an existing account, please provide the account number.
If not selected on the Account Registration Form, the Shareholder will
automatically receive exchange privileges.
The Funds reserve the right to change the terms of the exchange privilege
upon sixty days' written notice.
The Funds are not intended to serve as vehicles for frequent trading in
response to short-term fluctuations in the market. Due to the disruptive
effect that excessive trading can have on efficient portfolio management, the
Funds have established a policy of limiting exchange activity to four
substantive exchange redemptions from a Fund during any calendar year. Other
than exchanges pursuant to the Eureka Funds' Auto Exchange Plan, there is a
$500 minimum for exchanges.
PRICING OF FUND SHARES
VALUATION OF SHARES. The price of a Fund's shares is based on the Fund's net
asset value. The net asset value of a Fund is determined by dividing the
total market value of the Fund's investments and other assets, less any
liabilities, by the total number of outstanding shares of the Fund. The net
asset value is calculated separately for the Trust shares and the Class A
shares of each Fund.
The net asset value for each Fund (except the Money Market Funds) may be
found daily in The Wall Street Journal and other newspapers.
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SHAREHOLDER INFORMATION
<TABLE>
<S> <C> <C>
Money Market Funds (the U.S. - The net asset value of each of the Money Market Funds is
Treasury Obligations Fund and determined on each business day as of 1:00 p.m. Eastern
the Prime Money Market Fund) time and as of the close of regular trading of the New
York Stock Exchange ("NYSE") (generally 4:00 p.m. Eastern
time) on each day in which the NYSE is open for trading
and the Federal Reserve Bank is open and any other day
during which there is sufficient trading in a Fund's
investments that the Fund's net asset value may be
materially affected.
- The assets in each Money Market Fund are valued based upon
the amortized cost method, which does not take into
account unrealized gains or losses.
- Each Money Market Fund's net asset value is expected to
remain at a constant $1, although there is no assurance
that this will be maintained.
- For further information about the valuation of
investments, see the Statement of Additional Information.
Investment Grade Bond Fund, the - The net asset value of the Investment Grade Bond Fund, the
Global Asset Allocation Fund, Global Asset Allocation Fund, and the Equity Fund is
and the Equity Fund determined on each business day as of the close of regular
trading of the NYSE (generally 4:00 p.m. Eastern time) on
each day in which the NYSE is open for trading and any
other day during which there is sufficient trading in a
Fund's investments that the Fund's net asset value may be
materially affected.
- The assets in the Investment Grade Bond Fund, the Global
Asset Allocation Fund, and the Equity Fund are valued
accordingly:
Portfolio securities, the principal market for which is a
securities exchange, will be valued at the closing
sales price on that exchange, or, if there have been
no sales during that day, at their latest bid. If
market quotations are not readily available, the
securities will be valued by a method which the Board
of Trustees believes accurately reflects fair value.
Portfolio securities, the principal market for which is
not a securities exchange, will be valued at the mean
between their latest bid and asked prices. If such
prices are not available, then the securities will be
valued by a method which the Board of Trustees
believes accurately reflects fair value.
- For further information about the valuation of
investments, see the Statement of Additional Information.
</TABLE>
BUY AND SELL PRICES. When you buy shares, you pay the net asset value next
determined after your order is received. When you sell shares, you receive
the net asset value next determined after your order is received.
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SHAREHOLDER INFORMATION
ADDITIONAL INVESTOR SERVICES
AUTO INVEST PLAN (AIP). AIP lets you set up periodic additional investments
in the Funds of your choice through automatic deductions from your bank
account. The minimum investment amount is $50 per Fund and the minimum
subsequent investment amount is $50 per Fund. Investments may be made
bi-monthly, monthly, or quarterly. To establish, complete the appropriate
section in the Account Registration Form. To participate in AIP from your
bank account, please attach a voided check to your Account Registration Form.
CHECK WRITING SERVICE. Shareholders of Class A Shares of a Money Market Fund
may write checks in the amount of $500 or more against their Fund account.
You will receive a supply of checks after a signed signature card is
received. A check may be made payable to any person, and your account will
continue to earn dividends until the check clears. Because of the difficulty
of determining in advance the exact value of a Fund account, you may not use
a check to close your account. The Eureka Funds reserve the right to charge
your account a fee for stopping payment of a check upon your request or if
the check cannot be honored because of insufficient funds or other valid
reasons.
AUTO EXCHANGE. Eureka Funds Auto Exchange enables you to make regular,
automatic withdrawals from Class A Shares of a Money Market Fund and use
those proceeds to benefit from dollar-cost-averaging by automatically making
purchases of shares of another Eureka Fund. With your authorization, the
Transfer Agent will withdraw the amount specified (subject to the applicable
minimums) from your Money Market Fund account and will automatically invest
that amount in Class A Shares of the Fund you designate. In order to
participate in the Auto Exchange, you must have a minimum beginning balance
of $10,000 in your Money Market Fund account; you will still be subject to
minimum account balance requirements as described below.
To participate in the Auto Exchange, complete the appropriate section of the
Account Registration Form, which can be acquired by calling the Funds at
(888)890-8121. To change the Auto Exchange instructions or to discontinue the
feature, a shareholder must send a written request to the Eureka Funds, P.O.
Box 182792, Columbus, Ohio 43218-2792. The Auto Exchange may be amended or
terminated without notice at any time.
AUTO WITHDRAWAL PLAN (AWP). If you have at least $10,000 in the Fund selected
and maintain a minimum account balance of $1,000 in the Fund, you may use
AWP, which allows you to receive regular distributions from your account.
Under the plan you may elect to receive automatic payments via check of at
least $100 per Fund or more on a monthly basis. You may arrange to receive
regular distributions from your account and have the amount transferred
according to your instructions by completing the appropriate section in the
Account Registration Form or by submitting a written request (with signature
guarantee) to the Funds. To change the AWP instructions or to discontinue the
feature, the request must be made in writing to the Eureka Funds, P.O. Box
182792, Columbus, Ohio 43218-2792. The AWP may be amended or terminated,
without notice, at any time.
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SHAREHOLDER INFORMATION
EUREKA FUNDS INDIVIDUAL RETIREMENT ACCOUNT ("IRA"). The minimum initial
investment in an IRA is $1,000 and the minimum subsequent investment amount
is $50. Available IRAs include IRAs set up under a Simplified Employee
Pension Plan and IRA "Rollover Accounts." An IRA enables individuals, even if
they participate in an employer-sponsored retirement plan, to establish their
own retirement program by purchasing Class A Shares for an IRA. Eureka Funds
IRA contributions may be tax deductible and earnings are tax deferred.
For more information on a Eureka Funds IRA call the Funds at (888) 890-8121.
Shareholders are advised to consult a tax adviser on Eureka Funds IRA
contribution and withdrawal requirements and restrictions.
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SHAREHOLDER INFORMATION
DIVIDENDS AND DISTRIBUTIONS
As a mutual fund shareholder, you may receive capital gains and/or income
from your investment. The Money Market Funds and the Investment Grade Bond
Fund declare dividends daily and pay income dividends monthly. The Global
Asset Allocation Fund declares and pays income dividends annually. The Equity
Fund declares and pays income dividends monthly. The Money Market Funds do
not expect to realize any capital gains. However, if capital gains are
realized, the Money Market Funds will distribute such gains at least once a
year. The Investment Grade Bond Fund, the Global Asset Allocation Fund, and
the Equity Fund each distribute capital gains, if any, at least once a year.
We will automatically reinvest any income dividends and capital gains
distributions you are entitled to in additional shares of your Fund(s) unless
you notify the Funds that you want to receive your distributions in cash. To
do so, select the cash option on your application or to change your existing
account, send a letter with your request, including your name and account
number to:
Eureka Funds
P.O. Box 182792
Columbus, Ohio 43218-2792
Your request will become effective for distributions having record dates
after our Distributor receives your request. Note that the Internal Revenue
Service treats dividends paid in additional Fund shares the same as it treats
dividends paid in cash.
TAXES
Your mutual fund investments may have a considerable impact on your tax
situation. We've summarized some of the main points you should know below.
Note, however, that the following is general information and will not apply
to you if you are investing through a tax-deferred account such as an IRA or
a qualified employee benefit plan. In addition, if you are not a resident of
the United States, you may have to pay taxes besides those described here,
such as U.S. withholding and estate taxes.
We will send you a statement each year showing the tax status of all your
distributions. The laws governing taxes change frequently, however, so please
consult your tax adviser for the most up-to-date information and specific
guidance regarding your particular tax situation. You can find more
information about the potential tax consequences of mutual fund investing in
our Statement of Additional Information.
Note that you may have to pay taxes on Fund distributions whether you
received them in the form of cash or additional Fund shares. The Internal
Revenue Service treats most mutual fund distributions as ordinary income. One
exception is long-term capital gains, which are typically taxed at a lower
rate than ordinary income when distributed to shareholders who are
individuals regardless of how long such shareholders have held their Fund
shares.
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SHAREHOLDER INFORMATION
TAXES ON FUND DISTRIBUTIONS. You may owe taxes on Fund distributions even if
they represent income or capital gains the Fund earned before you invested in
it (if such income or capital gains were included in the price you initially
paid for your shares).
STATE, LOCAL, AND FOREIGN TAXES. In addition to federal taxes, you may have
to pay state, local, and foreign taxes on the dividends or capital gains, if
any, you receive from a Fund, as well as on capital gains, if any, you
realized from selling or exchanging Fund shares.
DIVIDENDS AND SHORT-TERM CAPITAL GAINS. The Internal Revenue Service treats
any dividends and short-term capital gains you receive from the Funds as
ordinary income.
FUNDS INVESTING IN FOREIGN SECURITIES: If your Fund invests in foreign
securities, the income those securities generate may be subject to foreign
withholding taxes, which may decrease their yield. Foreign governments may
also impose taxes on other payments or gains your Fund earns on these
securities. In general, shareholders in these Funds will not be entitled to
claim a credit or deduction for these foreign taxes on their U.S. tax return.
(There are some exceptions, however; please consult your tax adviser for more
information.) In addition, foreign investments may prompt a Fund to
distribute ordinary income more frequently and/or in greater amounts than
purely domestic funds, which could increase your tax liability.
TAX CONSEQUENCES OF SELLING OR EXCHANGING SHARES. If you sell or exchange
Fund shares, you may have to report capital gains, if any, you realize as
income and any capital loss as a deduction on your federal income tax return.
For more specific information about your own tax situation, consult your tax
adviser.
The portfolio managers of the Funds do not actively consider tax consequences
when making investment decisions. From time to time, the Funds may realize
capital gains as by-products of ordinary investment activities. As a result,
the amount and timing of Fund distributions may vary considerably from year
to year.
AVOID 31% TAX WITHHOLDING. If you have not done so already, be sure to
provide us with your correct taxpayer identification number OR certify that
it is correct. Unless we have that information, the Funds may be required,
by law, to withhold 31% of the taxable distributions you would otherwise be
entitled to receive from your Fund investments as well as any proceeds you
would normally receive from selling Fund shares.
THESE TAX CONSIDERATIONS MAY OR MAY NOT APPLY TO YOU. PLEASE CONSULT YOUR TAX
ADVISER TO DETERMINE WHETHER THESE CONSIDERATIONS ARE RELEVANT TO YOUR
PARTICULAR INVESTMENTS AND TAX SITUATION. MORE INFORMATION ABOUT TAXES CAN BE
FOUND IN THE STATEMENT OF ADDITIONAL INFORMATION.
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INVESTMENT MANAGEMENT
INVESTMENT ADVISER
Sanwa Bank California (Sanwa), 601 S. Figueroa Street, Los Angeles,
California 90017, serves as the investment adviser to each Fund, subject to
the general supervision of the Board of Trustees of the Funds, and, is
responsible for the day-to-day management of their investment portfolios.
Sanwa is a wholly-owned subsidiary of The Sanwa Bank Limited, of Japan.
Established in 1972, Sanwa provides a full range of individual and business
banking services through a network of more than 100 branches and offices
statewide. As of September 30, 1999, Sanwa had approximately $8.9 billion in
assets.
The Eureka Equity Fund and the Eureka Global Asset Allocation Fund are
managed by a team of investment professionals at Sanwa who make the
investment decisions and continuously review and administer the investment
programs of these Funds.
The Eureka U.S. Treasury Obligations Fund, the Eureka Prime Money Market
Fund, and the Eureka Investment Grade Bond Fund are managed by David Lampert.
Mr. Lampert, Vice President and Director of Fixed Income, has been with the
Adviser since 1984 where he handles investment management and client
relations for personal and institutional trust and agency accounts for Sanwa
Investment Management. As Deputy Head of Sanwa Investment Management, Mr.
Lampert is a key player in the investment strategy and portfolio management
of the Adviser's $2 billion in managed assets.
Mr. Lampert has held several positions within Sanwa. Before joining the
investment management department, he served as deputy treasurer, managing
investment and derivative sales, trading, and funding. He also served as
fixed income section manager, managing a bond portfolio of $700 million and a
money market portfolio of $1.2 billion. Mr. Lampert graduated from the
University of California at Los Angeles with a bachelor of arts in
business/economics.
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INVESTMENT MANAGEMENT
The investment advisory fees paid to Sanwa, after voluntary fee reductions,
by the Funds for the fiscal year ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
FUND % OF AVERAGE NET ASSETS
<S> <C>
------------------------------
U.S. Treasury Obligations Fund 0.10%
------------------------------
Prime Money Market Fund 0.20%
------------------------------
Investment Grade Bond Fund 0.50%
------------------------------
Global Asset Allocation Fund 0.80%
------------------------------
Equity Fund 0.65%
------------------------------
</TABLE>
PRIOR PERFORMANCE OF THE ADVISER
The following tables set forth the Adviser's composite performance data
relating to the historical performance of all collective investment trusts
and common trust funds managed by the Adviser, since the dates indicated,
that have investment objectives, policies, strategies and risks substantially
similar to those of the Equity Fund and the Investment Grade Bond Fund. The
data is provided to illustrate the past performance of the Adviser in
managing substantially similar accounts as measured against a specified
market index or indices and does not represent the performance of the Equity
Fund and the Investment Grade Bond Fund. Investors should not consider this
performance data as an indication of future performance of the Equity Fund
and the Investment Grade Bond Fund or of the Adviser.
The Adviser's composite performance data shown below were calculated on a
total return basis and include all dividends and interest, accrued income and
realized and unrealized gains and loses. All returns reflect the deduction of
investment advisory fees, brokerage commissions and execution costs paid by
the Adviser's institutional private accounts, without provision for federal
or state income taxes. Custodial fees, if any, were not included in the
calculation. The Adviser's composites include all actual, fee-paying,
discretionary institutional, private accounts managed by the Adviser that
have investment objectives, policies, strategies and risks substantially
similar to those of the Equity Fund and the Investment Grade Bond Fund.
Securities transactions are accounted for on the trade date and accrual
accounting is utilized. Cash and equivalents are included in performance
returns. The monthly returns of the Adviser's composites combine the
individual accounts' returns by asset-weighting each individual account's
asset value as of the beginning of the month. Yearly returns are calculated
by geometrically linking the monthly returns.
The institutional private accounts that are included in the Adviser's
composites are not subject to the same types of expenses to which the Equity
Fund and Investment Grade Bond Fund are subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Funds by the 1940 Act or Subchapter M of the Internal Revenue Code.
Consequently, the performance results for the Adviser's composites could have
been adversely affected if the institutional private accounts included in the
composites had been regulated as investment companies under the federal
securities laws. In addition, the performance results for the Adviser's
composites would have been lower if the expenses to which the Equity Fund and
the Investment Grade Bond Fund are subject were applied.
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INVESTMENT MANAGEMENT
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
The investment results of the Adviser's composites presented below are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the Equity Fund and Investment Grade Bond Fund or an
individual investor investing in such Funds. The investment results of the
Adviser's composites were not calculated pursuant to the methodology
established by the SEC that will be used to calculate the performance results
of the Funds. Investors should also be aware that the use of a methodology
different from that used below to calculate performance could result in
different performance data.
All information set forth in the tables below relies on data supplied by the
Adviser or from statistical services, reports or other sources believed by
the Adviser to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
EQUITY PERFORMANCE
<TABLE>
<CAPTION>
INVESTMENT
EUREKA ADVISER'S EQUITY S&P 500
YEAR EQUITY FUND COMPOSITE INDEX(1)
---- ----------- ---------------- --------
<S> <C> <C> <C>
1988 10.20% 16.50%
1989 25.18% 31.43%
1990 4.03% -3.19%
1991 29.66% 30.55%
1992 3.12% 7.68%
1993 2.54% 10.00%
1994 0.75% 1.23%
1995 35.85% 37.50%
1996 22.60% 23.12%
1997(2) 23.47% 25.34%
1998(3) 22.72% -- 27.19%
1999(4) 15.73% -- 21.04%
Since Inception(5) 20.03% -- 25.24%
Year through October 31, 1997 30.12% 32.10%
5 Years through October 31, 1997 17.38% 19.85%
10 Years through October 31, 1997 15.03% 17.14%
</TABLE>
(1) The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the U.S. stock market. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any,
but does not reflect fees, brokerage commissions, or other expenses of
investing.
(2) For the ten-month period through October 31, 1997.
(3) Aggregate total return for the Class A Shares of the Eureka Equity Fund
from commencement of operations on February 3, 1998 through December 31,
1998. Return has not been annualized.
(4) Average annual total return for the Class A Shares of the Eureka Equity
Fund from January 1, 1999 through December 31, 1999.
(5) Average annual total return for the Class A Shares of the Eureka Equity
Fund from February 3, 1998 through December 31, 1999.
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INVESTMENT MANAGEMENT
INVESTMENT GRADE BOND PERFORMANCE
<TABLE>
<CAPTION>
EUREKA INVESTMENT LEHMAN LEHMAN
INVESTMENT ADVISER'S BROTHERS BROTHERS
GRADE INVESTMENT GOVERNMENT/ AGGREGATE
BOND GRADE BOND CORPORATE BOND
YEAR FUND COMPOSITE BOND INDEX(1) INDEX(2)
---- ---------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
1988 8.72% 7.59% 7.88%
1989 12.16% 14.24% 14.53%
1990 6.65% 8.28% 8.95%
1991 13.37% 16.13% 16.00%
1992 6.95% 7.58% 7.40%
1993 9.40% 10.97% 9.75%
1994 -5.26% -3.49% -2.92%
1995 16.58% 19.24% 18.48%
1996 0.22% 2.91% 3.61%
1997(3) 7.45% 8.04% 8.09%
1998(4) 7.21% -- 7.95% 7.31%
1999(5) -2.29% -- -2.15% -0.83%
Since Inception(6) 2.65% -- 2.89% 3.29%
Year through October 31, 1997 8.05% 8.81% 8.89%
5 Years through October 31, 1997 5.65% 7.62% 7.51%
10 Years through October 31, 1997 7.60% 9.19% 9.25%
</TABLE>
(1) The Lehman Brothers Government/Corporate Bond Index includes the
Government and Corporate Bond indices. The Lehman Brothers Government
Bond Index is made up of the Lehman Brothers Treasury Bond Index (all
public obligations of the U.S. Treasury, excluding flower bonds and
foreign-targeted issues) and the Lehman Brothers Agency Bond Index (all
publicly issued debt of U.S. Government agencies and quasi-federal
corporation, and corporate debt guaranteed by the U.S. Government). We
have also included the 1-3 year Government Index, composed of agency and
Treasury securities with maturities of one to three years, and the 20+
Year Lehman Brothers Treasury Index, composed of Treasury issues with 20
years or more to maturity. The Lehman Brothers Corporate Bond Index
includes all publicly issued, fixed rate, nonconvertible investment
grade, dollar-denominated, SEC-registered corporate debt. The Lehman
Brothers Corporate Index sectors are industrial, finance, utility, and
Yankee. Also included among Yankees is debt issued or guaranteed by
foreign sovereign governments, municipalities, or governmental or
international agencies.
(2) The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues
rated investment grade or higher by Moody's Investors Service, Standard &
Poor's Corporation, or Fitch Investors Service, in that order. All issues
have at least one year to maturity and an outstanding par value of at
least $100 million. Intermediate indices include bonds with maturities of
up to 10 years, and long-term indices include those with maturities of 10
years or longer. Price, coupon, paydown, and total return are reported
for all sectors on a month-end to month-end basis. All returns are market
value-weighted inclusive of accrued interest.
(3) For the ten-month period through October 31, 1997.
(4) Aggregate total return for the Class A Shares of the Eureka Investment
Grade Bond Fund from commencement of operations on February 3, 1998
through December 31, 1998. Return has not been annualized.
(5) Average annual total return for the Class A Shares of the Eureka
Investment Grade Bond Fund from January 1, 1999 through December 31,
1999.
(6) Average annual total return for the Class A Shares of the Eureka
Investment Grade Bond Fund from February 3, 1998 through December 31,
1999.
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INVESTMENT MANAGEMENT
OTHER SERVICE PROVIDERS
<TABLE>
<C> <S>
DISTRIBUTOR & BISYS Fund Services
ADMINISTRATOR -- 3435 Stelzer Road
Columbus, Ohio 43219-3035
TRANSFER AGENT -- BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN -- The Bank of New York
100 Church Street
New York, New York 10286
LEGAL COUNSEL -- Ropes & Gray
1301 K Street, N.W., Suite 800 East
Washington, DC 20005
AUDITORS -- Ernst & Young LLP
10 West Broad Street
Columbus, Ohio 43215
</TABLE>
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FINANCIAL HIGHLIGHTS
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The financial highlights table is intended to help you understand the
financial performance of the Class A Shares of each Fund for the period from
commencement of operations on February 3, 1998 through September 30, 1999.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have
earned or lost on an investment in the Fund (assuming reinvestment of all
dividends and distributions). This information has been audited by Ernst &
Young LLP, whose report, along with the Fund's financial statements, are
included in the annual report, which is available upon request.
U.S. TREASURY OBLIGATIONS FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS A SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED FEBRUARY 3, 1998*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 1.00 $1.00
------ -----
Investment Activities:
Net investment income................................ 0.04 0.03
------ -----
Total from Investment Activities....................... 0.04 0.03
------ -----
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.04) (0.03)
------ -----
Total distributions................................ (0.04) (0.03)
------ -----
Net change in net asset value per share................ -- --
------ -----
NET ASSET VALUE, END OF PERIOD......................... $ 1.00 $1.00
====== =====
TOTAL RETURN........................................... 4.26% 3.02%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $3,906 $ 720
Ratios to average net assets:
Expenses............................................. 0.70% 0.72%(b)
Net investment income................................ 4.25% 4.76%(b)
Expenses**........................................... 1.06% 1.10%(b)
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
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FINANCIAL HIGHLIGHTS
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PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS A SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED FEBRUARY 3, 1998*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 1.00 $ 1.00
------- ------
Investment Activities:
Net investment income................................ 0.04 0.03
------- ------
Total from Investment Activities....................... 0.04 0.03
------- ------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.04) (0.03)
------- ------
Total distributions................................ (0.04) (0.03)
------- ------
Net change in net asset value per share................ -- --
------- ------
NET ASSET VALUE, END OF PERIOD......................... $ 1.00 $ 1.00
======= ======
TOTAL RETURN........................................... 4.48% 2.93%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $29,246 $8,514
Ratios to average net assets:
Expenses............................................. 0.76% 0.75%(b)
Net investment income................................ 4.42% 4.88%(b)
Expenses**........................................... 1.17% 1.20%(b)
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
40
<PAGE> 42
FINANCIAL HIGHLIGHTS
[Logo]
INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS A SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED FEBRUARY 3, 1998*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $10.42 $10.10
------ ------
Investment Activities:
Net investment income................................ 0.51 0.36
Net realized and unrealized gain (loss) on
investments........................................ (0.67) 0.32
------ ------
Total from Investment Activities....................... (0.16) 0.68
------ ------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.51) (0.36)
Net realized gains................................... (0.03) --
In excess of net realized gains...................... (0.21) --
------ ------
Total distributions................................ (0.75) (0.36)
------ ------
Net change in net asset value per share................ (0.91) 0.32
------ ------
NET ASSET VALUE, END OF PERIOD......................... $ 9.51 $10.42
====== ======
TOTAL RETURN........................................... (1.58)% 6.89%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $3,670 $1,272
Ratios to average net assets:
Expenses............................................. 1.10% 1.14%(b)
Net investment income................................ 5.18% 4.99%(b)
Expenses**........................................... 1.45% 1.49%(b)
Portfolio Turnover Rate (c)............................ 52% 54%
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
41
<PAGE> 43
FINANCIAL HIGHLIGHTS
[Logo]
GLOBAL ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS A SHARES
------------------ --------------------------
FOR THE PERIOD FOR THE PERIOD FROM
ENDED FEBRUARY 3, 1998*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $10.49 $10.31
------ ------
Investment Activities:
Net investment income................................ 0.14 0.05
Net realized and unrealized gain on investments...... 1.51 0.13
------ ------
Total from Investment Activities....................... 1.65 0.18
------ ------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.14) --
Net realized gains................................... (0.07) --
------ ------
Total distributions................................ (0.21) --
------ ------
Net change in net asset value per share................ 1.44 0.18
------ ------
NET ASSET VALUE, END OF PERIOD......................... $11.93 $10.49
====== ======
TOTAL RETURN........................................... 15.81% 1.75%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $3,810 $1,775
Ratios to average net assets:
Expenses............................................. 1.53% 1.73%(b)
Net investment income................................ 1.33% 1.27%(b)
Expenses**........................................... 1.88% 2.08%(b)
Portfolio Turnover Rate(c)............................. 29% 35%
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
42
<PAGE> 44
FINANCIAL HIGHLIGHTS
[Logo]
EQUITY FUND
<TABLE>
<CAPTION>
CLASS A SHARES CLASS A SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED FEBRUARY 3, 1998*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $10.94 $10.87
------ ------
Investment Activities:
Net investment income................................ 0.01 0.02
Net realized and unrealized gain on investments...... 2.55 0.07
------ ------
Total from Investment Activities....................... 2.56 0.09
------ ------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.01) (0.02)
In excess of net investment income................... (0.01) --
Net realized gains................................... (1.49) --
------ ------
Total distributions................................ (1.51) (0.02)
------ ------
Net change in net asset value per share................ 1.05 0.07
------ ------
NET ASSET VALUE, END OF PERIOD......................... $11.99 $10.94
====== ======
TOTAL RETURN........................................... 24.34% 0.83%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $2,604 $1,287
Ratios to average net assets:
Expenses............................................. 1.23% 1.28%(b)
Net investment income................................ 0.08% 0.13%(b)
Expenses**........................................... 1.58% 1.63%(b)
Portfolio Turnover Rate(c)............................. 46% 57%
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
43
<PAGE> 45
[Logo]
ADDITIONAL INVESTMENT PRACTICES AND RISKS
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows
is a list of the securities and techniques used by the Fund, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk. Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information. Following the table is a more complete discussion of risk.
------------------
X No fundamental policy limitation on usage
-- Not permitted
# Represents maximum permissible percentage of total assets
+ For temporary defensive purposes may constitute 100 percent of total
assets
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
AND SECURITIES
ASSET BACKED SECURITIES. Securities secured by company
receivables, home equity loans, truck and auto loans,
leases, credit card receivables and other securities
backed by receivables or assets. Credit, interest rate,
opportunity and pre-payment risks. X -- X 35 35
BANKERS' ACCEPTANCES. Bills of exchange or time drafts
drawn on and accepted by a commercial bank. Credit risk. 25 -- 35+ 35+ 35+
BORROWINGS.(1) The borrowing of money from banks or
through reverse repurchase agreements. Leverage and
credit risks. 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
CERTIFICATES OF DEPOSIT. Negotiable instruments with a
stated maturity. Credit and liquidity risks. X -- 35+ 35+ 35+
COMMERCIAL PAPER AND OTHER SHORT-TERM
OBLIGATIONS. Short-term promissory notes or other
obligations issued by corporations and other entities.
Credit risk. X -- 35+ 35+ 35+
COMMON STOCK. Shares of ownership of a company. Market
risk. -- -- -- X X
CONVERTIBLE SECURITIES. Bonds or preferred stock that
convert to common stock. Credit, interest rate and
market risks. -- -- X X X
CORPORATE OR COMMERCIAL BONDS. Debt securities issued
by corporations. Credit and interest rate risks. X -- X X 35
DOLLAR ROLLS. A transaction in which a fund sells
securities for delivery in a current month and
simultaneously contracts with the same party to
repurchase similar but not identical securities on a
specified future date. Interest rate, management and
market risks. -- -- X X X
EMERGING MARKET SECURITIES. Securities of countries
with emerging economies or securities markets Currency,
information, liquidity, market and political risks. -- -- 15 15 15
</TABLE>
44
<PAGE> 46
[Logo]
ADDITIONAL INVESTMENT PRACTICES AND RISKS
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
FOREIGN SECURITIES.
- Stocks and bonds of foreign issuers. -- -- 35 X 35
- American depository receipts, European depository
receipts, global depository receipts and other similar
global instruments. -- -- 35 X 35
- Eurodollar Certificates of Deposit, Yankee
Certificates of Deposit, Eurodollar Time Deposits
("ETD's") and Canadian Time Deposits. 35 -- 35 X 35
Currency, information, liquidity, market, natural event
and political risks.
FORWARD COMMITMENTS. The purchase or sale of a security
with payment and delivery scheduled for a future time. X X X X X
FORWARD FOREIGN CURRENCY EXCHANGE
TRANSACTIONS. Contractual agreement to purchase or sell
one specified currency for another currency at a
specified future date and price. Credit, correlation,
currency, information, leverage, liquidity, management,
market, opportunity and political risks. -- -- -- 50 --
ILLIQUID SECURITIES.(3) Securities which may be
difficult to sell at an acceptable price. Liquidity,
market and valuation risks. 10 -- 15 15 15
INVESTMENT COMPANY SECURITIES. Shares of other mutual
funds. The Adviser and BISYS Fund Services will reduce
certain fees when investing in funds for which it serves
as investment adviser or administrator (Investments in
any one fund will not exceed 5% of total assets.
Investments in all funds will not exceed 10% of total
assets). Management and market risks.
- Money market mutual funds. 10 10 10 10 10
- Non-money market mutual funds. -- -- -- 10 --
INVESTMENT GRADE BONDS. Interest-bearing or discounted
government or corporate securities that obligate the
issuer to pay the bondholder a specified sum of money,
usually at specific intervals, and to repay the
principal amount of the loan at maturity. Investment
grade bonds are those rated BBB or better by S&P or Baa
or better by Moody's or similarly rated by other
nationally recognized statistical rating organizations,
or, if not rated, determined to be of comparable quality
by the Adviser. Market and credit risk. -- -- X X X
MONEY MARKET INSTRUMENTS. Investment-grade, U.S dollar
denominated debt securities that have remaining
maturities of one year or less. These securities may
include U.S. government obligations, commercial paper
and other short-term corporate obligations, repurchase
agreements collateralized with U.S. government
securities, certificates of deposit, bankers'
acceptances, and other financial institution
obligations. These securities may carry fixed or
variable interest rates. Market and credit risks. X -- X X X
</TABLE>
45
<PAGE> 47
[Logo]
ADDITIONAL INVESTMENT PRACTICES AND RISKS
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES.(2) Debt obligations secured
by real estate loans and pools of loans, including such
securities as collateralized mortgage obligations, which
are structured pools of mortgage pass through
certificates or mortgage loans, real estate investment
conduits, and stripped mortgage backed securities.
Mortgage backed securities may have greater price and
yield volatility than traditional fixed-income
securities and their prepayment sensitivity may range
from relatively low to relatively high. Credit, interest
rate, opportunity and pre-payment risks. -- -- X 35 35
MUNICIPAL OBLIGATIONS. Securities issued by a state or
political subdivision to obtain funds for various public
purposes. Municipal obligations include participation
certificates in leases, installment purchase contracts
and conditional sales contracts. Credit, liquidity,
political and tax risks. X -- X -- --
OPTIONS AND FUTURES.(1) Contracts involving the right
or obligation to deliver or receive assets or money
depending upon the performance of one or more assets or
an economic index. Currency, correlation, credit,
interest rate, leverage, liquidity, opportunity and
market risks. -- -- X X X
PREFERRED STOCK. A class of stock that generally pays a
dividend at a specified rate and has preference over
common stock in the payment of dividends and
liquidation. Market risk. -- -- 30 X X
REPURCHASE AGREEMENTS.(1) The purchase of a security
and the simultaneous commitment to sell it back at an
agreed upon price. Credit, market and leverage risks. X X X X X
REVERSE REPURCHASE AGREEMENTS.(1)(4) The sale of a
security and the simultaneous commitment to buy it back
at an agreed upon price. Credit, leverage and market
risks. X X X X X
RESTRICTED SECURITIES.(5) Securities not registered
under the Securities Act of 1933. Market and valuation
risks. X -- X X X
RIGHTS AND WARRANTS. A contract issued by a corporation
enabling the owner to subscribe to and purchase a
specified number of shares of the corporation at a
specified price during a specified period of time.
Market and valuation risks. -- -- X X X
SECURITIES LENDING.(1) The lending of securities to
financial institutions, which provide cash or government
securities as collateral. Credit risk. 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
SHORT-TERM TRADING. The sale of a security soon after
its purchase. A portfolio engaging in such trading will
have higher turnover and transaction expenses. Such
trading may also increase a shareholder's tax liability.
Market risk. -- -- X X X
</TABLE>
46
<PAGE> 48
[Logo]
ADDITIONAL INVESTMENT PRACTICES AND RISKS
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
SWAPS, CAPS AND FLOORS.(5) Swaps involve the exchange
of obligations by two parties. Caps and floors entitle a
purchaser to a principal amount from the seller of the
cap or floor to the extent that a specified index
exceeds or falls below a predetermined interest rate or
amount. Correlation, credit, interest rate, liquidity,
management, market and opportunity risks. -- -- X X X
TIME DEPOSITS. Non-negotiable receipts issued by a bank
in exchange for the deposit of funds. Liquidity risk. X -- 35+ 35+ 35+
U.S. GOVERNMENT AGENCY SECURITIES. Obligations issued
by U.S. government agencies, such as the Federal
National Mortgage Association (FNMA), including bills,
notes, bonds, and separately traded registered interest
and principal securities. Although these securities have
high credit ratings, the majority of these obligations
are not backed by the full faith and credit of the U.S.
government as are U.S. Treasury securities. Credit and
interest rate risks. X X X X 35+
U.S. TREASURY SECURITIES. Obligations issued or
guaranteed as to payment of principal and interest by
the full faith and credit of the U.S. government
including bills, notes, bonds, and separately traded
registered interest and principal securities. Market
risk. X X X X 35+
VARIABLE AND FLOATING RATE INSTRUMENTS. Obligations
with a yield that is reset on a periodic basis and
loosely correlated to changes in money market interest
rates, including variable and floating rate notes and
bonds Credit, interest rate and liquidity risks. X X X X X
WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. The
purchase or sale of securities for delivery at a future
date. Leverage, market and opportunity risks. X X X X X
</TABLE>
------------------
(1) Each Fund has a fundamental investment policy regarding these
practices or securities, as set forth in the Statement of Additional
Information, which may in some cases be less restrictive than the
operating policy set forth in the chart.
(2) The Money Market Funds may invest in these securities only if
consistent with their objectives and Rule 2a-7.
(3) Each Fund's liquidity limit is calculated as a percentage of its net
assets.
(4) Reverse repurchase agreements would also be subject to a Fund's policy
on borrowings.
(5) Relative to other securities, these securities are more likely to be
deemed illiquid and, therefore, may be subject to the restrictions on
illiquid securities.
47
<PAGE> 49
[Logo]
ADDITIONAL INVESTMENT PRACTICES AND RISKS
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above as well as those risks
discussed in "What are the main risks of investing in this Fund?" Because of
these risks, the value of the securities held by each Fund may fluctuate, as
will the value of your investment in the Fund. Certain investments and Funds
are more susceptible to these risks than others.
CORRELATION RISK. The risk that changes in the value of a hedging instrument
will not match those of the asset being hedged (hedging is the use of one
investment to offset the effects of another investment). Incomplete
correlation can result in unanticipated risks and volatility.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK. The risk that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses.
FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk. Foreign securities may also
be affected by incomplete or inaccurate financial information on companies,
social upheavals or political actions ranging from tax code changes to
governmental collapse. These risks are more significant in emerging markets.
INFORMATION RISK. The risk that key information about a security or market
is inaccurate or unavailable.
INTEREST RATE RISK. The risk of market losses attributable to changes in
interest rates. With fixed-rate securities, a rise in interest rates
typically causes a fall in values, while a fall in rates typically causes a
rise in values.
LEVERAGE RISK. The risk associated with securities or practices (such as
borrowing) that multiply small index or market movements into large changes
in value. Leverage is often associated with investments in derivatives, but
also may be embedded directly in the characteristics of other securities.
- HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position
that the Fund also holds, any loss generated by the derivative should
be substantially offset by gains on the hedged investment, and vice
versa. Hedges are sometimes subject to imperfect matching between the
derivative and underlying security, and there can be no assurance that
a Fund's hedging transactions will be effective.
- SPECULATIVE. To the extent that a derivative is not used as a hedge,
the Fund is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivatives original cost.
48
<PAGE> 50
[Logo]
ADDITIONAL INVESTMENT PRACTICES AND RISKS
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
MANAGEMENT RISK. The risk that a strategy used by a Fund's portfolio manager
may fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks. This risk is
common to all mutual funds.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industrial sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. A rise in interest rates typically causes a fall in values,
while a fall in rates typically causes a rise in values. Finally, key
information about a security or market may be inaccurate or unavailable.
OPPORTUNITY RISK. The risk of foregoing an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISK. The risk of losses attributable to governmental or political
actions, from changes in tax or trade statutes to governmental collapse and
war. There are also risks in particular to investing in foreign securities,
including higher transaction costs, delayed settlements, currency controls
and adverse economic developments.
PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur sooner than expected and will effect the rate of return on
mortgage-backed securities and may result in greater price and yield
volatility and possible investment losses. When mortgage obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
During periods of declining interest rates, prepayment rates can be expected
to accelerate. Under certain interest rate and prepayment rate scenarios, a
Fund may fail to recoup any premium paid on mortgage-related securities
notwithstanding a direct or indirect governmental or agency guarantee.
