<PAGE>
Filed with the Securities and Exchange Commission on April 1, 1997.
FILE NO. 2-15037
FILE NO. 811-879
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Post-Effective Amendment No. 57
------
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No 57
------
TRAINER, WORTHAM FIRST MUTUAL FUNDS
===================================
(Exact name of Registrant as Specified in Charter)
845 Third Avenue, 6th Floor
New York, New York 10022 (212) 759-7755
------------------------ --------------
(Address of Principal Executive Offices) (Registrant's Telephone Number)
Patrick W.D. Turley
Dechert, Price & Rhoads
1500 "K" Street, N.W.
Washington, D.C. 20005-1208
---------------------------
(Name and Address of Agent for Service)
It is proposed that this filing become effective (check appropriate box):
X immediately upon filing pursuant to Paragraph (b);
on April 1, 1997 (date) pursuant to Paragraph (b);
60 days after filing pursuant to Paragraph (a)(1);
on ___________________________ (date) pursuant to Paragraph (a)(1);
75 days after filing pursuant to Paragraph (a)(2); or
on ___________________________ (date) pursuant to paragraph (a) (2)
of Rule 485.
If appropriate, check the following box:
this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Registrant has registered an indefinite number of Shares of Beneficial
Interest of Trainer, Wortham First Mutual Funds under the Securities Act
of 1933 pursuant to Rule 24f-2 under the Investment Company Act of 1940.
The Rule 24f-2 Notice for Registrant's most recent fiscal year was
filed on August 28, 1996.
1
<PAGE>
CROSS REFERENCE SHEET
---------------------
Pursuant to Rule 481(a)
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Caption
-------- ------------------
<S> <C>
1. Cover Page Not Titled
2. Synopsis Expense Information
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Investment Objectives and
Policies; Investment Strategies
and Risk Considerations
5. Management of the Trust Management of the
Fund; Brokerage
6. Capital Stock and Other Securities Net Asset Value; Dividends
and Taxes; Purchase of Shares
7. Purchase of Shares Being Offered Net Asset Value; Purchase of
Shares; Exchange of Shares;
Shareholder Services
8. Redemption or Repurchase Redemption of Shares;
Exchange of Shares.
9. Pending Legal Proceedings *
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Part B
Item No. SAI Caption
-------- ------------------
<S> <C>
10. Cover Page Not Titled
11. Table of Contents Table of Contents
12. General Information and History Trainer, Wortham First Mutual Funds
Investment Objectives and Policies;
Investment Restrictions; Other
Investment Restrictions
13. Investment Objectives and Policies Investment Objectives and Policies;
Investment Restrictions; Other Invest-
ment Restrictions; Brokerage
14. Management of the Trust Trustees and Officers
15. Control Persons and Principal Holders of Control Persons and Principal
Securities Holders of Securities
16. Investment Advisory and Other Services Investment Advisor; Administrator;
Distributor; Distribution Plan; Trans-
fer Agent, and Accounting Services
Agent; Custodian
17. Brokerage Allocation Brokerage
18. Capital Stock and Other Securities Brokerage
19. Purchase, Redemption and Pricing of Securities Covered in Part A
Being Offered
20. Tax Status Covered in Part A
21. Underwriters Investment Advisor; Distribution Plan
22. Calculation of Performance Data Performance Calculations
23. Financial Statements Annual Reports to Shareholders in
Exhibit "A" and Interim Financial Statements
dated February 28, 1997 in Exhibit "B" to this
Statement of Additional Information
</TABLE>
* The answer to the item is negative or the item is not applicable to this
filing, the registrant, or the securities being registered.
3
<PAGE>
TRAINER, WORTHAM FIRST MUTUAL FUNDS
FIRST MUTUAL FUND
845 THIRD AVENUE, 6TH FLOOR
NEW YORK, NY 10022
(800) 257-4414
PROSPECTUS
OCTOBER 1, 1996
Trainer, Wortham First Mutual Funds (the "Trust") is an open-end management
investment company which currently offers shares of three series: First Mutual
Fund; Trainer, Wortham Emerging Growth Fund; and Trainer, Wortham Total Return
Bond Fund (individually and collectively, the "Series"). Each Series has
distinct investment objectives and policies.
This Prospectus pertains only to First Mutual Fund (the "Fund"). The Fund
seeks to achieve capital appreciation through investment in common stocks and
securities convertible into common stocks. Its secondary objective is income.
Trainer, Wortham & Co., Inc. (the "Advisor") serves as the Fund's investment
advisor.
The minimum initial investment for the Fund is $250. Subsequent investments
will be accepted in minimum amounts of $50.00.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Fund, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission and is available upon request
without charge by calling or writing to the Fund at the telephone number or
address shown above. The Statement of Additional Information bears the same
date as this Prospectus and is incorporated by reference in its entirety into
this Prospectus.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE INFORMATION........................................................ 3
FINANCIAL HIGHLIGHTS....................................................... 4
INVESTMENT OBJECTIVES AND POLICIES......................................... 5
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS.............................. 5
MANAGEMENT OF THE FUND..................................................... 9
THE BOARD OF TRUSTEES..................................................... 9
THE INVESTMENT ADVISOR.................................................... 9
ADMINISTRATOR............................................................. 10
DISTRIBUTOR............................................................... 10
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT.............................. 11
DISTRIBUTION PLAN.......................................................... 11
BROKERAGE.................................................................. 11
PURCHASE OF SHARES......................................................... 12
REDEMPTION OF SHARES....................................................... 14
EXCHANGE OF SHARES......................................................... 16
SHAREHOLDER SERVICES....................................................... 16
NET ASSET VALUE............................................................ 17
DIVIDENDS AND TAXES........................................................ 17
PERFORMANCE INFORMATION.................................................... 19
GENERAL INFORMATION........................................................ 20
</TABLE>
UNDERWRITER: ADVISOR:
FPS Broker Services, Inc. Trainer, Wortham & Co., Inc.,
3200 Horizon Drive 845 Third Avenue
P.O. Box 61503 New York, NY 10022
King of Prussia, PA 19406-0903 (800) 775-0604
(800) 257-4414
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION ABOUT THE ITEMS DISCUSSED IN THIS PROSPECTUS, A
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO THE FUND AT 845 THIRD AVENUE, 6TH FLOOR, NEW YORK, NY 10022, OR
BY CALLING (800) 257-4414.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2
<PAGE>
EXPENSE INFORMATION
Below is a summary of the operating expenses that the Fund incurred during its
last fiscal year. A hypothetical example based on the summary is also shown.
ANNUAL TRUST OPERATING EXPENSES(1)
(as a percentage of average net assets) for the year ended June 30, 1996
<TABLE>
<S> <C>
Management Fees........................................................... 0.75%
12b-1 Fees................................................................ 0.25%
Other Expenses............................................................ 0.74%
-----
Total Trust Operating Expenses............................................ 1.74%
=====
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
EXAMPLE: ------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses
on a $1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of each
period $18 $55 $94 $205
</TABLE>
(1) Average net assets have been computed on the basis of net assets at
month end. Other expenses reflect actual expenses for the fiscal year
ended June 30, 1996. The maximum fee allowable under the 12b-1 Plan is
0.25%.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the tables above is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose any sales load, redemption or exchange
fees; however, the transfer agent currently charges investors who request
redemptions by wire transfer a fee of $9 for each transaction. For more
complete descriptions of the various costs and expenses, see the sections
entitled "Management of the Fund," and "Distribution Plan."
3
<PAGE>
FINANCIAL HIGHLIGHTS
The following financial highlights for the fiscal year ended June 30, 1996 were
derived from the Fund's financial statements dated June 30, 1996, which were
audited by Tait, Weller & Baker, independent auditors, whose unqualified report
thereon may be found in the Fund's Statement of Additional Information. The
Fund's Statement of Additional Information may be obtained without charge and
is incorporated by reference into this Prospectus.
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
FIRST MUTUAL FUNDS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR................... $ 10.03 $ 8.21 $ 9.29 $ 8.49 $ 9.24
------- ------- ------- ------- -------
INCOME FROM INVESTMENT
OPERATIONS
Net investment income..... (0.09) (0.09) (0.09) (0.06) 0.01
Net gains (losses) on
securities (both
realized and
unrealized).............. 4.79 2.10 (0.13) 1.09 (0.09)
------- ------- ------- ------- -------
Total from investment
operations.............. 4.70 2.01 (0.22) 1.03 (0.08)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
Dividends (from net
investment income)....... 0.00 0.00 0.00 0.00 (0.02)
Distributions (from
capital gains)........... (0.92) (0.19) (0.86) (0.23) (0.65)
Distributions (from paid-
in capital).............. -- -- -- -- --
------- ------- ------- ------- -------
Total distributions..... (0.92) (0.19) (0.86) (0.23) (0.67)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR...................... $ 13.81 $ 10.03 $ 8.21 $ 9.29 $ 8.49
======= ======= ======= ======= =======
TOTAL RETURN............... 49.12 % 25.04 % (3.91)% 12.17 % (1.01)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)............... $32,147 $20,281 $21,446 $19,093 $18,143
Ratio of expenses to aver-
age net assets (2)....... 1.74 % 2.16 % 1.97 % 1.99 % 1.87 %
Ratio of net investment
income (loss) to average
net assets (2)........... (0.82)% (0.77)% (0.97)% (0.61)% 0.08 %
Portfolio turnover rate... 107 % 198 % 178 % 172 % 175 %
Average commission rate
paid..................... $0.0683 N/A N/A N/A N/A
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------------------------
1991 1990* 1989 1988 1987
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR................... $ 9.30 $ 8.03 $ 6.91 $ 8.94 $ 9.14
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OP-
ERATIONS
Net investment income..... 0.03 0.09 0.02 0.12 0.09
Net gains (losses) on se-
curities (both realized
and unrealized).......... 0.31 1.34 1.23 (1.24) 0.98
------- ------- ------- ------- -------
Total from investment op-
erations................ 0.34 1.43 1.25 (1.12) 1.07
LESS DISTRIBUTIONS DIVI-
DENDS (FROM NET INVEST-
MENT INCOME)............. (0.06) (0.06) (0.13) (0.13) (0.03)
Distributions (from capi-
tal gains)............... (0.34) (0.10)(1) -- (0.68) (1.24)
Distributions (from paid-
in capital).............. -- -- -- (0.10) --
------- ------- ------- ------- -------
Total distributions..... (0.40) (0.16) (0.13) (0.91) (1.27)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
YEAR...................... $ 9.24 $ 9.30 $ 8.03 $ 6.91 $ 8.94
======= ======= ======= ======= =======
TOTAL RETURN............... 4.35 % 17.88 % 18.52 % (14.10)% 14.36 %
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in 000's)............... $16,606 $14,720 $13,250 $12,659 $16,289
Ratio of expenses to aver-
age net assets(2)........ 2.32 % 2.04 % 2.15 % 1.96 % 1.94 %
Ratio of net investment
income to average net as-
sets(2).................. 0.36 % 1.03 % 0.22 % 1.67 % 1.52 %
Portfolio turnover rate... 178 % 158 % 197 % 203 % 212 %
Average commission rate
paid..................... N/A N/A N/A N/A N/A
</TABLE>
- ---------------------
1 The distribution for the fiscal year 1990 represents the amount required to
be distributed for tax purposes to avoid imposition of excise taxes on
realized capital gains.