TAX RISK. The risk that the issuer of tax-exempt securities will fail to
comply with certain requirements of the Internal Revenue Code, which could
cause interest income to be retroactively included in gross income.
VALUATION RISK. The risk that a Fund has valued certain of its securities at
a higher price than it can sell them for.
PORTFOLIO TURNOVER. High portfolio turnover rates will generally result in
higher transaction costs to a Fund and may increase the taxes payable by a
Fund's shareholders.
49
<PAGE> 51
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 52
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 53
HOW TO OBTAIN MORE INFORMATION
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More detailed information about the Eureka Funds is included in our SAI. The SAI
has been filed with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Funds' holdings and contain information on the market
conditions and investment strategies that significantly affected the Eureka
Funds' performance during the last year.
TO OBTAIN THE SAI, ANNUAL OR SEMI-ANNUAL REPORTS, OR MORE INFORMATION:
BY TELEPHONE:
Call (888) 890-8121
BY MAIL:
Eureka Funds
P.O. Box 182792
Columbus, Ohio 43218-2792
BY INTERNET:
www.eurekafunds.com
FROM THE SEC:
You can also obtain the SAI, the Annual and Semi-Annual Reports, and other
information about the Eureka Funds, from the SEC's web site
(http://www/sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-202-942-8090). You may
request documents by mail from the SEC, upon payment of a duplicating fee, by
writing to: Securities and Exchange Commission, Public Reference Section, 450
5th Street, N.W., Washington, DC 20549-0102 or by sending an e-mail to:
[email protected].
Eureka Funds' Investment Company Act registration number is 811-08305.
<PAGE> 54
The Securities and Exchange
Commission has not approved or
disapproved these securities
or determined whether this
prospectus is accurate or
complete. Any representation
to the contrary is unlawful.
Questions?
Call 1-888-890-8121
or your investment representative
- ---------------------------------
EUR-0032 (2/00)
EUREKA(SM)
FUNDS
------------------------------
U.S. TREASURY OBLIGATIONS FUND
------------------------------
PRIME MONEY MARKET FUND
------------------------------
INVESTMENT GRADE BOND FUND
------------------------------
GLOBAL ASSET ALLOCATION FUND
------------------------------
EQUITY FUND
------------------------------
Prospectus Dated
February 1, 2000
-FOR TRUST SHARES-
NOT FDIC INSURED
<PAGE> 55
EUREKA FUNDS TABLE OF CONTENTS
HOW TO READ THIS PROSPECTUS
This prospectus is arranged into different sections so that you can easily
review this important information. The next page contains general information
you should know about investing in the Funds.
<TABLE>
<S> <C> <C> <C>
INTRODUCTION
3
FUND SUMMARY, INVESTMENT STRATEGY, RISK/RETURN SUMMARY,
PERFORMANCE INFORMATION, AND FEES AND EXPENSES
[Logo]
If you would like more 4 U.S. Treasury Obligations Fund
detailed information about 7 Prime Money Market Fund
each Fund, please see: 10 Investment Grade Bond Fund
14 Global Asset Allocation Fund
18 Equity Fund
SHAREHOLDER INFORMATION
[Logo]
If you would like more 22 Multiple Class Structure
information about the 22 Opening an Account
following topics, please 23 Buying Shares
see: 25 Selling Shares
28 Exchanging Shares
28 Pricing of Fund Shares
30 Additional Investor Services
31 Dividends and Distributions
31 Taxes
INVESTMENT MANAGEMENT
[Logo]
33 Investment Adviser
37 Other Service Providers
FINANCIAL HIGHLIGHTS
[Logo]
38 Financial Highlights
ADDITIONAL INVESTMENT PRACTICES AND RISKS
[Logo]
43 Additional Investment Practices and Risks
</TABLE>
TO OBTAIN MORE INFORMATION ABOUT THE EUREKA FUNDS PLEASE REFER TO THE BACK COVER
OF THE PROSPECTUS.
2
<PAGE> 56
INTRODUCTION
Each Fund is a mutual fund. A mutual fund pools shareholders' money and,
using professional investment managers, invests it in securities like stocks
and bonds. Before you invest, you should know a few things about investing in
mutual funds.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and
other events that affect securities markets generally, as well as those that
affect particular companies or governments. These price movements, sometimes
called volatility, will vary depending on the types of securities a Fund owns
and the markets where these securities trade.
LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR INVESTMENT IN A FUND.
YOUR INVESTMENT IN A FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK. IT IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY GOVERNMENT AGENCY.
Each Fund has its own investment goal and strategies for reaching that goal.
However, it cannot be guaranteed that a Fund will achieve its goal. Before
investing, make sure that the Fund's goal matches your own.
The portfolio manager invests each Fund's assets in a way that the manager
believes will help the Fund achieve its goal. A manager's judgments about the
bond and stock markets, economy and companies, and his or her method of
investment selection, may cause a Fund to underperform other funds with
similar objectives.
3
<PAGE> 57
[LOGO]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
U.S. TREASURY OBLIGATIONS FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Current income with liquidity and stability of principal
Investment Focus U.S. Treasury securities and repurchase agreements
collateralized by U.S. Treasury securities
Principal Investment Invests in short-term U.S. Treasury securities
Strategy
Share Price Volatility Low
Investor Profile Short-term or highly risk averse investors seeking current
income from a money market fund that invests in obligations
supported by the full faith and credit of the U.S.
government
INVESTMENT OBJECTIVE The U.S. Treasury Obligations Fund seeks current income
consistent with liquidity and stability of principal.
INVESTMENT STRATEGY The Fund invests exclusively in bills, notes, and bonds
issued or guaranteed by the U.S. government, agency
obligations supported by the full faith and credit of the
U.S. government, and repurchase agreements collateralized by
U.S. Treasury securities. The Fund intends to maintain an
average weighted maturity of not greater than 60 days.
WHAT ARE THE MAIN RISKS OF Your investment in the Fund may be subject to the following
INVESTING IN THIS FUND? principal risks:
Interest Rate Risk -- Interest rate risk involves the
possibility that the Fund's yield will decrease due to
a decline in interest rates.
Net Asset Value Risk -- The risk that the Fund will be
unable to meet its goal of a constant $1 per share.
For more information about these risks please refer to
the section titled "Additional Investment Practices and
Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY 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 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
4
<PAGE> 58
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
U.S. TREASURY OBLIGATIONS FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for two full calendar years of
operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<CAPTION>
<S> <C>
1998 5.03
1999 4.59
</TABLE>
Best Quarter: Q3
1998 1.28%
Worst Quarter: Q1
1999 1.07%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Lipper U. S. Treasury Money Market
Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (11/3/97)
<S> <C> <C>
----------------------------------
U.S. TREASURY OBLIGATIONS FUND 4.59% 4.85%
----------------------------------
LIPPER U.S. TREASURY MONEY MARKET FUNDS AVERAGE(1) 4.23% 4.49%
----------------------------------------------------------------------------------------------
</TABLE>
(1) The Lipper U.S. Treasury Money Market Funds Average is based on an
arithmetic average of the performance of U.S. Treasury money market funds
as reported by Lipper Inc.
YIELD
All mutual funds must use the same formulas to calculate yield and effective
yield. The Fund typically advertises performance in terms of a 7-day yield
and 7-day effective yield and may advertise total return. The 7-day yield
quotation more closely reflects current earnings of the Fund than the total
return quotation. The 7-day effective yield will be slightly higher than the
yield because of the compounding effect of the assumed reinvestment. Current
yields and effective yields fluctuate daily and will vary due to factors such
as interest rates and the quality, length of maturities, and type of
investments in the portfolio. The 7-day yield for the period ended December
31, 1999 was 4.46%.
You may obtain the most current yield information for the Fund by calling
(888) 890-8121.
5
<PAGE> 59
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
U.S. TREASURY OBLIGATIONS FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Please refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.20%*
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.36%
Total Annual Fund Operating Expenses 0.56%*
</TABLE>
* During the last fiscal year, Sanwa Bank California (the "Adviser")
waived 0.10% of its Investment Advisory Fees. This fee waiver may be
terminated at any time by the Adviser. Accordingly, actual annual fund
operating expenses were as follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.10%
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.36%
Total Annual Fund Operating Expenses 0.46%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$57 $179 $313 $701
</TABLE>
6
<PAGE> 60
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
PRIME MONEY MARKET FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Current income with liquidity and stability of principal
Investment Focus High quality money market instruments
Principal Investment Invests in high-quality, short-term debt instruments
Strategy
Share Price Volatility Low
Investor Profile Short-term or risk averse investors seeking current income
from a money market fund that invests in high quality
instruments
INVESTMENT OBJECTIVE The Prime Money Market Fund seeks as high a level of current
income as is consistent with maintaining liquidity and
stability of principal.
INVESTMENT STRATEGY The Fund invests primarily in U.S. government agency
securities, high-quality commercial paper, short-term
corporate debt obligations, and repurchase agreements. To be
considered high-quality, a security must be rated in one of
the two highest credit quality categories for short-term
securities or, if not rated, determined by the Fund's
Adviser to be of comparable quality. The Fund intends to
maintain an average weighted maturity of not greater than 60
days.
WHAT ARE THE MAIN RISKS OF Your investment in the Fund may be subject to the following
INVESTING IN THIS FUND? principal risks:
Credit Risk -- Credit risk is the possibility that an
issuer cannot make timely interest and principal
payments on its securities. Because the Fund will only
invest in securities believed to pose minimal credit
risk, it is unlikely that losses due to credit risk
will cause a decline in the value of your investment.
However, even if not severe enough to cause such a
decline in principal value, credit losses could reduce
the Fund's yield. In general, lower-rated securities
have higher credit risks.
Interest Rate Risk -- Interest rate risk involves the
possibility that the Fund's yield will decrease due to
a decline in interest rates.
Net Asset Value Risk -- The risk that the Fund will be
unable to meet its goal of a constant $1 per share.
For more information about these risks please refer to
the section titled "Additional Investment Practices and
Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY 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 PER
SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE FUND.
7
<PAGE> 61
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
PRIME MONEY MARKET FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows changes in the Fund's performance from year to year.+
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<CAPTION>
'1990' 8
- ------ -
<S> <C>
'1991' 7.23
'1992' 4.00
'1993' 2.83
'1994' 3.63
'1995' 5.52
'1996' 4.92
'1997' 5.11
'1998' 5.18
'1999' 4.83
</TABLE>
Best
Quarter: Q2 1990 2.06%
Worst
Quarter: Q3 1993 0.65%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Lipper Money Market Funds Average.+
<TABLE>
<CAPTION>
1 YEAR 5 YEARS 10 YEARS
<S> <C> <C> <C>
-------------------------------------
PRIME MONEY MARKET FUND 4.83% 5.11% 5.11%
-------------------------------------
LIPPER MONEY MARKET FUNDS AVERAGE(1) 4.49% 4.95% 4.79%
-------------------------------------------------------------------------------------------
</TABLE>
(1) The Lipper Money Market Funds Average is based on an arithmetic average
of the performance of money market funds as reported by Lipper Inc.
+ The above-quoted performance data includes the performance of a predecessor
fund for the period before the Prime Money Market Fund commenced operations
(11/1/97) adjusted to reflect the deduction of fees and expenses applicable
to the Trust shares of the Prime Money Market Fund as stated in this
prospectus in the Fees and Expenses section (i.e., adjusted to reflect
anticipated fees and expenses, absent any fee waivers). The predecessor
fund was not registered under the Investment Company Act of 1940 (1940 Act)
and therefore was not subject to certain investment restrictions,
limitations and diversification requirements imposed by the Act and the
Internal Revenue Code. If the predecessor fund had been registered under
the 1940 Act, its performance may have been adversely affected. The
investment objective, restrictions and guidelines of the Prime Money Market
Fund are substantially similar to its predecessor fund.
YIELD
All mutual funds must use the same formulas to calculate yield and effective
yield. The Fund typically advertises performance in terms of a 7-day yield
and 7-day effective yield and may advertise total return. The 7-day yield
quotation more closely reflects current earnings of the Fund than the total
return quotation. The 7-day effective yield will be slightly higher than the
yield because of the compounding effect of the assumed reinvestment. Current
yields and effective yields fluctuate daily and will vary due
8
to factors such as interest rates and the quality, length of maturities, and
type of investments in the portfolio. The 7-day yield for the period ended
December 31, 1999 was 5.07%.
You may obtain the most current yield information for the Fund by calling
(888) 890-8121.
9
<PAGE> 62
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
PRIME MONEY MARKET FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Please refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.30%*
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.37%*
Total Annual Fund Operating Expenses 0.67%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fees and the Administrator waived 0.06% of Other Expenses.
These fee waivers may be terminated at any time by the Adviser and the
Administrator, respectively. Accordingly, actual annual fund operating
expenses were as follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.20%
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.31%
Total Annual Fund Operating Expenses 0.51%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$68 $214 $373 $835
</TABLE>
9
<PAGE> 63
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal A high level of income, consistent with preservation of
capital
Investment Focus Investment grade debt obligations
Principal Investment Attempts to identify fixed income securities with high
Strategy expected returns using a quantitative securities selection
process
Share Price Volatility Low to Medium
Investor Profile Investors willing to accept low to medium price fluctuation
in order to receive income from their investment that is
typically higher than that of a money market fund
INVESTMENT OBJECTIVE The Investment Grade Bond Fund seeks a high level of income,
consistent with preservation of capital.
INVESTMENT STRATEGY The Fund invests in a broad range of fixed income
securities, including U.S. Treasury securities, U.S. agency
securities, mortgage related securities, and corporate
bonds. The Fund will invest at least 80% of its net assets
in bonds which are investment grade securities. To be
considered investment grade, a security must be rated in one
of the four highest credit quality categories or, if not
rated, determined by the Fund's Adviser to be of comparable
quality.
The Adviser uses its proprietary security selection strategy
to determine the optimal combination of investments in the
portfolio. Quantitative investment models and risk
management systems assist the Adviser in identifying the
optimal choice of credit rating, maturity, and coupon rate,
among other factors. The Adviser seeks the fixed income
sectors and/or securities with high expected relative return
premiums, adjusted for risk. Fundamental valuation,
macroeconomic, technical and risk measures are all employed
to determine the expected relative return premium for each
sector and/or security. Once the attractiveness of the
various investment sector and individual security
alternatives is determined, the portfolio is constructed so
as to overweight those sectors and/or securities with the
most-favorable prospects, according to the current
quantitative analysis.
The Fund may invest up to 20% of its assets in
non-investment grade debt securities (rated B- and higher),
preferred stocks and convertible securities. In the event
that a security held by the Fund is downgraded, the Fund may
continue to hold such security until such time as the
Adviser deems it to be advantageous to dispose of the
security.
</TABLE>
10
<PAGE> 64
[LOGO]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
CONTINUED
<TABLE>
<S> <C>
In pursuing its investment objective, the Fund expects that
its portfolio will be characterized by investment risk that
is similar to that of a broadly diversified investment grade
bond portfolio, such as a portfolio structured to match the
Lehman Brothers Aggregate Bond Index or the Salomon Broad
Investment Grade Bond Index. The Fund seeks to maintain a
dollar-weighted average portfolio maturity of five to ten
years.
The Fund may, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal
investment strategies in attempting to respond to adverse
market, economic, political, or other conditions. In these
and in other cases, the Fund may not achieve its investment
objective.
WHAT ARE THE MAIN RISKS OF Loss of money is a risk of investing in the Fund. In
INVESTING IN THIS FUND? addition, your investment in the Fund may be subject to the
following principal risks:
Credit Risk -- Credit risk is the possibility that an
issuer cannot make timely interest and principal
payments on its debt obligations, such as bonds. In
general, lower-rated bonds have higher credit risks.
However, because the Fund invests primarily in
investment grade debt obligations, credit risk is
minimized.
Interest Rate Risk -- Interest rate risk involves the
possibility that the value of the Fund's investments
will decline due to an increase in interest rates. In
general, the longer a security's maturity, the greater
the interest rate risk.
Prepayment/Call Risk -- Prepayment risk is the chance
that the repayment of mortgages backing a security will
occur sooner than expected. Call risk is the
possibility that during periods of falling interest
rates, a bond issuer will "call" -- or repay -- its
high-yielding bond before the bond's maturity date. In
each case, the Fund may be forced to reinvest in
securities with a lower yield. It may also lose any
premium paid for the bond. Changes in prepayment/call
rates can result in greater price and yield volatility.
The Fund may trade securities actively, which could
increase its transaction costs (thus lowering
performance) and may increase the amount of taxes that
you pay.
For more information about these risks please refer to
the section titled "Additional Investment Practices and
Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK, AND IT IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
11
<PAGE> 65
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for two full calendar years of
operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<S> <C>
'1998' 8.25
'1999' -1.95
</TABLE>
Best Quarter: Q3
1998 3.93%
Worst Quarter: Q2
1999 -1.40%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Lehman Brothers Aggregate Bond
Index, the Salomon Broad Investment Grade Bond Index, and the Lipper
Intermediate Investment Grade Debt Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (11/1/97)
<S> <C> <C>
----------------------------------
INVESTMENT GRADE BOND FUND -1.95% 3.37%
----------------------------------
LEHMAN BROTHERS AGGREGATE BOND INDEX(1) -0.83% 4.22%
----------------------------------
SALOMON BROAD INVESTMENT GRADE BOND INDEX(2) -0.83% 4.24%
----------------------------------
LIPPER INTERMEDIATE INVESTMENT GRADE DEBT FUNDS AVERAGE(3) -1.31% 3.25%
-----------------------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
representative of the performance of intermediate-term government bonds,
investment grade corporate debt securities and mortgage-backed
securities.
(2) The Salomon Broad Investment Grade Bond Index is an unmanaged index
generally representative of the performance of U.S. investment grade
bonds with over one year to maturity.
(3) The Lipper Intermediate Investment Grade Debt Funds Average is based on
an arithmetic average of the performance of intermediate investment grade
debt funds as reported by Lipper Inc.
12
<PAGE> 66
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
INVESTMENT GRADE BOND FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Please refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.60%*
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.37%
Total Annual Fund Operating Expenses 0.97%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fees. This fee waiver may be terminated at any time by the
Adviser. Accordingly, actual annual fund operating expenses were as
follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.50%
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.37%
Total Annual Fund Operating Expenses 0.87%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$99 $309 $536 $1,190
</TABLE>
13
<PAGE> 67
[Logo]
FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Income and long-term capital appreciation
Investment Focus Common stocks and bonds of U.S. and foreign issuers
Principal Investment Attempts to diversify investments across countries,
Strategy currencies, and asset classes using a quantitative
securities selection process
Share Price Volatility Medium
Investor Profile Investors seeking current income and capital appreciation
with higher current income and lower volatility than the
average stock fund
INVESTMENT OBJECTIVE The Global Asset Allocation Fund seeks a balance of income
and long-term capital appreciation.
INVESTMENT STRATEGY Through the use of a disciplined asset allocation approach,
the Fund intends to invest in, and assume a level of risk
commensurate with, a globally diversified portfolio of
medium to large capitalization stocks, investment grade
bonds, and cash equivalents. The Adviser will use a variety
of quantitative investment models to identify the country,
sector, and asset classes with the highest expected
risk-adjusted return. Once the relative attractiveness of
the various investment class alternatives is determined, the
portfolio is constructed so as to overweight those
countries, currencies, sectors, and asset classes with the
most favorable prospects, according to the current
quantitative analysis. The Fund seeks to outperform a
blended 70% stock and 30% bond benchmark as part of its
investment approach. The Fund reserves the right to vary its
stock exposure 50% to 75% of its assets its bond exposure
from 25% to 50% of its assets.
The Fund will invest in a varying combination of stocks,
bonds, and cash equivalents selected primarily from major
markets such as: the United States, Japan, the U.K.,
Germany, France, Switzerland, Spain, Canada, and Australia.
The Fund may also invest in other markets, including
emerging markets. By diversifying across countries,
currencies, and asset classes (stocks and bonds), the Fund
pursues its capital appreciation goals while seeking to
control portfolio risk. The Fund will normally invest at
least 65% of its net assets in securities representing at
least three different countries, including the United
States.
The Fund's equity exposure typically will not deviate by
more than 20% from the market capitalization weights of the
respective individual equity markets as determined by that
market's representation in the Salomon Smith Barney Primary
Market Index-World or the Morgan Stanley Capital
International World Index. For example, if the Japanese
equity market represents 30% of the Salomon Smith Barney
Primary Market Index-World, then Japanese equities will
typically represent not less than 10% nor more than 50% of
the Fund's equity exposure.
Bonds in the Fund's portfolio are expected to range in
maturity from one to thirty years. The Fund's bond portfolio
will seek to maintain a risk level, yield, maturity and
other characteristics commensurate with that of the Lehman
Brothers U.S. Treasury Index.
</TABLE>
14
<PAGE> 68
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FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
CONTINUED
<TABLE>
<S> <C>
In order to execute its strategy in an efficient manner, the
Adviser may utilize equity index, bond index, and currency
futures contracts in the various countries. The Fund may use
futures contracts to provide an efficient means of achieving
broad market exposure to the stock, fixed income and
currency markets of a particular country, to provide
liquidity, and to facilitate asset allocation shifts.
The Fund may, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal
investment strategies in attempting to respond to adverse
market, economic, political, or other conditions. In these
and in other cases, the Fund may not achieve its investment
objective.
WHAT ARE THE MAIN RISKS OF Loss of money is a risk of investing in the Fund. In
INVESTING IN THIS FUND? addition, your investment in the Fund may be subject to the
following principal risks:
Foreign Securities Risk -- Investing in foreign markets
involves greater risk than investing in the United
States. Foreign securities may be affected by such
factors as fluctuations in currency exchange rates,
incomplete or inaccurate financial information on
companies, social upheavals and political actions
ranging from tax code changes to governmental collapse.
Emerging market securities may be even more susceptible
to these risks.
Market Risk -- Market risk is the possibility that the
Fund's investments in equity securities will decline
because of drops in the stock market. Stock markets
tend to move in cycles, with periods of either rising
or falling prices. The value of your investment will go
up or down in response to these movements.
Investment Style Risk -- Investment style risk is the
possibility that returns from large capitalization
stocks will trail returns from other asset classes or
the overall stock market.
Credit Risk -- Credit risk is the possibility that an
issuer cannot make timely interest and principal
payments on its debt obligations, such as bonds. In
general, lower-rated bonds have higher credit risks.
Interest Rate Risk -- Interest rate risk involves the
possibility that the value of the Fund's investments
will decline due to an increase in interest rates. In
general, the longer a security's maturity, the greater
the interest rate risk.
The Fund may trade securities actively, which could
increase its transaction costs (thus lowering
performance) and may increase the amount of taxes that
you pay.
For more information about these risks please refer to
the section titled "Additional Investment Practices and
Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK, AND IS NOT INSURED OR GUARANTEED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
15
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FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for two full calendar years of
operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<S> <C>
'1998' 17.67
'1999' 12.45
</TABLE>
Best Quarter: Q4
1998 13.08%
Worst Quarter: Q3
1998 -7.40%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the Salomon Smith Barney Primary Market
Index-World, the Lehman Brothers U.S. Treasury Index, and the Lipper Global
Flexible Portfolio Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (11/3/97)
<S> <C> <C>
----------------------------------
GLOBAL ASSET ALLOCATION FUND 12.45% 14.44%
----------------------------------
SALOMON SMITH BARNEY PRIMARY MARKET INDEX-WORLD(1) 24.51% 24.17%
----------------------------------
LEHMAN BROTHERS U.S. TREASURY INDEX(2) -2.53% 4.03%
----------------------------------
LIPPER GLOBAL FLEXIBLE PORTFOLIO FUNDS AVERAGE(3) 21.18% 14.78%
----------------------------------------------------------------------------------------------
</TABLE>
(1) The Salomon Smith Barney Primary Market Index-World is an unmanaged index
generally representative of the performance of the international and
domestic stock market.
(2) The Lehman Brothers U.S. Treasury Index is an unmanaged index generally
representative of the performance of the domestic Treasury market.
(3) The Lipper Global Flexible Portfolio Funds Average is based on an
arithmetic average of the performance of global funds as reported by
Lipper Inc.
16
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FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
GLOBAL ASSET ALLOCATION FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Please refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.90%*
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.50%
Total Annual Fund Operating Expenses 1.40%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fee. This fee waiver may be terminated at any time by the
Adviser. Accordingly, actual annual fund operating expenses were as
follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.80%
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.50%
Total Annual Fund Operating Expenses 1.30%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$143 $443 $766 $1,680
</TABLE>
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FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
FUND SUMMARY
<TABLE>
<S> <C>
Investment Goal Long-term capital growth
Investment Focus U.S. common stocks
Principal Investment Attempts to identify medium to large capitalization stocks
Strategy of undervalued companies and/or growth companies using a
quantitative securities selection process
Share Price Volatility Medium to high
Investor Profile Investors with long-term investment goals who are looking
primarily for growth of capital
INVESTMENT OBJECTIVE The Equity Fund seeks long-term capital growth.
INVESTMENT STRATEGY The Fund attempts to identify medium to large capitalization
stocks of both undervalued companies and growth companies
using a quantitative securities selection process. The Fund
intends to invest at least 65% of its net assets in the
common stocks of corporations representing a broad cross
section of the U.S. economy. Common stocks are chosen based
upon the Adviser's quantitative stock selection models which
rank a universe of approximately 1,000 U.S. common stocks
according to their valuation, growth, return, and risk
measures. The stocks assigned the highest ratings are those
deemed to have a greater potential for price appreciation
over a short-to-intermediate term horizon.
The portfolio is constructed so that the aggregate
investment characteristics of the Fund are similar to those
of the S&P 500 Index. These characteristics include such
measures as weighted average market value, economic sector
diversification, P/E ratio, dividend yield, and market
"beta" (or sensitivity). However, while maintaining
aggregate investment characteristics similar to those of the
S&P 500 Index, the Fund seeks to invest in individual common
stocks -- including stocks which may not be part of that
Index -- which the Adviser believes hold a greater potential
for price appreciation. As of the date of this Prospectus,
the S&P 500 Index statistics were as follows: the weighted
average market value was $143 billion, the mean market value
was $25 billion, the smallest company had a market value of
$361 million, and the largest company had a market value of
$602 billion.
Although the Fund normally intends to be fully invested in
common stocks, it may invest temporarily in certain
short-term fixed income securities, investment company
securities, and money market instruments. Such securities
may be used to invest uncommitted cash balances or to
maintain liquidity in order to meet shareholder redemptions.
</TABLE>
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FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
CONTINUED
<TABLE>
<S> <C>
The Fund may, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal
investment strategies in attempting to respond to adverse
market, economic, political, or other conditions. In these
and in other cases, the Fund may not achieve its investment
objective.
WHAT ARE THE MAIN RISKS OF Loss of money is a risk of investing in the Fund. In
INVESTING IN THIS FUND? addition, your investment in the Fund may be subject to the
following principal risks:
Market Risk -- Market risk is the possibility that the
Fund's investments in equity securities will decline
because of drops in the stock market. Stock markets
tend to move in cycles, with periods of either rising
or falling prices. The value of your investment will go
up or down in response to these movements.
Investment Style Risk -- Investment style risk is the
possibility that returns from large capitalization
stocks (generally, stocks in the S&P 500 Index) will
trail returns from other asset classes or the overall
stock market.
The Fund may trade securities actively, which could
increase its transaction costs (thus lowering
performance) and may increase the amount of taxes that
you pay.
For more information about these risks please refer to
the section titled "Additional Investment Practices and
Risks."
</TABLE>
AN INVESTMENT IN THE FUND IS NOT A DEPOSIT OR AN OBLIGATION OF SANWA BANK
CALIFORNIA, ITS AFFILIATES, OR ANY BANK, AND IT IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
19
<PAGE> 73
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FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
CONTINUED
PERFORMANCE INFORMATION
The bar chart and the performance table below illustrate the risks and
volatility of an investment in the Fund. Of course, the Fund's past
performance does not necessarily indicate how the Fund will perform in the
future.
This bar chart shows the Fund's performance for two full calendar years of
operations.
PERFORMANCE BAR CHART AND TABLE
<TABLE>
<S> <C>
'1998' 27.05
'1999' 15.96
</TABLE>
Best Quarter: Q4
1998 21.82%
Worst Quarter: Q3
1998 -11.60%
AVERAGE ANNUAL TOTAL
RETURNS
(for the periods ending
December 31, 1999)
This table compares the Fund's average annual total returns for periods
ending December 31, 1999 to those of the S&P 500 Index and Lipper U.S.
Diversified Equity Funds Average.
<TABLE>
<CAPTION>
SINCE INCEPTION
1 YEAR (11/1/97)
<S> <C> <C>
----------------------------------
EQUITY FUND 15.96% 22.60%
----------------------------------
S&P 500 INDEX(1) 21.04% 26.23%
----------------------------------
LIPPER U.S. DIVERSIFIED EQUITY FUNDS AVERAGE(2) 27.17% 19.42%
----------------------------------------------------------------------------------------------
</TABLE>
(1) The S&P 500 Index is an unmanaged index generally representative of the
performance of large companies in the U.S. stock market.
(2) The Lipper U.S. Diversified Equity Funds Average is based on an
arithmetic average of the performance of U.S. diversified equity funds as
reported by Lipper Inc.
20
<PAGE> 74
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FUND SUMMARY, INVESTMENT STRATEGY AND RISKS
EQUITY FUND
CONTINUED
FEES AND EXPENSES
THIS TABLE DESCRIBES THE SHAREHOLDER FEES THAT YOU PAY IF YOU PURCHASE OR
SELL FUND SHARES. YOU WOULD PAY THESE FEES DIRECTLY FROM YOUR INVESTMENT IN A
FUND.
<TABLE>
<CAPTION>
SHAREHOLDER FEES(1)
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a
percentage of offering price) 0%
Maximum Deferred Sales Charge (Load) (as a percentage of net
asset value) 0%
Redemption Fee (as a percentage of amount redeemed)(2) 0%
</TABLE>
(1) A shareholder's account may be charged account fees, by its financial
institution, for automatic investments, exchanges, and other investment
services. Please refer to the section titled "Shareholder Information."
(2) Does not include any wire transfer fees, if applicable. Currently, a wire
transfer fee is not being charged by the Transfer Agent.
THIS TABLE DESCRIBES THE FUND'S EXPENSES THAT YOU PAY INDIRECTLY IF YOU HOLD
FUND SHARES.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES
<S> <C>
Investment Advisory Fees 0.75%*
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.34%
Total Annual Fund Operating Expenses 1.09%*
</TABLE>
* During the last fiscal year, the Adviser waived 0.10% of its Investment
Advisory Fees. This fee waiver may be terminated at any time by the
Adviser. Accordingly, actual annual fund operating expenses were as
follows:
<TABLE>
<S> <C>
Investment Advisory Fees 0.65%
Distribution/Service (12b-1) Fees 0.00%
Other Expenses 0.34%
Total Annual Fund Operating Expenses 0.99%
</TABLE>
EXAMPLE
This Example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in the Fund for the time periods indicated. The
Example also assumes that each year your investment has a 5% return and Fund
expenses remain the same. Although your actual costs and returns may be
different, your approximate costs of investing $10,000 in the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
<S> <C> <C> <C>
$111 $347 $601 $1,329
</TABLE>
21
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SHAREHOLDER INFORMATION
MULTIPLE CLASS STRUCTURE
The Eureka Funds offer two classes of shares: Trust shares and Class A
shares. Trust shares are offered to Sanwa Bank California and its affiliates,
and certain other financial service providers approved by the Distributor.
Trust shares are also offered to employees of Sanwa Bank California,
employees of BISYS Fund Services, and Trustees of the Eureka Funds. Trust
shares are not subject to a distribution/service (12b-1) fee or a shareholder
servicing fee. Class A shares are offered to the general public and are
subject to a distribution/service (12b-1) fee and a shareholder servicing
fee.
OPENING AN ACCOUNT
1. Read this prospectus carefully.
2. Determine how much you want to invest.
- If purchasing through a financial institution approved by the
Distributor, then contact that financial institution. With respect to
such shares, it is the responsibility of the financial institution to
transmit purchase or redemption orders to the Distributor. Such shares
will normally be held of record by the financial institution. Beneficial
ownership of shares will be recorded by the financial institution and
reflected in the account statements provided by the financial
institution to the customer. The minimum initial investment is $100,000.
There is no minimum subsequent investment amount.
- Employees of Sanwa Bank California, employees of BISYS Fund Services,
and Trustees of the Eureka Funds may directly purchase Trust shares. The
minimum initial investment is $500, or $50 if part of the Eureka Funds'
automatic investment plan. There is no minimum subsequent investment
amount.
Complete the appropriate parts of the Account Registration Form,
carefully following the instructions. You must submit additional
documentation when opening trust, corporate or power of attorney
accounts. For additional information or for an Account Registration
Form, please contact your local Sanwa Bank California office or call
Eureka Funds at (888) 890-8121.
A Fund may waive its minimum purchase requirement. The Distributor may
reject an order if it is considered to be in the best interest of the Fund.
22
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SHAREHOLDER INFORMATION
BUYING SHARES
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY MAIL OR BY OVERNIGHT MAIL
- To buy shares through a financial - To add to your account through a
institution approved by the Distributor, financial institution approved by the
you must contact that financial Distributor, you must contact that
institution. financial institution.
- Employees of Sanwa Bank California, - Employees of Sanwa Bank California,
employees of BISYS Fund Services, and employees of BISYS Fund Services, and
Trustees of the Eureka Funds may follow Trustees of the Eureka Funds may follow
the instructions below: the instructions below:
- Make out a check, bank draft, or - Make out a check, bank draft, or money
money order for the investment order for the investment amount payable
amount (at least $500, or at least $50 if (there is no minimum amount) to the
part of the automatic investment plan), Eureka Funds.
payable to the Eureka Funds. - Deliver the check, bank draft, or money
- Deliver the check, bank draft, or order and investment slip attached to
money order and your completed your account statement (or, if
Account Registration Form to: unavailable, provide the Fund name, share
BY MAIL: class, amount invested, account name, and
Eureka Funds account number) to:
P.O. Box 182792 BY MAIL:
Columbus, Ohio 43218-2792 Eureka Funds
BY OVERNIGHT MAIL: P.O. Box 182792
Eureka Funds Columbus, Ohio 43218-2792
c/o BISYS Fund Services BY OVERNIGHT MAIL:
Attn: T.A. Operations Eureka Funds
3435 Stelzer Road c/o BISYS Fund Services
Columbus, Ohio 43219 Attn: T.A. Operations
3435 Stelzer Road
Columbus, Ohio 43219
All purchases by check should be in U.S. dollars.
Third party checks, credit cards or cash will not be accepted.
</TABLE>
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SHAREHOLDER INFORMATION
BUYING SHARES
<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY WIRE TRANSFER
- If you purchased shares through a
financial institution approved by the
Distributor, contact that financial
institution to place an order by wire
transfer.
- Employees of Sanwa Bank California,
employees of BISYS Fund Services, and
Trustees of the Eureka Funds may follow
the instructions below:
- To place an order by wire transfer call
the Funds at (888) 890-8121 to obtain
wiring instructions regarding the bank
account number into which funds should be
wired and other pertinent information.
Your bank may charge a fee to wire funds.
BY AUTOMATED CLEARING HOUSE
- Your bank must participate in the - Employees of Sanwa Bank California,
Automated Clearing House and must be a employees of BISYS Fund Services, and
U.S. bank. Trustees of the Eureka Funds may call
- To purchase shares by Automated Clearing (888) 890-8121 to arrange an electronic
House through a financial institution purchase.
approved by the Distributor, you must
contact that financial institution.
- Employees of Sanwa Bank California,
employees of BISYS Fund Services, and
Trustees of the Eureka Funds may follow
the instructions below:
- Establish the electronic purchase
option on your Account Registration
Form.
- Call (888) 890-8121 to arrange an
electronic purchase.
Your bank may charge a fee to send funds by Automated Clearing House.
</TABLE>
24
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SHAREHOLDER INFORMATION
SELLING SHARES
<TABLE>
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY MAIL
- Accounts of any type. - Write a letter of instruction indicating
- Sales of any amount. the fund name, your account number, the
Shares purchased through a financial name(s) in which the account is registered
institution approved by the Distributor may and the dollar value or number of shares
be required to be redeemed in accordance you wish to sell.
with instructions and limitations - Include the account owner(s)
pertaining to his or her account. For signature(s).
example, if a customer has agreed to - Mail the materials to the Eureka Funds,
maintain a minimum balance in his or her P.O. Box 182792, Columbus, Ohio 43218-2792.
account, and the balance in that account Or by overnight mail to the Eureka Funds,
falls below that minimum, the customer may c/o BISYS Fund Services, Attn: T.A.
be required to redeem, or the financial Operations, 3435 Stelzer Road, Columbus,
institution approved by the Distributor may Ohio 43219.
redeem for and on behalf of the customer, - A check will be mailed to the name(s) and
all or part of the customer's shares to the address in which the account is
extent necessary to maintain the required registered, or otherwise according to
minimum balance. If a distribution is to be your letter of instruction.
made to a customer who is not eligible to
receive Trust Shares, for whatever reason,
then Class A Shares will be distributed to
that customer. Contact your financial
institution for instructions and more
information.
BY TELEPHONE
- Accounts of any type. - Call (888) 890-8121 with instructions as
- Sales of any amount. to how you wish to receive your funds
Shares purchased through a financial (mail, wire, electronic transfer).
institution approved by the Distributor may
be required to be redeemed in accordance
with instructions and limitations
pertaining to your account. Contact your
financial institution for instructions and
more information.
This option is not available if you have declined telephone privileges.
</TABLE>
25
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SHAREHOLDER INFORMATION
SELLING SHARES
<TABLE>
<CAPTION>
DESIGNED FOR TO SELL SOME OR ALL OF YOUR SHARES
<S> <C>
BY WIRE
- Accounts of any type which have elected - Call (888) 890-8121 to request a wire
the wire option on the Account transfer.
Registration Form. - If you call by 4 p.m. Eastern time, your
- Sales of any amount. payment will normally be wired to your bank
Shares purchased through a financial on the next business day.
institution approved by the Distributor may
be required to be redeemed in accordance
with instructions and limitations
pertaining to your account. Contact your
financial institution for instructions and
more information.
The Fund may charge a wire fee.
Your bank may charge a fee to receive funds by wire.