2 Average net assets have been computed on the basis of the value of the net
assets as determined as of the end of the month.
* The investment adviser to the Fund changed on the following dates: 1/25/88
(changed from Trainer, Wortham & Co., Inc. to BIL Trainer Wortham, Inc.);
12/21/90 (changed to Trainer, Wortham & Co., Inc.)
4
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund's primary investment objective is to seek capital appreciation
principally through investments in common stock. The Fund may also invest in
securities convertible into common stock such as convertible bonds or
preferred stock. Its secondary investment objective is to seek income from
dividends and interest. Due to the risks inherent in any investment program,
the Fund cannot ensure that its investment objectives will be realized. The
value of a share of the Fund will fluctuate as the values of the securities in
the Fund's portfolio fluctuate.
The Fund will invest primarily in common stock and in securities convertible
into common stock. The Fund's investment strategy will emphasize companies
that, in the opinion of the Advisor, offer prospects for capital growth and
growth of earnings and dividends. The Advisor may deem it appropriate to
invest in other types of securities, consisting of obligations of the U.S.
Government, its agencies or instrumentalities. There is no limitation as to
the proportion of the Fund's assets which may be invested in any class of
securities.
When, in the opinion of the Advisor, a defensive investment posture is
warranted, the Fund is permitted to invest temporarily and without limitation
in U.S. Government obligations, money market instruments (such as U.S.
Treasury bills, commercial paper, certificates of deposit and banker's
acceptances) and repurchase agreements. Assets so invested will be productive
and yet readily available (when markets are deemed attractive) for
reinvestment in accordance with the Fund's principal investment policies.
The equity securities in which the Fund invests will be traded on a national
securities exchange or traded in the over-the-counter market. Up to 15% of the
Fund's net assets may be invested in foreign securities in the form of
American Depository Receipts ("ADRs"). The Fund does not expect to invest in
unsponsored ADRs. See "INVESTMENT STRATEGIES AND RISK CONSIDERATIONS."
Although the Fund's portfolio is professionally managed, the Fund may suffer a
loss on investments resulting in a lower net asset value. The likelihood of
loss is greater than that for funds with more conservative investment
policies.
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
Shareholders should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Fund, nor can
there be any assurance that the Fund's investment objective will be attained.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to permissible
portfolio securities. Under the terms of a repurchase agreement, the Fund
would acquire
5
<PAGE>
securities from financial institutions such as banks and registered broker-
dealers which the Advisor deems 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 then-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 102% of the repurchase price (including
accrued interest). If the seller were to default on its repurchase obligation
or become insolvent, the Fund 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 by the Fund were delayed pending court action. It is the
intent of the Fund to utilize repurchase agreements to invest idle funds for
short periods of time. Securities subject to repurchase agreements will be
held by the Fund's Custodian or in the Federal Reserve/Treasury book-entry
system. Repurchase agreements are considered to be loans by the Fund under the
Investment Company Act of 1940, as amended (the "Act").
AMERICAN DEPOSITORY RECEIPTS ("ADRS")
Investments in foreign securities are subject to special investment risks that
differ in some respects from those related to investments in securities of
U.S. domestic issuers. Such risks include potential political, social or
economic instability in the country of the issuer, the difficulty of
predicting international trade patterns, the possibility of the imposition of
exchange controls, expropriation, limits on removal of currency or other
assets, nationalization of assets, foreign withholding and income taxation,
and foreign trading practices (including higher trading commissions, custodial
charges and delayed settlements). Such securities may be subject to greater
fluctuations in price than securities issued by United States corporations or
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. The markets on which such securities trade may have less
volume and liquidity, and may be more volatile, than securities markets in the
United States. In addition, there may be less publicly available information
about a foreign company than about a U.S. domiciled company. Foreign companies
generally are not subject to uniform accounting, auditing and financial
reporting standards comparable to those applicable to domestic companies.
There is generally less government regulation of securities exchanges, brokers
and listed companies abroad than in the United States. Confiscatory taxation
or diplomatic developments could also affect investment in those countries. In
addition, foreign branches of U.S. banks, foreign banks and foreign issuers
may be subject to less stringent reserve requirements and to different
accounting, auditing, reporting, and recordkeeping standards than those
applicable to domestic branches of U.S. banks and domestic issuers.
For many foreign securities, U.S. dollar-denominated ADRs, which are traded in
the United States on exchanges or over-the-counter, are issued by domestic
banks. ADRs
6
<PAGE>
represent the right to receive securities of foreign issuers deposited in a
domestic bank or a correspondent bank. ADRs do not eliminate the risk inherent
in investing in the securities of foreign issuers. However, by investing in
ADRs rather than directly in stock of foreign issuers, the Fund can avoid
currency risks during the settlement period for either purchases or sales. In
general, there is a large, liquid market in the United States for many ADRs.
The information available for ADRs is subject to the accounting, auditing and
financial reporting standards of the domestic market or exchange on which they
are traded, whose standards are more uniform and more exacting than those to
which many foreign issuers may be subject. The Fund may also invest in
European Depository Receipts, or EDRs, which are receipts evidencing an
arrangement with a European bank similar to that for ADRs and are designed for
use in the European securities markets.
Certain ADRs and EDRs, typically those denominated as unsponsored, require the
holders thereof to bear most of the costs of such facilities while issuers of
sponsored facilities normally pay more of the costs thereof. The depository of
an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders in respect
to the deposited securities, whereas the depository of a sponsored facility
typically distributes shareholder communications and passes through the voting
rights.
ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities that are illiquid because of restrictions on transferability or
other reasons. Repurchase agreements with deemed maturities in excess of seven
days and securities that are not registered under the Securities Act of 1933
(the "1933 Act") but that may be purchased by institutional buyers pursuant to
Rule 144A under the 1933 Act are subject to this 10% limit. Rule 144A allows
for a broader institutional trading market for securities otherwise subject to
restriction on resale to the general public by establishing a "safe harbor"
from the registration requirements of the 1933 Act for resales of certain
securities to qualified institutional buyers.
CONVERTIBLE SECURITIES
The Fund may purchase convertible securities, which are fixed-income
securities, such as bonds or preferred stock, which may be converted at a
stated price within a specified period of time into a specified number of
shares of common stock of the same or a different issuer. Convertible
securities are senior to common stock in a corporation's capital structure,
but usually are subordinated to non-convertible debt securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a non-
convertible debt security), a
7
<PAGE>
convertible security also affords an investor the opportunity, through its
conversion feature, to participate in the capital appreciation of the common
stock into which it is convertible.
The Fund also may invest in debt securities with warrants attached or in units
with warrants. A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time.
In general, the market value of a convertible security is the higher of its
"investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock
if the security is converted). As a fixed-income security, the market value of
a convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market value of the underlying stock declines. Investments in
convertible securities generally entail less risk than investments in the
common stock of the same issuer.
MONEY MARKET INSTRUMENTS
The Fund may invest, in the following types of money market instruments, each
of which at the time of purchase must have or be deemed to have under rules of
the Securities and Exchange Commission remaining maturities of 13 months or
less. The Fund may invest in money market instruments and debt securities,
including bank obligations and commercial paper, which are at least comparable
in quality to the Fund's other investments. Bank obligations may include
bankers' acceptances, negotiable certificates of deposit and non-negotiable
time deposits earning a specified return, issued for a definite period of time
by a U.S. bank that is a member of the Federal Reserve System or is insured by
the Federal Deposit Insurance Corporation, or by a savings and loan
association or savings bank that is insured by the Federal Deposit Insurance
Corporation. Bank obligations also include U.S. dollar-denominated obligations
of foreign branches of U.S. banks or of U.S. branches of foreign banks, all of
the same type as domestic bank obligations. Investments in bank obligations
are limited to the obligations of financial institutions having more than $1
billion in total assets at the time of purchase. Investments by the Fund in
non-negotiable time deposits are limited to no more than 5% of its total
assets at the time of purchase.
U.S. TREASURY SECURITIES
U.S. Treasury securities include Treasury bills, Treasury notes and Treasury
bonds that differ in their interest rates, maturities and times of issuance.
Treasury bills have initial maturities of one year or less; Treasury notes
have initial maturities of one to ten years; and Treasury bonds generally have
initial maturities of greater than ten years.
8
<PAGE>
U.S. GOVERNMENT SECURITIES
In addition to U.S. Treasury securities, U.S. Government securities include
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Principal
and interest may fluctuate based on generally recognized reference rates or
the relationship of rates. While the U.S. Government provides financial
support to such U.S. Government-sponsored agencies or instrumentalities, no
assurance can be given that it will always do so, since it is not so obligated
by law.
MANAGEMENT OF THE FUND
THE BOARD OF TRUSTEES
Under Delaware law, the business and affairs of the Trust are managed under
the direction of the Board of Trustees. There are currently eight Trustees,
five of whom are not "interested persons" of the Trust within the meaning of
that term under the Act. The Trustees, in turn, elect the officers of the
Trust to supervise actively its day-to-day operations. The Statement of
Additional Information contains the name and background information regarding
each Trustee.
THE INVESTMENT ADVISOR
Trainer, Wortham & Co., Inc. (the "Advisor"), with offices at 845 Third
Avenue, New York, NY 10022 is the Trust's investment advisor and manager and
is registered as an investment advisor under the Investment Advisors Act of
1940, as amended.
The Advisor, organized in 1990, continues an investment counseling business
which began in 1924 as Trainer & Associates. The Advisor supervises
approximately $1.7 billion in investment accounts and is owned entirely by the
officers active in the day-to-day management of portfolios. By reason of his
ownership of 45% of the Advisor's stock, Charles V. Moore may be said to be a
"controlling person" of that firm.
Pursuant to an investment advisory agreement with the Trust on behalf of the
Fund, the Advisor receives an annual fee, accrued daily and paid monthly of
0.75% of the Fund's average daily net assets. For the fiscal year ended June
30, 1996, the Fund paid the
9
<PAGE>
Advisor fees aggregating, $191,340 which is higher than the advisory fees paid
by most other funds; however, this fee is comparable to those of other mutual
funds with similar investment objectives.
Subject to the general supervision of the Board of Trustees, and in accordance
with the Fund's investment objectives, policies, and restrictions, the Advisor
manages the Fund's investment portfolio, makes decisions with respect to and
places orders for all purchases and sales of the portfolio securities. The
President of the Trust, David P. Como, has been primarily responsible for the
day-to-day investment management of the Fund's portfolio since 1982. Mr. Como
has been a Managing Director of the Advisor since September, 1990, and was
Managing Director and Vice President of BIL, Trainer, Wortham & Co., its
predecessor company, from 1988 through September 1990.
ADMINISTRATOR
The Trust, on behalf of the Fund, has entered into an administrative services
agreement (the "Administration Agreement") with FPS Services, Inc. ("FPS"),
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, pursuant
to which the administrator receives a fee accrued daily and paid monthly of
0.15% of the value of such Fund's first $50 million of total average net
assets; 0.10% of the value of such Fund's next $50 million of total average
net assets; and 0.05% of the value of such Fund's total average net assets in
excess of $100 million, subject to an annual minimum fee of $72,000 for the
Trust.