BY AUTOMATED CLEARING HOUSE (ACH)
- Accounts of any type. - Call (888) 890-8121 to request an
- Sales of any amount. electronic sale.
- Shareholders with accounts at a U.S. - If you call by 4 p.m. Eastern time, the
bank which participates in the NAV of your shares will normally be
Automated Clearing House. determined on the same day and the
proceeds will be created within 8 days.
Your bank may charge a fee to receive funds by Automated Clearing House.
</TABLE>
26
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SHAREHOLDER INFORMATION
GENERAL POLICIES ON SELLING SHARES
SELLING SHARES IN WRITING. In certain circumstances, you may need to include
a signature guarantee, which protects you against fraudulent orders. You will
need a signature guarantee unless:
- the redemption check is payable to the shareholder(s) of record, and
- the check is mailed to the shareholder(s) of record and mailed to the
address of record.
You should be able to obtain your signature guarantee from a bank, broker,
dealer, credit union, securities exchange or association, clearing agency, or
savings association. A notary public CANNOT provide a signature guarantee.
RECEIVING YOUR MONEY. Normally, payment of your redemption proceeds will be
made as promptly as possible and, in any event, within seven calendar days
after the redemption order is received. At various times, however, a Fund may
be requested to redeem shares for which it has not yet received good payment;
collection of payment may take fifteen days or more. If you have made your
initial investment by check, you cannot receive the proceeds of that check
until it has cleared. You can avoid this delay by purchasing shares with a
certified check or wire transfer.
INVOLUNTARY SALES OF YOUR SHARES. Shares may be redeemed involuntarily if an
account balance falls below the minimum due to redemptions established by the
financial institution approved by the Distributor. Each Fund reserves the
right to redeem your shares at net asset value if your account balance drops
below $25,000 due to redemptions. Before a Fund exercises its right to redeem
such shares, the shareholder will be given notice that the value of his
shares of a Fund is less than the minimum amount and will be allowed 60 days
to make an additional investment to increase the value of the account to at
least $25,000. Employees of Sanwa Bank California, employees of BISYS Fund
Services, and Trustees of the Eureka Funds will not be required to maintain a
minimum account balance.
POSTPONEMENT OF REDEMPTION REQUEST. The Funds may postpone payment for shares
at times when the New York Stock Exchange is closed or under any emergency
circumstances as determined by the Securities and Exchange Commission. If you
experience difficulty making a telephone redemption during periods of drastic
economic or market change, you can send the Funds your request by regular or
express mail. Follow the instructions above under "Selling Your Shares" in
this section.
REDEMPTION IN KIND. The Funds reserve the right to make payment in securities
rather than cash, known as a "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 a 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.
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 undeliverable or uncashed for six months will be
canceled and will be redeposited in your account at the current net asset
value.
27
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SHAREHOLDER INFORMATION
EXCHANGING SHARES
HOW TO EXCHANGE YOUR SHARES. Trust Shares of each Fund may be exchanged for
Trust Shares of the other Funds, provided that the Shareholder making the
exchange is eligible on the date of the exchange to purchase Trust Shares
(with certain exceptions and subject to the terms and conditions described in
this prospectus). A Shareholder wishing to exchange Trust Shares purchased
through a financial adviser or brokerage account may do so by contacting
their adviser or broker.
The Funds do not charge a fee for processing exchanges of its Trust Shares.
The exchange will be made on the basis of the relative net asset value of the
Shares exchanged.
An exchange from one Fund to another Fund is considered a sale of shares and
will result in a capital gain or loss for federal income tax purposes.
Any shareholder who wishes to make an exchange must have received a current
Prospectus of the Fund in which he or she wishes to invest before the
exchange will be effected.
If not selected on the Account Registration form, the Shareholder will
automatically receive exchange privileges.
The Funds reserve the right to change the terms of the exchange privilege
upon sixty days' written notice.
The Funds are not intended to serve as vehicles for frequent trading in
response to short-term fluctuations in the market. Due to the disruptive
effect that excessive trading can have on efficient portfolio management, the
Funds have established a policy of limiting exchange activity to four
substantive exchange redemptions from a Fund during any calendar year. Other
than exchanges pursuant to the Eureka Funds' Auto Exchange Plan, there is a
$500 minimum for exchanges.
PRICING OF FUND SHARES
VALUATION OF SHARES. The price of a Fund's shares is based on the Fund's net
asset value. The net asset value of a Fund is determined by dividing the
total market value of the Fund's investments and other assets, less any
liabilities, by the total number of outstanding shares of the Fund. The net
asset value is calculated separately for the Trust shares and the Class A
shares of each Fund.
The net asset value for each Fund (except the Money Market Funds) may be
found daily in The Wall Street Journal and other newspapers.
28
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SHAREHOLDER INFORMATION
<TABLE>
<S> <C> <C>
Money Market Funds (the U.S. - The net asset value of each of the Money Market Funds is
Treasury Obligations Fund and determined on each business day as of 1:00 p.m. Eastern
the Prime Money Market Fund) time and as of the close of regular trading of the New
York Stock Exchange ("NYSE") (generally 4:00 p.m. Eastern
time) on each day in which the NYSE is open for trading
and the Federal Reserve Bank is open and any other day
during which there is sufficient trading in a Fund's
investments that the Fund's net asset value may be
materially affected.
- The assets in each Money Market Fund are valued based upon
the amortized cost method, which does not take into
account unrealized gains or losses.
- Each Money Market Fund's net asset value is expected to
remain at a constant $1, although there is no assurance
that this will be maintained.
- For further information about the valuation of
investments, see the Statement of Additional Information.
Investment Grade Bond Fund, the - The net asset value of the Investment Grade Bond Fund, the
Global Asset Allocation Fund, Global Asset Allocation Fund, and the Equity Fund is
and the Equity Fund determined on each business day as of the close of regular
trading of the NYSE (generally 4:00 p.m. Eastern time) on
each day in which the NYSE is open for trading and any
other day during which there is sufficient trading in a
Fund's investments that the Fund's net asset value may be
materially affected.
- The assets in the Investment Grade Bond Fund, the Global
Asset Allocation Fund, and the Equity Fund are valued
accordingly:
Portfolio securities, the principal market for which
is a securities exchange, will be valued at the
closing sales price on that exchange, or, if there
have been no sales during that day, at their latest
bid. If market quotations are not readily available,
the securities will be valued by a method which the
Board of Trustees believes accurately reflects fair
value.
Portfolio securities, the principal market for which
is not a securities exchange, will be valued at the
mean between their latest bid and asked prices. If
such prices are not available, then the securities
will be valued by a method which the Board of
Trustees believes accurately reflects fair value.
- For further information about the valuation of
investments, see the Statement of Additional Information.
</TABLE>
BUY AND SELL PRICES. When you buy shares, you pay the net asset value next
determined after your order is received. When you sell shares, you receive
the net asset value next determined after your order is received.
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SHAREHOLDER INFORMATION
ADDITIONAL INVESTOR SERVICES
AUTO INVEST PLAN (AIP). AIP enables a Shareholder who is an employee of Sanwa
Bank California, an employee of BISYS Fund Services, or a Trustee of the
Eureka Funds to set up periodic additional investments in the Funds of your
choice through automatic deductions from your bank account. The minimum
investment amount is $50 per Fund and the minimum subsequent investment
amount is $50 per Fund. Investments may be made bi-monthly, monthly, or
quarterly. To establish, complete the appropriate section in the Account
Registration Form. To participate in AIP from your bank account, please
attach a voided check to your Account Registration Form.
CHECK WRITING SERVICE. Shareholders of Trust Shares of a Money Market Fund
may write checks in the amount of $500 or more against their Fund account.
You will receive a supply of checks after a signed signature card is
received. A check may be made payable to any person, and your account will
continue to earn dividends until the check clears. Because of the difficulty
of determining in advance the exact value of a Fund account, you may not use
a check to close your account. The Eureka Funds reserve the right to charge
your account a fee for stopping payment of a check upon your request or if
the check cannot be honored because of insufficient funds or other valid
reasons.
AUTO EXCHANGE. Eureka Funds Auto Exchange enables a Shareholder who is an
employee of Sanwa Bank California, an employee of BISYS Fund Services, or a
Trustee of the Eureka Funds to make regular, automatic withdrawals from Trust
Shares of a Money Market Fund and use those proceeds to benefit from
dollar-cost-averaging by automatically making purchases of shares of another
Eureka Fund. With your authorization, the Transfer Agent will withdraw the
amount specified (subject to the applicable minimums) from your Money Market
Fund account and will automatically invest that amount in Trust Shares of the
Fund you designate. In order to participate in the Auto Exchange, you must
have a minimum beginning balance of $10,000 in your Money Market Fund
account; you will still be subject to minimum account balance requirements as
described below.
To participate in the Auto Exchange, complete the appropriate section of the
Account Registration Form, which can be acquired by calling the Funds at
(888) 890-8121. To change the Auto Exchange instructions or to discontinue
the feature, a shareholder must send a written request to the Eureka Funds,
P.O. Box 182792, Columbus, Ohio 43218-2792. The Auto Exchange may be amended
or terminated without notice at any time.
AUTO WITHDRAWAL PLAN (AWP). If you have at least $10,000 in the Fund selected
and maintain a minimum account balance of $1,000 in the Fund, you may use
AWP, which allows you to receive regular distributions from your account.
Under the plan you may elect to receive automatic payments via check of at
least $100 per Fund or more on a monthly basis. You may arrange to receive
regular distributions from your account and have the amount transferred
according to your instructions by completing the appropriate section in the
Account Registration Form or by submitting a written request (with signature
guarantee) to the Funds. To change the AWP instructions or to discontinue the
feature, the request must be made in writing to the Eureka Funds, P.O. Box
182792, Columbus, Ohio 43218-2792. The AWP may be amended or terminated,
without notice, at any time.
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SHAREHOLDER INFORMATION
EUREKA FUNDS INDIVIDUAL RETIREMENT ACCOUNT ("IRA"). The Eureka Funds IRAs are
available to employees of Sanwa Bank California, employees of BISYS Fund
Services and Trustees of the Eureka Funds. The minimum initial investment in
an IRA is $500 and there is no minimum subsequent investment requirement.
Available IRAs include IRAs set up under a Simplified Employee Pension Plan
and IRA "Rollover Accounts." An IRA enables individuals, even if they
participate in an employer-sponsored retirement plan, to establish their own
retirement program by purchasing Trust Shares for an IRA. Eureka Funds IRA
contributions may be tax deductible and earnings are tax deferred.
For more information on a Eureka Funds IRA call the Funds at (888) 890-8121.
Shareholders are advised to consult a tax adviser on Eureka Funds IRA
contribution and withdrawal requirements and restrictions.
DIVIDENDS AND DISTRIBUTIONS
As a mutual fund shareholder, you may receive capital gains and/or income
from your investment. The Money Market Funds and the Investment Grade Bond
Fund declare dividends daily and pay income dividends monthly. The Global
Asset Allocation Fund declares and pays income dividends annually. The Equity
Fund declares and pays income dividends monthly. The Money Market Funds do
not expect to realize any capital gains. However, if capital gains are
realized, the Money Market Funds will distribute such gains at least once a
year. The Investment Grade Bond Fund, the Global Asset Allocation Fund, and
the Equity Fund each distribute capital gains, if any, at least once a year.
We will automatically reinvest any income dividends and capital gains
distributions you are entitled to in additional shares of your Fund(s) unless
you notify the Funds that you want to receive your distributions in cash. To
do so, select the cash option on your application or to change your existing
account, send a letter with your request, including your name and account
number to:
Eureka Funds
P.O. Box 182792
Columbus, Ohio 43218-2792
Your request will become effective for distributions having record dates
after our Distributor receives your request. Note that the Internal Revenue
Service treats dividends paid in additional Fund shares the same as it treats
dividends paid in cash.
TAXES
Your mutual fund investments may have a considerable impact on your tax
situation. We've summarized some of the main points you should know below.
Note, however, that the following is general information and will not apply
to you if you are investing through a tax-deferred account such as an IRA or
a qualified employee benefit plan. In addition, if you are not a resident of
the United States, you may have to pay taxes besides those described here,
such as U.S. withholding and estate taxes.
We will send you a statement each year showing the tax status of all your
distributions. The laws governing taxes change frequently, however, so please
consult your tax adviser for the most up-to-date information and specific
guidance regarding your particular tax situation. You can find more
information
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SHAREHOLDER INFORMATION
about the potential tax consequences of mutual fund investing in our
Statement of Additional Information.
Note that you may have to pay taxes on Fund distributions whether you
received them in the form of cash or additional Fund shares. The Internal
Revenue Service treats most mutual fund distributions as ordinary income. One
exception is long-term capital gains, which are typically taxed at a lower
rate than ordinary income when distributed to shareholders who are
individuals regardless of how long such shareholders have held their Fund
shares.
TAXES ON FUND DISTRIBUTIONS. You may owe taxes on Fund distributions even if
they represent income or capital gains the Fund earned before you invested in
it (if such income or capital gains were included in the price you initially
paid for your shares).
STATE, LOCAL, AND FOREIGN TAXES. In addition to federal taxes, you may have
to pay state, local, and foreign taxes on the dividends or capital gains, if
any, you receive from a Fund, as well as on capital gains, if any, you
realized from selling or exchanging Fund shares.
DIVIDENDS AND SHORT-TERM CAPITAL GAINS. The Internal Revenue Service treats
any dividends and short-term capital gains you receive from the Funds as
ordinary income.
FUNDS INVESTING IN FOREIGN SECURITIES: If your Fund invests in foreign
securities, the income those securities generate may be subject to foreign
withholding taxes, which may decrease their yield. Foreign governments may
also impose taxes on other payments or gains your Fund earns on these
securities. In general, shareholders in these Funds will not be entitled to
claim a credit or deduction for these foreign taxes on their U.S. tax return.
(There are some exceptions, however; please consult your tax adviser for more
information.) In addition, foreign investments may prompt a Fund to
distribute ordinary income more frequently and/or in greater amounts than
purely domestic funds, which could increase your tax liability.
TAX CONSEQUENCES OF SELLING OR EXCHANGING SHARES. If you sell or exchange
Fund shares, you may have to report capital gains, if any, you realize as
income and any capital loss as a deduction on your federal income tax return.
For more specific information about your own tax situation, consult your tax
adviser.
The portfolio managers of the Funds do not actively consider tax consequences
when making investment decisions. From time to time, the Funds may realize
capital gains as by-products of ordinary investment activities. As a result,
the amount and timing of Fund distributions may vary considerably from year
to year.
AVOID 31% TAX WITHHOLDING. If you have not done so already, be sure to
provide us with your correct taxpayer identification number OR certify that
it is correct. Unless we have that information, the Funds may be required,
by law, to withhold 31% of the taxable distributions you would otherwise be
entitled to receive from your Fund investments as well as any proceeds you
would normally receive from selling Fund shares.
THESE TAX CONSIDERATIONS MAY OR MAY NOT APPLY TO YOU. PLEASE CONSULT YOUR TAX
ADVISER TO DETERMINE WHETHER THESE CONSIDERATIONS ARE RELEVANT TO YOUR
PARTICULAR INVESTMENTS AND TAX SITUATION. MORE INFORMATION ABOUT TAXES CAN BE
FOUND IN THE STATEMENT OF ADDITIONAL INFORMATION.
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INVESTMENT MANAGEMENT
INVESTMENT ADVISER
Sanwa Bank California (Sanwa), 601 S. Figueroa Street, Los Angeles,
California 90017, serves as the investment adviser to each Fund and, subject
to the general supervision of the Board of Trustees of the Funds, is
responsible for the day-to-day management of their investment portfolios.
Sanwa is a wholly-owned subsidiary of The Sanwa Bank Limited, of Japan.
Established in 1972, Sanwa provides a full range of individual and business
banking services through a network of more than 100 branches and offices
statewide. As of September 30, 1999, Sanwa had approximately $8.9 billion in
assets.
The Eureka Equity Fund and the Eureka Global Asset Allocation Fund are
managed by a team of investment professionals at Sanwa who make the
investment decisions and continuously review and administer the investment
programs of the Funds.
The Eureka U.S. Treasury Obligations Fund, the Eureka Prime Money Market
Fund, and the Eureka Investment Grade Bond Fund are managed by David Lampert.
Mr. Lampert, Vice President and Director of Fixed Income, has been with the
Adviser since 1984 where he handles investment management and client
relations for personal and institutional trust and agency accounts for Sanwa
Investment Management. As Deputy Head of Sanwa Investment Management, Mr.
Lampert is a key player in the investment strategy and portfolio management
of the Adviser's $2 billion in managed assets.
Mr. Lampert has held several positions within Sanwa. Before joining the
investment management department, he served as deputy treasurer, managing
investment and derivative sales, trading, and funding. He also served as
fixed income section manager, managing a bond portfolio of $700 million and a
money market portfolio of $1.2 billion. Mr. Lampert graduated from the
University of California at Los Angeles with a bachelor of arts in
business/economics.
The investment advisory fees paid to Sanwa, after voluntary fee reductions,
by the Funds for the fiscal year ended September 30, 1999 were as follows:
<TABLE>
<CAPTION>
FUND % OF AVERAGE NET ASSETS
<S> <C>
------------------------------
U.S. Treasury Obligations Fund 0.10%
------------------------------
Prime Money Market Fund 0.20%
------------------------------
Investment Grade Bond Fund 0.50%
------------------------------
Global Asset Allocation Fund 0.80%
------------------------------
Equity Fund 0.65%
--------------------------------------------- ------------------------------
</TABLE>
PRIOR PERFORMANCE OF THE ADVISER
The following tables set forth the Adviser's composite performance data
relating to the historical performance of all collective investment trusts
and common trust funds managed by the Adviser, since the dates indicated,
that have investment objectives, policies, strategies and risks substantially
similar to those of the Equity Fund and the Investment Grade Bond Fund. The
data is provided to illustrate the past performance of the Adviser in
managing substantially similar accounts as measured against a specified
market index or indices and does not represent the performance of the Equity
Fund and the Investment Grade Bond Fund. Investors should not consider this
performance data as an indication of future performance of the Equity Fund
and the Investment Grade Bond Fund or of the Adviser.
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INVESTMENT MANAGEMENT
The Adviser's composite performance data shown below were calculated on a
total return basis and include all dividends and interest, accrued income and
realized and unrealized gains and losses. All returns reflect the deduction
of investment advisory fees, brokerage commissions and execution costs paid
by the Adviser's institutional private accounts, without provision for
federal or state income taxes. Custodial fees, if any, were not included in
the calculation. The Adviser's composites include all actual, fee-paying,
discretionary institutional, private accounts managed by the Adviser that
have investment objectives, policies, strategies and risks substantially
similar to those of the Equity Fund and the Investment Grade Bond Fund.
Securities transactions are accounted for on the trade date and accrual
accounting is utilized. Cash and equivalents are included in performance
returns. The monthly returns of the Adviser's composites combine the
individual accounts' returns by asset-weighting each individual account's
asset value as of the beginning of the month. Yearly returns are calculated
by geometrically linking the monthly returns.
The institutional private accounts that are included in the Adviser's
composites are not subject to the same types of expenses to which the Equity
Fund and Investment Grade Bond Fund are subject nor to the diversification
requirements, specific tax restrictions and investment limitations imposed on
the Funds by the 1940 Act or Subchapter M of the Internal Revenue Code.
Consequently, the performance results for the Adviser's composites could have
been adversely affected if the institutional private accounts included in the
composites had been regulated as investment companies under the federal
securities laws. In addition, the performance results for the Adviser's
composites would have been lower if the expenses to which the Equity Fund and
the Investment Grade Bond Fund are subject were applied.
The results presented below may not necessarily equate with the return
experienced by any particular investor as a result of the timing of
investments and redemptions. In addition, the effect of taxes on any investor
will depend on such person's tax status, and the results have not been
reduced to reflect any income tax which may have been payable.
The investment results of the Adviser's composites presented below are
unaudited and are not intended to predict or suggest the returns that might
be experienced by the Equity Fund and Investment Grade Bond Fund or an
individual investor investing in such Funds. The investment results of the
Adviser's composites were not calculated pursuant to the methodology
established by the SEC that will be used to calculate the performance results
of the Funds. Investors should also be aware that the use of a methodology
different from that used below to calculate performance could result in
different performance data.
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INVESTMENT MANAGEMENT
All information set forth in the tables below relies on data supplied by the
Adviser or from statistical services, reports or other sources believed by
the Adviser to be reliable. However, except as otherwise indicated, such
information has not been verified and is unaudited.
EQUITY PERFORMANCE
<TABLE>
<CAPTION>
EUREKA ADVISER'S EQUITY S&P 500
YEAR EQUITY FUND COMPOSITE INDEX(1)
---- ----------- ---------------- --------
<S> <C> <C> <C>
1988 10.20% 16.50%
1989 25.18% 31.43%
1990 4.03% -3.19%
1991 29.66% 30.55%
1992 3.12% 7.68%
1993 2.54% 10.00%
1994 0.75% 1.23%
1995 35.85% 37.50%
1996 22.60% 23.12%
1997(2) 23.47% 25.34%
1997(3) 5.55% -- 6.42%
1998(4) 27.05% -- 28.60%
1999(5) 15.96% -- 21.04%
Since Inception(6) 22.60% -- 26.23%
Year through October 31, 1997 30.12% 32.10%
5 Years through October 31, 1997 17.38% 19.85%
10 Years through October 31, 1997 15.03% 17.14%
</TABLE>
(1) The S&P 500 Index is an unmanaged index containing common stocks of 500
industrial, transportation, utility and financial companies, regarded as
generally representative of the U.S. stock market. The Index reflects the
reinvestment of income dividends and capital gain distributions, if any,
but does not reflect fees, brokerage commissions, or other expenses of
investing.
(2) For the ten-month period through October 31, 1997.
(3) Aggregate total return for the Trust Shares of the Eureka Equity Fund for
the period from November 1, 1997 through December 31, 1997. Return has
not been annualized.
(4) Average annual total return for the Trust Shares of the Eureka Equity
Fund from January 1, 1998 through December 31, 1998.
(5) Average annual total return for the Trust Shares of the Eureka Equity
Fund from January 1, 1999 through December 31, 1999.
(6) Average annual total return for the Trust Shares of the Eureka Equity
Fund from November 1, 1997 through December 31, 1999.
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INVESTMENT MANAGEMENT
INVESTMENT GRADE BOND PERFORMANCE
<TABLE>
<CAPTION>
LEHMAN
EUREKA ADVISER'S BROTHERS LEHMAN
INVESTMENT INVESTMENT GOVERNMENT/ BROTHERS
GRADE BOND GRADE BOND CORPORATE AGGREGATE
YEAR FUND COMPOSITE BOND INDEX(1) BOND INDEX(2)
---- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C>
1988 8.72% 7.59% 7.88%
1989 12.16% 14.24% 14.53%
1990 6.65% 8.28% 8.95%
1991 13.37% 16.13% 16.00%
1992 6.95% 7.58% 7.40%
1993 9.40% 10.97% 9.75%
1994 -5.26% -3.49% -2.92%
1995 16.58% 19.24% 18.48%
1996 0.22% 2.91% 3.61%
1997(3) 7.45% 8.04% 8.09%
1997(4) 1.24% -- 1.58% 1.47%
1998(5) 8.25% -- 9.47% 8.69%
1999(6) -1.95% -- -2.15% -0.83%
Since Inception(7) 3.37% -- 3.97% 4.22%
Year through October 31, 1997 8.05% 8.81% 8.89%
5 Years through October 31, 1997 5.65% 7.62% 7.51%
10 Years through October 31, 1997 7.60% 9.19% 9.25%
</TABLE>
(1) The Lehman Brothers Government/Corporate Bond Index includes the Lehman
Brothers Government and Lehman Brothers Corporate Bond indices. The
Government Bond Index is made up of the Treasury Bond Index (all public
obligations of the U.S. Treasury, excluding flower bonds and
foreign-targeted issues) and the Lehman Brothers Agency Bond Index (all
publicly issued debt of U.S. Government agencies and quasi-federal
corporation, and corporate debt guaranteed by the U.S. Government). We
have also included the 1-3 year Government Index, composed of agency and
Treasury securities with maturities of one to three years, and the 20+
Year Treasury Index, composed of Treasury issues with 20 years or more to
maturity. The Lehman Brothers Corporate Bond Index includes all publicly
issued, fixed rate, nonconvertible investment grade, dollar-denominated,
SEC-registered corporate debt. The Lehman Brothers Corporate Index
sectors are industrial, finance, utility, and Yankee. Also included among
Yankees is debt issued or guaranteed by foreign sovereign governments,
municipalities, or governmental or international agencies.
(2) The Lehman Brothers Aggregate Bond Index includes fixed rate debt issues
rated investment grade or higher by Moody's Investors Service, Standard &
Poor's Corporation, or Fitch Investors Service, in that order. All issues
have at least one year to maturity and an outstanding par value of at
least $100 million. Intermediate indices include bonds with maturities of
up to 10 years, and long-term indices include those with maturities of 10
years or longer. Price, coupon, paydown, and total return are reported
for all sectors on a month-end to month-end basis. All returns are market
value-weighted inclusive of accrued interest.
(3) For the ten-month period through October 31, 1997.
(4) Aggregate total return for the Trust Shares of the Eureka Investment
Grade Bond Fund for the period from November 1, 1997 through December 31,
1997. Return has not been annualized.
(5) Average annual total return for the Trust Shares of the Eureka Investment
Grade Bond Fund from January 1, 1998 through December 31, 1998.
(6) Average annual total return for the Trust Shares of the Eureka Investment
Grade Bond Fund from January 1, 1999 through December 31, 1999.
(7) Average annual total return for the Trust Shares of the Eureka Investment
Grade Bond Fund from November 1, 1997 through December 31, 1999.
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INVESTMENT MANAGEMENT
OTHER SERVICE PROVIDERS
<TABLE>
<C> <S>
DISTRIBUTOR & BISYS Fund Services
ADMINISTRATOR -- 3435 Stelzer Road
Columbus, Ohio 43219-3035
TRANSFER AGENT -- BISYS Fund Services, Inc.
3435 Stelzer Road
Columbus, Ohio 43219
CUSTODIAN -- The Bank of New York
100 Church Street
New York, New York 10286
LEGAL COUNSEL -- Ropes & Gray
1301 K Street, N.W., Suite 800 East
Washington, DC 20005
AUDITORS -- Ernst & Young LLP
10 West Broad Street
Columbus, Ohio 43215
</TABLE>
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FINANCIAL HIGHLIGHTS
[Logo]
The financial highlights table is intended to help you understand the
financial performance of the Trust Shares of each Fund for the period from
commencement of operations through September 30, 1999. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Ernst & Young LLP, whose
report, along with the Fund's financial statements, are included in the
annual report, which is available upon request.
U.S. TREASURY OBLIGATIONS FUND
<TABLE>
<CAPTION>
TRUST SHARES TRUST SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED NOVEMBER 1, 1997*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 1.00 $ 1.00
-------- --------
Net investment income................................ 0.04 0.05
-------- --------
Total from Investment Activities....................... 0.04 0.05
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.04) (0.05)
-------- --------
Total distributions................................ (0.04) (0.05)
-------- --------
Net change in net asset value per share................ -- --
-------- --------
NET ASSET VALUE, END OF PERIOD......................... $ 1.00 $ 1.00
======== ========
TOTAL RETURN........................................... 4.52% 4.70%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $104,553 $101,300
Ratios to average net assets:
Expenses............................................. 0.46% 0.47%(b)
Net investment income................................ 4.42% 5.08%(b)
Expenses**........................................... 0.56% 0.61%(b)
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
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FINANCIAL HIGHLIGHTS
[Logo]
PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>
TRUST SHARES TRUST SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED NOVEMBER 3, 1997*
SEPTEMBER 30,1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 1.00 $ 1.00
-------- --------
Net investment income................................ 0.05 0.05
-------- --------
Total from Investment Activities....................... 0.05 0.05
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.05) (0.05)
-------- --------
Total distributions................................ (0.05) (0.05)
-------- --------
Net change in net asset value per share................ -- --
-------- --------
NET ASSET VALUE, END OF PERIOD......................... $ 1.00 $ 1.00
======== ========
TOTAL RETURN........................................... 4.74% 4.84%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $221,565 $144,806
Ratios to average net assets:
Expenses............................................. 0.51% 0.49%(b)
Net investment income................................ 4.64% 5.17%(b)
Expenses**........................................... 0.67% 0.69%(b)
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
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FINANCIAL HIGHLIGHTS
[Logo]
INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
TRUST SHARES TRUST SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED NOVEMBER 1, 1997*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 10.40 $ 10.00
-------- --------
Net investment income................................ 0.53 0.50
Net realized and unrealized gain (loss) on
investments........................................ (0.67) 0.40
-------- --------
Total from Investment Activities....................... (0.14) 0.90
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.53) (0.50)
Net realized gains................................... (0.21) --
In excess of net realized gains...................... (0.03) --
-------- --------
Total distributions................................ (0.77) (0.50)
-------- --------
Net change in net asset value per share................ (0.91) 0.40
-------- --------
NET ASSET VALUE, END OF PERIOD......................... $ 9.49 $ 10.40
======== ========
TOTAL RETURN........................................... (1.36)% 9.31%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $152,106 $145,194
Ratios to average net assets:
Expenses............................................. 0.87% 0.90%(b)
Net investment income................................ 5.43% 5.46%(b)
Expenses**........................................... 0.97% 1.00%(b)
Portfolio Turnover Rate(c)............................. 52% 54%
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
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FINANCIAL HIGHLIGHTS
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GLOBAL ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
TRUST SHARES TRUST SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED NOVEMBER 1, 1997*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 10.51 $ 10.00
-------- --------
Net investment income................................ 0.17 0.15
Net realized and unrealized gain on investments...... 1.51 0.38
-------- --------
Total from Investment Activities....................... 1.68 0.53
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.15) (0.02)
Net realized gains................................... (0.07) --
-------- --------
Total distributions................................ (0.22) (0.02)
-------- --------
Net change in net asset value per share................ 1.46 0.51
-------- --------
NET ASSET VALUE, END OF PERIOD......................... $ 11.97 $ 10.51
======== ========
TOTAL RETURN........................................... 16.09% 5.34%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $ 83,111 $ 66,793
Ratios to average net assets:
Expenses............................................. 1.30% 1.44%(b)
Net investment income................................ 1.51% 1.53%(b)
Expenses**........................................... 1.40% 1.54%(b)
Portfolio Turnover Rate(c)............................. 29% 35%
</TABLE>
------------------
* Commencement of operations
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
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FINANCIAL HIGHLIGHTS
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EQUITY FUND
<TABLE>
<CAPTION>
TRUST SHARES TRUST SHARES
------------------ --------------------------
FOR THE YEAR FOR THE PERIOD FROM
ENDED NOVEMBER 1, 1997*
SEPTEMBER 30, 1999 THROUGH SEPTEMBER 30, 1998
------------------ --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................... $ 10.96 $ 10.00
-------- --------
Net investment income................................ 0.04 0.05
Net realized and unrealized gain on investments...... 2.56 0.96
-------- --------
Total from Investment Activities....................... 2.60 1.01
-------- --------
LESS DISTRIBUTIONS FROM:
Net investment income................................ (0.04) (0.05)
Net realized gains................................... (1.49) --
-------- --------
Total distributions................................ (1.53) (0.05)
-------- --------
Net change in net asset value per share................ 1.07 0.96
-------- --------
NET ASSET VALUE, END OF PERIOD......................... $ 12.03 $ 10.96
======== ========
TOTAL RETURN........................................... 24.72% 10.08%(a)
RATIOS/SUPPLEMENTARY DATA:
Net assets, end of period (in thousands)............... $188,259 $170,652
Ratios to average net assets:
Expenses............................................. 0.99% 1.03%(b)
Net investment income................................ 0.32% 0.47%(b)
Expenses**........................................... 1.09% 1.13%(b)
Portfolio Turnover Rate(c)............................. 46% 57%
</TABLE>
------------------
* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/or
reimbursed. If such voluntary fee reductions and/or reimbursements had
not occurred, the ratio would have been as indicated.
(a) Not annualized.
(b) Annualized.
(c) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
42
<PAGE> 96
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ADDITIONAL INVESTMENT PRACTICES AND RISKS
INVESTMENT PRACTICES
The Funds invest in a variety of securities and employ a number of investment
techniques. Each security and technique involves certain risks. What follows
is a list of the securities and techniques used by the Fund, as well as the
risks inherent in their use. Equity securities are subject mainly to market
risk. Fixed income securities are primarily influenced by market, credit and
prepayment risks, although certain securities may be subject to additional
risks. For a more complete discussion, see the Statement of Additional
Information. Following the table is a more complete discussion of risk.
------------------
X No fundamental policy limitation on usage
-- Not permitted
# Represents maximum permissible percentage of total assets
+ For temporary defensive purposes may constitute 100 percent of total
assets
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
INVESTMENT PRACTICES
AND SECURITIES
ASSET BACKED SECURITIES. Securities secured by company
receivables, home equity loans, truck and auto loans,
leases, credit card receivables and other securities
backed by receivables or assets. Credit, interest rate,
opportunity and pre-payment risks. X -- X 35 35
BANKERS' ACCEPTANCES. Bills of exchange or time drafts
drawn on and accepted by a commercial bank. Credit risk. 25 -- 35+ 35+ 35+
BORROWINGS.(1) The borrowing of money from banks or
through reverse repurchase agreements. Leverage and
credit risks. 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
CERTIFICATES OF DEPOSIT. Negotiable instruments with a
stated maturity. Credit and liquidity risks. X -- 35+ 35+ 35+
COMMERCIAL PAPER AND OTHER SHORT-TERM
OBLIGATIONS. Short-term promissory notes or other
obligations issued by corporations and other entities.
Credit risk. X -- 35+ 35+ 35+
COMMON STOCK. Shares of ownership of a company. Market
risk. -- -- -- X X
CONVERTIBLE SECURITIES. Bonds or preferred stock that
convert to common stock. Credit, interest rate and
market risks. -- -- X X X
CORPORATE OR COMMERCIAL BONDS. Debt securities issued
by corporations. Credit and interest rate risks. X -- X X 35
DOLLAR ROLLS. A transaction in which a fund sells
securities for delivery in a current month and
simultaneously contracts with the same party to
repurchase similar but not identical securities on a
specified future date. Interest rate, management and
market risks. -- -- X X X
EMERGING MARKET SECURITIES. Securities of countries
with emerging economies or securities markets. Currency,
information, liquidity, market and political risks. -- -- 15 15 15
</TABLE>
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ADDITIONAL INVESTMENT PRACTICES AND RISKS
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
FOREIGN SECURITIES.
- Stocks and bonds of foreign issuers. -- -- 35 X 35
- American depository receipts, European depository
receipts, global depository receipts and other similar
global instruments. -- -- 35 X 35
- Eurodollar Certificates of Deposit, Yankee
Certificates of Deposit, Eurodollar Time Deposits
("ETD's") and Canadian Time Deposits. 35 -- 35 X 35
Currency, information, liquidity, market, natural event
and political risks.
FORWARD COMMITMENTS. The purchase or sale of a security
with payment and delivery scheduled for a future time.
Leverage, market and opportunity risks. X X X X X
FORWARD FOREIGN CURRENCY EXCHANGE
TRANSACTIONS. Contractual agreement to purchase or sell
one specified currency for another currency at a
specified future date and price. Credit, correlation,
currency, information, leverage, liquidity, management,
market, opportunity and political risks. -- -- -- 50 --
ILLIQUID SECURITIES.(3) Securities which may be
difficult to sell at an acceptable price. Liquidity,
market and valuation risks. 10 -- 15 15 15
INVESTMENT COMPANY SECURITIES. Shares of other mutual
funds. The Adviser and BISYS Fund Services will reduce
certain fees when investing in funds for which it serves
as investment adviser or administrator. (Investments in
any one fund will not exceed 5% of total assets.
Investments in all funds will not exceed 10% of total
assets.) Management and market risks.
- Money market mutual funds. 10 10 10 10 10
- Non-money market mutual funds. -- -- -- 10 --
INVESTMENT GRADE BONDS. Interest-bearing or discounted
government or corporate securities that obligate the
issuer to pay the bondholder a specified sum of money,
usually at specific intervals, and to repay the
principal amount of the loan at maturity. Investment
grade bonds are those rated BBB or better by S&P or Baa
or better by Moody's or similarly rated by other
nationally recognized statistical rating organizations,
or, if not rated, determined to be of comparable quality
by the Adviser. Market and credit risks. -- -- X X X
MONEY MARKET INSTRUMENTS. Investment-grade, U.S.
dollar-denominated debt securities that have remaining
maturities of one year or less. These securities may
include U.S. government obligations, commercial paper
and other short-term corporate obligations, repurchase
agreements collateralized with U.S. government
securities, certificates of deposit, bankers'
acceptances, and other financial institution
obligations. These securities may carry fixed or
variable interest rates. Market and credit risks. X -- X X X
</TABLE>
44
<PAGE> 98
[Logo]
ADDITIONAL INVESTMENT PRACTICES AND RISKS
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
MORTGAGE BACKED SECURITIES.(2) Debt obligations secured
by real estate loans and pools of loans, including such
securities as collateralized mortgage obligations, which
are structured pools of mortgage pass through
certificates or mortgage loans, real estate investment
conduits, and stripped mortgage backed securities.
Mortgage backed securities may have greater price and
yield volatility than traditional fixed-income
securities and their prepayment sensitivity may range
from relatively low to relatively high. Credit, interest
rate, opportunity and pre-payment risks. -- -- X 35 35
MUNICIPAL OBLIGATIONS. Securities issued by a state or
political subdivision to obtain funds for various public
purposes. Municipal obligations include participation
certificates in leases, installment purchase contracts
and conditional sales contracts. Credit, liquidity,
political and tax risks. X -- X -- --
OPTIONS AND FUTURES.(1) Contracts involving the right
or obligation to deliver or receive assets or money
depending upon the performance of one or more assets or
an economic index. Currency, correlation, credit,
interest rate, leverage, liquidity, opportunity and
market risks. -- -- X X X
PREFERRED STOCK. A class of stock that generally pays a
dividend at a specified rate and has preference over
common stock in the payment of dividends and
liquidation. Market risk. -- -- 30 X X
REPURCHASE AGREEMENTS.(1) The purchase of a security
and the simultaneous commitment to sell it back at an
agreed upon price. Credit, market and leverage risks. X X X X X
REVERSE REPURCHASE AGREEMENTS.(1)(4) The sale of a
security and the simultaneous commitment to buy it back
at an agreed upon price. Credit, leverage and market
risks. X X X X X
RESTRICTED SECURITIES.(5) Securities not registered
under the Securities Act of 1933. Market and valuation
risks. X -- X X X
RIGHTS AND WARRANTS. A contract issued by a corporation
enabling the owner to subscribe to and purchase a
specified number of shares of the corporation at a
specified price during a specified period of time.