The term of the Administration Agreement is two years and shall continue in
force each year thereafter, so long as such continuance is approved (i) by
FPS; (ii) by vote, cast in person at a meeting called for the purpose, of a
majority of the Board of Trustees who are not parties to the Administration
Agreement or interested persons (as defined in the Act) of any such party, and
(iii) by vote of a majority of the Board of Trustees or a majority of the
Fund's outstanding voting securities. The Fund and FPS may terminate the
Administration Agreement at any time without penalty upon giving the other
party 120 days written notice. The Administration Agreement shall
automatically terminate in the event of its assignment.
The services FPS provides to the Fund include: coordinating and monitoring of
any third parties furnishing services; providing the necessary office space,
equipment and personnel to perform administrative and clerical functions;
preparing, filing and distributing of proxy materials, periodic reports to
shareholders, registration statements and other documents; organizing of board
meetings; and responding to shareholder inquiries.
DISTRIBUTOR
FPS Broker Services, Inc. ("FPSB") serves as the Fund's Distributor on a best
efforts basis. FPSB is an affiliated company of FPS inasmuch as both are under
common ownership.
10
<PAGE>
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
FPS also serves as the Fund's Transfer Agent, Dividend Disbursing Agent,
Redemption Agent and Accounting Services Agent. In such capacities, FPS is
responsible for providing record-keeping and administrative services
(including calculation of net asset value) and for processing share purchases
and redemptions. Correspondence relating to purchases and redemptions of Fund
shares, or to dividend payments or reinvestment, should be addressed to FPS
Services, Inc.
CUSTODIAN
UMB Bank, n.a., Kansas City, MO is Custodian for the securities and cash of
the Fund.
DISTRIBUTION PLAN
The Shareholders of the Fund adopted a Plan of Distribution (the "Plan"),
effective October 31, 1991, pursuant to Rule 12b-1 under the Act, which was
last approved by the Board of Trustees on October 17, 1995. The Plan permits
the Fund to pay certain expenses associated with the distribution of its
shares. The Plan provides that the Fund will reimburse FPSB for actual
distribution and shareholder servicing expenses incurred by FPSB not
exceeding, on an annual basis, 0.25% of the Fund's average daily net assets.
Amounts expended by FPSB, but not reimbursed by the Fund, in any year will not
be a continuing liability of the Fund in subsequent years. Because the Fund
reimburses FPSB only for actual expenditures, FPSB realizes no profit from the
Plan. The Plan may be terminated by either party at any time and the Fund
shall have no liability for expenses that were not reimbursed as of the date
of termination.
All such payments made pursuant to the Plan shall be made for the purpose of
promoting the sale of shares or other such distribution related expenses,
including any distribution or service fees paid to securities dealers,
investment advisors, financial planners, and others, who have executed a
distribution agreement with FPSB. Distribution expenses which are attributable
to a particular Series will be charged against that Series' assets.
Distribution expenses which are attributable to more than one Series will be
allocated among the Series in proportion to their relative net assets.
BROKERAGE
The Advisor will attempt to place portfolio transactions for the Fund with
those brokers and dealers who will execute orders in an effective manner at
the most favorable price. When the execution and price offered by two or more
brokers or dealers are comparable, the Advisor may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide research advice and other services. The Advisor may
11
<PAGE>
give consideration to the sale of shares of the Fund as a factor in the
selection of brokers and dealers to execute Fund portfolio transactions
subject to seeking best price and execution. The Fund may pay brokerage
commissions to brokers which are affiliated with Officers and Trustees of the
Fund, provided that such transactions are in compliance with Section 17(e)(2)
of the Act.
PORTFOLIO TURNOVER
The rate of portfolio turnover will depend on the investment strategy
implemented by the Advisor for the Fund which will vary over any given time
period, but may be influenced by the following: general market conditions;
valuation analysis; market volatility; and technical analysis. It is not the
policy of the Fund to invest with the goal of generating short-term trading
profits, rather the Fund seeks to generate long-term capital appreciation when
possible by holding investments over a full market cycle, normally 2-3 years.
It is anticipated that the Fund's investment objective and strategy will
result in a portfolio turnover rate of less than 150% over the course of a
fiscal year, however market conditions may cause turnover to exceed 150% in
certain years. The portfolio turnover rates of the Fund for the fiscal years
ended June 30, 1996, 1995 and 1994 were 107%, 198%, and 178%, respectively.
High portfolio turnover involves correspondingly greater brokerage commissions
and other costs, which are borne directly by the Fund.
PURCHASE OF SHARES
Shares are offered for sale by the Fund on a continuous basis at the Fund's
net asset value. Purchasers of the Fund's shares pay no "sales load" or
underwriting commission, although broker-dealers effecting purchases or sales
of Fund shares for their customers may charge a service fee in connection
therewith. The minimum initial investment in the Fund is $250.00. Existing
shareholders may purchase additional shares with a minimum purchase of $50 per
transaction.
Purchases of the Fund are made at the net asset value per share next
determined after receipt by FPS as Transfer Agent of a purchase order in good
order. Thus, for orders received in good order before 4:00 p.m. (Eastern
time), the public offering price will be the net asset value determined as of
4:00 p.m. (Eastern time) that day. Orders for Fund shares received after 4:00
p.m. (Eastern time) will be purchased at the next determined net asset value
on the business day following receipt of the order.
INVESTING BY TELEPHONE
The Fund may accept telephone orders from broker-dealers or service
organizations which have been previously approved by the Trust. It is the
responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for same to the Fund. Shares of the Fund
may be purchased through broker-dealers, banks
12
<PAGE>
and bank trust departments which may charge the investor a transaction fee or
other fee for their services at the time of purchase. Such fees would not
otherwise be charged if the shares were purchased directly from the Fund.