Market and valuation risks. -- -- X X X
SECURITIES LENDING.(1) The lending of securities to
financial institutions, which provide cash or government
securities as collateral. Credit risk. 33 1/3 33 1/3 33 1/3 33 1/3 33 1/3
SHORT-TERM TRADING. The sale of a security soon after
its purchase. A portfolio engaging in such trading will
have higher turnover and transaction expenses. Such
trading may also increase a shareholder's tax liability.
Market risk. -- -- X X X
</TABLE>
45
<PAGE> 99
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ADDITIONAL INVESTMENT PRACTICES AND RISKS
<TABLE>
<CAPTION>
PRIME U.S. INVESTMENT GLOBAL
MONEY TREASURY GRADE ASSET
MARKET OBLIGATIONS BOND ALLOCATION EQUITY
FUND FUND FUND FUND FUND
------ ----------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C>
SWAPS, CAPS AND FLOORS.(5) Swaps involve the exchange
of obligations by two parties. Caps and floors entitle a
purchaser to a principal amount from the seller of the
cap or floor to the extent that a specified index
exceeds or falls below a predetermined interest rate or
amount. Correlation, credit, interest rate, liquidity,
management, market and opportunity risks. -- -- X X X
TIME DEPOSITS. Non-negotiable receipts issued by a bank
in exchange for the deposit of funds. Liquidity risk. X -- 35+ 35+ 35+
U.S. GOVERNMENT AGENCY SECURITIES. Obligations issued
by U.S. government agencies, such as the Federal
National Mortgage Association (FNMA), including bills,
notes, bonds, and separately traded registered interest
and principal securities. Although these securities have
high credit ratings, the majority of these obligations
are not backed by the full faith and credit of the U.S.
government as are U.S. Treasury securities. Credit and
interest rate risks. X X X X 35+
U.S. TREASURY SECURITIES. Obligations issued or
guaranteed as to payment of principal and interest by
the full faith and credit of the U.S. government
including bills, notes, bonds, and separately traded
registered interest and principal securities. Market
risk. X X X X 35+
VARIABLE AND FLOATING RATE INSTRUMENTS. Obligations
with a yield that is reset on a periodic basis and
loosely correlated to changes in money market interest
rates, including variable and floating rate notes and
bonds. Credit, interest rate and liquidity risks. X -- X X X
WHEN-ISSUED OR DELAYED-DELIVERY SECURITIES. The
purchase or sale of securities for delivery at a future
date. Leverage, market and opportunity risks. X X X X X
</TABLE>
------------------
(1) Each Fund has a fundamental investment policy regarding these
practices or securities, as set forth in the Statement of Additional
Information, which may in some cases be less restrictive than the
operating policy set forth in the chart.
(2) The Money Market Funds may invest in these securities only if
consistent with their objectives and Rule 2a-7.
(3) Each Fund's liquidity limit is calculated as a percentage of its net
assets.
(4) Reverse repurchase agreements would also be subject to a Fund's policy
on borrowings.
(5) Relative to other securities, these securities are more likely to be
deemed illiquid and, therefore, may be subject to the restrictions on
illiquid securities.
46
<PAGE> 100
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ADDITIONAL INVESTMENT PRACTICES AND RISKS
INVESTMENT RISKS
Below is a more complete discussion of the types of risks inherent in the
securities and investment techniques listed above as well as those risks
discussed in "What are the main risks of investing in this Fund?" Because of
these risks, the value of the securities held by each Fund may fluctuate, as
will the value of your investment in the Fund. Certain investments and Funds
are more susceptible to these risks than others.
CORRELATION RISK. The risk that changes in the value of a hedging instrument
will not match those of the asset being hedged (hedging is the use of one
investment to offset the effects of another investment). Incomplete
correlation can result in unanticipated risks and volatility.
CREDIT RISK. The risk that the issuer of a security, or the counterparty to
a contract, will default or otherwise become unable to honor a financial
obligation.
CURRENCY RISK. The risk that fluctuations in the exchange rates between the
U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses.
FOREIGN INVESTMENT RISK. The risk associated with higher transaction costs,
delayed settlements, currency controls and adverse economic developments.
This also includes the risk that fluctuations in the exchange rates between
the U.S. dollar and foreign currencies may negatively affect an investment.
Adverse changes in exchange rates may erode or reverse any gains produced by
foreign currency denominated investments and may widen any losses. Exchange
rate volatility also may affect the ability of an issuer to repay U.S. dollar
denominated debt, thereby increasing credit risk. Foreign securities may also
be affected by incomplete or inaccurate financial information on companies,
social upheavals or political actions ranging from tax code changes to
governmental collapse. These risks are more significant in emerging markets.
INFORMATION RISK. The risk that key information about a security or market
is inaccurate or unavailable.
INTEREST RATE RISK. The risk of market losses attributable to changes in
interest rates. With fixed-rate securities, a rise in interest rates
typically causes a fall in values, while a fall in rates typically causes a
rise in values.
LEVERAGE RISK. The risk associated with securities or practices (such as
borrowing) that multiply small index or market movements into large changes
in value. Leverage is often associated with investments in derivatives, but
also may be embedded directly in the characteristics of other securities.
- HEDGED. When a derivative (a security whose value is based on another
security or index) is used as a hedge against an opposite position
that the Fund also holds, any loss generated by the derivative should
be substantially offset by gains on the hedged investment, and vice
versa. Hedges are sometimes subject to imperfect matching between the
derivative and underlying security, and there can be no assurance that
a Fund's hedging transactions will be effective.
- SPECULATIVE. To the extent that a derivative is not used as a hedge,
the Fund is directly exposed to the risks of that derivative. Gains or
losses from speculative positions in a derivative may be substantially
greater than the derivatives original cost.
47
<PAGE> 101
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ADDITIONAL INVESTMENT PRACTICES AND RISKS
LIQUIDITY RISK. The risk that certain securities may be difficult or
impossible to sell at the time and the price that would normally prevail in
the market. The seller may have to lower the price, sell other securities
instead or forego an investment opportunity, any of which could have a
negative effect on Fund management or performance. This includes the risk of
missing out on an investment opportunity because the assets necessary to take
advantage of it are tied up in less advantageous investments.
MANAGEMENT RISK. The risk that a strategy used by a Fund's portfolio manager
may fail to produce the intended result. This includes the risk that changes
in the value of a hedging instrument will not match those of the asset being
hedged. Incomplete matching can result in unanticipated risks. This risk is
common to all mutual funds.
MARKET RISK. The risk that the market value of a security may move up and
down, sometimes rapidly and unpredictably. These fluctuations may cause a
security to be worth less than the price originally paid for it, or less than
it was worth at an earlier time. Market risk may affect a single issuer,
industrial sector of the economy or the market as a whole. There is also the
risk that the current interest rate may not accurately reflect existing
market rates. A rise in interest rates typically causes a fall in values,
while a fall in rates typically causes a rise in values. Finally, key
information about a security or market may be inaccurate or unavailable.
OPPORTUNITY RISK. The risk of foregoing an investment opportunity because
the assets necessary to take advantage of it are tied up in less advantageous
investments.
POLITICAL RISK. The risk of losses attributable to governmental or political
actions, from changes in tax or trade statutes to governmental collapse and
war. There are also risks in particular to investing in foreign securities,
including higher transaction costs, delayed settlements, currency controls
and adverse economic developments.
PRE-PAYMENT RISK. The risk that the principal repayment of a security will
occur sooner than expected and will effect the rate of return on
mortgage-backed securities and may result in greater price and yield
volatility and possible investment losses. When mortgage obligations are
pre-paid, a Fund may have to reinvest in securities with a lower yield.
During periods of declining interest rates, prepayment rates can be expected
to accelerate. Under certain interest rate and prepayment rate scenarios, a
Fund may fail to recoup any premium paid on mortgage-related securities
notwithstanding a direct or indirect governmental or agency guarantee.
TAX RISK. The risk that the issuer of tax-exempt securities will fail to
comply with certain requirements of the Internal Revenue Code, which could
cause interest income to be retroactively included in gross income.
VALUATION RISK. The risk that a Fund has valued certain of its securities at
a higher price than it can sell them for.
PORTFOLIO TURNOVER. High portfolio turnover rates will generally result in
higher transaction costs to a Fund and may increase the taxes payable by a
Fund's shareholders.
48
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 104
HOW TO OBTAIN MORE INFORMATION
More information about the Funds is available without charge through the
following:
STATEMENT OF ADDITIONAL INFORMATION (SAI)
More detailed information about the Eureka Funds is included in our SAI. The SAI
has been filed with the SEC and is incorporated by reference into this
prospectus. This means that the SAI, for legal purposes, is a part of this
prospectus.
ANNUAL AND SEMI-ANNUAL REPORTS
These reports list the Funds' holdings and contain information on the market
conditions and investment strategies that significantly affected the Eureka
Funds' performance during the last year.
TO OBTAIN THE SAI, ANNUAL OR SEMI-ANNUAL REPORTS, OR MORE INFORMATION:
BY TELEPHONE:
Call (888) 890-8121
BY MAIL:
Eureka Funds
P.O. Box 182792
Columbus, Ohio 43218-2792
BY INTERNET:
www.eurekafunds.com
FROM THE SEC:
You can also obtain the SAI, the Annual and Semi-Annual Reports, and other
information about the Eureka Funds, from the SEC's web site
(http://www/sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, DC (for information call 1-202-942-8090). You may
request documents from the SEC, upon payment of a duplicating fee, by writing
to: Securities and Exchange Commission, Public Reference Section, 450 5th
Street, N.W., Washington, DC 20549-0102 or by sending an e-mail to:
[email protected].
Eureka Funds' Investment Company Act registration number is 811-08305.
<PAGE> 105
<TABLE>
CROSS REFERENCE SHEET
---------------------
EUREKA FUNDS
------------
STATEMENT OF ADDITIONAL INFORMATION
-----------------------------------
<CAPTION>
Statement of Additional
Part B Item No. Information Caption
- --------------- -----------------------
<S> <C>
10. Cover Page and Table of Contents Cover Page; Table of Contents
11. Fund History Additional Information - Organization and
Description of Shares
12. Description of the Fund and its Investments Investment Objective and Policies
and Risks
13. Management of the Funds Management of the Eureka Funds
14. Control Persons and Principal
Holders of Securities Miscellaneous
15. Investment Advisory and Other Services Management of the Eureka Funds
16. Brokerage Allocation and Other Practices Management of the Eureka Funds
17. Capital Stock and Other Securities Valuation; Additional Purchase and
Redemption Information; Management of the
Eureka Funds; Additional Information
18. Purchase, Redemption and Pricing
of Shares Valuation; Additional Purchase and
Redemption Information; Management of the
Eureka Funds
19. Taxation of the Fund Additional Tax Information
20. Underwriters Management of Eureka Funds
21. Calculation of Performance Data Performance Information
22. Financial Statements Financial Statements
</TABLE>
<PAGE> 106
------------
EUREKA FUNDS
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 1, 2000
----------------
This Statement of Additional Information is not a Prospectus, but should be read
in conjunction with the Prospectuses of the Eureka U.S. Treasury Obligations
Fund, the Eureka Prime Money Market Fund, the Eureka Investment Grade Bond Fund,
the Eureka Global Asset Allocation Fund, and the Eureka Equity Fund which are
dated February 1, 2000. This Statement of Additional Information is incorporated
by reference in its entirety into the Prospectuses. The Eureka Funds were
organized on April 7,1997 as the Sanwa Fund and changed their name to the
"Eureka Funds" prior to commencing operations. Copies of the Prospectuses may be
obtained by writing the Eureka Funds at P.O. Box 182792, Columbus, Ohio
43218-2792, or by telephoning toll free 888-890-8121.
<PAGE> 107
<TABLE>
TABLE OF CONTENTS
-----------------
<CAPTION>
Page
----
<S> <C>
EUREKA FUNDS......................................................................................................1
INVESTMENT OBJECTIVE AND POLICIES.................................................................................1
Additional Information on Portfolio Instruments..........................................................1
Investment Restrictions.................................................................................21
Additional Information Regarding Fundamental Investment Restrictions....................................22
Portfolio Turnover......................................................................................24
VALUATION........................................................................................................24
Valuation of the Money Market Funds.....................................................................25
Valuation of the Investment Grade Bond Fund, the Global Asset
Allocation Fund, and the Equity Fund...........................................................25
Valuation of International Securities...................................................................
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...................................................................26
How to Purchase and Redeem Shares.......................................................................26
Matters Affecting Redemption............................................................................32
ADDITIONAL TAX INFORMATION.......................................................................................33
General.................................................................................................35
Additional Tax Information Concerning the Global Asset Allocation Fund..................................37
MANAGEMENT OF THE EUREKA FUNDS...................................................................................38
Trustees and Officers...................................................................................38
Investment Adviser......................................................................................41
Portfolio Transactions..................................................................................42
Glass-Steagall Act......................................................................................44
Administrator...........................................................................................45
Distributor.............................................................................................47
Service Plan............................................................................................48
Distribution Plan.......................................................................................49
Expenses................................................................................................50
Custodian...............................................................................................50
Transfer Agent and Fund Accounting Services.............................................................50
Independent Auditors....................................................................................51
Legal Counsel...........................................................................................51
</TABLE>
B-i
<PAGE> 108
<TABLE>
<S> <C>
PERFORMANCE INFORMATION..........................................................................................51
Yields of the Money Market Funds........................................................................51
Calculation of Total Return.............................................................................53
Performance Comparisons.................................................................................55
ADDITIONAL INFORMATION...........................................................................................58
Organization and Description of Shares..................................................................58
Shareholder and Trustee Liability.......................................................................58
Miscellaneous...........................................................................................59
APPENDIX.........................................................................................................63
</TABLE>
B-ii
<PAGE> 109
STATEMENT OF ADDITIONAL INFORMATION
EUREKA FUNDS
Eureka Funds is an open-end management investment company. The Eureka
Funds consist of five series of units of beneficial interest ("Shares") offered
to the public, each representing interests in one of five separate investment
portfolios: the Eureka U.S. Treasury Obligations Fund (the "U.S. Treasury
Obligations Fund"), the Eureka Prime Money Market Fund (the "Prime Money Market
Fund" and together with the U.S. Treasury Obligations Fund, the "Money Market
Funds"), the Eureka Investment Grade Bond Fund (the "Investment Grade Bond
Fund"), the Eureka Global Asset Allocation Fund (the "Global Asset Allocation
Fund"), and the Eureka Equity Fund (the "Equity Fund" and together with the
Investment Grade Bond Fund and the Global Asset Allocation Fund, the "Variable
NAV Funds"). Each Fund offers to the public two classes of Shares: Class A
Shares and Trust Shares. Most information contained in this Statement of
Additional Information expands on subjects discussed in the Prospectuses.
Capitalized terms not defined herein are defined in the Prospectuses. An
investment in Shares of a Fund should not be made without first reading the
applicable Prospectus.
INVESTMENT OBJECTIVE AND POLICIES
Additional Information on Portfolio Instruments
- -----------------------------------------------
The following policies supplement the information pertaining to
portfolio instruments of each Fund as set forth in the Prospectuses.
The Appendix to this Statement of Additional Information identifies
nationally recognized statistical ratings organizations ("NRSROs") that may be
used by Sanwa Bank California, the Eureka Funds' investment adviser ("SBCL"),
with regard to portfolio investments for the Funds and provides a description of
relevant ratings assigned by each such NRSRO. A rating by an NRSRO may be used
only where the NRSRO is neither controlling, controlled by, nor under common
control with the issuer of, or any issuer, guarantor, or provider of credit
support for, the instrument.
Asset-Backed Securities. Each Fund, except the U.S. Treasury
Obligations Fund, may invest in asset-backed securities. The Prime Money Market
Fund and the Investment Grade Bond Fund may each invest up to 100% of their
total assets, and the Global Asset Allocation Fund and the Equity Fund may each
invest up to 35% of their total assets in asset-backed securities.
B-1
<PAGE> 110
Asset-backed securities are secured by company receivables, home equity
loans, truck or auto loans, leases, credit card receivables and other securities
backed by receivables or assets.
Offerings of Certificates for Automobile Receivables ("CARS") are
structured either as flow-through grantor trusts or as pay-through notes. CARS
structured as flow-through instruments represent ownership interests in a fixed
pool of receivables. CARS structured as pay-through notes are debt instruments
supported by the cash flows from the underlying assets. CARS may also be
structured as securities with fixed payment schedules which are generally issued
in multiple-classes. Cash-flow from the underlying receivables is directed first
to paying interest and then to retiring principal via paying down the two
respective classes of notes sequentially. Cash-flows on fixed-payment CARS are
certain, while cash-flows on other types of CARS issues depends on the
prepayment rate of the underlying automobile loans. Prepayments of automobile
loans are triggered mainly by automobile sales and trade-ins. Many people buy
new cars every two or three years, leading to rising prepayment rates as a pool
becomes more seasoned.
Certificates for Amortizing Revolving Debt ("CARDS") represent
participation in a fixed pool of credit card accounts. CARDS pay "interest only"
for a specified period. The CARDS principal balance remains constant during this
period, while any cardholder repayments or new borrowings flow to the issuer's
participation. Once the principal amortization phase begins, the balance
declines with paydowns on the underlying portfolio. Cash flows on CARDS are
certain during the interest-only period. After this initial interest-only
period, the cash flow will depend on how fast cardholders repay their
borrowings. Historically, monthly cardholder repayment rates have been
relatively fast. As a consequence, CARDS amortize rapidly after the end of the
interest-only period. During this amortization period, the principal payments on
CARDS depend specifically on the method for allocating cardholder repayments to
investors. In many cases, the investor's participation is based on the ratio of
the CARDS' balance to the total credit card portfolio balance. This ratio can be
adjusted monthly or can be based on the balances at the beginning of the
amortization period. In some issues, investors are allocated most of the
repayments, regardless of the CARDS' balance. This method results in especially
fast amortization.
Credit support for asset-backed securities may be based on the
underlying assets or provided by a third party. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated structures and over
collateralization.
Bankers' Acceptances, Certificates of Deposit, Demand and Time
Deposits. Each Fund, except the U.S. Treasury Obligations Fund, may invest in
bankers' acceptances, certificates of deposit, and demand and time deposits. The
Prime Money Market Fund may invest up to 25% of its total assets, and the
Investment Grade Bond Fund, the Global Asset
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Allocation Fund, and the Equity Fund may each invest up to 35% of their total
assets in bankers' acceptance. For temporary defensive purposes, the Investment
Grade Bond Fund, the Global Asset Allocation Fund, and the Equity Fund may each
invest 100% of their total assets in bankers' acceptance and certificates of
deposit. The Prime Money Market Fund may invest 100% of its total assets, and
the Investment Grade Bond Fund, the Global Asset Allocation Fund, and the Equity
Fund may each invest up to 35% of their total assets in certificates of deposit
and time deposits. For temporary defensive purposes, the Investment Grade Bond
Fund, the Global Asset Allocation Fund, and the Equity Fund may each invest 100%
of their total assets in time deposits.
Bankers' acceptances are negotiable drafts or bills of exchange
typically drawn by an importer or exporter to pay for specific merchandise,
which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return.
Bankers' acceptances will be those guaranteed by domestic and foreign
banks, if at the time of investment such banks have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements). Certificates of deposit and demand and
time deposits will be those of domestic and foreign banks and savings and loan
associations, if (a) at the time of investment they have capital, surplus, and
undivided profits in excess of $100,000,000 (as of the date of their most
recently published financial statements) or (b) the principal amount of the
instrument is insured in full by the Federal Deposit Insurance Corporation.
Collateralized Mortgage Obligations. The Investment Grade Bond Fund may
invest 100% of its total assets and the Global Asset Allocation Fund and the
Equity Fund may each invest up to 35% of their total assets in collateralized
mortgage obligations ("CMOs"). CMOs are mortgage-related securities which are
structured pools of mortgage pass-through certificates or mortgage loans. CMOs
are issued with a number of classes or series which have different maturities
and which may represent interests in some or all of the interest or principal on
the underlying collateral or a combination thereof. CMOs of different classes
are generally retired in sequence as the underlying mortgage loans in the
mortgage pool are repaid. In the event of sufficient early prepayments on such
mortgages, the class or series of CMOs first to mature generally will be retired
prior to its maturity. Thus, the early retirement of a particular class or
series of a CMO held by a Fund would have the same effect as the prepayment of
mortgages underlying a mortgage-backed pass-through security.
Certain debt securities such as, but not limited to, mortgage-backed
securities, CMOs and asset-backed securities, as well as securities subject to
prepayment of principal prior to the stated maturity date, are expected to be
repaid prior to their stated maturity dates. As a result,
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the effective maturity of these securities is expected to be shorter than the
stated maturity. For purposes of calculating a Fund's weighted average portfolio
maturity, the effective maturity of such securities will be used.
CMOs include stripped mortgage securities, which are derivative
multi-class mortgage securities issued by agencies or instrumentalities of the
U.S. government, or by private originators of, or investors in, mortgage loans,
including savings and loan associations, mortgage banks, commercial banks,
investment banks and special purpose subsidiaries of the foregoing. Stripped
mortgage securities are usually structured with two classes that receive
different proportions of the interest and principal distributions on a pool of
mortgage assets. A common type of stripped mortgage security will have one class
receiving all of the interest from the mortgage assets (the interest-only or
"IO" class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on an IO class is extremely
sensitive to the rate of principal payments (including prepayments) on the
related underlying mortgage assets, and a rapid rate of principal payments may
have a material adverse effect on the securities' yield to maturity. Generally,
the market value of the PO class is unusually volatile in response to changes in
interest rates. If the underlying mortgage assets experience greater than
anticipated prepayments of principal, the Fund may fail to fully recoup its
initial investment in these securities even if the security is rated in the
highest rating category.
Although stripped mortgage securities are purchased and sold by
institutional investors through several investment banking firms acting as
brokers or dealers, these securities were only recently developed. As a result,
established trading markets have not fully developed. Stripped mortgage
securities issued or guaranteed by the U.S. government and held by a Fund may be
considered liquid securities pursuant to guidelines established by the Board of
Trustees.
Convertible Securities. Each Variable NAV Fund may invest 100% of its
total assets in convertible securities.
Commercial Paper. Each Fund, except for the U.S. Treasury Obligations
Fund, may invest in commercial paper. The Prime Money Market Fund may invest
100% of its total assets, and the Investment Grade Bond Fund, the Global Asset
Allocation Fund, and the Equity Fund may each invest up to 35% of their total
assets in commercial paper. For temporary defensive purposes, the Investment
Grade Bond Fund, the Global Asset Allocation Fund, and the Equity Fund may each
invest 100% of their total assets in commercial paper. Commercial paper consists
of unsecured promissory notes issued by corporations. Commercial paper usually
has a maturity of less than nine months and has a fixed rates of return.
The Prime Money Market Fund, the Investment Grade Bond Fund, the Global
Asset Allocation Fund, and the Equity Fund may purchase commercial paper
designated as "Section 4(2) paper," a term that includes debt obligations issued
in reliance on the "private placement"
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exemption from registration afforded by Section 4(2) of the Securities Act of
1933. Section 4(2) paper is restricted as to disposition under the Federal
securities laws, and is frequently sold (and resold) to institutional investors
through or with the assistance of investment dealers who make a market in the
Section 4(2) paper. Certain transactions in Section 4(2) paper may qualify for
the registration exemption provided in Rule 144A under the Securities Act of
1933.
Common and Preferred Stock. The Investment Grade Bond Fund may invest
up to 30% of its total assets in preferred stock. The Global Asset Allocation
Fund may invest up to 75% of its assets in common and/or preferred stock. The
Equity Fund may invest 100% of its total assets in common and/or preferred
stock. Stocks represent shares of ownership in a company. Generally, preferred
stock has a specified dividend and ranks after bonds and before common stocks in
its claim on income for dividend payments and on assets should the company be
liquidated. After other claims are satisfied, common stockholders participate in
company profits on a pro rata basis; profits may be paid out in dividends or
reinvested in the company to help it grow. Increases and decreases in earnings
are usually reflected in a company's stock price, so common stocks generally
have the greatest appreciation and depreciation potential of all corporate
securities. While most preferred stocks pay a dividend, the Funds may purchase
preferred stock where the issuer has omitted, or is in danger of omitting,
payment of its dividend. Such investments would be made primarily for their
capital appreciation potential.
Corporate Bonds. The Prime Money Market Fund, the Investment Grade Bond
Fund, and the Global Asset Allocation Fund may each invest 100% of their total
assets and the Equity Fund may invest up to 35% of its total assets in corporate
bonds.
Dollar Rolls. Each Variable NAV Fund may invest 100% of its total
assets in dollar rolls.
Foreign Currency Transactions. The Global Asset Allocation Fund may use
forward foreign currency exchange contracts. Forward foreign currency exchange
contracts involve an obligation to purchase or sell a specified currency at a
future date at a price set at the time of the contract. Forward currency
contracts do not eliminate fluctuations in the values of portfolio securities
but instead allow a Fund to establish a rate of exchange for a future point in
time. The Fund may use forward foreign currency exchange contracts to hedge
against movements in the value of foreign currencies (including the "ECU" used
in the European Community) relative to the U.S. dollar in connection with
specific portfolio transactions or with respect to portfolio positions. The Fund
may enter into forward foreign currency exchange contracts when deemed advisable
by SBCL under two circumstances. First, when entering into a contract for the
purchase or sale of a security, the Fund may enter into a forward foreign
currency exchange contract for the amount of the purchase or sale price to
protect against variations, between the date the security is purchased or sold
and the date on which payment is made or received, in the value of the foreign
currency relative to the U.S. dollar or other foreign currency.
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Second, when SBCL anticipates that a particular foreign currency may
decline relative to the U.S. dollar or other leading currencies, in order to
reduce risk, the Fund may enter into a forward contract to sell, for a fixed
amount, the amount of foreign currency approximating the value of some or all of
the Fund's securities denominated in such foreign currency. With respect to any
forward foreign currency contract, it will not generally be possible to match
precisely the amount covered by the contract and the value of the securities
involved due to the changes in the values of such securities resulting from
market movements between the date the forward contract is entered into and the
date it matures. In addition, while forward contracts may offer protection from
losses resulting from declines in the value of a particular foreign currency,
they also limit potential gains which might result from increases in the value
of such currency. The Fund will also incur costs in connection with forward
foreign currency exchange contracts and conversions of foreign currencies and
U.S.
dollars.
A separate account of a Fund consisting of liquid assets equal to the
amount of the Fund's assets that could be required to consummate forward
contracts entered into under the second circumstance, as set forth above, will
be established with the Fund's custodian. For the purpose of determining the
adequacy of the securities in the account, the deposited securities will be
valued at market or fair value. If the market or fair value of such securities
declines, additional cash or securities will be placed in the account daily so
that the value of the account will be equal the amount of such commitments by
the Fund.
The Global Asset Allocation Fund may take positions in forward foreign
currency exchange contracts up to a value not in excess of 50% of its total
assets.
Foreign Investment. The Funds, other than the U.S. Treasury Obligations
Fund, may each invest up to 35% of their total assets, and the Global Asset
Allocation Fund may invest 100% of its total assets, in certain obligations or
securities of foreign issuers. Permissible investments include Eurodollar
Certificates of Deposit ("ECDs") which are U.S. dollar denominated certificates
of deposit issued by branches of foreign and domestic banks located outside the
United States, Yankee Certificates of Deposit ("Yankee CDs") which are
certificates of deposit issued by a U.S. branch of a foreign bank, denominated
in U.S. dollars and held in the United States, Eurodollar Time Deposits
("ETD's") which are U.S. dollar denominated deposits in a foreign branch of a
U.S. bank or a foreign bank, and Canadian Time Deposits ("CTD's") which are U.S.
dollar denominated certificates of deposit issued by Canadian offices of major
Canadian banks, Canadian commercial paper, which is commercial paper issued by a
Canadian corporation or a Canadian counterpart of a U.S. corporation, and
European commercial paper, which is U.S. dollar denominated commercial paper of
an issuer located in Europe. The Funds may invest in foreign commercial paper,
including Canadian and European commercial paper as described above.
The Investment Grade Bond Fund and the Equity Fund may each invest up
to 35% of their total assets and the Global Asset Allocation Fund may invest up
to 100% of its assets in
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foreign equity securities, including American Depository Receipts (sponsored and
unsponsored) ("ADRs"), European Depository Receipts ("EDRs") and Global
Depository Receipts ("GDRs").
Each Variable NAV Fund may invest up to 15% of it total assets in
emerging market securities.
Investments in securities issued by foreign branches of U.S. banks,
foreign banks, or other foreign issuers, including ADRs and securities purchased
on foreign securities exchanges, may subject a Fund to additional investment
risks. Such risks include adverse political and economic developments, possible
seizure, currency blockage, nationalization or expropriation of foreign
investments, less stringent disclosure requirements, exchange control
regulations, non-U.S. withholding taxes and the adoption of other foreign
governmental restrictions.
Additional risks include currency exchange risks, less publicly
available information, the risk that companies may not be subject to the
accounting, auditing and financial reporting standards and requirements of U.S.
companies, the risk that foreign securities markets may have less volume and
therefore may be less liquid and their prices more volatile than U.S.
securities, and the risk that custodian and brokerage costs may be higher.
Foreign issuers of securities or obligations are often subject to accounting
treatment and engage in business practices different from those respecting
domestic issuers of similar securities or obligations. Foreign branches of U.S.
banks and foreign banks may be subject to less stringent reserve requirements
than those applicable to domestic branches of U.S. banks. The Funds will acquire
such securities only when SBCL believes the risks associated with such
investments are minimal.
Futures Contracts and Related Options. The Investment Grade Bond Fund,
the Global Asset Allocation Fund, and the Equity Fund may invest in futures
contracts and options thereon (interest rate futures contracts or index futures
contracts, as applicable). Positions in futures contracts may be closed out only
on an exchange which provides a secondary market for such futures. However,
there can be no assurance that a liquid secondary market will exist for any
particular futures contract at any specific time. Thus, it may not be possible
to close a futures position. In the event of adverse price movements, a Fund
would continue to be required to make daily cash payments to maintain its
required margin. In such situations, if a Fund has insufficient cash, it may
have to sell portfolio securities to meet daily margin requirements at a time
when it may be disadvantageous to do so. In addition, a Fund may be required to
make delivery of the instruments underlying futures contracts it holds. The
inability to close options and futures positions also could have an adverse
impact on a Fund's ability to effectively hedge.
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Successful use of futures by the Funds is also subject to SBCL's
ability to correctly predict the direction the market will move. For example, if
a Fund has hedged against the possibility of a decline in the market adversely
affecting securities held by it and securities prices increase instead, a Fund
will lose part or all of the benefit to the increased value of its securities
which it has hedged because it will have approximately equal offsetting losses
in its futures positions. In addition, in some situations, if a Fund has
insufficient cash, it may have to sell securities to meet daily variation margin
requirements. Such sales of securities may be, but will not necessarily be, at
increased prices which reflect the rising market. A Fund may have to sell
securities at a time when it may be disadvantageous to do so.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. As a result, a relatively
small price movement in a futures contract may result in immediate and
substantial loss (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.
Utilization of futures transactions by a Fund involves the risk of loss
by a Fund of margin deposits in the event of bankruptcy of a broker with whom a
Fund has an open position in a futures contract or related option.
Most futures exchanges limit the amount of fluctuation permitted in
futures contract prices during a single trading day. The daily limit establishes
the maximum amount that the price of a futures contract may vary either up or
down from the previous day's settlement price at the end of a trading session.
Once the daily limit has been reached in a particular type of contract, no
trades may be made on that day at a price beyond that limit. The daily limit
governs only price movement, during a particular trading day and therefore does
not limit potential losses, because the limit may prevent the liquidation of
unfavorable positions. Futures contract prices have occasionally moved to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions and subjecting some
futures traders to substantial losses.
The trading of futures contracts is also subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
to impossible to liquidate existing positions or to recover excess variation
margin payments.
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Guaranteed Investment Contracts. Guaranteed investment contracts
("GICs") are issued by highly rated U.S. insurance companies. Under these
contracts, a Fund makes cash contributions to a deposit fund of the insurance
company's general account. The insurance company then credits interest to the
Fund on a monthly basis, which is based on an index (such as the Solomon
Brothers CD Index), but is guaranteed not to be less than a certain minimum
rate.
Illiquid and Restricted Securities. The Prime Money Market may invest
up to 10% of its net assets in illiquid securities. The Investment Grade Bond
Fund, Global Asset Allocation Fund, and the Equity Fund may invest up to 15% of
their net assets in illiquid securities. Each Fund, except the U.S. Treasury
Obligations Fund, may invest in restricted securities. Some investments may be
determined by SBCL, under the supervision of the Board of Trustees, to be
illiquid. Securities may be deemed illiquid if the Fund cannot reasonably expect
within seven days to sell the securities for approximately the amount at which
the Fund values such securities. The sale of illiquid securities, if they can be
sold at all, generally will require more time and result in higher brokerage
charges or dealer discounts and other selling expenses than will the sale of
liquid securities such as securities eligible for trading on U.S. securities
exchanges or in over-the-counter markets. Moreover, restricted securities, which
may be illiquid, often sell, if at all, at a price lower than similar securities
that are not subject to restrictions on resale.
Illiquid securities include those that are subject to restrictions
contained in the securities laws of other countries. However, securities that
are freely marketable in the country where they are principally traded, but
would not be freely marketable in the United States, will not be considered
illiquid. Where registration is required, the Fund may be obligated to pay all
or part of the registration expenses and a considerable period may elapse
between the time of the decision to sell and the time the Fund may be permitted
to sell a security under an effective registration statement. If, during such a
period, adverse market conditions were to develop, the Fund might obtain a less
favorable price than prevailed when it decided to sell.
Not all restricted securities are illiquid. In recent years a large
institutional market has developed for certain securities that are not
registered under the Securities Act of 1933, including private placements,
repurchase agreements, commercial paper, foreign securities and corporate bonds
and notes. These instruments are often restricted securities because the
securities are sold in transactions not requiring registration. Institutional
investors generally will not seek to sell these instruments to the general
public, but instead will often depend either on an efficient institutional
market in which such unregistered securities can be readily resold or on an
issuer's ability to honor a demand for repayment. Therefore, the fact that there
are contractual or legal restrictions on resale to the general public or certain
institutions is not dispositive of the liquidity of such investments.
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Investment Company Securities. Each Fund may invest up to 10% of its
total assets in money market investment company securities. The Global Asset
Allocation Fund may invest up to 10% of its total assets in non-money market
investment company securities. By investing in investment companies, a Fund
becomes exposed to the risks of that investment company's portfolio of
securities. Securities of other investment companies will be acquired by the
Funds within the limits prescribed by the 1940 Act. As a shareholder of another
investment company, a Fund would bear, along with other shareholders, its pro
rata portion of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory fees and other
expenses the Fund bear directly in connection with its own operations.
Investment Grade Debt Obligations. The Variable NAV Funds may invest in
"investment grade securities," which are securities rated in the four highest
rating categories of an NRSRO. It should be noted that debt obligations rated in
the lowest of the top four ratings (i.e., "Baa" by Moody's) are considered to
have some speculative characteristics and are more sensitive to economic change
than higher rated securities.
Under normal circumstances at least 80% of the Investment Grade Bond
Fund's assets will be invested in investment grade debt securities (securities
that, at the time of initial investment, are rated equal to or greater than BBB-
by Standard & Poor's or Baa3 by Moody's). With respect to 80% of its assets, the
Fund will only invest in unrated debt securities should SBCL determine that the
security is of comparable quality to an investment grade issue. With respect to
80% of its assets, the Fund will not invest in securities that, at the time of
initial investment, do not meet the above credit guidelines. Investment grade
securities that are subsequently downgraded in quality below investment grade by
both Standard & Poor's and Moody's may continue to be held in the portfolio, and
will be sold only if SBCL believes it would be advantageous to do so. The Fund
may invest 20% of its assets in debt securities rated B- and above. Securities
rated less than BBB- by Standard & Poor's and Baa3 by Moody's are classified as
non-investment grade securities. Such securities carry a high degree of risk and
are considered speculative by the major credit ratings agencies. Credit quality
in the non-investment grade bond market can change suddenly and unexpectedly and
even recently issued credit rating may not fully reflect the actual risks posed
by a particular non-investment grade security.
Municipal Obligations. The Prime Money Market Fund and the Investment
Grade Bond Fund may each invest up to 35% of their total assets in municipal
obligations. The Prime Money Market Fund will only invest in municipal
securities rated in the top two tiers by a NRSRO. Municipal securities are debt
securities issued by a state, its political subdivisions, agencies, authorities
and corporations. Municipal securities include debt obligations issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities such as airports, bridges, highways, housing, hospitals, mass
transportation, public utilities, schools, streets, and water and sewer works.
Other public purposes for which municipal securities may be issued include
refunding outstanding obligations, obtaining funds
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for general operating expenses and obtaining funds to loan to other public
institutions and facilities.
Municipal securities include securities issued to finance various
private activities, including certain types of private activity bonds
("industrial development bonds" under prior law). These securities may be issued
by or on behalf of public authorities to obtain funds to provide certain
privately owned or operated facilities.
Municipal securities are generally classified as "general obligation"
or "revenue." General obligation securities are secured by the issuer's pledge
of its full credit and taxing power for the payment of principal and interest.
Revenue securities are payable only from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise or other specific revenue source. Private activity bonds and
industrial development bonds that are municipal securities are in most cases
revenue bonds and generally do not constitute the pledge of the credit of the
issuer of such bonds.
Municipal notes are instruments issued by or on behalf of governments
and political sub-divisions thereof. Examples include: tax anticipation notes,
which are short-term debt instruments issued by a municipality or state to
finance working capital needs of the issuer in anticipation of receiving taxes
on a future date; revenue anticipation notes, which are short-term debt
instruments issued by a municipality or state to provide cash prior to receipt
of expected non-tax revenues from a specific source; bond anticipation notes,
which are short-term debt instruments issued by a municipality or state that
will be paid off with the proceeds of an upcoming bond issue; and tax revenue
anticipation notes, which are short-term debt instruments issued by a
municipality or state to finance working capital needs in anticipation of
receiving taxes or other revenues. Construction loan notes are instruments
insured by the Federal Housing Administration with permanent financing by
"Fannie Mae" (the Federal National Mortgage Association) or "Ginnie Mae" (the
Government National Mortgage Association) at the end of the project construction
period. Tax-free commercial paper is an unsecured promissory obligation issued
or guaranteed by a municipal issuer.
Taxable municipal securities are municipal securities the interest on
which is not exempt from federal income tax. Taxable municipal securities may
include "private activity bonds" that are issued by or on behalf of states or
political subdivisions thereof to finance privately-owned or operated facilities
for business and manufacturing, housing, sports, and pollution control and to
finance facilities for charitable institutions. The payment of the principal and
interest on private activity bonds is not backed by a pledge of tax revenues,
and is dependent solely on the ability of the facility's user to meet its
financial obligations. Taxable municipal securities also may include remarketed
certificates of participation.
The federal bankruptcy statutes relating to the adjustments of debts of
political subdivisions and authorities of states of the United States provide
that, in certain
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circumstances, such subdivisions or authorities may be authorized to initiate
bankruptcy proceedings without prior notice to or consent of creditors, which
proceedings could result in material adverse changes in the rights of holders of
obligations issued by such subdivisions or authorities.
Municipal securities also include participation certificates in a
lease, an installment purchase contract, or a conditional sales contract ("lease
obligations") entered into by a state or political subdivision to finance the
acquisition or construction of equipment, land or facilities. Although lease
obligations are not general obligations of the issuer for which the state or
other governmental body's unlimited taxing power is pledged, certain lease
obligations are backed by a covenant to appropriate money to make the lease
obligation payments. However, under certain lease obligations, the state or
governmental body has no obligation to make these payments in future years
unless money is appropriated on a yearly basis. Although "non-appropriation"
lease obligations are secured by the leased property, disposition of the
property in the event of foreclosure might prove difficult. These securities
represent a relatively new type of financing that is not yet marketable as more
conventional securities. Certain investments in lease obligations may be
illiquid. Under guidelines established by the Board of Trustees, the following
factors will be considered when determining the liquidity of a lease obligation:
(1) the frequency of trades and quotes for the obligation; (2) the number of
dealers willing to purchase or sell the obligation and the number of potential
buyers; (3) the willingness of dealers to undertake to make a market in the
obligation; and (4) the nature of the marketplace trades.
Options - Calls and Puts.
-------------------------
Calls. The Variable NAV Funds may write (sell) "covered" call options
and purchase options to close out options previously written by it. Such options
must be listed on a National Securities Exchange and issued by the Options
Clearing Corporation. The purpose of writing covered call options is to generate
additional income. This premium income will serve to enhance each Fund's total
return and will reduce the effect of any price decline of the security involved
in the option.
A call option gives the holder (buyer) the "right to purchase" a
security at a specified price (the exercise price) at any time until a certain
date (the expiration date). So long as the obligation of the writer of a call
option continues, the writer may be assigned an exercise notice by the
broker-dealer through whom such option was sold, requiring the writer to deliver
the underlying security against payment of the exercise price. This obligation
terminates upon the expiration of the call option, or such earlier time at which
the writer effects a closing purchase transaction by repurchasing an option
identical to that previously sold. To secure the writer's obligation to deliver
the underlying security in the case of a call option, a writer is
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required to deposit in escrow the underlying security or other assets in
accordance with the rules of the Options Clearing Corporation. The Funds will
write only covered call options. This means that a Fund will only write a call
option on a security which it already owns.
The Variable NAV Funds will write call options only if they are
"covered" and may buy call options. In the case of a call option on a security,
the option is "covered" if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount as are held in a segregated account by its custodian)
upon conversion or exchange of other securities held by it. For a call option on
an index, the option is covered if the Fund maintains with its custodian cash or
cash equivalents equal to the contract value. A call option is also covered if
the Fund holds a call on the same security or index as the call written where
the exercise price of the call held is (i) equal to or less than the exercise
price of the call written, or (ii) greater than the exercise price of the call
written provided the difference is maintained by the Fund in cash or cash
equivalents in a segregated account with its custodian.
Fund securities on which call options may be written will be purchased
solely on the basis of investment considerations consistent with a Fund's
investment objectives. The writing of covered call options is a conservative
investment technique believed to involve relatively little risk (in contrast to
the writing of naked or uncovered options which the Funds will not do), but
capable of enhancing a Fund's total return. When writing a covered call option,
a Fund, in return for the premium, gives up the opportunity for profit from a
price increase in the underlying security above the exercise price, but retains
the risk of loss should the price of the security decline. Unlike owning
securities not subject to an option, a Fund does not have any control over the
point at which it may be required to sell the underlying securities, because it
may be assigned an exercise notice at any time prior to the expiration of its
obligation as a writer. If a call option which a Fund has written expires, the
Fund will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security during the
option period. If the call option is exercised, a Fund will realize a gain or
loss from the sale of the underlying security. The security covering the call
will be maintained in a segregated account by the Fund's custodian. A Fund does
not consider a security covered by a call to be "pledged" as that term is used
in its policy which limits the pledging or mortgaging of its assets.
The premium received is the market value of an option. The premium a
Fund will receive from writing a call option will reflect, among other things,
the current market price of the underlying security, the relationship of the
exercise price to such market price, the historical price volatility of the
underlying security, and the length of the option period. Once the decision to
write a call option has been made, SBCL, in determining whether a particular
call option should be written on a particular security, will consider the
reasonableness of the anticipated premium and the likelihood that a liquid
secondary market will exist for the option.
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The premium received by a Fund for writing covered call options will be recorded
as a liability in a Fund's statement of assets and liabilities. This liability
will be readjusted daily to the option's current market value, which will be the
latest sale price at the time at which the net asset value per share of a Fund
is computed (close of the New York Stock Exchange (the "NYSE")), or, in the
absence of such sale, the latest asked price (or, with respect to the Global
Asset Allocation Fund, the mean between the last bid and asked prices). The
liability will be extinguished upon expiration of the option, the purchase of an
identical option in the closing transaction, or delivery of the underlying
security upon the exercise of the option.
Closing transactions will be effected in order to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
or to permit the sale of the underlying security. Furthermore, effecting a
closing transaction will permit a Fund to write another call option on the
underlying security with either a different exercise price or expiration date or
both. If a Fund desires to sell a particular security from its portfolio on
which it has written a call option, it will seek to effect a closing transaction
prior to, or concurrently with, the sale of the security. There is, of course,
no assurance that a Fund will be able to effect such closing transactions at a
favorable price. If a Fund cannot enter into such a transaction, it may be
required to hold a security that it might otherwise have sold, in which case it
would continue to be at market risk on the security. This could result in higher
transaction costs. A Fund will pay transaction costs in connection with the
writing of options to close out previously written options. Such transaction
costs are normally higher than those applicable to purchases and sales of
portfolio securities.
Call options written by a Fund will normally have expiration dates of
less than nine months from the date written. The exercise price of the options
may be below, equal to, or above the current market values of the underlying
securities at the time the options are written. From time to time, a Fund may
purchase an underlying security for delivery in accordance with an exercise
notice of a call option assigned to it, rather than delivering such security
from its portfolio. In such cases, additional costs will be incurred.
A Fund will realize a profit or loss from a closing purchase
transaction if the cost of the transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
underlying security, any loss resulting from the repurchase of a call option is
likely to be offset in whole or in part by appreciation of the underlying
security owned by a Fund.
Puts. A put is a right to sell a specified security (or securities)
within a specified period of time at a specified exercise price. To the extent
consistent with its investment objective, the Variable NAV Funds may buy put
options and write secured put options.
The amount payable to a Fund upon its exercise of a "put" is normally
(i) the Fund's acquisition cost of the securities subject to the put (excluding
any accrued interest which the
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Fund paid on the acquisition), less any amortized market premium or plus any
amortized market or original issue discount during the period the Fund owned the
securities, plus (ii) all interest accrued on the securities since the last
interest payment date during that period.
These options may relate to particular securities, financial
instruments, foreign currencies, stock or bond indices or the yield differential
between two securities, and may or may not be listed on a securities exchange
and may or may not be issued by the Options Clearing Corporation. Options
trading is a highly specialized activity that entails greater than ordinary
investment risks. In addition, unlisted options are not subject to the
protections afforded purchasers of listed options issued by the Options Clearing
Corporation, which performs the obligations of its members if they default.
Cross hedging is the use of options or forward contracts in one currency to
hedge against fluctuations in the value of securities denominated in a different
currency based on a belief that there is a pattern of correlation between the
two currencies. The Funds intend to enter into puts only with dealers, banks,
and broker-dealers which, in SBCL's opinion, present minimal credit risks.
Risk Factors Relating to Options. There are several risks associated
with transactions in put and call options. For example, there are significant
differences between the securities and options markets that could result in an
imperfect correlation between these markets, causing a given transaction not to
achieve its objectives. In addition, a liquid secondary market for particular
options, whether traded over-the-counter or on a national securities exchange
("Exchange") may be absent for reasons which include the following: there may be
insufficient trading interest in certain options, restrictions may be imposed by
an Exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities; unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or one or more Exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that Exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by the Options Clearing Corporation as a result of trades on
that Exchange would continue to be exercisable in accordance with their terms.
In addition, the success of a hedging strategy based on options transactions may
depend on the ability of SBCL to predict movements in the prices of individual
securities, fluctuations in markets and movements in interest rates.
Repurchase Agreements. Securities held by each of the Funds may be
subject to repurchase agreements. Under the terms of a repurchase agreement, a
Fund would acquire securities from member banks of the Federal Deposit Insurance
Corporation with capital, surplus, and undivided profits of not less than
$100,000,000 (as of the date of their most recently published financial
statements) and from registered broker-dealers which SBCL deems
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creditworthy under guidelines approved by the Board of Trustees, subject to the
seller's agreement to repurchase such securities at a mutually agreed-upon date
and price. The repurchase price would generally equal the price paid by the Fund
plus interest negotiated on the basis of current short-term rates, which may be
more or less than the rate on the underlying portfolio securities. The seller
under a repurchase agreement will be required to maintain the value of
collateral held pursuant to the agreement at not less than the repurchase price
(including accrued interest) and SBCL will monitor the collateral's value to
ensure that it equals or exceeds the repurchase price (including accrued
interest). In addition, securities subject to repurchase agreements will be held
in a segregated account.
If the seller were to default on its repurchase obligation or become
insolvent, a Fund holding such obligation would suffer a loss to the extent that
the proceeds from a sale of the underlying portfolio securities were less than
the repurchase price under the agreement, or to the extent that the disposition
of such securities held by the Fund were delayed pending court action.
Additionally, if the seller should be involved in bankruptcy or insolvency
proceedings, a Fund may incur delay and costs in selling the underlying security
or may suffer a loss of principal and interest if the Fund is treated as an
unsecured creditor and required to return the underlying security to the
seller's estate. Securities subject to repurchase agreements will be held by the
Eureka Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the Investment Company Act of 1940 (the "1940 Act").
Reverse Repurchase Agreements. Each Fund may borrow funds for temporary
purposes by entering into reverse repurchase agreements in accordance with each
Fund's investment restrictions. Each Fund may borrow up to 33 1/3% of its total
assets. Pursuant to such agreements, a Fund would sell portfolio securities to
financial institutions such as banks and broker-dealers, and agree to repurchase
the securities at a mutually agreed-upon date and price. Each Fund intends to
enter into reverse repurchase agreements only to avoid otherwise selling
securities during unfavorable market conditions to meet redemptions. At the time
a Fund enters into a reverse repurchase agreement, it will place in a segregated
custodial account liquid assets consistent with the Fund's investment
restrictions having a value equal to the repurchase price (including accrued
interest), and will subsequently monitor the account to ensure that such
equivalent value is maintained. Such assets will include U.S. government
securities or other liquid high quality debt securities or high grade debt
securities. Reverse repurchase agreements involve the risk that the market value
of the securities sold by a Fund may decline below the price at which it is
obligated to repurchase the securities. Reverse repurchase agreements are
considered to be borrowings by a Fund under the 1940 Act.
Rights Offerings and Warrants to Purchase. The Variable NAV Funds may
participate in rights offerings and may purchase warrants, which are privileges
issued by corporations enabling the owners to subscribe to and purchase a
specified number of shares of the corporation at a specified price during a
specified period of time. Subscription rights normally
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have a short life span to expiration. The purchase of rights or warrants
involves the risk that the Fund could lose the purchase value of a right or
warrant if the right to subscribe to additional shares is not exercised prior to
the rights' and warrants' expiration. Also, the purchase of rights and/or
warrants involves the risk that the effective price paid for the right and/or
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security. A Fund will not invest more
than 5% of its net assets, taken at market value, in warrants, or more than 2%
of its net assets, taken at market value, in warrants not listed on the New York
or American Stock Exchanges. Warrants acquired by a Fund in units or attached to
other securities are not subject to this restriction.
Securities Lending. Each Fund may engage in securities lending.
Securities lending is limited to 33 1/3% of a Fund's total assets. While the
lending of securities may subject a Fund to certain risks, such as delays or the
inability to regain the securities in the event the borrower was to default on
its lending agreement or enter into bankruptcy, the Fund will receive 100%
collateral in the form of cash or U.S. government securities. This collateral
will be valued daily by SBCL and should the market value of the loaned
securities increase, the borrower will furnish additional collateral to the
Fund. During the time portfolio securities are on loan, the borrower will pay
the Fund any dividends or interest paid on such securities. Loans are subject to
termination by a Fund or the borrower at any time. While a Fund will not have
the right to vote securities on loan, the Funds intend to terminate the loan and
regain the right to vote if that is considered important with respect to the
investment. The Funds will only enter into loan arrangements with
broker-dealers, banks or other institutions which SBCL has determined are
creditworthy under guidelines established by the Board of Trustees.
Short-Term Trading. Each Variable NAV Fund may engage in short-term
trading. Short-term trading involves the selling of securities held for a short
time, ranging from several months to less than a day. The object of such
short-term trading is to increase the potential for capital appreciation and/or
income of the Funds in order to take advantage of what SBCL believes are changes
in market, industry or individual company conditions or outlook. Any such
trading would increase the portfolio turnover rate of the Funds and their
transaction costs. In addition, short-term trading may increase the amount of
taxes payable by shareholders.
Supranational Organizational Obligations. The Funds, other than the
U.S. Treasury Obligations Fund, may purchase debt securities of supranational
organizations such as the European Coal and Steel Community, the European
Economic Community and the World Bank, which are chartered to promote economic
development.
Swaps. Each Variable NAV Fund may enter swap agreements. Swap
agreements (a common form of derivatives) are contracts between parties in which
one party agrees to make payments to the other party based on the change in
market value of a specified index or asset. In return, the other party agrees to
make payments to the first party based on the return of a
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different specified index or asset. Although swap agreements entail the risk
that a party will default on its payment obligations the Funds will minimize
this risk by entering into agreements that mark to market no less frequently
than quarterly. Swap agreements also bear the risk that the Funds will not be
able to meet their obligations to the counterparty. This risk will be mitigated
by having the Funds invest in an equivalent asset for which they are obligated
to pay a return. Swap agreements may be considered illiquid and therefore
subject to a Fund's limitation on illiquid securities.
U.S. Government Obligations. The U.S. Treasury Obligations Fund will
invest exclusively in bills, notes and bonds issued or guaranteed by the U.S.
Treasury or agency obligations which are also supported by the full faith and
credit of the U.S. government. Each of the other Funds may invest in such
obligations and in other obligations issued or guaranteed by the U.S.
government, its agencies and instrumentalities. Such other obligations may
include those which are supported by the full faith and credit of the U.S.
government; others which are supported by the right of the issuer to borrow from
the Treasury; others which are supported by the discretionary authority of the
U.S. government to purchase the agency's obligations; and still others which are
supported only by the credit of the instrumentality. No assurance can be given
that the U.S. government would provide financial support to U.S.
government-sponsored agencies and instrumentalities if it is not obligated to do
so by law. A Fund will invest in the obligations of such agencies and
instrumentalities only when SBCL believes that the credit risk with respect
thereto is minimal.
U.S. Government Agency Securities. The Prime Money Market Fund, the
U.S. Treasury Obligations Fund, the Investment Grade Bond Fund, and the Global
Asset Allocation Fund may each invest 100% of their total assets in U.S.
government agency securities. The Equity Fund may invest up to 35% of its total
assets in U.S. government agency securities and for temporary defensive purposes
may invest 100% of its total assets in U.S. government agency securities. U.S.
government agency securities include obligations issued or guaranteed as to
payment of principal and interest by the full faith and credit of the U.S.
government, such as Treasury bills, notes, bonds and certificates of
indebtedness, and obligations issued or guaranteed by the agencies or
instrumentalities of the U.S. government, but not supported by such full faith
and credit. Obligations of certain agencies and instrumentalities of the U.S.
government, such as GNMA and the Export-Import Bank of the United States, are
supported by the full faith and credit of the U.S. Treasury; others, such as
those of FNMA, are supported by the right of the issuer to borrow from the
Treasury; others are supported by the discretionary authority of the U.S.
government to purchase the agency's obligations; still others, such as those of
the Federal Farm Credit Banks, or the Federal Home Loan Mortgage Corporation,
are supported only by the credit of the instrumentality. No assurance can be
given that the U.S. government would provide financial support to U.S.
government-sponsored agencies or instrumentalities if it is not obligated to do
so by law.
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U.S. government agency securities may include mortgage-backed
pass-through securities. Interest and principal payments (including prepayments)
on the mortgages underlying such securities are passed through to the holders of
the security. Prepayments occur when the borrower under an individual mortgage
repays the remaining principal before the mortgage's scheduled maturity date. As
a result of the pass-through of prepayments of principal on the underlying
securities, mortgage-backed pass-through securities are often subject to more
rapid prepayments of principal than their stated maturity would indicate.
Because the prepayment characteristics of the underlying mortgages vary, it is
not possible to predict accurately the realized yield or average life of a
particular issue of pass-through certificates. Prepayments are important because
of their effect on the yield and price of the securities. During periods of
declining interest rates, such prepayments can be expected to accelerate, and
the Funds would be required to reinvest the proceeds at the lower interest rates
then available. In addition, prepayments of mortgages which underlie securities
purchased at a premium may not have been fully amortized at the time the
obligation is repaid. As a result of these principal prepayment features,
mortgage-backed pass-through securities are generally more volatile investments
than other U.S. government agency securities.
"Zero coupon" U.S. government agency securities also tend to be more
volatile than other types of U.S. government agency securities. Zero coupon
securities are debt instruments that do not pay current interest and are
typically sold at prices greatly discounted from par value. The return on a zero
coupon obligation, when held to maturity, equals the difference between the par
value and the original purchase price.
U.S. Treasury Securities. The Prime Money Market Fund, the U.S.
Treasury Obligations Fund, the Investment Grade Bond Fund, and the Global Asset
Allocation Fund may each invest up to 100% of their total assets in U.S.
Treasury securities. The Equity Fund may invest up to 35% of its total assets in
U.S. Treasury securities and for temporary defensive purposes may invest up to
100% of its total assets in U.S. Treasury securities.
Variable Amount Master Demand Notes. Variable amount master demand
notes, in which the Funds, except for the U.S. Treasury Obligations Fund, may
invest are unsecured demand notes that permit the indebtedness thereunder to
vary and provide for periodic adjustments in the interest rate according to the
terms of the instrument. They are also referred to as variable rate demand
notes. Because these notes are direct lending arrangements between the Fund and
the issuer, they are not normally traded. Although there may be no secondary
market in the notes, the Fund may demand payment of principal and accrued
interest at any time or during specified periods not exceeding one year,
depending upon the instrument involved, and may resell the note at any time to a
third party. The absence of such an active secondary market, however, could make
it difficult for a Fund to dispose of a variable amount master demand note if
the issuer defaulted on its payment obligations or during periods when the Fund
is not entitled to exercise their demand rights, and a Fund could, suffer a loss
to the extent of the default. While the notes are not typically rated by credit
rating agencies, issuers
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of variable amount master demand notes must satisfy the criteria for commercial
paper. SBCL will consider the earning power, cash flow, and other liquidity
ratios of the issuers of such notes and will continuously monitor their
financial status and ability to meet payment on demand. Where necessary to
ensure that a note is of "high quality," a Fund will require that the issuer's
obligation to pay the principal of the note be backed by an unconditional bank
letter or line of credit, guarantee or commitment to lend. In determining
dollar-weighted average portfolio maturity, a variable amount master demand note
will be deemed to have a maturity equal to the period of time remaining until
the principal amount can be recovered from the issuer through demand.
Variable and Floating Rate Notes. The Funds, other than the U.S.
Treasury Obligations Fund, may acquire variable and floating rate notes, subject
to that Fund's investment objective, policies, and restrictions. A variable rate
note is one whose terms provide for the adjustment of its interest rate on set
dates and which, upon such adjustment, can reasonably be expected to have a
market value that approximates its par value. A floating rate note is one whose
terms provide for the adjustment of its interest rate whenever a specified
interest rate changes and which, at any time, can reasonably be expected to have
a market value that approximates its par value. Such notes are frequently not
rated by credit rating agencies; however, unrated variable and floating rate
notes purchased by a Fund will be determined by SBCL under guidelines
established by the Board of Trustees to be of comparable quality at the time of
purchase to rated instruments eligible for purchase under a Fund's investment
policies. In making such determinations, SBCL will consider the earning power,
cash flow and other liquidity ratios of the issuers of such notes (such issuers
include financial, merchandising, bank holding and other companies) and will
continuously monitor their financial condition. Although there may be no active
secondary market with respect to a particular variable or floating rate note
purchased by a Fund, it may resell a note at any time to a third party. The
absence of an active secondary market, however, could make it difficult for a
Fund to dispose of a variable or floating rate note in the event the issuer of
the note defaulted on its payment obligations and a Fund could, as a result or
for other reasons, suffer a loss to the extent of the default. Variable or
floating rate notes may be secured by bank letters of credit.
For purposes of the Money Market Funds, the maturities of the variable
and floating rate notes will be determined in accordance with Rule 2a-7 under
the 1940 Act.
When-Issued Securities. Each Fund may purchase securities on a
when-issued basis and may purchase and sell securities on a forward commitment
basis (i.e., for delivery beyond the normal settlement date at a stated price
and yield), including "TBA" (to be announced) purchase commitments. When a Fund
agrees to purchase securities on a when-issued or forward commitment basis, the
Fund's custodian will set aside cash or liquid portfolio securities equal to the
amount of the commitment in a separate account. Normally, the custodian will set
aside portfolio securities to satisfy the purchase commitment, and in such a
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case, a Fund may be required subsequently to place additional assets in the
separate account in order to assure that the value of the account remains equal
to the amount of the Fund's commitment. It may be expected that any such Fund's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
When a Fund engages in when-issued or forward commitment transactions,
it relies on the seller to consummate the trade. Failure of the seller to do so
may result in the Fund incurring a loss or missing the opportunity to obtain a
price considered to be advantageous. In addition, the purchase of securities on
a when-issued or forward commitment basis involves a risk of loss if the value
of the security to be purchased declines prior to the settlement date. Each of
the Funds does not intend to purchase when-issued securities for speculative
purposes but only in furtherance of its investment objective.
Investment Restrictions
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For each Fund the following investment restrictions are fundamental and
cannot be changed without approval of the holders of a majority of the
outstanding voting securities (as defined in the 1940 Act) of that Fund.
1. The Fund may lend or borrow money to the extent permitted by the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
2. The Fund may pledge, mortgage or hypothecate any of its assets to
the extent permitted by the 1940 Act or the rules or regulations
thereunder, as such statute, rules or regulations may be amended from
time to time.
3. The Fund may issue senior securities to the extent permitted by the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
4. The Fund may purchase securities of any issuer only when consistent
with the maintenance of its status as a diversified company under the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
5. The Fund may not concentrate investments in a particular industry or
group of industries as concentration is defined under the 1940 Act, or
the rules or regulations thereunder, as such statute, rules or
regulations may be amended from time to time.
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6. The Fund may underwrite securities to the extent permitted by the
1940 Act or the rules or regulations thereunder, as such statute, rules
or regulations may be amended from time to time.
7. The Fund may purchase or sell commodities, commodities contracts,
futures contracts, or real estate to the extent permitted by the 1940
Act or the rules or regulations thereunder, as such statute, rules or
regulations may be amended from time to time.
Additional Information Regarding Fundamental Investment Restrictions
- --------------------------------------------------------------------
The fundamental investment restrictions limit a Fund's ability to
engage in certain investment practices and purchase securities to the extent
permitted by, or consistent with, the 1940 Act. Relevant limitations of the 1940
Act are described below. Each Fund may be subject to more restrictive
non-fundamental investment policies. Non-fundamental investment policies may be
changed by the Board of Trustees.
The following 1940 Act descriptions are to assist the investor in
understanding the fundamental restrictions above, and are not themselves
fundamental.
Fundamental investment restriction (1). The 1940 Act presently limits a
Fund=s ability to borrow to one-third of the value of its total assets.
Borrowing by a Fund allows it to leverage its portfolio, which exposes it to
certain risks. Leveraging exaggerates the effect of any increase or decrease in
the value of portfolio securities on a Fund=s net asset value, and money
borrowed will be subject to interest costs (which may include commitment fees
and/or the cost of maintaining minimum average balances) which may or may not
exceed the interest received from the securities purchased with borrowed funds.
The 1940 Act also restricts the ability of any mutual fund to lend.
Under the 1940 Act, a Fund may only make loans if expressly permitted to do so
by the Fund=s investment policies, and a Fund may not make loans to persons who
control or are under common control with the Fund. Thus, the 1940 Act
effectively prohibits a Fund from making loans to certain persons when conflicts
of interest or undue influence are most likely present. The Funds may, however,
make other loans which if made would expose shareholders to certain additional
risks.
Fundamental investment restriction (2). The 1940 Act limits a Fund's
ability to pledge, mortgage or hypothecate its assets to one-third of its
assets. To the extent that pledged assets are encumbered for more than seven
days such assets would be considered illiquid and, therefore, each Fund's use of
such techniques would be limited to 15% of its net assets (10% for the Money
Market Funds).
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Fundamental investment restriction (3). The ability of a mutual fund to
issue senior securities is severely circumscribed by complex regulatory
constraints under the 1940 Act that restrict, for instance, the amount, timing,
and form of senior securities that may be issued. Because portfolio management
techniques involving the issuance of senior securities, such as the purchase of
securities on margin, short sales, or the writing of puts on portfolio
securities, are all techniques that involve the leveraging of a portfolio and
would not be consistent with the current SEC rules governing Money Market Funds.
Fundamental investment restriction (4). Under Section 5(b) of the 1940
Act, an investment company is diversified if, as to 75% of its total assets, no
more than 5% of the value of its total assets is invested in the securities of a
single issuer and no more than 10% of the issuer's voting securities is held by
the investment company. However, each of the Funds is subject to the "per
issuer" diversification requirements of the Internal Revenue Code of 1986
("Code") at the Fund's tax quarter-ends. Under the Code, the 5% "per issuer"
limit is applied only to 50% of a Fund's total assets (not 75% of total assets
as under the 1940 Act). However, no single issuer can exceed 25% of a Fund's
total assets under the Code as well as under the 1940 Act.
Fundamental investment restriction (5). "Concentration" is interpreted
under the 1940 Act to mean investment of 25% or more of a Fund's total assets in
a single industry. If a Fund were to "concentrate" its investments in a narrow
industry, investors would be exposed to greater risks because the Fund's
performance would be largely dependent on that segment's performance. None of
the Funds have reserved the right to concentrate in any industry.
Fundamental investment restriction (6). The 1940 Act prohibits a
diversified mutual fund from underwriting securities in excess of 25% of its
total assets.
Fundamental investment restriction (7). This restriction would permit
investment in commodities, commodities contracts, futures contracts, or real
estate to the extent permitted under the 1940 Act. Each Fund has the ability to
use these investment techniques. Commodities, as opposed to commodity futures,
represent the actual underlying bulk goods, such as grains, metals and food
stuffs. Real estate-related instruments include real estate investment trusts,
commercial and residential mortgage-backed securities, and real estate
financings, and such instruments are generally sensitive to factors such as
changes in real estate values and property taxes, interest rates, cash flow of
underlying real estate assets, overbuilding, and the management skill and
creditworthiness of the issuer. If a Fund invested in these instruments it would
be exposed to the risks associated with the underlying Security.
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Portfolio Turnover
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The portfolio turnover rate for each Fund is calculated by dividing the
lesser of a Fund's purchases or sales of portfolio securities for the year by
the monthly average value of the portfolio securities. The calculation excludes
all securities whose maturities at the time of acquisition were one year or
less. High portfolio turnover rates will generally result in higher transaction
costs to the Funds and may result in higher levels of taxable realized gains
(including short-term capital gains generally taxed at ordinary income tax rates
when distributed to shareholders who are individuals) to a Fund's shareholders.
The portfolio turnover rate may vary greatly from year to year as well as within
a particular year, and may also be affected by cash requirements for redemptions
of Shares. Portfolio turnover will not be a limiting factor in making investment
decisions.
Because securities with maturities of less than one year are excluded
from the calculation of the portfolio turnover rate, the portfolio turnover rate
for each Money Market Fund is expected to be zero for regulatory and reporting
purposes.
VALUATION
The net asset value of each Fund other than the Money Market Funds is
determined and its Shares are priced as of the close of regular trading of the
NYSE (generally 4:00 p.m. Eastern time) on each Business Day ("Valuation
Times"). The net asset value of each Money Market Fund is determined and its
Shares are priced as of 1:00 p.m. (Eastern time) and as of the close of regular
trading of the NYSE (generally 4:00 p.m., Eastern time) on each Business Day.
For each Money Market Fund, as used herein a "Business Day" constitutes (i) any
day on which the Federal Reserve Bank is open and the NYSE is open for trading
and (ii) any other day (other than a day during which no Shares are tendered for
redemption and no orders to purchase Shares are received) during which there is
sufficient trading in a Fund's portfolio instruments that the Fund's net asset
value per share might be materially affected. For each other fund, a Business
Day is (i) any day on which the NYSE is open for trading and (ii) any other day
(other than a day during which no Shares are tendered for redemption and no
orders to purchase Shares are received) during which there is sufficient trading
in a Fund's portfolio instruments that the Fund's net asset value per share
might be materially affected. Net asset value per Share for purposes of pricing
sales and redemptions is calculated by determining the value of the class's
proportional interest in the securities and other assets of a Fund, less (i)
such class's proportional share of general liabilities and (ii) the liabilities
allocable only to such class, and dividing such amount by the number of relevant
class Shares outstanding. Currently, the NYSE is closed on the customary
national business holidays of New Year's Day, Martin Luther King, Jr., Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
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The securities in each Fund, other than the Money Market Funds, will be
valued at market value. If market quotations are not available, the securities
will be valued by a method which the Board of Trustees believes accurately
reflects fair value.
Valuation of the Money Market Funds
- -----------------------------------
The Money Market Funds use the amortized cost method of valuing their
securities. This involves valuing an instrument at its cost initially and
thereafter assuming 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. This method may result in periods during which value,
as determined by amortized cost, is higher or lower than the price each Money
Market Fund would receive if it sold the instrument. The value of each Money
Market Fund's securities can be expected to vary inversely with changes in
prevailing interest rates.
Pursuant to Rule 2a-7, each Money Market Fund will maintain a
dollar-weighted average portfolio maturity appropriate to its objective of
maintaining a stable net asset value per Share, provided that the Fund will not
purchase any security with a remaining maturity of more than thirteen months
(securities subject to repurchase agreements may bear longer maturities) nor
maintain a dollar-weighted average portfolio maturity which exceeds 90 days. The
Board of Trustees has also undertaken to establish procedures reasonably
designed, taking into account current market conditions and each Money Market
Fund's investment objective, to stabilize the net asset value per Share for
purposes of sales and redemptions at $1.00. These procedures include review by
the Trustees, at such intervals as they deem appropriate, to determine the
extent, if any, to which the net asset value per Share deviates from $1.00 per
Share. In the event such deviation exceeds one-half of one percent, Rule 2a-7
requires the Board of Trustees to promptly consider what action, if any, should
be initiated. If the Board of Trustees determines that the deviation from a
$1.00 price per Share may result in material dilution or other unfair results to
Shareholders, it will take the appropriate steps to eliminate or reduce these
consequences to the extent reasonably practicable. These steps may include
selling portfolio instruments prior to maturity in order to realize capital
gains or losses to shorten the average portfolio maturity, adjusting or
withholding dividends or utilizing a net asset value per Share determined by
using available market quotations.
Valuation of the Investment Grade Bond Fund, the Global Asset Allocation Fund,
- ------------------------------------------------------------------------------
and the Equity Fund
- -------------------
Portfolio securities, the principal market for which there is a
securities exchange, will be valued at the closing sales price on that exchange
on the day of computation, or, if there have been no sales during such day, at
their latest bid quotations. If no such bid and asked prices are available, then
the securities will be valued in good faith at their respective fair market
values using methods determined by or under the supervision of the Board of
Trustees of the Eureka Funds; provided however, that before any such securities
are purchased for any
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Variable NAV Fund, the Trustees of the Eureka Funds shall be notified and given
the opportunity to establish appropriate methods of determining the fair market
value of such securities.
Portfolio securities, the principal market for which there is not a
securities exchange, will be valued at the mean between their latest bid and
asked quotations in such principal market. If no such bid and asked prices are
available, then the securities will be valued in good faith at their respective
fair market values using methods determined by or under the supervision of the
Board of Trustees of the Eureka Funds.
All other assets and securities including securities for which market
quotations are not readily available will be valued at their fair value as
determined in good faith under the general supervision of the Board of Trustees
of the Eureka Funds; provided however, that before any such securities are
purchased for any Variable NAV Fund, the Trustees of the Eureka Funds shall be
notified and given the opportunity to establish appropriate methods of
determining the fair market value of such securities.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
HOW TO PURCHASE AND REDEEM SHARES
DISTRIBUTOR
Shares are sold on a continuous basis by the Eureka Funds' Distributor,
BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219. If you wish to
purchase Shares, contact the Eureka Funds at (888) 890-8121.
PURCHASES OF CLASS A SHARES
Class A Shares may be purchased through procedures established by the
Distributor in connection with the requirements of qualified accounts maintained
by or on behalf of certain persons ("Customers"). All payments by the
Distributor for distribution assistance or shareholder services under the
Distribution Plan will be made pursuant to an agreement (a "Servicing
Agreement") between the Distributor and such bank, other financial institution
or intermediary, broker-dealer, or affiliate or subsidiary of the Distributor
("Participating Organizations"). Class A Shares may be purchased by
Participating Organizations under the Eureka Funds' Distribution Plan. See
"MANAGEMENT OF THE EUREKA FUNDS--Distribution Plan."
Shares of the Eureka Funds sold to Participating Organizations acting
in a fiduciary, advisory, custodial (other than individual retirement accounts),
or other similar capacity on
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behalf of Customers will normally be held of record by the Participating
Organizations. With respect to Shares so sold, it is the responsibility of the
Participating Organization to transmit purchase or redemption orders to the
Distributor and to deliver federal funds for purchase on a timely basis.
Investors may directly purchase Class A Shares of a Fund by completing
and signing an Account Registration Form and mailing it, together with a check
(or other negotiable bank draft or money order) for at least the minimum initial
purchase amount, payable to Eureka Funds, P.O. Box 182792, Columbus, Ohio
43218-2792. The Funds do not accept third-party checks. Investors may obtain an
Account Registration Form and additional information regarding the Eureka Funds
by contacting their local Sanwa Bank California office or calling (888)
890-8121. Initial purchases of shares into a new account may not be made by
wire. Subsequent purchases of Class A Shares of a Fund may be made at any time
by mailing a check (or other negotiable bank draft or money order) to the above
address.
If an Account Registration Form has been previously received by the
Distributor, investors may also purchase Class A Shares by telephone. Telephone
orders may be placed by calling the Eureka Funds at (888) 890-8121. Payment for
Class A Shares ordered by telephone may be made by sending funds electronically
to the Eureka Funds' custodian. To make payments electronically, investors must
call the Eureka Funds at (888) 890-8121 to obtain instructions regarding the
bank account number into which the funds should be wired and other pertinent
information.
Class A Shares of the Variable NAV Funds are sold at the net asset
value next determined after receipt by the Distributor of an order in good form
to purchase Shares (see "VALUATION OF SHARES"). In the case of orders for the
purchase of Shares placed through a broker-dealer, the public offering price
will be the net asset value as so determined, but only if the broker-dealer
receives the order prior to the Valuation Time for that day and transmits to the
Eureka Funds by the Valuation Time. The broker-dealer is responsible for
transmitting such orders promptly. If the broker-dealer fails to do so, the
investor's right to that day's closing price must be settled between the
investor and the broker-dealer. If the broker-dealer receives the order after
the Valuation Time for that day, the price will be based on the net asset value
determined as of the Valuation Time for the next Business Day.
There is a minimum initial investment of $1,000 for the purchase of
Class A Shares of a Fund, and a $50 minimum for subsequent purchases. The
minimum initial investment amount is $50 if purchases are made in connection
with qualified retirement plans (401(k) and 403(b) accounts only), systematic
investment plans or payroll deduction plans. There is no limit on the amount of
Class A Shares that may be purchased.
Shareholders will be mailed a confirmation of each new transaction in
their account. In the case of Class A Shares held of record by a Participating
Organization but beneficially
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owned by a Customer, confirmations of purchases, exchanges and redemptions of
Class A Shares by a Participating Organization will be sent to the Customer by
the Participating Organization. Certificates representing Shares will not be
issued.