INVESTING BY MAIL
Prospective shareholders may purchase shares of the Fund by completing and
signing the "Investment Application" enclosed with this Prospectus and sending
the application, together with a check payable to First Mutual Fund, c/o FPS
Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-
0903. Except as noted below, purchases without full payment will not be
processed until payment is received. The ownership of shares shall be recorded
on the books of the Transfer Agent in an account under the shareholder's name.
A confirmation of the purchase will be issued showing the account number and
number of shares owned.
INVESTING BY WIRE
Shares may also be purchased by instructing the bank to wire Federal Funds to
the Transfer Agent. Federal Funds are monies of member banks within the
Federal Reserve System. The bank must include the full name(s) in which the
account is registered and the Fund account number, and should address its wire
as follows:
UMB BANK KC NA
ABA # 10-10-00695 FOR: FPS SERVICES, INC. A/C 98-7037-071-9 FBO "First Mutual
Fund," Account of (exact name(s) of account registration) Shareholder Account
#
When opening a new account by wire transfer, first telephone the Transfer
Agent at 800-441-6580 to request an account number and furnish the Fund with a
social security or other tax identification number. A completed application
with signature(s) of registrant(s) must be filed with the Fund immediately
subsequent to the initial wire. Federal Funds wires must be made in amounts of
$250 or more. The bank will generally charge a fee for this wire. The Fund
will not be responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems.
SUBSEQUENT INVESTMENTS
Once a shareholder's account has been established, additional purchases may be
made by sending a check payable to "First Mutual Fund" c/o FPS Services, Inc.,
P.O. Box 412797, Kansas City, MO 64141-2797. Please enclose the stub of the
account statement and include the Fund account number on the check (as well as
the attributable year for retirement plan investments, if applicable).
Additional purchases may also be made through the Fund's Automatic Investment
Plan which provides shareholders a convenient method to make regularly
scheduled subsequent investments. See "SHAREHOLDER SERVICES."
13
<PAGE>
REDEMPTION OF SHARES
IN GENERAL
The Trust will make your redemption proceeds available as promptly as possible
and, in any event, within seven business days after your redemption order, in
proper order, is received. For your redemption order to be in proper order,
your order must include name as it appears on your account, your account
number and a signature guarantee as required as described below. However, your
redemption proceeds may be delayed if your purchased the shares to be redeemed
by check (including certified or cashier checks) until such check has cleared
and the Trust has collected good funds for your purchase. Such collection may
take 15 days or more.
REDEMPTIONS BY WRITTEN REQUEST
Shareholders may redeem shares by mail by writing directly to the Transfer
Agent at FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903, and requesting liquidation of all or any part of their
shares. The redemption request must be signed exactly as the shareholder's
name appears on the form of registration and must include the Fund account
number. If shares are owned by more than one person, the redemption request
must be signed by all owners exactly as their names appear in the
registration. Shares registered in the name of corporations, trusts and
fiduciaries can be redeemed only upon instructions of a duly authorized
person. To protect the account, the Transfer Agent and the Fund from fraud,
signature guarantees are required for certain redemptions. Signature
guarantees are required for: (1) all redemptions of $25,000 or more; (2) any
redemptions if the proceeds are to be paid to someone other than the person(s)
or organization in whose name the account is registered; (3) any redemptions
which request that the proceeds be wired to a bank (unless bank information
was received at the time the account was established); and (4) requests to
transfer the registration of shares to another owner. The Transfer Agent
requires that signatures be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, broker-dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. Broker-dealers guaranteeing signatures must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. The Transfer Agent cannot
accept guarantees from notaries public. The Transfer Agent may require
additional supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians.
14
<PAGE>
Shares will be redeemed at the net asset value, next determined after receipt
of a redemption request in proper form. Moreover, under the Act, the right of
redemption may be suspended when (a) trading on the New York Stock Exchange is
restricted or such Exchange is closed for other than weekends or holidays, (b)
the Securities and Exchange Commission has by order permitted such suspension,
or (c) an emergency exists making disposal of portfolio securities or
valuation of net assets not reasonably practicable. When in the opinion of the
Board of Trustees, conditions exist which make payments in cash on redemption
unwise or undesirable, the Fund may make payment of redemption in securities.
The value of a shareholder's shares upon redemption may be more or less than
their cost depending upon the value of the Fund's portfolio securities at the
time of redemption.
REDEMPTIONS BY TELEPHONE
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by instructing the Transfer
Agent by telephone at (800) 441-6580.
In order to arrange for redemption by wire or telephone after an account has
been opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent at the address
listed under "Investing by Mail". Such requests must be signed by the
shareholder, with signatures guaranteed (see "By Written Request" for details
regarding signature guarantees). Further documentation may be requested from
corporations, executors, administrators, trustees, or guardians.
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time by the Fund. Neither the
Fund nor any of their service contractors will be liable for any loss or
expense in acting upon telephone instructions that are reasonably believed to
be genuine. In attempting to confirm that telephone instructions are genuine,
the Fund will use such procedures as are considered reasonable, including
requesting a shareholder to correctly state his or her Fund account number,
the name in which his or her account is registered, his or her social security
number, banking institution, bank account number, and the name in which his or
her bank account is registered. To the extent that the Fund fails to use
reasonable procedures to verify the genuineness of telephone instructions, it
and/or its service contractors may be liable for any such instructions that
prove to be fraudulent or unauthorized.
Shares of the Fund may be redeemed through certain broker-dealers, banks and
bank trust departments who may charge the investor a transaction fee or other
fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed directly from the Fund.
15
<PAGE>
THIS IS YOUR
INVESTMENT APPLICATION
Detach and Mail to:
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
<PAGE>
INVESTMENT APPLICATION
- -------------------------------------------------------------------------------
MAIL TO: FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903
1. INITIAL INVESTMENT ($250 MINIMUM)
- -------------------------------------------------------------------------------
FORM OF PAYMENT
[ ] Check for $ enclosed (payable to "First Mutual Fund")
[ ] BY WIRE* An initial purchase of $ was wired on by
(Date)
---------------------------- to account #------------------------
Name of your Bank or Broker Number assigned by FPS
* Before making an initial investment by wire,you must be assigned an account
number by calling (800) 441-6580. Then have your local bank wire your funds
to: UMB Bank, N.A., ABA #10-10-00695 for credit to FPS AC #98-7037-071-9
(First Mutual Fund). Be sure to include your name and account number on the
wire.
- -------------------------------------------------------------------------------
2. REGISTRATION (Please Print)
- -------------------------------------------------------------------------------
INDIVIDUAL
---------------------------------------------------- ---------------------
First name Middle Initial Last Name Social Security #
--------------------------------------------------- ---------------------
Jt. Owner First Name* Middle Initial Last Name Social Security #
Citizen of: [ ] United States [ ] Other (Please Indicate)
*(Joint ownership with rights of survivorship unless otherwise noted).
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
GIFT TO MINORS
---------------------------------------------------------------------------
Name of Custodian (Name one only) As Custodian For (name one only)
Under the Uniform Gift to Minors Act -------------------------
----------- Minor's Social Security #
State
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS**
----------------------------------------------------------------------
Name of Corporation, Partnership, Trust or Other
----------------------------------------------------------------------
Tax I.D. # Name of Trustee(s) Date of Trust
**Complete Corporate Resolution attached.
- --------------------------------------------------------------------------------
<PAGE>
3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
-----------------------------------------------------------------------------
Street Address and Apt. No. City State Zip
( )__________________________ ( )___________________________
Residence Telephone Number Business Telephone Number
4. DISTRIBUTION OPTIONS (Please indicate one)
[ ] Reinvest (dividends & capital gains in additional shares).
[ ] Cash Dividends (dividend in cash, capital gains in additional shares).
[ ] All Cash (dividends & capital gains in cash).
5. SYSTEMATIC WITHDRAWAL PLAN (MINIMUM INITIAL INVESTMENT $5,000)
A check in the amount of $ (minimum $50) will be sent to your address of
record unless otherwise noted.
Please select desired frequency:
[ ] Monthly, prior to last day
[ ] Quarterly, prior to last day of_______,________,________, and_______.
[ ] Semi-Annual or Annual, prior to the last day of_____,_____, or______.
6. TELEPHONE PRIVILEGE: REDEMPTIONS; EXCHANGES BETWEEN FUNDS
Check box if you want this service:
I (We) authorize FPS Services, Inc. and/or Trainer, Wortham First Mutual
Funds to act upon instructions received by telephone from me (us) to redeem
shares or to exchange for shares of other Trainer, Wortham First Mutual
Funds. I (we) understand an exchange is made by redeeming shares of one fund
and using the proceeds to buy shares of another fund. Exchanges must be made
into identically registered accounts. Redemption proceeds will be sent as
indicated in this prospectus.
*If not otherwise indicated below, only exchanges will be allowed.
[ ] Redemption [ ] Exchanges [ ] Both
Check one only, if none are checked all redemptions will be sent by check.
[ ] All redemptions proceeds will be executed by an ACH transaction unless FPS
Services, Inc. is notified otherwise in writing. There is no charge for ACH
transactions. Allow 3 business days.
[ ] All redemption proceeds will be executed by a FED Wire transaction unless
FPS Services is notified otherwise in writing. There is a $9 charge for FED
Wire transactions.
[ ] All redemption proceeds will be sent by check to the mailing address
indicated below unless FPS Services is notified otherwise in writing.
All FED Wire and ACH transactions will be sent as indicated below. There will be
no charge for ACH transactions. Any changes in ACH transactions must be made in
writing to FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903. Please allow one month for ACH instructions to be
effective.
(Notify your bank of your intent to establish this option on your bank account.)
------------------------------------------------------------------------------
Bank Name Branch Office (if applicable)
------------------------------------------------------------------------------
Bank Address (Do not use P.O. Box) City State Zip Code
------------------------------------------------------------------------------
Bank Wire Routing Number Name(s) on Your Bank Account
------------------------------------------------------------------------------
Your Bank Account Number
Voided Personal Check or Deposit Slip Must Be Attached
<PAGE>
7. SIGNATURE AND CERTIFICATION
The following is required by Federal tax law to avoid 20% backup withholding,
"By signing below, I certify under penalties of perjury that the social
security or taxpayer identification number entered above is correct (or I am
waiting for a number to be issued to me), and that I have not been notified
by the IRS that I am subject to backup withholding unless I have checked the
box." If you have been notified by the IRS that you are subject to backup
withholding, check box [ ]. "The Internal Revenue Service does not require
your consent to any provision of this document other than the certifications
required to avoid backup withholding."
Receipt of current prospectus is hereby acknowledged.
-------------------------------------------------------------------------
SIGNATURE [ ] OWNER [ ]CUSTODIAN [ ] TRUSTEE DATE
-------------------------------------------------------------------------
Signature of Joint Owner (if applicable)
8. INVESTMENT DEALER INFORMATION
------------------------------------------------------------------------------
Name of Firm Rep Name & No. Authorized Signature
------------------------------------------------------------------------------
Street Address City State Zip
<PAGE>
RESOLUTIONS
(THIS SECTION TO BE COMPLETED BY CORPORATIONS, TRUSTS, AND OTHER ORGANIZATIONS).