EUREKA FUNDS INDIVIDUAL RETIREMENT ACCOUNT ("IRA")
The Eureka Funds make available IRAs, including IRAs set up under a
Simplified Employee Pension Plan ("SEP-IRAs") and IRA "Rollover Accounts." An
IRA enables individuals, even if they participate in an employer-sponsored
retirement plan, to establish their own retirement program by purchasing Class A
Shares for an IRA. Eureka Funds IRA contributions may be tax-deductible and
earnings are tax deferred. Under the Tax Reform Act of 1986, the tax
deductibility of IRA contributions is restricted or eliminated for individuals
who participate in certain employer pension plans and whose annual income
exceeds certain limits. Existing IRAs and future contributions up to the IRA
maximums, whether deductible or not, still earn income on a tax-deferred basis.
The Eureka Funds also make available the Roth IRA. Unlike a traditional
IRA, contributions to a Roth IRA are not tax deductible. However, distributions
are generally excluded from income provided they occur at least five years after
the creation of the Roth IRA and the distribution is (1) made on or after the
date on which the individual attains age 59 1/2; (2) made to a beneficiary (or
the individual's estate) on or after the individual's death; (3) attributable to
the individual being disabled; or (4) a "qualified first-time home buyer
distribution," subject to a $10,000 limit.
Trust Shares of the Eureka Funds IRAs are available to employees of
SBCL, employees of BISYS Fund Services and Trustees of the Eureka Funds; the
minimum initial investment in an IRA is $500 and there is no minimum subsequent
investment requirement. Class A Shares of the Eureka Funds IRAs are available to
all shareholders; the minimum investment in an IRA is $1,000 and the minimum for
subsequent investments is $50.
BISYS Fund Services, Inc. serves as transfer agent to each Fund
pursuant to a Transfer Agency Agreement. All Eureka Funds IRA distribution
requests must be made in writing to BISYS Fund Services, Inc. (the "Transfer
Agent"). Any additional deposits to a Eureka Funds IRA must distinguish the type
and year of the contribution.
For more information on a Eureka Funds IRA call the Eureka Funds at
(888) 890-8121. Shareholders are advised to consult a tax adviser on Eureka
Funds IRA contribution and withdrawal requirements and restrictions.
Shareholders should read the Disclosure Statement and Custodial Agreement for
further details on eligibility, service fees, and tax implications.
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ADDITIONAL INFORMATION ABOUT PURCHASING SHARES
Purchases of Class A Shares of the Eureka Funds will be effected only
on a Business Day (as defined in "VALUATION"). An order for a Money Market Fund
received prior to a Valuation Time on any Business Day will be executed at the
net asset value determined as of the next Valuation Time on the date of receipt.
An order for a Money Market Fund received after the last Valuation Time on any
Business Day will be executed at the net asset value determined as of the next
Valuation Time on the next Business Day. An order for any Fund other than a
Money Market Fund received prior to the Valuation Time on any Business Day will
be executed at the net asset value determined as of the Valuation Time on the
date of receipt. An order for any Fund other than a Money Market Fund received
after the Valuation Time on any Business Day will be executed at the net asset
value determined as of the Valuation Time on the Business Day.
An order to purchase Class A Shares of a Money Market Fund will be
deemed to have been received by the Distributor when federal funds are available
to the Eureka Funds' custodian for investment. Federal funds are monies credited
to a bank's account within a Federal Reserve Bank. Payment for an order to
purchase Shares of a Money Market Fund which is transmitted by federal funds
wire will be available the same day for investment by the Eureka Funds'
custodian, if received prior to the last Valuation Time (see "VALUATION"). It is
strongly recommended that investors of substantial amounts use federal funds to
purchase Shares of a Money Market Fund.
Shares of a Money Market Fund purchased before 1:00 p.m., Eastern time,
begin earning dividends on the same Business Day. All Shares of a Money Market
Fund continue to earn dividends through the day before their redemption.
Depending upon the terms of a particular Customer account, a
Participating Organization or Bank may charge a Customer's account fees for
services provided in connection with investment in the Eureka Funds. Information
concerning this Prospectus should be read in conjunction with any such
information received from the Participating Organizations or Banks.
The Eureka Funds reserve the right to reject any order for the purchase
of its Class A Shares in whole or in part, including purchases made with foreign
drafts or checks. The Eureka Funds will not accept third party checks for
investment.
Please call the Eureka Funds at (888) 890-8121 regarding proper
instructions and information to purchase or redeem Shares by check or wire.
Shareholders may also execute telephone transactions as explained below.
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REDEMPTION OF SHARES
Shareholders may redeem their Class A Shares without charge on any day
that net asset value is calculated (see "VALUATION") and Shares may ordinarily
be redeemed by mail or by telephone. However, all or part of a Customer's Shares
may be required to be redeemed in accordance with instructions and limitations
pertaining to his or her account held by a Participating Organization or Bank.
For example, if a Customer has agreed to maintain a minimum balance in his or
her account, and the balance in that account falls below that minimum, the
Customer may be obliged to redeem, or the Participating Organization or Bank may
redeem for and on behalf of the Customer, all or part of the Customer's Shares
to the extent necessary to maintain the required minimum balance.
Each Fund reserves the right to redeem a shareholder's Class A Shares
if the Shareholder does not maintain a balance of $1,000 in the Class A Shares
of that Fund.
REDEMPTION BY MAIL
A written request for redemption must be received by the Eureka Funds
in order to constitute a valid tender for redemption. The signature on the
written request must be guaranteed by a bank, broker, dealer, credit union,
securities exchange, securities association, clearing agency or savings
association, as those terms are defined in Rule 17Ad-15 under the Securities
Exchange Act of 1934 if (a) a redemption check is to be payable to anyone other
than the Shareholder(s) of record; or (b) a redemption check is to be mailed to
the Shareholder(s) at an address other than the address of record or other than
to a commercial bank designated on the Account Registration Form of such
Shareholder(s). The Distributor reserves the right to reject any signature
guarantee if (1) it has reason to believe that the signature is not genuine, (2)
it has reason to believe that the transaction would otherwise be improper, or
(3) the guarantor institution is a broker or dealer that is neither a member of
a clearing corporation nor maintains net capital of at least $100,000. A
signature notarized by a notary public will not be accepted as a signature
guarantee. Proceeds may be mailed to the address of record or sent
electronically or mailed to a previously designated bank account without a
signature guarantee. See "Redemption by Telephone" for further discussion
regarding sending proceeds to your bank account.
REDEMPTION BY TELEPHONE
Shares may be redeemed by telephone if the Shareholder selected that
option on the Account Registration Form or in a subsequent written request to
the Transfer Agent. A Shareholder may have the proceeds mailed to the address of
record or sent electronically or mailed directly to a domestic commercial bank
account previously designated by the Shareholder on the Account Registration
Form. Under most circumstances, such payments will be transmitted on the next
Business Day following receipt of a valid request for
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redemption. Such electronic redemption requests may be made by the Shareholder
by telephone to the Transfer Agent. The Transfer Agent may reduce the amount of
a wire redemption payment by its then-current wire redemption charge. Presently
there is no charge. There is no charge for having payment of redemption requests
mailed or sent via the Automated Clearing House to a designated bank account.
For telephone redemptions, contact the Funds at (888) 890-8121.
TELEPHONE PROCEDURES
A change of address may be requested over the telephone or by fax.
These requests will be processed and subject to independent verification at the
point of entry. Telephone and faxed address changes may not be made in
conjunction with a redemption request or a change in Auto Invest/Auto Withdrawal
instructions. A Shareholder that changes his or her address by phone will have
their account subject to a ten business day escrow hold.
The Distributor, the Transfer Agent, SBCL and the Eureka Funds will not
be liable for any losses, damages, expenses or costs arising out of any
telephone transaction (including purchases, exchanges, and redemptions) effected
in accordance with the Eureka Funds' telephone transaction procedures, upon
instructions reasonably believed to be genuine. The Eureka Funds will employ
procedures designed to provide reasonable assurance that instructions
communicated by telephone are genuine; if these procedures are followed, the
Eureka Funds will not be liable for any losses due to unauthorized or fraudulent
instructions. These procedures include recording phone conversations, sending
confirmations to Shareholders within 72 hours of the telephone transaction,
verifying the account name and a Shareholder's account number or tax
identification number and sending redemption proceeds only to the address of
record or to a previously authorized bank account. If, due to temporary adverse
conditions, Shareholders are unable to effect telephone transactions,
Shareholders may mail redemption requests to the Eureka Funds.
PAYMENTS TO SHAREHOLDERS
Redemption orders are effected at the net asset value per Share next
determined after the Shares are properly tendered for redemption, as described
above. Payment to Shareholders for Shares redeemed will be made within seven
days after receipt by the Distributor of the request for redemption. However, to
the greatest extent possible, the Eureka Funds will attempt to honor requests
from Shareholders for next Business Day payments if the request for redemption
is received by the Transfer Agent before the Valuation Time on a Business Day
or, if the request for redemption is received after the Valuation Time, to honor
requests for payment within two Business Days, unless it would be
disadvantageous to the Eureka Funds or the Shareholders of the particular Fund
to sell or liquidate portfolio securities in an amount sufficient to satisfy
requests for payments in that manner. The Money Market Funds will attempt to
honor requests from Shareholders for same day payment upon redemption of Shares
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if the request for redemption is received by the Transfer Agent before 1:00 p.m.
Eastern time, on a Business Day or, if the request for redemption is received
after 1:00 p.m. Eastern time, to honor requests for payment on the next Business
Day, unless it would be disadvantageous to the Fund or its Shareholders to sell
or liquidate portfolio securities in an amount sufficient to satisfy requests
for payments in that manner.
In some instances, a Fund may be requested to redeem Shares for which
it has not yet received good payment. Under such circumstances, the Eureka Funds
may delay forwarding the proceeds until payment has been collected for the
purchase of such Shares, which may take up to 15 days or more. To avoid delay in
payment upon redemption, investors should purchase Shares by certified check or
by wire transfer. The Eureka Funds intend to pay cash for all Shares redeemed,
but under abnormal conditions which may make payment in cash unwise, the Eureka
Funds may make payment wholly or partly in portfolio securities at their then
current market value equal to the redemption price. In such cases, an investor
may incur brokerage costs in converting such securities to cash.
Due to the relatively high cost of handling small investments, the
Eureka Funds reserve the right to redeem, at net asset value, the Shares in an
account with a value of less than $1,000. Accordingly, an investor purchasing
Shares of a Fund in only the minimum investment amount may be subject to such
involuntary redemption if he thereafter redeems some of his Shares. Before the
Eureka Funds exercises its right to redeem such Shares, the Shareholder will be
given notice that the value of his Shares of a Fund is less than the minimum
amount and will be allowed 60 days to make an additional investment to increase
the value of the account to at least $1,000.
Each class of Shares of the Funds are sold on a continuous basis by
BISYS Fund Services Limited Partnership d/b/a/ BISYS Fund Services. In addition
to purchasing Shares directly from BISYS Fund Services, Class A or Trust Shares
may be purchased through procedures established by BISYS Fund Services in
connection with the requirements of accounts at SBCL, or SBCL's affiliated or
correspondent banks. Customers purchasing Shares of the Eureka Funds may include
officers, directors, employees of SBCL or SBCL's affiliated or correspondent
banks, employees of BISYS Fund Services or Trustees of the Eureka Funds.
Matters Affecting Redemption
- ----------------------------
The Eureka Funds may suspend the right of redemption or postpone the
date of payment for Shares during any period when (a) trading on the NYSE is
restricted by applicable rules and regulations of the Securities and Exchange
Commission, (b) the NYSE is closed for other than customary weekend and holiday
closings, (c) the Securities and Exchange Commission has by order permitted such
suspension, or (d) an emergency exists as a result of which (i) disposal by the
Eureka Funds of securities owned by it is not reasonably practical or
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(ii) it is not reasonably practical for the Company to determine the fair market
value of its total net assets.
The Eureka Funds may redeem any class of Shares involuntarily if
redemption appears appropriate. See "Valuation of the Money Market Funds" above.
ADDITIONAL TAX INFORMATION
DIVIDENDS AND TAXES
Each Fund will be treated as a separate entity for federal income tax
purposes. Each Fund intends to qualify for treatment as a "regulated investment
company" under the Internal Revenue Code of 1986, as amended (the "Code"). If
qualified, a Fund will not have to pay federal taxes on amounts it distributes
to Shareholders. Regulated investment companies are subject to a federal excise
tax if they do not distribute substantially all of their income on a timely
basis. Each Fund intends to avoid paying federal income and excise taxes by
timely distributing substantially all its net income and net realized capital
gains.
Shareholders will be advised at least annually as to the amount and
federal income tax character of distributions made during the year.
The net investment income of each Money Market Fund is declared daily
as a dividend to Shareholders at the close of business on the day of
declaration. Dividends will generally be paid monthly. The Money Market Funds do
not expect to realize any long-term capital gains and, therefore, do not foresee
paying any "capital gains dividends" as described in the Code. However, any such
capital gains will be distributed no more than twice a year after deduction for
any available capital loss carryforward.
The amount of dividends payable with respect to the Trust Shares will
exceed dividends on Class A Shares due to the Distribution and Shareholder
Services Plan fee and Services Plan fee applicable to Class A Shares.
Dividends on the Shares of the Investment Grade Bond Fund are declared
daily and paid monthly. A dividend on the Shares of the Global Asset Allocation
Fund is declared and paid annually. A dividend on the Shares of the Equity Fund
is declared and paid monthly. Net realized capital gains, if any, are
distributed at least annually to Shareholders of record after deduction for any
available capital loss carryforward.
A Shareholder will automatically receive all income dividends and
capital gain distributions in additional full and fractional Shares at net asset
value as of the date of payment unless the Shareholder elects to receive such
dividends or distributions in cash. Such election,
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or any revocation thereof, must be made in writing to the Eureka Funds, P.O. Box
182792, Columbus, Ohio 43218-2792, and will become effective with respect to
dividends and distributions having record dates after its receipt by the
Transfer Agent. Reinvested dividends receive the same tax treatment as dividends
paid in cash. Dividends are paid in cash not later than seven Business Days
after a Shareholder's complete redemption of his or her Shares. If you elect to
receive distributions in cash, and checks (1) are returned and marked as
"undeliverable" or (2) remain uncashed for six months, your cash election will
be changed automatically and your future dividend and capital gains
distributions will be reinvested in the Fund at the per share net asset value
determined as of the date of payment of the distribution. In addition, any
undeliverable checks or checks that remain uncashed for six months will be
canceled and will be held in a non-interest bearing account pending further
instructions from the Shareholder.
Dividends are generally taxable in the taxable year received. However,
dividends declared in October, November or December to Shareholders of record
during such a month and paid during the following January are treated for tax
purposes as if they were received by each Shareholder on December 31 of the year
in which the dividends were declared.
Dividends will generally be taxable to a Shareholder as ordinary income
to the extent of the Shareholder's ratable share of the earnings and profits of
a Fund as determined for tax purposes. Certain dividends paid by the Investment
Grade Bond Fund, the Global Asset Allocation Fund, and the Equity Fund, and
so-designated by the Funds may qualify for the dividends received deduction for
corporate shareholders. Because all of the net investment income of the
remaining Funds is expected to be interest income, it is anticipated that no
distributions from such Funds will qualify for the dividends received deduction.
Distributions of net realized capital gains are taxable to Shareholders as
long-term capital gains regardless of how long the Shareholder has held Shares
in the Fund. Shareholders who are not subject to tax on their income generally
will not have to pay federal income tax on amounts distributed to them.
Dividends and distributions on a Fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
Fund's realized income and gains, even though such dividends and distributions
may economically represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares purchased at a time
when a Fund's net asset value reflects gains that are either unrealized, or
realized but not distributed. Such realized gains may be required to be
distributed even when a Fund's net asset value also reflects unrealized losses.
Dividends received by a Shareholder of a Fund that are derived from
such Fund's investments in U.S. government agency securities may not be entitled
to the exemption from state and local income taxes that would be available if
the Shareholder had purchased U.S. government agency securities directly.
Distributions of income derived from repurchase
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<PAGE> 143
agreements and securities lending transactions generally will not qualify for
exemption from state and local income taxes.
The foregoing is a summary of certain federal income tax consequences
of investing in a Fund. Shareholders should consult their own tax advisers
concerning the tax consequences of an investment in a Fund including the
application of state and local taxes to distributions received from a Fund.
General
- -------
It is the policy of each of the Funds to qualify for the favorable tax
treatment accorded regulated investment companies (a "RIC") under Subchapter M
of the Code. By qualifying as a RIC, each Fund expects to eliminate or reduce to
a nominal amount its federal income taxes.
In order to qualify as a RIC and to qualify for the favorable tax
treatment accorded RICs and their shareholders, a Fund must (a) derive at least
90% of its gross income from dividends, interest, payments with respect to
certain securities loans, and gains from the sale of stock, securities, and
foreign currencies, or other income (including but not limited to gains from
options, futures, or forward contracts) derived with respect to its business of
investing in such stock, securities, or currencies; (b) distribute each year at
least 90% of its dividend, interest (including tax-exempt interest), and certain
other income and the excess, if any, of its net short-term capital gains over
its net long-term capital losses; and (c) diversify its holdings so that, at the
end of each fiscal quarter (i) at least 50% of the market value of its assets is
represented by cash, cash items, U.S. government securities, securities of other
RICs, and other securities, limited in respect of any one issuer to a value not
greater than 5% of the value of the Fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities (other than those of the U.S.
government or other RICs) of any one issuer or of two or more issuers which the
Fund controls and which are engaged in the same, similar, or related trades or
businesses.
A non-deductible excise tax is imposed on RICs that do not distribute
in each calendar year (regardless of whether they have a non-calendar taxable
year) an amount at least equal to (i) 98% of their "ordinary income" (as
defined) for the calendar year plus (ii) 98% of their capital gain net income
for the 12 month period ending on October 31 of such calendar year plus (iii)
any undistributed amounts from prior years. For the foregoing purposes, a Fund
is treated as having distributed any amount on which it is subject to income tax
for any taxable year ending in such calendar year. If distributions during a
calendar year by a Fund were less than the required amount, the Fund would be
subject to a non-deductible excise tax equal to 4% of the deficiency.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of taxable dividends and other distributions paid to any
Shareholder who has provided
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either an incorrect taxpayer identification number or no number at all, who is
subject to withholding by the Internal Revenue Service for failure properly to
report payments of interest or dividends, or who fails to provide a certified
statement that he or she is not subject to "backup withholding."
A Fund's transactions in futures contracts, options, and
foreign-currency-denominated securities, and certain other investment and
hedging activities of the Fund, will be subject to special tax rules (including
"mark-to-market," "straddle," "wash sale," "constructive sale" and "short sale"
rules), the effect of which may be to accelerate income to the Fund, defer
losses to the Fund, cause adjustments in the holding periods of the Fund's
assets, convert short-term capital losses into long-term capital losses, convert
long-term capital gains into short-term capital gains and otherwise affect the
character of the Fund's income. These rules could therefore affect the amount,
timing, and character of distributions to Shareholders. Income earned as a
result of these transactions would, in general, not be eligible for the
dividends received deduction or for treatment as exempt-interest dividends when
distributed to Shareholders. The Funds will endeavor to make any available
elections pertaining to these transactions in a manner believed to be in the
best interest of the Funds.
Investment by the Fund in "passive foreign investment companies" could
subject the Fund to federal income tax or other charge on the proceeds from the
sale of its investment in such a company; however, this tax can be avoided by
making an election to mark such investments to market annually or to treat the
passive foreign investment company as a "qualified electing fund."
A "passive foreign investment company" is any foreign corporation: (i)
75 percent or more of the income of which for the taxable year is passive
income, or (ii) the average percentage of the assets of which (generally by
value, but by adjusted tax basis in certain cases) that produce or are held for
the production of passive income is at least 50 percent. Generally, passive
income for this purpose means dividends, interest (including income equivalent
to interest), royalties, rents, annuities, the excess of gains over losses from
certain property transactions and commodities transactions, and foreign currency
gains. Passive income for this purpose does not include rents and royalties
received by the foreign corporation from active business and certain income
received from related persons.
Although each Fund expects to qualify as a RIC and to be relieved of
all or substantially all Federal income taxes, depending upon the extent of
their activities in states and localities in which their offices are maintained,
in which their agents or independent contractors are located, or in which they
are otherwise deemed to be conducting business, the Funds may be subject to the
tax laws of such states or localities. If for any taxable year a Fund does not
qualify for the special federal tax treatment accorded a RIC, all of its taxable
income will be subject to federal income tax at regular corporate rates at the
Fund level (without any deduction for distributions to its Shareholders). In
addition, distributions to Shareholders will
B-36
<PAGE> 145
be taxed as ordinary income even if the distributions are attributable to
capital gains or exempt interest earned by the Fund.
Information set forth in the Prospectuses and this Statement of
Additional Information which relates to federal taxation is only a summary of
some of the important federal tax considerations generally affecting purchasers
of Shares of the Funds. No attempt has been made to present a detailed
explanation of the federal income tax treatment of a Fund or its Shareholders
and this discussion is not intended as a substitute for careful tax planning.
Accordingly, potential purchasers of Shares of a Fund are urged to consult their
tax advisers. In addition, the tax discussion in the Prospectuses and this
Statement of Additional Information is based on tax laws and regulations which
are in effect on the date of the Prospectuses and this Statement of Additional
Information; such laws and regulations may be changed by legislative or
administrative action.
Additional Tax Information Concerning the Global Asset Allocation Fund
- ----------------------------------------------------------------------
Dividends and certain interest income earned by the Global Asset
Allocation Fund from foreign securities may be subject to foreign withholding
taxes or other taxes. So long as more than 50% of the value of the Fund's total
assets at the close of any taxable year consists of stock or securities of
foreign corporations, the Fund may elect, for federal income tax purposes, to
treat certain foreign taxes paid by it, including generally any withholding
taxes and other foreign income taxes, as paid by its shareholders. It is
possible that the Global Asset Allocation Fund will make this election in
certain years. The remaining Funds do not expect to be eligible to make this
election. If a Fund makes the election, the amount of such foreign taxes paid by
a Fund will be included in its shareholders' income pro rata (in addition to
taxable distributions actually received by them). A shareholder's ability to
claim a foreign tax credit or deduction in respect of foreign taxes paid by the
Fund may be subject to certain limitations imposed by the Code, as a result of
which a shareholder may not get a full credit or deduction for the amount of
such taxes. Shareholders who do not itemize on their federal income tax returns
may claim a credit (but no deduction) for such foreign taxes.
The Global Asset Allocation Fund's transactions in foreign currencies
and hedging activities may give rise to ordinary income or loss to the extent
such income or loss results from fluctuations in value of the foreign currency
concerned. In addition, such activities will likely produce a difference between
book income and taxable income. This difference may cause a portion of a Fund's
income distributions to constitute a return of capital for tax purposes or
require the Fund to make distributions exceeding book income to qualify as a
regulated investment company for tax purposes.
B-37
<PAGE> 146
MANAGEMENT OF THE EUREKA FUNDS
Trustees and Officers
- ---------------------
The Board of Trustees of the Eureka Funds has overall responsibility
for the Funds. The Board of Trustees is elected by the Shareholders. There are
currently five Trustees, two of whom are "interested persons" of the Eureka
Funds within the meaning of that term under the 1940 Act. The Trustees, in turn,
elect the officers of the Eureka Funds to supervise its day-to-day operations.
The Trustees and officers of each Fund, their current addresses, and
principal occupations during the past five years are as follows (if no address
is listed, the address is 3435 Stelzer Road, Columbus, Ohio 43219):
<TABLE>
<CAPTION>
Position with the
Name/Age Eureka Funds Principal Occupation
- -------- ----------------- --------------------
<S> <C> <C>
Larry D. Layne* Trustee; Chairman of the Board Vice Chairman/Head-Commercial Banking Group -
58 Sanwa Bank California, January 1999 to
present; Group Executive Vice President/Head-
Relationship Banking Group - Sanwa Bank
California, 1992-Present
Donald H. Livingstone Trustee Director - Center for Entrepreneurship,
56 1994-1999; Professor - Marriott School of
Business, 1994-1997; Partner -Arthur Andersen
LLP, 1976-1995
Walter F. Beran Trustee Chairman - Pacific Alliance Group, Present;
72 Board Member - Compensation Resource Group,
Present; Board Member - Fleetwood Enterprises,
Inc., Present; Board Member - Ventas, Inc.,
Present; Retired, Vice Chairman - Ernst &
Young, 1986
Takashi Muraoka* Trustee Vice Chairman/Head - Corporate Development
46 Group - Sanwa Bank California, November 1999 to
present; Executive Vice President/Deputy Head -
Corporate Development Group - Sanwa Bank California,
August 1999 to October 1999; Deputy General Manager -
Human Resources Department - The Sanwa Bank, Limited,
Tokyo, November 1994 to July 1999
</TABLE>
B-38
<PAGE> 147
<TABLE>
<CAPTION>
Position with the
Name/Age Eureka Funds Principal Occupation
- -------- ----------------- --------------------
<S> <C> <C>
David L. Buell Trustee Chairman and Chief Executive Officer - Prime
63 Bank February 1998 to Present; Owner (50%) -
Prime, LLC, 1996-1998; Founder, Chairman & CEO
- Metrobank, 1978-1996
Irimga McKay President Senior Vice President, July 1993 to date,
38 prior thereto First Vice President of the
Administrator and Distributor, November 1988 to
July 1993; Regional Vice President, Continental
Equities, June 1987 to November 1988; Assistant
Wholesaler, VMS Realty Partners (a real estate
limited partnership), May 1986 to June 1987
Sandra Souter Vice President Vice President of Client Services, BISYS Fund
38 Services (June 1999 to present); Vice
President, First Union Bank (1996-May 1999);
Manager of Telewholesaling, BISYS Fund
Services (1992-1995)
Martin R. Dean Secretary Vice President of Administration Services of
36 BISYS Fund Services (1994-Present); Senior
Manager, KPMG Peat Marwick LLP (1987-1994)
Frank M. Deutchki Treasurer Vice President, Financial Services Dept.,
45 BISYS Fund Services (April, 1996 to present);
Vice President and Audit Director, Mutual Fund
Services Co. (1989-1996)
</TABLE>
B-39
<PAGE> 148
<TABLE>
<CAPTION>
Position with the
Name/Age Eureka Funds Principal Occupation
- -------- ----------------- --------------------
<S> <C> <C>
Alaina V. Metz Assistant Secretary Chief Administrative Officer of BISYS Fund
32 Services - Blue Sky compliance (1995-Present);
Alliance Capital Management, L.P. (1989-1995)
</TABLE>
* Considered to be an "interested person" of the Funds as defined in the
1940 Act.
The officers of the Eureka Funds receive no compensation directly from
the Eureka Funds for performing the duties of their offices. BISYS Fund Services
receives fees from the Eureka Funds for acting as Administrator and BISYS Fund
Services, Inc. receives fees from the Eureka Funds for acting as Transfer Agent
and for providing fund accounting services to the Eureka Funds.
<TABLE>
COMPENSATION TABLE(1)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Pension or Total
Aggregate Retirement Estimated Compensation
Compensation Benefits Accrued Annual from the Eureka
from the Eureka as Part of Fund Benefits upon Funds Paid to
Name of Person, Position Funds Expenses Retirement Directors
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walter F. Beran, Trustee $15,000 None None $15,000
- ----------------------------------------------------------------------------------------------------------
David L. Buell, Trustee $15,000 None None $15,000
- ----------------------------------------------------------------------------------------------------------
Kazuyoshi Kuwahata, $ 0 None None $ 0
Trustee(2)
- ----------------------------------------------------------------------------------------------------------
Donald H. Livingstone, Trustee $15,000 None None $15,000
- ----------------------------------------------------------------------------------------------------------
Larry Layne, Trustee $ 0 None None $ 0
- ----------------------------------------------------------------------------------------------------------
Takashi Muraoka, Trustee(3) $ 0 None None $ 0
</TABLE>
(1) Compensation figures are for the fiscal year ended on September 30, 1999.
(2) Mr. Kuwahata resigned as Trustee effective November 12, 1999.
(3) Mr. Muraoka was appointed as Trustee as of November 30, 1999 and therefore
did not receive any compensation for the fiscal year ended September 30,
1999.
B-40
<PAGE> 149
Investment Adviser
- ------------------
Investment advisory and management services are provided to each Fund
by SBCL pursuant to an Investment Advisory Agreement ("Advisory Agreement")
dated October 21, 1997.
The Advisory Agreement provides that SBCL shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Eureka Funds
in connection with the performance of such Advisory Agreement, except a loss
resulting from a breach of fiduciary duty under the 1940 Act with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith, or gross negligence on the part of SBCL in the
performance of its duties, or from reckless disregard by SBCL of its obligations
and duties under the Advisory Agreement.
The Advisory Agreement will continue in effect until May 31, 2000, and
if not terminated, shall continue in effect as to a particular Fund for
successive periods of twelve months, provided such continuance is specifically
approved at least annually (a) by the vote of a majority of those members of the
Trust's Board of Trustees who are not parties to the Advisory Agreement or
interested persons of any party to the Advisory Agreement, cast in person at a
meeting called for the purpose of voting on such approval, and (b) by the vote
of a majority of the Trust's Board of Trustees or by the vote of a majority of
the outstanding voting securities of such Fund. The Advisory Agreement is
terminable as to a particular Fund at any time on 60 days written notice,
without the payment of any penalty, by the Trust (by vote of the Trust's Board
of Trustees or by the vote of a majority of the outstanding voting securities of
such Fund) or by SBCL. The Advisory Agreement will immediately terminate in the
event of its assignment, as defined in the 1940 Act.
Under an investment advisory agreement between the Eureka Funds and
SBCL, the fee payable to SBCL by each Fund for investment advisory services is
the lesser of: (a) a fee computed daily and paid monthly at the annual rate of
thirty one-hundredths of one percent (0.30%) of the Prime Money Market Fund's
average daily net assets; twenty one-hundredths of one percent (0.20%) of the
U.S. Treasury Obligations Fund's average daily net assets; sixty one-hundredths
of one percent (0.60%) of the Investment Grade Bond Fund=s average daily net
assets; ninety one-hundredths of one percent (0.90%) of the Global Asset
Allocation Fund=s average daily net assets; and seventy five one-hundredths of
one percent (0.75%) of the Equity Fund=s average daily net assets, or (b) such
fee as may from time to time be agreed upon by the Eureka Funds and SBCL. The
fee agreed to from time to time by the Eureka Funds and SBCL may be
significantly lower than the fee calculated at the annual rate and the effect of
such agreed upon lower fee would be to lower a Fund's expenses and increase the
net income of the Fund during the period when such agreed upon lower fee is in
effect.
B-41
<PAGE> 150
SBCL received the following fees for investment advisory services:
<TABLE>
FISCAL YEAR ENDED
<CAPTION>
September 30, 1999 September 30, 1998
------------------------- -------------------------
Additional Additional
Amount Amount
Paid Waived Paid Waived
---- ------ ---- ------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations Fund $ 111,492 $ 82,306 $ 82,306 $ 82,303
Prime Money Market Fund $ 399,512 $199,752 $ 299,724 $149,859
Investment Grade Bond Fund $ 738,773 $147,752 $ 635,809 $127,160
Global Asset Allocation Fund $ 662,224 $ 82,778 $ 464,946 $ 58,118
Equity Fund $1,295,200 $199,260 $1,159,221 $178,340
</TABLE>
Portfolio Transactions
- ----------------------
Pursuant to the Advisory Agreement, SBCL determines, subject to the
general supervision of the Board of Trustees and in accordance with each Fund's
investment objective and restrictions, which securities are to be purchased and
sold by a Fund, and which brokers are to be eligible to execute portfolio
transactions. Purchases and sales of portfolio securities with respect to the
Funds usually are principal transactions in which portfolio securities are
purchased directly from the issuer or from an underwriter or market maker for
the securities. Purchases from underwriters of portfolio securities generally
include (but not in the case of mutual fund shares purchased by the Funds) a
commission or concession paid by the issuer to the underwriter and purchases
from dealers serving as market makers may include the spread between the bid and
asked price. Transactions on stock exchanges involve the payment of negotiated
brokerage commissions. Transactions in the over-the-counter market are generally
principal transactions with dealers. With respect to the over-the-counter
market, the Eureka Funds, where possible, will deal directly with dealers who
make a market in the securities involved unless better price and execution are
available elsewhere. While SBCL generally seeks competitive spreads or
commissions, the Eureka Funds may not necessarily pay the lowest spread or
commission available on each transaction, for reasons discussed below.
Allocation of transactions, including their frequency, to various
dealers is determined by SBCL in its best judgment and in a manner deemed fair
and reasonable to Shareholders. The major consideration in allocating brokerage
business is the assurance that the best execution is being received on all
transactions. Brokerage will at times be allocated to firms that supply
research, statistical data and similar services when the terms of the
transaction and the capabilities of different broker/dealers are consistent with
the guidelines set forth in Section 28(e) of the Securities Exchange Act of
1934. Information so received is in addition to, and not in lieu of, services
required to be performed by SBCL and does not reduce the advisory fees payable
to SBCL. Such information may be useful to SBCL in serving both the Eureka Funds
and other clients and, conversely, supplemental information obtained by the
placement
B-42
<PAGE> 151
of business of other clients may be useful to SBCL in carrying out its
obligations to the Eureka Funds.
Except as otherwise disclosed to the Shareholders of the Funds and as
permitted by applicable rules and regulations, SBCL will not execute portfolio
transactions on behalf of the Funds through, acquire portfolio securities issued
by, make savings deposits in, or enter into repurchase or reverse repurchase
agreements with SBCL, BISYS Fund Services, or their affiliates, and will not
give preference to SBCL's correspondents with respect to such transactions,
securities, savings deposits, repurchase agreements, and reverse repurchase
agreements.
Investment decisions for each Fund are made independently from those
for the other Funds or any other investment company or account managed by SBCL.
Other investment companies or accounts may also invest in the same securities as
the Eureka Funds. When a purchase or sale of the same security is made at
substantially the same time on behalf of a Fund and another Fund of the Eureka
Funds, investment company or account, the transaction will be averaged as to
price and available investments will be allocated as to amount in a manner which
SBCL believes to be equitable to the Fund(s) and such other investment company
or account. In some instances, this investment procedure may adversely affect
the price paid or received by a Fund or the size of the position obtained by a
Fund. To the extent permitted by law, SBCL may aggregate the securities to be
sold or purchased for a Fund with those to be sold or purchased for the other
Funds or for other investment companies or accounts in order to obtain best
execution. As provided by the Advisory Agreement, in making investment
recommendations for the Eureka Funds, SBCL will not inquire or take into
consideration whether an issuer of securities proposed for purchase or sale by
the Eureka Funds is a customer of SBCL or their parents, subsidiaries, or
affiliates, and, in dealing with their customers, SBCL and their parents,
subsidiaries, and affiliates will not inquire or take into consideration whether
securities of such customers are held by the Eureka Funds.
In determining when and to what extent to use Sanwa Universal
Securities, LLC, Sanwa Futures LLC or any other affiliated broker-dealer as its
broker for executing orders for the Funds on securities exchanges, SBCL will
consider (if relevant) whether the compensation to be paid Sanwa Universal
Securities, LLC, Sanwa Futures LLC or any other affiliated broker-dealer will be
(i) fair and reasonable, (ii) at least as favorable to the Funds as commissions
that would be charged by other qualified brokers having comparable execution
capabilities and (iii) at least as favorable as commissions contemporaneously
charged by Sanwa Universal Securities, LLC, Sanwa Futures LLC or any other
affiliated broker-dealer on comparable transactions for its most favored
unaffiliated customers. The Funds do not consider it practicable or in the best
interests of their shareholders to solicit competitive bids for commission rates
on each transaction. However, the Board of Trustees, including a majority of the
Trustees who are not "interested persons" of Sanwa Universal Securities, LLC,
Sanwa Futures LLC or any other affiliated broker-dealer within the meaning of
the 1940 Act,
B-43
<PAGE> 152
(i) has prescribed procedures designed to provide that the Funds do not pay
commissions that do not meet the standards described above, (ii) reviews those
procedures annually to determine whether they remain adequate and (iii)
considers quarterly whether or not the commissions charged by Sanwa Universal
Securities, LLC, Sanwa Futures LLC or any other affiliated broker-dealer have
met the standards.
Brokerage services Sanwa Universal Securities, LLC, or Sanwa Futures
LLC provides to the Funds are also subject to Rule 11a2-2(T) under the
Securities Exchange Act of 1934, as amended. Rule 11a2-2(T) permits the Funds to
use Sanwa Universal Securities, LLC, or Sanwa Futures LLC as a broker provided
certain conditions are met. Among these requirements are that members of the
exchange not associated with Sanwa Universal Securities, LLC, or Sanwa Futures
LLC perform the floor brokerage element of portfolio transactions (that is,
execution on the exchange floor or through use of exchange facilities) that the
orders to such members be transmitted from off the exchange floor and that
neither Sanwa Universal Securities, LLC, Sanwa Futures LLC nor an associated
person of Sanwa Universal Securities, LLC, or Sanwa Futures LLC participates in
the execution of the transaction after the order has been so transmitted. In
connection with transactions in which Sanwa Universal Securities, LLC, or Sanwa
Futures LLC acts as broker for the Funds, Sanwa Universal Securities, LLC, or
Sanwa Futures LLC, while not permitted to perform floor brokerage (which is
undertaken by members Sanwa Universal Securities, LLC, or Sanwa Futures LLC
selects who are not associated with that firm), still continues to bear
principal responsibility for determining important elements of overall execution
such as timing and order size, and also clears and settles such transactions.
Sanwa Universal Securities, LLC, or Sanwa Futures LLC pays the fees charged by
those persons performing the described floor brokerage elements. Sanwa Universal
Securities, LLC, or Sanwa Futures LLC will not trade directly with the Funds in
any transactions in which Sanwa Universal Securities, LLC, or Sanwa Futures LLC
or an affiliate acts as principal.
The Funds paid aggregate brokerage commissions in the following amounts:
<TABLE>
FISCAL YEAR ENDED
<CAPTION>
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
Global Asset Allocation Fund $ 61,956 $127,543
Equity Fund $268,417 $216,829
</TABLE>
Glass-Steagall Act
- ------------------
In 1971, the United States Supreme Court held in Investment Company
Institute v. Camp that the Federal statute commonly referred to as the
Glass-Steagall Act prohibits a bank from operating a mutual fund for the
collective investment of managing agency accounts.
B-44
<PAGE> 153
Subsequently, the Board of Governors of the Federal Reserve System (the "Board")
issued a regulation and interpretation to the effect that the Glass-Steagall Act
and such decision: (a) forbid a bank holding company registered under the
Federal Bank Holding Company Act of 1956 (the "Holding Company Act") or any
non-bank affiliate thereof from sponsoring, organizing, or controlling a
registered, open-end investment company continuously engaged in the issuance of
its shares, but (b) do not prohibit such a holding company or affiliate from
acting as investment adviser, transfer agent, and custodian to such an
investment company. In 1981, the United States Supreme Court held in Board of
Governors of the Federal Reserve System v. Investment Company Institute that the
Board did not exceed its authority under the Holding Company Act when it adopted
its regulation and interpretation authorizing bank holding companies and their
non-bank affiliates to act as investment advisers to registered closed-end
investment companies. In the Board of Governors case, the Supreme Court also
stated that if a bank complied with the restrictions imposed by the Board in its
regulation and interpretation authorizing bank holding companies and their
non-bank affiliates to act as investment advisers to investment companies, a
bank performing investment advisory services for an investment company would not
violate the Glass-Steagall Act.
SBCL believes that they possess the legal authority to perform the
services for each Fund contemplated by the Advisory Agreement and described in
the Prospectuses and this Statement of Additional Information and has so
represented in the Advisory Agreement. Future changes in either federal or state
statutes and regulations relating to the permissible activities of banks or bank
holding companies and the subsidiaries or affiliates of those entities, as well
as further judicial or administrative decisions or interpretations of present
and future statutes and regulations, could prevent or restrict SBCL from
continuing to perform such services for the Eureka Funds. Depending upon the
nature of any changes in the services which could be provided by SBCL, the Board
of Trustees of the Eureka Funds would review the Eureka Funds' relationship with
SBCL and consider taking all action necessary in the circumstances.
Should future legislative, judicial, or administrative action prohibit
or restrict the proposed activities of SBCL or their affiliated and
correspondent banks (the "Banks") in connection with Customer's purchases of
Shares of the Eureka Funds, the Banks might be required to alter materially or
discontinue the services offered by them to Customers. It is not anticipated,
however, that any change in the Eureka Funds' method of operations would affect
its net asset value per Share or result in financial losses to any Customer.
Administrator
- -------------
BISYS Fund Services serves as administrator (the "Administrator") to
each Fund pursuant to the Administration Agreement dated as of October 21, 1997.
The Administrator assists in supervising operations of each Fund (other than
those performed by SBCL under the Advisory Agreement, those performed by The
Bank of New York under its custodial services agreements with the Eureka Funds,
and those performed by BISYS Fund Services, Inc. under
B-45
<PAGE> 154
its transfer agency, shareholder service and fund accounting agreements with the
Eureka Funds). The Administrator is a broker-dealer registered with the
Securities and Exchange Commission, and is a member of the National Association
of Securities Dealers, Inc. The Administrator provides financial services to
institutional clients.
Under the Administration Agreement, the Administrator has agreed to
monitor the net asset value of the Money Market Funds, to maintain office
facilities for the Eureka Funds, to maintain the Eureka Funds' financial
accounts and records, and to furnish the Eureka Funds statistical and research
data and certain bookkeeping services, and certain other services required by
the Eureka Funds. The Administrator prepares annual and semi-annual reports to
the Securities and Exchange Commission, prepares federal and state tax returns,
prepares filings with state securities commissions, and generally assists in
supervising all aspects of the Eureka Funds' operations (other than those
performed by SBCL under the Advisory Agreement, and those performed by The Bank
of New York, under its custodial services agreements with the Eureka Funds, and
those performed by BISYS Fund Services, Inc. under its transfer agency,
shareholder service and fund accounting agreements with the Eureka Funds). Under
the Administration Agreement, the Administrator may delegate all or any part of
its responsibilities thereunder.
Under the Administration Agreement, the Administrator receives a fee
from each Fund equal to the lesser of (a) a fee computed at the annual rate set
forth below, subject to a per Fund annual minimum of $75,000: twenty
one-hundredths of one percent (0.20%) of a Fund's average daily net assets up to
$500 million; eighteen and one-half one-hundredths of one percent (0.185%) of a
Fund's average daily net assets in excess of $500 million up to $1 billion; and
seventeen and one-half one-hundredths of one percent (0.175%) of a Fund's
average daily net assets in excess of $1 billion, or (b) such fee as may from
time to time be agreed upon by the Eureka Funds and the Administrator. A fee
agreed to from time to time by the Eureka Funds and the Administrator may be
significantly lower than the fee calculated at the annual rate and the effect of
such lower fee would be to lower a Fund's expenses and increase the net income
of the Fund during the period when such lower fee is in effect.
The Administration Agreement will continue until May 31, 2000.
Thereafter, the Administration Agreement shall be renewed automatically for
successive two year terms, unless written notice not to renew is given by the
non-renewing party to the other party at least 60 days prior to the expiration
of the then-current term. The Administration Agreement is terminable with
respect to a particular Fund only upon mutual agreement of the parties to the
Administration Agreement and for cause (as defined in the Administration
Agreement) by the party alleging cause, on not less than 60 days notice by the
Eureka Funds' Board of Trustees or by the Administrator.
The Administration Agreement provides that the Administrator shall not
be liable for any loss suffered by the Eureka Funds in connection with the
matters to which the Administration Agreement relates, except a loss, action or
error resulting from willful
B-46
<PAGE> 155
misfeasance, bad faith, or negligence in the performance of its duties, or by
reason of reckless disregard by the Administrator of its obligations and duties
thereunder.
For administration services for the fiscal year ended September 30,
1999, the Administrator received the following amounts after voluntary fee
reductions: 0.10% of the average daily net assets of the Prime Money Market
Fund, 0.16% of the average daily net assets of the U.S. Treasury Obligations
Fund, 0.20% of the average daily net assets of the Investment Grade Bond Fund,
0.20% of the average daily net assets of the Global Asset Allocation Fund, and
0.20% of the average daily net assets of the Equity Fund.
BISYS Fund Services received the following fees for administration services:
<TABLE>
FISCAL YEAR ENDED
<CAPTION>
September 30, 1999 September 30, 1998
---------------------- ----------------------
Additional Additional
Amount Amount
Paid Waived Paid Waived
---- ------ ---- ------
<S> <C> <C> <C> <C>
U.S. Treasury Obligations Fund $217,347 $ 439 $134,418 $ 33,312
Prime Money Market Fund $270,242 $119,850 $152,976 $147,824
Investment Grade Bond Fund $288,577 $ 0 $256,175 $ 0
Global Asset Allocation Fund $161,661 $ 0 $120,879 $ 0
Equity Fund $389,186 $ 0 $357,113 $ 0
</TABLE>
Distributor
- -----------
BISYS Fund Services serves as distributor to each Fund pursuant to a
Distribution Agreement dated October 21, 1997. The Distribution Agreement will
continue in effect for one-year periods if such continuance is approved at least
annually (i) by the Board of Trustees or by the vote of a majority of the
outstanding Shares of the Funds or Fund subject to such Distribution Agreement,
and (ii) by the vote of a majority of the Trustees who are not parties to such
Distribution Agreement or interested persons (as defined in the 1940 Act) of any
party to such Distribution Agreement, cast in person at a meeting called for the
purpose of voting on such approval. The Distribution Agreement may be terminated
in the event of any assignment, as defined in the 1940 Act.
BISYS Fund Services is entitled to a fee of 0.25% of the average daily
net assets of Class A Shares of each Fund payable under the Fund's Distribution
Plan, for its services as Distributor.
BISYS Fund Services received the following fees for distribution services:
B-47
<PAGE> 156
<TABLE>
FISCAL YEAR ENDED
<CAPTION>
September 30, 1999 September 30, 1998
------------------ ------------------
<S> <C> <C>
U.S. Treasury Obligations Fund $ 3,182 $ 641
Prime Money Market Fund $31,086 $11,036
Investment Grade Bond Fund $ 7,718 $ 1,010
Global Asset Allocation Fund $ 8,397 $ 1,541
Equity Fund $ 5,644 $ 1,247
</TABLE>
The Distribution Plan was initially approved on October 21, 1997 by the
Board of Trustees, including a majority of the trustees who are not interested
persons of the Fund (as defined in the 1940 Act) and who have no direct or
indirect financial interest in the Distribution Plan (the "Independent
Trustees"). The Distribution Plan provides for fees only upon the Class A Shares
of each Fund.
In accordance with Rule 12b-1 under the 1940 Act, the Distribution Plan
may be terminated with respect to any Fund by a vote of a majority of the
Independent Trustees, or by a vote of a majority of the outstanding Class A
Shares of that Fund. The Distribution Plan may be amended by vote of the Board
of Trustees, including a majority of the Independent Trustees, cast in person at
a meeting called for such purpose, except that any change in the Distribution
Plan that would materially increase the distribution fee with respect to a Fund
requires the approval of the holders of that Fund's Class A Shares. The Board of
Trustees will review on a quarterly and annual basis written reports of the
amounts received and expended under the Distribution Plan (including amounts
expended by the Distributor to Participating Organizations pursuant to the
Servicing Agreements entered into under the Distribution Plan) indicating the
purposes for which such expenditures were made.
Service Plan
- ------------
Under the Service Plan, a Fund will pay a monthly service fee to BISYS
Fund Services ("BISYS") as compensation for services in connection with the
Service Plan at an annual rate equal to twenty-five one-hundredths of one
percent (0.25%) of the average daily net assets of Class A Shares of each Fund.
BISYS may periodically waive all or a portion of the fee with respect to a Fund.
BISYS may use the service fee to pay banks, other financial institutions and
intermediaries, broker-dealers, SBCL and SBCL's affiliates and subsidiaries
compensation for services or reimbursement of expenses incurred in connection
with the provision of administrative services or to provide administrative
services to the holders of Class A Shares. All payments by BISYS for services
under the Service Plan will be made pursuant to an agreement (a "Service
Agreement") between BISYS and such bank, financial institution or intermediary,
broker-dealer, or affiliate or subsidiary ("Participating Organization"). A
Service Agreement will relate to the provision of administrative services to the
Participating Organization's customers owning a Fund's Class A Shares. Under the
Service Plan, a Participating Organization may include SBCL or a subsidiary bank
or nonbank affiliates, or the
B-48
<PAGE> 157
subsidiaries or affiliates of those banks. A Service Agreement entered into with
a bank (or any of its subsidiaries or affiliates) will contain a representation
that the bank (or subsidiary or affiliate) believes that it possesses the legal
authority to perform the services contemplated by the Service Agreement without
violation of applicable banking laws (including the Glass-Steagall Act) and
regulations.
Distribution Plan
- -----------------
The Eureka Funds' Class A Shares are sold on a continuous basis by the
Distributor under a Distribution Agreement. Under the Distribution Plan, a Fund
will pay a monthly distribution fee to the Distributor as compensation for its
services in connection with the Distribution Plan at an annual rate equal to
twenty-five one-hundredths of one percent (0.25%) of the average daily net
assets of Class A Shares of each Fund. The Distributor may periodically waive
all or a portion of the fee with respect to a Fund in order to increase the net
investment income of the Fund available for distribution as dividends. The
Distributor may use the distribution fee to provide distribution assistance with
respect to a Fund's Class A Shares or to provide shareholder services to the
holders of such Shares. The Distributor may also use the distribution fee (i) to
pay financial institutions and intermediaries (such as insurance companies and
investment counselors but not including banks), broker-dealers, and the
Distributor's affiliates and subsidiaries compensation for services or
reimbursement of expenses incurred in connection with distribution assistance or
(ii) to pay banks, other financial institutions and intermediaries,
broker-dealers, and the Distributor's affiliates and subsidiaries compensation
for services or reimbursement of expenses incurred in connection with the
provision of shareholder services. A Servicing Agreement will relate to the
provision of distribution assistance in connection with the distribution of a
Fund's Class A Shares to the Participating Organization's customers on whose
behalf the investment in such Shares is made and/or to the provision of
shareholder services to the Participating Organization's customers owning a
Fund's Class A Shares. Under the Distribution Plan, a Participating Organization
may include SBCL or a subsidiary bank or nonbank affiliates, or the subsidiaries
or affiliates of those banks. A Servicing Agreement entered into with a bank (or
any of its subsidiaries or affiliates) will contain a representation that the
bank (or subsidiary or affiliate) believes that it possesses the legal authority
to perform the services contemplated by the Servicing Agreement without
violation of applicable banking laws (including the Glass-Steagall Act) and
regulations.
The distribution fee will be payable without regard to whether the
amount of the fee is more or less than the actual expenses incurred in a
particular year by the Distributor in connection with distribution assistance or
shareholder services rendered pursuant to the Servicing Agreements entered into
under the Distribution Plan. If the amount of the distribution fee is greater
than the Distributor's actual expenses incurred in a particular year (and the
Distributor does not waive that portion of the distribution fee), the
Distributor will realize a profit in that year from the distribution fee. If the
amount of the distribution fee is less than the Distributor's actual expenses
incurred in a particular year, the Distributor will realize a loss in that year
under the Distribution Plan and will not recover from a Fund the
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excess of expenses for the year over the distribution fee, unless actual
expenses incurred in a later year in which the Distribution Plan remains in
effect were less than the distribution fee paid in that later year.
The Distribution Plan also contains a so-called "defensive" provision
applicable to all classes of Shares. Under this defensive provision to the
extent that any payment made to the Administrator, including payment of
administration fees, should be deemed to be indirect financing of any activity
primarily intended to result in the sale of Shares issued by the Eureka Funds
within the context of Rule 12b-1 under the 1940 Act, such payment shall be
deemed to be authorized by the Distribution Plan.
Expenses
- --------
SBCL and the Administrator each bear all expenses in connection with
the performance of their services as investment adviser and administrator,
respectively, other than the cost of securities (including brokerage
commissions, if any) purchased for a Fund. The Eureka Funds is responsible for
all of its expenses and liabilities. As a general matter, expenses are allocated
to the Class A Shares and Trust Shares of a Fund on the basis of the relative
net asset value of each class. At present, the only expenses that will be borne
solely by Class A Shares, other than in accordance with the relative net asset
value of the class, are expenses under the Eureka Funds' Distribution and
Shareholder Services Plan ("Distribution Plan") and a Service Plan which relate
only to the Class A Shares.
The organizational expenses of each Fund have been capitalized and are
being amortized in the first five years of each Fund's operations. Such
amortization will reduce the amount of income available for payment as
dividends.
Custodian
- ---------
The Bank of New York serves as the Eureka Funds' Custodian.
Transfer Agent and Fund Accounting Services
- -------------------------------------------
Under the Transfer Agency Agreement, BISYS Fund Services, Inc., the
Transfer Agent, receives a fee from each Fund at the annual rate of $15,000 in
addition to various annual per account fees.
BISYS Fund Services, Inc. also provides fund accounting services to
each of the Funds pursuant to a Fund Accounting Agreement with the Eureka Funds.
Under the Fund Accounting Agreement, BISYS Fund Services, Inc. receives a fee
from each Fund at the annual rate of 0.03% of such Fund's average daily net
assets, subject to a minimum annual fee.
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<PAGE> 159
Independent Auditors
- --------------------
The financial information appearing in the Prospectuses under
"FINANCIAL HIGHLIGHTS" has been derived from financial statements of the Eureka
Funds incorporated by reference into this Statement of Additional Information
which have been audited by Ernst & Young LLP, independent auditors, as set forth
in their report incorporated by reference herein. The address of Ernst & Young
LLP, is 10 West Broad Street, Columbus, Ohio 43215.
Legal Counsel
- -------------
Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite 800 East,
Washington, DC 20005 serve as counsel to the Eureka Funds.
PERFORMANCE INFORMATION
Yields of the Money Market Funds
- --------------------------------
From time to time, a Money Market Fund's annualized "yield" and
"effective yield" and total return may be presented in advertisements, sales
literature and shareholder reports. The "yield" of a Money Market Fund is based
upon the income earned by the Fund over a seven-day period and then annualized,
i.e. the income earned in the period is assumed to be earned every seven days
over a 52-week period and is stated as a percentage of the investment. The
"effective yield" of a Money Market Fund is calculated similarly but when
annualized, the income earned by the investment is assumed to be reinvested in
Shares of the Eureka Funds and thus compounded in the course of a 52-week
period. The effective yield will be higher than the yield because of the
compounding effect of the assumed reinvestment.
The "yield" of each Money Market Fund for a seven-day period (a "base
period") will be computed by determining the "net change in value" (calculated
as set forth below) of a hypothetical account having a balance of one share at
the beginning of the period, dividing the net change in account value by the
value of the account at the beginning of the base period to obtain the base
period return, and multiplying the base period return by 365/7 with the
resulting yield figure carried to the nearest hundredth of one percent. Net
changes in value of a hypothetical account will include the value of additional
shares purchased with dividends from the original share and dividends declared
on both the original share and any such additional shares, but will not include
realized gains or losses or unrealized appreciation or depreciation on portfolio
investments. Yield may also be calculated on a compound basis (the "effective
yield") which assumes that net income is reinvested in Fund shares at the same
rate as net income is earned for the base period.
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<PAGE> 160
The yield and effective yield of each Money Market Fund will vary in
response to fluctuations in interest rates and in the expenses of each Fund. For
comparative purposes the current and effective yields should be compared to
current and effective yields offered by competing financial institutions for
that base period only and calculated by the methods described above.
For the seven-day and thirty-day periods ended September 30, 1999, the
yield and effective yield, of the Trust Shares and Class A Shares of the U.S.
Treasury Obligations Fund, and the Prime Money Market Fund calculated as
described above was as follows:
<TABLE>
<CAPTION>
7-Day 30-Day
7-Day Effective 30-Day Effective
Fund Class Yield Yield Yield Yield
---- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
U.S. Treasury Obligations Fund Trust 4.72% 4.83% 4.72% 4.82%
Prime Money Market Fund Trust 4.96% 5.08% 4.89% 5.23%
U.S. Treasury Obligations Fund Class A 4.47% 4.57% 4.47% 4.56%
Prime Money Market Fund Class A 4.71% 4.82% 4.64% 4.74%
</TABLE>
Yields of the Variable NAV Funds
- --------------------------------
The yields of the Variable NAV Funds will be computed by annualizing
net investment income per share for a recent 30-day period and dividing that
amount by the maximum offering price per share (reduced by any undeclared earned
income expected to be paid shortly as a dividend) on the last trading day of
that period, according to the following formula:
a-b
30-Day Yield = 2[( ----- +1)(6)-1]
cd
In the above formula, "a" represents dividends and interest earned by a
particular class during the 30-day base period; "b" represents expenses accrued
to a particular class for the 30-day base period (net of reimbursements); "c"
represents the average daily number of shares of a particular class outstanding
during the 30-day base period that were entitled to receive dividends; and "d"
represents the maximum offering price per share of a particular class on the
last day of the 30-day base period.
Net investment income will reflect amortization of any market value
premium or discount of fixed income securities (except for obligations backed by
mortgages or other assets) and may include recognition of a pro rata portion of
the stated dividend rate of dividend paying portfolio securities. The yield of
each of the Variable NAV Funds will vary from time to time
B-52
<PAGE> 161
depending upon market conditions, the composition of the Fund's portfolio and
operating expenses of the Eureka Funds allocated to each Fund. These factors and
possible differences in the methods used in calculating yield should be
considered when comparing a Fund's yield to yields published for other
investment companies and other investment vehicles. Yield should also be
considered relative to changes in the value of the Fund's shares and to the
relative risks associated with the investment objectives and policies of each
Fund.
Investors in the Variable NAV Funds are specifically advised that share
prices, expressed as the net asset values per share, will vary just as yields
will vary.
For the 30-day period ending September 30, 1999, the yield of the Trust
Shares and Class A Shares of the Investment Grade Bond Fund, the Global Asset
Allocation Fund, and the Equity Fund, calculated as described above was as
follows:
<TABLE>
<CAPTION>
Fund Class Yield
---- ----- -----
<S> <C> <C>
Investment Grade Bond Fund Trust 5.91%
Global Asset Allocation Fund Trust 6.59%
Equity Fund Trust 0.38%
Investment Grade Bond Fund Class A 5.67%
Global Asset Allocation Fund Class A 6.33%
Equity Fund Class A 0.13%
</TABLE>
Calculation of Total Return
- ---------------------------
Total Return is a measure of the change in value of an investment in a
Fund over the period covered, assuming the investor paid the current maximum
applicable sales charge on the investment and that any dividends or capital
gains distributions were reinvested in the Fund immediately rather than paid to
the investor in cash.
Total return is calculated for the past year and the period since the
establishment of each Fund. Average annual total return is measured by comparing
the value of an investment in a Fund at the beginning of the relevant period to
the redemption value of the investment at the end of the period (assuming
immediate reinvestment of any dividends or capital gains distributions) and
annualizing the result. Aggregate total return is calculated similarly to
average annual total return except that the return figure is aggregated over the
relevant period instead of annualized. The formula for calculating Total Return
includes four steps: (1) adding to the total number of shares purchased by a
hypothetical $1,000 investment in the Fund all additional shares which would
have been purchased if all dividends and distributions paid or distributed
during the period had been immediately reinvested; (2) calculating the value of
the hypothetical initial investment of $1,000 as of the end of the period by
multiplying the
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<PAGE> 162
total number of shares owned at the end of the period by the net asset value per
share on the last trading day of the period; (3) assuming redemption at the end
of the period; and (4) dividing this account value for the hypothetical investor
by the initial $1,000 investment and annualizing the result for periods of less
than one year.
At any time in the future, yields and total return may be higher or
lower than past yields, there can be no assurance that any historical results
will continue.
For the period since inception through September 30, 1999, aggregate total
return was as follows:
<TABLE>
<CAPTION>
Aggregate
Fund Class Inception date Total Return
---- ----- -------------- ------------
<S> <C> <C> <C>
U.S. Treasury Obligations Fund Trust November 3, 1997 9.43%
Prime Money Market Fund Trust November 1, 1997 9.80%
Investment Grade Bond Fund Trust November 1, 1997 7.84%
Global Asset Allocation Fund Trust November 1, 1997 22.29%
Equity Fund Trust November 1, 1997 37.28%
U.S. Treasury Obligations Fund Class A February 3, 1998 7.40%
Prime Money Market Fund Class A February 3, 1998 7.54%
Investment Grade Bond Fund Class A February 3, 1998 5.55%
Global Asset Allocation Fund Class A February 3, 1998 15.70%
Equity Fund Class A February 3, 1998 25.04%
</TABLE>
For the period since inception through September 30, 1999, average annual total
return was as follows:
<TABLE>
<CAPTION>
Average Annual
Fund Class Inception date Total Return
---- ----- -------------- ------------
<S> <C> <C> <C>
U.S. Treasury Obligations Fund Trust November 3, 1997 4.84%
Prime Money Market Fund Trust November 1, 1997 5.01%
Investment Grade Bond Fund Trust November 1, 1997 4.02%
Global Asset Allocation Fund Trust November 1, 1997 11.08%
Equity Fund Trust November 1, 1997 17.99%
</TABLE>
B-54
<PAGE> 163
<TABLE>
<S> <C> <C> <C>
U.S. Treasury Obligations Fund Class A February 3, 1998 4.41%
Prime Money Market Fund Class A February 3, 1998 4.49%
Investment Grade Bond Fund Class A February 3, 1998 3.32%
Global Asset Allocation Fund Class A February 3, 1998 9.21%
Equity Fund Class A February 3, 1998 14.46%
</TABLE>
For the one-year period through September 30, 1999, average annual total return
was as follows:
<TABLE>
<CAPTION>
Average Annual
Fund Class Total Return
---- ----- ------------
<S> <C> <C>
U.S. Treasury Obligations Fund Trust 4.52%
Prime Money Market Fund Trust 4.74%
Investment Grade Bond Fund Trust -1.35%
Global Asset Allocation Fund Trust 16.09%
Equity Fund Trust 24.72%
U.S. Treasury Obligations Fund Class A 4.26%
Prime Money Market Fund Class A 4.48%
Investment Grade Bond Fund Class A -1.59%
Global Asset Allocation Fund Class A 15.81%
Equity Fund Class A 24.34%
</TABLE>
Performance Comparisons
- -----------------------
Yield and Total Return. From time to time, performance information for
the Funds showing their total return and/or yield may be included in
advertisements. Performance figures are based on historical earnings and are not
intended to indicate future performance.
From time to time, the Eureka Funds may include the following types of
information in advertisements, supplemental sales literature and reports to
present or prospective shareholders: (1) discussions of general economic or
financial principals (such as the effects of inflation, the power of compounding
and the benefits of dollar-cost averaging); (2) discussions
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<PAGE> 164
of general economic trends; (3) presentations of statistical data to supplement
such discussions; (4) descriptions of past or anticipated portfolio holdings for
one or more of the Funds within the Eureka Funds, (5) descriptions of investment
strategies for one or more of such Funds; (6) descriptions or comparisons of
various savings and investment products (including, but not limited to, insured
bank products, annuities, qualified retirement plans and individual stocks and
bonds), which may or may not include the Funds; (7) comparisons of investment
products (including the Funds) with relevant market or industry indices or other
appropriate benchmarks; (8) discussions of fund rankings or ratings by
recognized rating organizations; and (9) testimonials describing the experience
of persons that have invested in one or more of the Funds. The Funds may also
include in these communications calculations, such as hypothetical compounding
examples, that describe hypothetical investment results, such performance
examples will be based on an express set of assumptions and are not indicative
of performance of any of the Funds.
Total return and/or yield may also be used to compare the performance
of the Funds against certain widely acknowledged standards or indices for stock
and bond market performance. The Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index") is a market value-weighted and unmanaged index
showing the changes in the aggregate market value of 500 stocks relative to the
base period 1941-43. The S&P 500 Index is composed almost entirely of common
stocks of companies listed on the NYSE, although the common stocks of a few
companies listed on the American Stock Exchange or traded over-the-counter are
included. The 500 companies represented include 400 industrial, 60
transportation and 40 financial services concerns. The S&P 500 represents about
80% of the market value of all issues traded on the NYSE.
The Morgan Stanley Capital International Europe, Australasia and the
Far East Index ("EAFE") is an index composed of a sample of companies
representative of the market structure of twenty European and Pacific Basin
countries. The Index represents the evolution of an unmanaged portfolio
consisting of all domestically listed stocks.
The Lehman Brothers Aggregate Bond Index ("Aggregate Bond Index") is a
measure of the market value of all public obligations of the U.S. Treasury; all
publicly issued debt of all agencies of the U.S. government; all quasi-federal
corporations; all corporate debt guaranteed by the U.S. government; and mortgage
backed securities. Corporate issues must have amounts outstanding in excess of
$1 million, have at least one year to maturity and be rated investment grade by
a NRSRO. Flower bonds and foreign targeted issues are also included in the
Aggregate Bond Index.
Current yields or performance will fluctuate from time to time and are
not necessarily representative of future results. Accordingly, a Fund's yield or
performance may not provide for comparison with bank deposits or other
investments that pay a fixed return for a stated period of time. Yield and
performance are functions of quality, composition, and maturity, as well as
expenses allocated to the Fund. Fees imposed upon customer accounts by SBCL or
its
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<PAGE> 165
affiliated or correspondent banks for cash management services will reduce a
Fund's effective yield to Customers.
The Investment Grade Bond Fund, the Global Asset Allocation Fund and
the Equity Fund may also calculate a distribution rate. Distribution rates will
be computed by dividing the distribution per Share of a class made by a Fund
over a twelve-month period by the maximum offering price per Share. The
distribution rate includes both income and capital gain dividends and does not
reflect unrealized gains or losses. The calculation of income in the
distribution rate includes both income and capital gain dividends and does not
reflect unrealized gains or losses, although a Fund may also present a
distribution rate excluding the effect of capital gains. The distribution rate
differs from the yield, because it includes capital items which are often
non-recurring in nature, and may include returns of principal, whereas yield
does not include such items. The Funds do not intend to publish distribution
rates in Fund advertisements but may publish such rates in supplemental sales
literature.
Yield, effective yield, total return and distribution rate will be
calculated separately for each Class of Shares. Because Trust Shares are not
subject to Distribution Plan fees or Service Plan fees, the yield and total
return for Trust Shares will be higher than that of the Class A Shares for the
same period.
Investors may also judge the performance of a Fund by comparing its
performance to the performance of other mutual funds with comparable investment
objectives and policies through various mutual fund or market indices and data
such as that provided by Lipper Inc., IBC/Donoghue's MONEY FUND REPORT and
Ibbotson Associates, Inc. References may also be made to indices or data
published in Money Magazine, Forbes, Barron's, The Wall Street Journal, The New
York Times, Business Week, American Banker, Fortune, Institutional Investor,
Ibbotson Associates, Inc., Morningstar, Inc., CDA/Weisenberger, Pension and
Investments, U.S.A. Today and local newspapers. In addition to performance
information, general information about the Funds that appears in a publication
such as those mentioned above may be included in advertisements and in reports
to Shareholders.
Information about the performance of a Fund is based on a Fund's record
up to a certain date and is not intended to indicate future performance. Yields
and total returns of a Fund will fluctuate. Any fees charged by the
Participating Organizations to their customers in connection with investment in
a Fund are not reflected in the Eureka Funds' performance information.
Further information about the performance of a Fund is contained in
that Fund's annual report to Shareholders, which may be obtained without charge
by contacting the Eureka Funds at P.O. Box 182792, Columbus, Ohio 43218-2792.
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<PAGE> 166
ADDITIONAL INFORMATION
Organization and Description of Shares
- --------------------------------------
The Eureka Funds organized as a Massachusetts business trust by the
Agreement and Declaration of Trust, dated April 7, 1997, under the name "Sanwa
Fund." A copy of the Eureka Funds' Amended and Restated Agreement and
Declaration of Trust, (the "Declaration of Trust") is on file with the Secretary
of State of The Commonwealth of Massachusetts. The Declaration of Trust
authorizes the Board of Trustees to issue an unlimited number of Shares, which
are units of beneficial interest. The Eureka Funds presently have five series of
Shares offered to the public. The Declaration of Trust authorizes the Board of
Trustees to divide or redivide any unissued Shares of the Eureka Funds into one
or more additional series.
Shares have no subscription or preemptive rights and only such
conversion or exchange rights as the Board of Trustees may grant in its
discretion. When issued for payment as described in the Prospectuses and this
Statement of Additional Information, the Shares will be fully paid and
non-assessable. In the event of a liquidation or dissolution of the Eureka
Funds, Shareholders of a Fund are entitled to receive the assets available for
distribution belonging to that Fund, and a proportionate distribution, based
upon the relative asset values of the respective Funds, of any general assets
not belonging to any particular Fund which are available for distribution.
Shares of the Eureka Funds are entitled to one vote per share (with
proportional voting for fractional shares) on such matters as shareholders are
entitled to vote. Shareholders vote in the aggregate and not by series or class
on all matters except (i) when required by the 1940 Act, shares shall be voted
by individual series, (ii) when the Trustees have determined that the matter
affects only the interests of a particular series or class, then only
Shareholders of such series or class shall be entitled to vote thereon, and
(iii) only the holders of Class A Shares will be entitled to vote on matters
submitted to Shareholder vote with regard to the Distribution Plan applicable to
Class A. There will normally be no meetings of Shareholders for the purposes of
electing Trustees unless and until such time as less than a majority of the
Trustees have been elected by the Shareholders, at which time the Trustees then
in office will call a Shareholders' meeting for the election of Trustees. In
addition, Trustees may be removed from office by a written consent signed by the
holders of two-thirds of the outstanding shares of the Eureka Funds and filed
with the Eureka Funds' custodian or by vote of the holders of two-thirds of the
outstanding shares of the Eureka Funds at a meeting duly called for the purpose,
which meeting shall be held upon the written request of the holders of not less
than 10% of the outstanding shares of any Fund. Except as set forth above, the
Trustees shall continue to hold office and may appoint their successors.
Shareholder and Trustee Liability
- ---------------------------------
Under Massachusetts law, Shareholders could, under certain
circumstances, be held personally liable for the obligations of the Eureka
Funds. However, the Declaration of Trust disclaims Shareholder liability for
acts or obligations of the Eureka Funds and requires that
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<PAGE> 167
notice of such disclaimer be given in every agreement, obligation or instrument
entered into or executed by the Eureka Funds or the Trustees. The Declaration of
Trust provides for indemnification out of a Fund's property for all loss and
expense of any Shareholder of such Fund held liable on account of being or
having been a Shareholder. Thus, the risk of a Shareholder incurring financial
loss on account of Shareholder liability is limited to circumstances in which a
Fund would be unable to meet its obligations.
The Agreement and Declaration of Trust states further that no Trustee,
officer or agent of the Eureka Funds shall be personally liable in connection
with the administration or preservation of the assets of the Eureka Funds or the
conduct of the Eureka Funds' business; nor shall any Trustee, officer, or agent
be personally liable to any person for any action or failure to act except for
his own bad faith, willful misfeasance, gross negligence, or reckless disregard
of his duties. The Agreement and Declaration of Trust also provides that all
persons having any claim against the Trustees or the Eureka Funds shall look
solely to the assets of the Eureka Funds for payment.
Miscellaneous
- -------------
The Eureka Funds may include information in its Annual Reports and
Semi-Annual Reports to Shareholders that (1) describes general economic trends,
(2) describes general trends within the financial services industry or the
mutual fund industry, (3) describes past or anticipated portfolio holdings for
one or more of the Funds within the Eureka Funds, or (4) describes investment
management strategies for such Funds. Such information is provided to inform
Shareholders of the activities of the Eureka Funds for the most recent fiscal
year or half-year and to provide the views of the SBCL and/or Eureka Funds
officers regarding expected trends and strategies.
The organizational expenses of the Eureka Funds have been allocated to
each Fund and are being amortized over a period of five years from the
commencement of the public offering of Shares of the Eureka Funds. In the event
any of the initial Shares of the Eureka Funds are redeemed during the
amortization period by any holder thereof, the redemption proceeds will be
reduced by a pro rata portion of any unamortized organization expenses in the
same proportion as the number of initial Shares being redeemed bears to the
total number of initial Shares outstanding at the time of redemption. Investors
purchasing Shares of the Eureka Funds subsequent to the date of the Prospectuses
and this Statement of Additional Information bear such expenses only as they are
amortized against a Fund's investment income.
The Eureka Funds are registered with the Securities and Exchange
Commission as a management investment company. Such registration does not
involve supervision by the Securities and Exchange Commission of the management
or policies of the Eureka Funds.
As of January 14, 2000, the trustees and officers of the Trust, as a
group, owned less than 1% of the Trust Shares and of the Class A Shares of any
of the Eureka Funds.
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<PAGE> 168
As of January 27, 2000, SBCL, 601 S. Figueroa Street, Los Angeles,
California 90017 was the beneficial shareholder of the outstanding voting shares
of the Trust Shares of the Funds as follows: 11% of the U.S. Treasury
Obligations Fund, 33% of the Prime Money Market Fund, 97% of the Investment
Grade Bond Fund, 76% of the Global Asset Allocation Fund, and 78% of the Equity
Fund.
The following table indicates the ownership of record of the
shareholders who, to the best knowledge of the Trust, were the owners of 5% or
more of the outstanding shares of the Trust, as of January 14, 2000:
<TABLE>
<S> <C>
U.S. TREASURY OBLIGATIONS FUND - CLASS A SHARES
Sanwa Bank California 98.611%
1977 Saturn St., OC4-4.
Monterey Park, CA 91754
PRIME MONEY MARKET FUND - CLASS A SHARES
Sanwa Bank California 93.786%
1977 Saturn St., OC4-4.
Monterey Park, CA 91754
INVESTMENT GRADE BOND FUND - CLASS A SHARES
BISYS Brokerage Services, Inc. 96.450%
P.O. Box 4054
Concord, CA 94524
GLOBAL ASSET ALLOCATION FUND - CLASS A SHARES
BISYS Brokerage Services, Inc. 97.350%
P.O.Box 4054
Concord, CA 94524
EQUITY FUND - CLASS A SHARES
BISYS Brokerage Services, Inc. 78.592%
P.O.Box 4054
Concord, CA 94524
Linda Rogers 6.664%
Test Trust of Collece M. McGalliard
P.O.Box 85484
San Diego, CA 92186
</TABLE>
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<PAGE> 169
<TABLE>
<S> <C>
Union Bank of California 8.086%
Thelma B. Johnson Trust
P.O. Box 85484
San Diego, CA 92186
U.S. TREASURY OBLIGATIONS FUND - TRUST SHARES
Taylor & Co. 97.774%
P.O. Box 60078 OC4-5
Los Angeles, CA 90060
PRIME MONEY MARKET FUND - TRUST SHARES
Taylor & Co. 80.493%
P.O. Box 60078 OC4-5
Los Angeles, CA 90060
Sanwa Bank California 15.362%
Norwest Bank MN
2700 Snelling Avenue, N Suite 300
Minneapolis, MN 55479-2205
INVESTMENT GRADE BOND FUND - TRUST SHARES
Taylor & Co. 39.907%
P.O. Box 60078 OC4-5
Los Angeles, CA 90060
Chase Manhattan Bank 52.732%
Sanwa Bank CA Ret Plan 29074491
4 New York Plaza, 2nd Floor
New York, NY 10004
GLOBAL ASSET ALLOCATION FUND - TRUST SHARES
Taylor & Co. 34.354%
P.O. Box 60078 OC4-5
Los Angeles, CA 90060
</TABLE>
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<PAGE> 170
<TABLE>
<S> <C>
Sanwa Bank California 21.641%
P.O. Box 60540
Los Angeles, CA 90060-0540
Chase Manhattan Bank 41.436%
Sanwa Bank CA Ret Plan 29074491
4 New York Plaza, 2nd Floor
New York, NY 10004
EQUITY FUND - TRUST SHARES
Taylor & Co. 36.274%
P.O. Box 60078 OC4-5
Los Angeles, CA 90060
Sanwa Bank California 17.667%
P.O. Box 60540
Los Angeles, CA 90060
Chase Manhattan Bank 42.221%
Sanwa Bank CA Ret Plan 29074491
4 New York Plaza, 2nd Floor
New York, NY 10004
</TABLE>
The Prospectuses of the Funds and this Statement of Additional
Information omit certain of the information contained in the Registration
Statement filed with the Securities and Exchange Commission. Copies of such
information may be obtained from the Securities and Exchange Commission upon
payment of the prescribed fee.
The Prospectuses of the Funds and this Statement of Additional
Information are not an offering of the securities herein described in any state
in which such offering may not lawfully be made. No salesman, dealer, or other
person is authorized to give any information or make any representation other
than those contained in the Prospectuses of the Funds and this Statement of
Additional Information.
B-62
<PAGE> 171
APPENDIX
The NRSROs utilized by SBCL include Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Duff & Phelps Credit Rating Co. ("Duff"),
Fitch IBCA ("Fitch"), and Thomson BankWatch, Inc. ("Thomson"). Set forth below
is a description of the relevant ratings of each such NRSRO.
Long-Term Debt Ratings (may be assigned, for example, to corporate and municipal
bonds)
Description of the five highest long-term debt ratings by Moody's (Moody's
applies numerical modifiers (1, 2, and 3) in each rating category to indicate
the security's ranking within the category):
Aaa Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments
are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of
such issues.
Aa Bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be
as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat
larger than in Aaa securities.
A Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment some time in the
future.
Baa Bonds which are rated Baa are considered as medium-grade
obligations (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded
B-63
<PAGE> 172
during both good and bad times in the future. Uncertainty of
position characterizes bonds in this class.
Description of the five highest long-term debt ratings by S&P (S&P may apply a
plus (+) or minus (-) to a particular rating classification to show relative
standing within that classification):
AAA Debt rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA Debt rated AA differs from the highest rated obligations only
in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A Debt rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions
than obligations in higher rated categories. However, the
obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB Debt rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances
are more likely to lead to a weakened capacity of the obligor
to meet its financial commitment on the obligation.
BB Debt rated BB is regarded as having significant speculative
characteristics although it is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial or
economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the
obligation.
Description of the three highest long-term debt ratings by Duff:
AAA Highest credit quality. The risk factors are negligible, being
only slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong.
AA Risk is modest but may vary slightly from time to time
AA- because of economic conditions.
A+ Protection factors are average but adequate. However,
A risk factors are more variable and greater in periods
A- of economic stress.
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<PAGE> 173
Description of the three highest long-term debt ratings by Fitch (plus (+) or
minus (-) signs are used with a rating symbol to indicate the relative position
of the credit within the rating category):
AAA Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong
ability to pay interest and repay principal, which is unlikely
to be affected by reasonably foreseeable events.
AA Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and
repay principal is very strong, although not quite as strong
as bonds rated "AAA." Because bonds rated in the "AAA" and
"AA" categories are not significantly vulnerable to
foreseeable future developments, short-term debt of these
issues is generally rated "F-1+."
A Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
Fitch's description of its three highest long-term debt ratings:
AAA Obligations which have the highest rating. Capacity for timely
repayment of principal and interest is extremely strong.
AA Obligations for which capacity for timely repayment of
principal and interest is very strong. The risk attached to
these obligations differs only slightly from the highest rated
debt.
A Obligations for which capacity for timely repayment of
principal and interest is strong. However, adverse changes in
business, economic or financial conditions are more likely to
affect the capacity for timely repayment than for obligations
in higher rated categories.
B-65
<PAGE> 174
Short-Term Debt Ratings (may be assigned, for example, to commercial paper,
master demand notes, bank instruments, and letters of credit)
Moody's description of its three highest short-term debt ratings:
Prime-1 Issuers rated Prime-1 (or supporting institutions) have
a superior ability for repayment of senior short-term
debt obligations. Prime-1 repayment ability will often
be evidenced by many of the following characteristics:
- Leading market positions in
well-established industries.
- High rates of return on funds employed.
- Conservative capitalization structure with
moderate reliance on debt and ample asset
protection.
- Broad margins in earnings coverage of
fixed financial charges and high internal
cash generation.
- Well-established access to a range of
financial markets and assured sources of
alternate liquidity.
Prime-2 Issuers rated Prime-2 (or supporting institutions) have
a strong ability for repayment of senior short-term
debt obligations. This will normally be evidenced by
many of the characteristics cited above but to a lesser
degree. Earnings trends and coverage ratios, while
sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate
liquidity is maintained.
Prime-3 Issuers rated Prime-3 (or supporting institutions) have
an acceptable ability for repayment of senior
short-term obligations. The effect of industry
characteristics and market compositions may be more
pronounced. Variability in earnings and profitability
may result in changes in the level of debt protection
measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
S&P's description of its three highest short-term debt ratings:
A-1 Highest category. The obligor's capacity to meet its financial
commitments is strong. Within this category, certain
obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial
commitments is extremely strong.
A-2 Obligations assigned this rating are somewhat more susceptible
to the adverse effects of changes in circumstances and
economic conditions than obligations in
B-66
<PAGE> 175
higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is
satisfactory.
A-3 Obligations assigned this rating exhibit adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity
of the obligor to meet its financial commitment on the
obligation.
Duff's description of its five highest short-term debt ratings. Duff
incorporates gradations of "1+" (one plus) and "1-" (one minus) to assist
investors in recognizing quality differences within the highest rating category:
D-1+ Highest certainty of timely payment. Short-term liquidity,
including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety
is just below risk-free U.S. Treasury short-term
obligations.
D-1 Very high certainty of timely payment. Liquidity factors
are excellent and supported by good fundamental protection
factors. Risk factors are minor.
D-1- High certainty of timely payment. Liquidity factors are
strong and supported by good fundamental protection
factors. Risk factors are very small.
D-2 Good certainty of timely payment. Liquidity factors and
company fundamentals are sound. Although ongoing funding
needs may enlarge total financing requirements, access to
capital markets is good. Risk factors are small.
D-3 Satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors are
larger and subject to more variation. Nevertheless, timely
payment is expected.
Fitch's description of its four highest short-term debt ratings:
F1 Obligations assigned this rating have the highest capacity for
timely payment.
F2 Obligations supported by a strong capacity for timely
repayment. However, the relative degree of risk is slightly
higher than for issues classified as "F1" and capacity for
timely repayment may be susceptible to adverse changes in
business, economic, or financial conditions.
B-67
<PAGE> 176
F3 Obligations supported by an adequate capacity for timely
payment. Such capacity is more susceptible to adverse changes
in business, economic, or financial conditions than for
obligations in higher rated categories.
.
B Obligations for which the capacity for timely repayment is
uncertain relative. The capacity for timely repayment is
susceptible to adverse changes in business, economic, or
financial conditions.
Short-Term Loan/Municipal Note Ratings
- --------------------------------------
Moody's description of its two highest short-term loan/municipal note ratings:
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 designation denotes high quality. Margins of
protection are ample although not so large as in the
preceding group.
S&P's description of its two highest municipal note ratings:
SP-1 Strong capacity to pay principal and interest. An issue
determined to possess a very strong capacity to pay debt
service is given a plus (+) designation.
SP-2 Satisfactory capacity to pay principal and interest, with
some vulnerability to adverse financial and economic
changes over the term of the notes.
Short-Term Debt Ratings
- -----------------------
Thomson BankWatch, Inc. ("TBW") ratings are based upon a qualitative and
quantitative analysis of all segments of the organization including, where
applicable, holding company and operating subsidiaries.
The TBW Short-Term Debt Ratings apply only to specific debt instruments with
original maturities of one year or less. TBW ratings represent an assessment of
the likelihood of an untimely payment of principal and interest. Important
factors that may influence this assessment are the overall financial health of
the particular company, and the probability that the government will come to the
aid of a troubled institution in order to avoid a default or failure.
The TBW Short-Term Ratings represent an assessment of the likelihood of an
untimely payment of principal or interest.
B-68
<PAGE> 177
TBW-1 The highest category; indicates a very high likelihood
that principal and interest will be paid on a timely
basis.
TBW-2 The second-highest category; while the degree of safety
regarding timely repayment of principal and interest is
strong, the relative degree of safety is not as high as
for issues rated "TBW-1."
TBW-3 The lowest investment-grade category; indicates that while
the obligation is more susceptible to adverse developments
(both internal and external) than those with higher
ratings, the capacity to service principal and interest in
a timely fashion is considered adequate.
TBW-4 The lowest rating category; this rating is regarded as
non-investment grade and therefore speculative.
B-69
<PAGE> 178
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
(a) (1) Declaration of Trust, dated April 7,
1997, is incorporated by reference from
Exhibit 1 to the Funds' initial
Registration Statement filed on July 31,
1997 on Form N-1A.
(a) (2) Amended and Restated Agreement and
Declaration of Trust, dated October 17,
1997, is incorporated by reference from
Exhibit 1(b) to Post-Effective Amendment
No. 4 to the Fund's Registration
Statement (filed on November 25, 1998)
on Form N-1A.
(b) Form of By-Laws is incorporated by
reference from Exhibit 2 to the Funds'
initial Registration Statement filed on
July 31, 1997 on Form N-1A.
(c) (1) Article III, Sections 4 and 5; Article
IV, Section 1; Article V; Article VIII,
Section 4; and Article IX, Sections 1, 4
and 7 of the Declaration of Trust is
filed herewith.
(c) (2) Article 9; Article 10, Section 6; and
Article 11 of the By-laws is filed
herewith.
(d) Investment Advisory Agreement between
Registrant and Sanwa Bank California,
dated October 21, 1997, is incorporated
by reference from Exhibit 5 to
Post-Effective Amendment No. 1 to the
Fund's Registration Statement (filed
February 20, 1998) on Form N-1A.
(e) Distribution Agreement between
Registrant and BISYS Fund Services
Limited Partnership, dated October 31,
1997, is incorporated by reference from
Exhibit 6 to Post-Effective Amendment
No. 3 to the Funds' Registration
Statement (filed on April 29, 1998) on
Form N-1A.
(f) None.
(g) (1) Custody Agreement between Registrant and
The Bank of New York, dated November 3,
1997, is incorporated by reference from
Exhibit 8(a) to Post-Effective Amendment
No. 3 to the
<PAGE> 179
Funds' Registration Statement (filed on
April 29, 1998) on Form N-1A.
(2) Form of Foreign Custody Manager
Agreement between Registrant and The
Bank of New York is incorporated by
reference to Exhibit 8(b) to
Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement
filed on October 3, 1997 on Form N-1A.
(h) (1) Transfer Agency Agreement between
Registrant and BISYS Fund Services,
Inc., dated October 31, 1997, is
incorporated by reference from Exhibit
9(a) to Post-Effective Amendment No. 3
to the Funds' Registration Statement
(filed on April 29, 1998) on Form N-1A.
(2) Fund Accounting Agreement between
Registrant and BISYS Fund Services,
Inc., dated October 31, 1997, is
incorporated by reference from Exhibit
9(b) to Post-Effective Amendment No. 3
to the Funds' Registration Statement
(filed on April 29, 1998) on Form N-1A.
(3) Administration Agreement between
Registrant and BISYS Fund Services
Limited Partnership, dated October 31,
1997, is incorporated by reference from
Exhibit 9(c) to Post-Effective Amendment
No. 3 to the Funds' Registration
Statement (filed on April 29, 1998) on
Form N-1A.
(4) Form of Service Plan is incorporated by
reference from Exhibit 9(d) to
Pre-Effective Amendment No. 2 to the
Funds' Registration Statement filed on
October 3, 1997 on Form N-1A.
(5) Forms of service agreements pursuant to
Service Plan referred to herein as
Exhibit 9(d) is incorporated by
reference from Exhibit 9(e) to
Pre-Effective Amendment No. 2 to the
Funds' Registration Statement filed on
October 3, 1997 on Form N-1A.
(i) Opinion and Consent of Counsel as to
legality of shares being registered is
filed herewith.
(j) (1) Consent of Ernst & Young is filed
herewith.
(j) (2) Consent of Ropes & Gray is filed
herewith.
-2-
<PAGE> 180
(k) Omitted financial statements: None.
(l) Purchase Agreement between the
Registrant and BISYS Fund Services,
dated September 26, 1997, is
incorporated by reference from Exhibit
13 to Post-Effective Amendment No. 3 to
the Funds' Registration Statement (filed
on April 29, 1998) on Form N-1A.
(m) (1) Distribution and Shareholder Services
Plan between the Registrant and BISYS
Fund Services Limited Partnership, dated
October 21, 1997, is incorporated by
reference from Exhibit 15(a) to
Post-Effective Amendment No. 3 to the
Funds' Registration Statement (filed on
April 29, 1998) on Form N-1A.
(2) Forms of Servicing Agreement pursuant to
Distribution and Shareholder Services
Plan referred to herein as Exhibit 15(a)
are incorporated by reference from
Exhibit 15(b) to Pre-Effective Amendment
No. 2 to the Registrant's Registration
Statement filed on October 3, 1997 on
Form N-1A.
(m) Multiple Class Plan, dated October 21,
1997, is incorporated by reference from
Exhibit 18 to Post-Effective Amendment
No. 3 to the Funds' Registration
Statement (filed on April 29, 1998) on
Form N-1A.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
As of the date of this Registration Statement, there are no persons
controlled by or under common control with the Registrant.
ITEM 25. INDEMNIFICATION
Article VIII of Registrant's Amended and Restated Agreement and
Declaration of Trust (Exhibit (1) hereto, which is incorporated herein by
reference) provides in effect that Registrant will indemnify its officers
and trustees against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise, or as
fines and penalties, and counsel fees reasonably incurred by any such
officer or trustee in connection with the defense or disposition of any
action, suit, or other proceeding. However, in accordance with Section
17(h) and 17(i) of the 1940 Act and its own terms, said Agreement and
Declaration of Trust does not protect any person against any liability to
Registrant or its shareholders to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
-3-
<PAGE> 181
reckless disregard of the duties involved in the conduct of his or her
office. In any event, Registrant will comply with 1940 Act Releases Nos.
7221 and 11330 respecting the permissible boundaries of indemnification by
an investment company of its officers and trustees.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, Registrant has been advised that, in
the opinion of the Securities and Exchange Commission, such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by 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, 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 1933 Act and will be governed by
the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR
Sanwa Bank California ("SBCL"), performs investment advisory services
for the Registrant. SBCL is a wholly owned subsidiary of The Sanwa Bank
Limited, of Japan. Its principal offices are located at 601 South
Figueroa Street, Los Angeles, California 90017. Established in 1972,
SBCL provides a full range of personal and business banking services
through a network of more than 100 branches and offices statewide. SBCL
has approximately $8 billion in assets.
To the knowledge of Registrant, none of the directors or officers of
SBCL, except those set forth below, 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, except that certain
directors and officers of SBCL also hold positions with The Sanwa Bank
Limited, of Japan or its other subsidiaries.
Listed below are the directors and certain principal executive officers
of SBCL, their principal occupations and, for the prior two fiscal
years, any other business, profession, vocation, or employment of a
substantial nature engaged in by such directors and officers:
<TABLE>
<CAPTION>
NAME AND POSITION OTHER BUSINESS, PROFESSION, VOCATION, OR EMPLOYMENT
- ----------------- ---------------------------------------------------
<S> <C>
Teruyoshi Yasufuky Chairman of the Board, SBCL; Counselor, Sanwa Research Institute
Steven D. Broidy Director, SBCL; Vice Chairman and Chief Administrative Officer, City National Bank
</TABLE>
-4-
<PAGE> 182
<TABLE>
<S> <C>
Robert C. Cooke Director, SBCL
Robert C. Corteway Director, SBCL
Vilma Martinez Director, SBCL; Litigation Partner, Munger, Tolles & Olson
James M. Rosser, Ph.D. Director, SBCL; President, California State University at Los Angeles
Cynthia Ann Telles, Ph.D. Director, SBCL; Director, Spanish Speaking Psychosocial Clinic, The
Neuropsychiatric Institute and Hospital Department of Psychiatry and Behavioral
Sciences, UCLA School of Medicine
James C. Van Horne Director, SBCL; A.P. Gianniani Professor of Finance at the Graduate School of
Business at Stanford University
Tamio Takakura President and Chief Executive Officer, SBCL
Kazuyoshi Kuwahata Vice Chairman & Chief Line Officer, SBCL
Howard N. Gould Vice Chairman & Chief Administrative Officer, SBCL
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITER
(a) BISYS Fund Services acts as distributor for the Registrant. BISYS Fund
Services also distributes the securities of Alpine Equity Trust, American
Performance Funds, AmSouth Mutual Funds, The BB&T Funds, The Coventry
Group, ESC Strategic Funds, Inc., Fifth Third Funds, Governor Funds, Hirtle
Callaghan Trust, HSBC Funds Trust, HSBC Mutual Funds Trust, The Infinity
Mutual Funds, Inc., INTRUST Funds Trust, Magna Funds, Mercantile Mutual
Funds, Inc., Metamarkets.com, Meyers Investment Trust, MMA Praxis Mutual
Funds, M.S.D.&T Funds, Pacific Capital Funds, The Republic Funds Trust, The
Republic Advisors Funds Trust, SSgA International Liquidity Fund, Summit
Investment Trust, US Allianz Funds, US Allianz Funds Variable Insurance
Products Trust, Valenzuela Capital Trust, Variable Insurance Funds, The
Victory Portfolios, The Victory Variable Insurance Funds, and Vintage
Mutual Funds, Inc., each of which is a management investment company. The
parent of BISYS Fund Services, Inc. (the sole general partner of BISYS Fund
Services) is The BISYS Group, Inc.
(b) Partners of BISYS Fund Services as of the date of this Part C are as
follows:
<TABLE>
<CAPTION>
Positions and Positions and
Name and Principal Offices with The Offices with
Business Addresses Winsbury Company The Registrant
- ------------------ ---------------- --------------
<S> <C> <C>
BISYS Fund Services, Inc. Sole General None
3435 Stelzer Road Partner
Columbus, OH 43219
</TABLE>
-5-
<PAGE> 183
<TABLE>
<S> <C> <C>
WC Subsidiary Corporation Sole Limited Partner None
150 Clove Road
Little Falls, NJ 07424
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
(1) Sanwa Bank California, 601 S. Figueroa Street, Los Angeles,
California 90017 (records relating to the Advisor's functions
as investment adviser).
(2) BISYS Fund Services, 3435 Stelzer Road, Columbus, Ohio 43219
(records relating to its functions as administrator and
distributor).
(3) The Bank of New York, 100 Church Street, New York, New York
10286 (records relating to its function as custodian).
(4) Ropes & Gray, One Franklin Square, 1301 K Street, N.W., Suite
800 East, Washington, DC 20005 (the Registrant's Declaration
of Trust, By-Laws, and Minute Books).
(5) BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio
43219 (records relating to its functions as transfer agent and
fund accountant).
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
Registrant hereby undertakes to call a meeting of the shareholders for
the purpose of voting upon the question of removal of one or more
trustees when requested to do so by the holders of at least 10% of the
outstanding shares of Registrant and to comply with the provisions of
Section 16(c) of the Investment Company Act of 1940 relating to
shareholder communication.
Registrant hereby 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.
-6-
<PAGE> 184
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
the Registration Statement to be signed on its behalf by the undersigned,
thereto duly authorized, in the City of Washington, D.C., on the 31st day of
January 2000.
Eureka Funds
By: /s/ Larry Layne*
------------------------
Larry Layne
Chairman
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement of the Eureka Funds has been signed
below by the following persons in the capacities and on the dates indicated:
Signature Capacity Date
- --------- -------- ----
/s/ Larry Layne* Chairman of the Board January 31, 2000
- ----------------------------- and Trustee
Larry Layne
/s/ Walter F. Beran* Trustee January 31, 2000
- ----------------------------
Walter F. Beran
/s/ David L. Buell* Trustee January 31, 2000
- ----------------------------
David L. Buell
/s/ Donald H. Livingstone* Trustee January 31, 2000
- ----------------------------
Donald H. Livingstone
/s/ Takashi Muraoka* Trustee January 31, 2000
- ----------------------------
Takashi Muraoka
/s/ Irimga McKay* President January 31, 2000
- ----------------------------
Irimga McKay
/s/ Frank Deutchki* Treasurer January 31, 2000
- ----------------------------
Frank Deutchki
*By: Alyssa Albertelli
-----------------------
Alyssa Albertelli
Attorney-In-Fact
-7-
<PAGE> 185
POWER OF ATTORNEY
The undersigned, each being a Trustee of the Eureka Funds, does hereby
constitute and appoint Martin E. Lybecker, Brian L. Murray, Jr., and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments that said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
the Eureka Funds to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof,
and in connection with the filing and effectiveness of any registration
statement or statement of the Eureka Funds pursuant to said Acts and any and all
amendments thereto (including post-effective amendments), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as an officer
of the Eureka Funds any and all such amendments filed with the Securities and
Exchange Commission under said Acts, any Notification of Registration under the
Investment Company Act of 1940 and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
thereof.
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ Larry Layne Trustee October 21, 1997
- ---------------------------
Larry Layne
/s/ Kazuyoshi Kuwahata Trustee October 21, 1997
- ---------------------------
Kazuyoshi Kuwahata
/s/ Walter F. Beran Trustee October 21, 1997
- ---------------------------
Walter F. Beran
/s/ David L. Buell Trustee October 21, 1997
- ---------------------------
David L. Buell
/s/ Donald H. Livingstone Trustee October 21, 1997
- ---------------------------
Donald H. Livingstone
<PAGE> 186
POWER OF ATTORNEY
The undersigned, being the President of the Eureka Funds, does hereby
constitute and appoint Martin E. Lybecker, Brian L. Murray, Jr., and Alyssa
Albertelli, each individually, her true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments that said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
the Eureka Funds to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof,
and in connection with the filing and effectiveness of any registration
statement or statement of the Eureka Funds pursuant to said Acts and any and all
amendments thereto (including post-effective amendments), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as an officer
of the Eureka Funds any and all such amendments filed with the Securities and
Exchange Commission under said Acts, any Notification of Registration under the
Investment Company Act of 1940 and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
thereof.
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ Irimga McKay President February 20, 1998
- ---------------------------
Irimga McKay
<PAGE> 187
POWER OF ATTORNEY
The undersigned, being a Trustee of the Eureka Funds, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments that said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
the Eureka Funds to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof,
and in connection with the filing and effectiveness of any registration
statement or statement of the Eureka Funds pursuant to said Acts and any and all
amendments thereto (including post-effective amendments), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as an officer
of the Eureka Funds any and all such amendments filed with the Securities and
Exchange Commission under said Acts, any Notification of Registration under the
Investment Company Act of 1940 and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or either of them, shall do or cause to be done by virtue
thereof.
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ Takashi Muraoka Trustee November 30, 1999
- ---------------------------
Takashi Muraoka
<PAGE> 188
POWER OF ATTORNEY
The undersigned, being the Treasurer of the Eureka Funds, does hereby
constitute and appoint Martin E. Lybecker, Alan G. Priest, and Alyssa
Albertelli, each individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts and things and
to execute any and all instruments that said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
the Eureka Funds to comply with the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended ("Acts"), and any rules, regulations
or requirements of the Securities and Exchange Commission in respect thereof,
and in connection with the filing and effectiveness of any registration
statement or statement of the Eureka Funds pursuant to said Acts and any and all
amendments thereto (including post-effective amendments), including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as an officer
of the Eureka Funds any and all such amendments filed with the Securities and
Exchange Commission under said Acts, any Notification of Registration under the
Investment Company Act of 1940 and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, or any of them, shall do or cause to be done by virtue
thereof.
SIGNATURE CAPACITY DATE
- --------- -------- ----
/s/ Frank Deutchki Treasurer December 1, 1999
- ---------------------------
Frank Deutchki
<PAGE> 189
Exhibit Index
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
(c)(1) Instruments Defining Rights of Security Holders -
Declaration of Trust
(c)(2) Instruments Defining Rights of Security Holders - By-laws
(i) Opinion and Consent of Counsel
(j)(1) Consent of Ernst & Young LLP
(j)(2) Consent of Ropes & Gray
<PAGE> 1
Exhibit (c) (1)
ARTICLE III
Shares
No Preemptive Rights
Section 4. Shares shall have no preemptive or other right to subscribe
to any additional Shares or other securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal property giving only
the rights provided in this instrument. Every Shareholder by virtue of having
become a Shareholder shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. The death of a Shareholder
during the continuance of the Trust shall not operate to terminate the same nor
entitle the representative of any deceased Shareholder to an accounting or to
take any action in court or elsewhere against the Trust or the Trustees, but
only to the rights of said decedent under this Trust. Ownership of Shares shall
not entitle the Shareholder to any title in or to the whole or any part of the
Trust property or right to call for a partition or division of the same or for
an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. Neither the Trust nor the Trustees, nor any officer, employee or agent
of the Trust shall have any power to bind personally any Shareholder, nor except
as specifically provided herein to call upon any Shareholder for the payment of
any sum of money or assessment whatsoever other than such as the Shareholder may
at any time personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. The number of Trustees shall be as provided in the Bylaws or
as fixed from time to time by the Trustees. The Shareholders may elect Trustees
at any meeting of Shareholders called by the Trustees for that purpose. Each
Trustee shall serve during the continued lifetime of the Trust until he or she
dies, resigns or is removed, or, if sooner, until the next meeting of
Shareholders called for the purpose of electing Trustees and the election and
qualification of his or her successor. Any Trustee may resign at any time by
written instrument signed by him and delivered to any officer of the Trust, to
each other Trustee or to a meeting of the Trustees. Such resignation shall be
effective upon receipt
<PAGE> 2
unless specified to be effective at some other time. Except to the extent
expressly provided in a written agreement with the Trust, no Trustee resigning
and no Trustee removed shall have any right to any compensation for any period
following his or her resignation or removal, or any right to damages on account
of such removal.
ARTICLE V
Shareholders' Voting Powers and Meetings
Shareholders shall have such power to vote as is provided for in, and
may hold meetings and take actions pursuant to the provisions of the Bylaws.
ARTICLE VIII
Indemnification
Shareholders
Section 4. In case any Shareholder or former Shareholder shall be held
to be personally liable solely by reason of his or her being or having been a
Shareholder and not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a corporation or
other entity, its corporate or other general successor) shall be entitled to be
held harmless from and indemnified against all loss and expense arising from
such liability, but only out of the assets of the particular series of Shares of
which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting with or having
any claim against the Trust or a particular series of Shares shall look only to
the assets of the Trust or the assets of that particular series of Shares for
payment under such credit, contract or claim; and neither the Shareholders nor
the Trustees, nor any of the Trust's officers, employees or agents, whether
past, present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect any Trustee against any liability to which
such Trustee would otherwise be subject by reason of wilful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or undertaking made
or issued by the Trustees or by any officer or officers shall give notice that
this Declaration of Trust is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite that
<PAGE> 3
the same was executed or made by or on behalf of the Trust or by them as Trustee
or Trustees or as officer or officers and not individually and that the
obligations of such instrument are not binding upon any of them or the
Shareholders individually but are binding only upon the assets and property of
the Trust, and may contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholder or Shareholders individually.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the Trust shall
continue without limitation of time. The Trust may be terminated at any time by
the vote of Shareholders holding at least a majority of the Shares of each
series entitled to vote or by the Trustees by written notice to the
Shareholders. Any series of Shares may be terminated at any time by vote of
Shareholders holding at least a majority of the Shares of such series entitled
to vote or by the Trustees by written notice to the Shareholders of such series.
Upon termination of the Trust or of any one or more series of Shares,
after paying or otherwise providing for all charges, taxes, expenses and
liabilities, whether due or accrued or anticipated, of the Trust or of the
particular series as may be determined by the Trustees, the Trust shall, in
accordance with such procedures as the Trustees consider appropriate, reduce the
remaining assets to distributable form in cash or shares or other securities, or
any combination thereof, and distribute the proceeds to the Shareholders of the
series involved, ratably according to the number of Shares of such series held
by the several Shareholders of such series on the date of termination.
Amendments
Section 7. This Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then Trustees when authorized
to do so by vote of Shareholders holding a majority of the Shares of each series
entitled to vote, except that an amendment which shall affect the holders of one
or more series of Shares but not the holders of all outstanding series shall be
authorized by vote of the Shareholders holding a majority of the Shares entitled
to vote of each series affected and no vote of Shareholders of a series not
affected shall be required. Amendments having the purpose of changing the name
of the Trust, of establishing, changing, or eliminating the par value of the
Shares or of supplying any omission, curing any ambiguity or curing, correcting
or supplementing any defective or inconsistent provision contained herein shall
not require authorization by Shareholder vote.
<PAGE> 1
Exhibit (c) (2)
ARTICLE 9
Issuance of Share Certificates
9.1 Share Certificates. In lieu of issuing certificates for shares, the
Trustees or the transfer agent may either issue receipts therefor or may keep
accounts upon the books of the Trust for the record holders of such shares, who
shall in either case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such certificates and shall
be held to have expressly assented and agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled to a certificate
stating the number of shares owned by him, in such form as shall be prescribed
from time to time by the Trustees. Such certificates shall be signed by the
President or any Vice-President and by the Treasurer or Assistant Treasurer.
Such signatures may be facsimile if the certificate is signed by a transfer
agent, or by a registrar, other than a Trustee, officer or employee of the
Trust. In case any officer who has signed or whose facsimile signature has been
placed on such certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
9.2 Loss of Certificates. In case of the alleged loss or destruction or
the mutilation of a share certificate, a duplicate certificate may be issued in
place thereof, upon such terms as the Trustees shall prescribe.
9.3 Issuance of New Certificates to Pledgee. A pledgee of shares
transferred as collateral security shall be entitled to a new certificate if the
instrument of transfer substantially describes the debt or duty that is intended
to be secured thereby. Such new certificates shall express on its face that it
is held as collateral security, and the name of the pledgor shall be stated
thereon, who alone shall be liable as a shareholder and entitled to vote
thereon.
9.4 Discontinuance of Issuance of Certificates. The Trustees may at any
time discontinue the issuance of share certificates and may, by written notice
to each shareholder, require the surrender of share certificates to the Trust
for cancellation. Such surrender and cancellation shall not effect the ownership
of shares in the Trust.
<PAGE> 2
ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business
10.1 Conduct of Business. The Trust shall at all times conduct its
business in accordance with applicable provisions of the Investment Company Act
of 1940 (the "1940 Act"). The Trustees shall adopt valuation guidelines or
procedures consistent with the applicable provisions of the 1940 Act regarding
the valuation of the Shares of each series or class of the Trust.
ARTICLE 11
Shareholders' Voting Powers and Meetings
11.1 Voting Powers. The Shareholders shall have power to vote only (i)
for the election of Trustees as provided in Article IV, Section 1 of the
Declaration of Trust, provided, however, that no meeting of Shareholders is
required to be called for the purpose of electing Trustees unless and until such
time as less than a majority of the Trustees have been elected by the
Shareholders, (ii) with respect to any Manager or Sub-Adviser as provided in
Article IV, Section 6 of the Declaration of Trust to the extent required by the
1940 Act, (iii) with respect to any termination of this Trust to the extent and
as provided in Article IX, Section 4 of the Declaration of Trust, (iv) with
respect to any amendment of the Declaration of Trust to the extent and as
provided in Article IX, Section 7 of the Declaration of Trust, (v) to the same
extent as the stockholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the Trust or the
Shareholders, and (vi) with respect to such additional matters relating to the
Trust as may be required by law, the Declaration of Trust, these Bylaws or any
registration of the Trust with the Commission (or any successor agency) or any
state, or as the Trustees may consider necessary or desirable. Shareholders
holding at least 10% of the Trust's Shares shall have the right to call a
meeting to elect or remove one or more of the Trustees of the Trust. Removal of
one or more Trustees by Shareholder vote may be accomplished without a showing
of cause. Each whole Share shall be entitled to one vote as to any matter on
which it is entitled to vote and each fractional Share shall be entitled to a
proportionate fractional vote. The Shareholders of any particular series or
class shall not be entitled to vote on any matters as to which such series or
class is not affected. Except with respect to matters as to which the Trustees
have determined that only the interests of one or more particular series are
affected or as required by law, all of the Shares of each series or class shall,
on matters as to which it is entitled to vote, vote with other series so
entitled as a single class. Notwithstanding the foregoing, with respect to
matters which would otherwise be voted on by two or more series as a single
class, the Trustees may, in their sole discretion, submit such matters to the
Shareholders of any or all such series, separately. There shall be no cumulative
voting in the election of Trustees. Shares may be voted in person or by proxy. A
proxy with respect to Shares held in the name of two or more persons shall be
valid if executed by any one of them unless at or prior to exercise of the proxy
the Trust receives a specific written notice to the contrary
<PAGE> 3
from any one of them. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger. Until Shares
are issued, the Trustees may exercise all rights of Shareholders and may take
any action required by law, the Declaration of Trust or these Bylaws to be taken
by shareholders.
11.2 Voting Power and Meetings. Meetings of the Shareholders may be
called by the Trustees for the purpose of electing Trustees as provided in
Article IV, Section 1 of the Declaration of Trust and for such other purposes as
may be prescribed by law, by the Declaration of Trust or by these Bylaws.
Meetings of the Shareholders may also be called by the Trustees from time to
time for the purpose of taking action upon any other matter deemed by the
Trustees to be necessary or desirable. A meeting of Shareholders may be held at
any place designated by the Trustees. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees by mailing
such notice at least seven days before such meeting, postage prepaid, stating
the time and place of the meeting, to each Shareholder at the Shareholder's
address as it appears on the records of the Trust. Whenever notice of a meeting
is required to be given to a Shareholder under the Declaration of Trust or these
Bylaws, a written waiver thereof, executed before or after the meeting by such
Shareholder or his attorney thereunto authorized and filed with the records of
the meeting, shall be deemed equivalent to such notice.
11.3 Quorum and Required Vote. A majority of Shares entitled to vote
shall be a quorum for the transaction of business at a Shareholders' meeting,
except that where any provision of law or of the Declaration of Trust or these
Bylaws permits or requires that holders of any series shall vote as a series,
then a majority of the aggregate number of Shares of that series entitled to
vote shall be necessary to constitute a quorum for the transaction of business
by that series. Any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held, within a reasonable time after the
date set for the original meeting, without the necessity of further notice.
Except when a larger vote is required by any provision of law or the Declaration
of Trust or these Bylaws, a majority of the Shares voted shall decide any
questions and a plurality shall elect a Trustee, provided that where any
provision of law or of the Declaration of Trust or these Bylaws permits or
requires that the holders of any series shall vote as a series, then a majority
of the Shares of that series voted on the matter (or a plurality with respect to
the election of a Trustee) shall decide that matter insofar as that series is
concerned.
11.4 Action by Written Consent. Any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders entitled to vote on the
matter (or such larger proportion thereof as shall be required by any express
provision of law or the Declaration of Trust or these Bylaws) consent to the
action in writing and such written consents are filed with the records of the
meetings of Shareholders. Such consent shall be treated for all purposes as a
vote taken at a meeting of Shareholders.
<PAGE> 4
11.5 Record Dates. For the purpose of determining the shareholders who
are entitled to vote or act at any meeting or any adjournment thereof, or who
are entitled to receive payment of any dividend or of any other distribution,
the Trustees may from time to time fix a time, which shall be not more than 90
days before the date of any meeting of shareholders or the date for the payment
of any dividend or of any other distribution, as the record date for determining
the shareholders having the right to notice of and to vote at such meeting and
any adjournment thereof or the right to receive such dividend or distribution,
and in such case only shareholders of record on such record date shall have such
right notwithstanding any transfer of shares on the books of the Trust after the
record date; or without fixing such record date the Trustees may for any of such
purposes close the register or transfer books for all or any part of such
period.
<PAGE> 1
Exhibit (i)
ROPES & GRAY
One Franklin Square
1301 K Street, N.W.
Suite 800 East
Washington, D.C. 20005
WRITER'S DIRECT DIAL NUMBER: (202) 626-3967
January 31, 2000
Eureka Funds
3435 Stelzer Road
Columbus, Ohio 43219
Ladies and Gentlemen:
You have registered under the Securities Act of 1933, as amended (the
"1933 Act") an indefinite number of shares of beneficial interest of the Eureka
Funds (the "Trust"), as permitted by Rule 24f-2 under the Investment Company Act
of 1940, as amended (the "1940 Act"). You propose to file a post-effective
amendment on Form N-1A (the "Post-Effective Amendment") to your Registration
Statement as required by Section 10(a)(3) with respect to certain units of
beneficial interest of the Trust ("Shares").
We have examined your Agreement and Declaration of Trust on file in the
office of the Secretary of The Commonwealth of Massachusetts and the Clerk of
the City of Boston. We have also examined a copy of your Bylaws and such other
documents, receipts and records as we have deemed necessary for the purpose of
this opinion.
Based upon the foregoing, we are of the opinion that the issue and sale
of the Shares have been duly authorized under Massachusetts law. Under the
original issue and sale of the Shares and upon receipt of the authorized
consideration therefor in an amount not less than the net asset value of the
Shares established and in force at the time of their sale, the Shares issued
will be validly issued, fully paid and nonassessable.
<PAGE> 2
Eureka Funds
January 31, 2000
Page 2
The Eureka Funds is an entity of the type commonly known as a
"Massachusetts business trust." Under Massachusetts law, shareholders could,
under certain circumstances, be held personally liable for the obligations of
the Trust. However, the Agreement and Declaration of Trust provides for
indemnification out of the property of a particular series of Shares for all
loss and expenses of any shareholder of that series held personally liable
solely by reason of his being or having been a shareholder. Thus, the risk of
shareholder liability is limited to circumstances in which that series of Shares
itself would be unable to meet its obligations.
We understand that this opinion is to be used in connection with the
filing of the Post-Effective Amendment. We consent to the filing of this opinion
with and as part of your Post-Effective Amendment.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
<PAGE> 1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Other Service
Providers" and "Financial Highlights" in the prospectuses and under the caption
"Independent Auditors" in the Statement of Additional Information, both included
in Post-Effective Amendment No. 7 to the Registration Statement (Form N-1A No.
811-08305) of Eureka Funds and to the use of our report dated November 24, 1999,
incorporated therein by reference.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Columbus, Ohio
January 27, 2000
<PAGE> 1
EXHIBIT (j)(2)
CONSENT OF COUNSEL
We hereby consent to the use of our name and the references to our firm
under the caption "Legal Counsel" included in or made a part of Post-Effective
Amendment No. 7 to the Registration Statement of the Eureka Funds on Form N-1A
(File No. 333-32483) under the Securities Act of 1933, as amended.
/s/ Ropes & Gray
ROPES & GRAY
Washington, D.C.
January 31, 2000