RESOLVED: That this corporation or organization become a shareholder of First
Mutual Fund of Trainer, Wortham First Mutual Funds (the "Trust") and that
- -------------------------------------------------------------------------------
IS (ARE) AWARE HEREBY AUTHORIZED TO COMPLETE AND EXECUTE THE APPLICATION OF
BEHALF OF THE CORPORATION OR ORGANIZATION AND TAKE ANY ACTION FOR IT AS MAY BE
NECESSARY OR APPROPRIATE WITH RESPECT TO ITS SHAREHOLDERS ACCOUNT(S) WITH THE
TRUST, AND IT IS FURTHER RESOLVED: THAT ANY ONE OF THE ABOVE-NOTED OFFICERS IS
AUTHORIZED TO SIGN ANY DOCUMENTS NECESSARY OR APPROPRIATE TO APPOINT FPS
SERVICES, INC. AS REDEMPTION AGENT OF THE CORPORATION OR ORGANIZATION FOR
SHARES OF THE TRUST, TO ESTABLISH OR ACKNOWLEDGE TERMS AND CONDITIONS
GOVERNING THE REDEMPTION OF SAID SHARES OR TO OTHERWISE IMPLEMENT THE
PRIVILEGES ELECTED ON THE APPLICATION.
- -------------------------------------------------------------------------------
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the ______________________
(Name of Corporation)
incorporated or formed under the laws of ______________________________________
(State)
and were adopted at a meeting of the Board or Trustees of the organization or
corporation duly called and held on __________ at which a quorum was present and
acting throughout, and that the same are now in full force and effect.
I further certify that the following is (are) the duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title Name Title
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
Witness my hand and the seal of the corporation or organization this day
of , 19 .
_______________________________________ _______________________________________
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
EXCHANGE OF SHARES
You may exchange your shares of any Series of the Trust for shares of either
of the other Series at net asset value without the payment of any fee or
charge in writing or by telephone. An exchange is considered a sale of shares
and may result in capital gain or loss for federal income tax purposes. Before
an exchange can be made, you must have received the current Prospectus for the
Series into which you wish to exchange, and the exchange privilege may be
exercised only in those states where shares of such Series, as the case may
be, may legally be sold. If the Transfer Agent receives exchange instructions
from you in writing or by telephone at (800) 441-6580, in good order by the
Valuation Time on any Business Day, the exchange will be effected that day.
For your exchange request to be in good order, your request must include your
name as it appears on your account, your account number, the amount to be
exchanged, the name of the Funds from which and to which the exchange is to be
made and a signature guarantee as may be required. A written request by you
for an exchange in excess of $25,000 must be accompanied by a signature
guarantee as described under "REDEMPTION OF SHARES--By Written Request."
SHAREHOLDER SERVICES
The following special services are available to shareholders. An investor may
change or stop these services at any time by written notice to the Fund.
AUTOMATIC INVESTMENT PLAN
The Fund has an Automatic Investment Plan which provides shareholders with a
convenient method by which investors may have amounts deducted directly from
their checking accounts for investment in the Fund. The minimum initial and
subsequent investments for the Fund also apply when using this method of
investing. To begin participating in this Plan, use the Automatic Investment
Plan Application found in the back of this Prospectus.
SYSTEMATIC CASH WITHDRAWAL PLAN
The Fund has a Systematic Withdrawal Plan, which provides for voluntary
automatic withdrawals of at least $50 monthly, quarterly, semi-annually or
annually. In order to qualify for this option, dividends and capital gains
must be reinvested.
RETIREMENT PLANS
The Fund has available an Individual Retirement Account for use by certain
individuals who qualify (including earned income from self-employment). More
detailed information about how to participate in this plan, the fees charged
by the Custodian bank, and the limits on contributions can be found in the
Statement of Additional Information or may be obtained by contacting the Fund
at (800) 257-4414.
16
<PAGE>
NET ASSET VALUE
The net asset value per share of capital stock of the Fund will be determined
each business day on which the New York Stock Exchange is open for business as
of the close of regular trading hours (currently 4:00 p.m. Eastern time) and
for any other day (other than a day on which no shares are tendered for
redemption and no order to purchase or sell any shares is received) during
which there is a sufficient degree of trading in the Fund's portfolio
securities that the Fund's net asset value per share might be materially
affected. Determination of net asset value will be in accordance with
generally accepted accounting principles and will be computed by dividing the
value of the Fund's total net assets by the total number of shares
outstanding. Securities traded on a securities exchange are valued at the last
sale price prior to the time of computation or, if there have been no sales on
that day, at the mean of their closing bid and asked prices. Securities not
traded on a securities exchange but for which market quotations are readily
available will be valued at the mean of their bid and asked prices, although
securities traded over the counter on NASDAQ will be valued at their last sale
price. Securities not traded on a securities exchange and other securities or
assets for which market quotations are not readily available will be valued at
fair value as determined in good faith by the Board of Trustees. Once the
aggregate value of all securities has been determined, there will be added to
this total the dollar amount of cash on hand and receivables and the value of
all other assets. From the sum of the foregoing, the aggregate amount of all
liabilities and all accrued expenses will be deducted to produce the total net
asset value of all shares outstanding.
DIVIDENDS AND TAXES
The Fund intends to qualify annually to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As such, the Fund will not be subject to Federal income tax, or
to any excise tax, to the extent its earnings are distributed as provided in
the Code and by satisfying certain other requirements relating to the sources
of its income and diversification of its assets.
The Fund intends to distribute substantially all of its net investment income
and net capital gains. The Fund intends to distribute its net investment
income at least annually and to distribute its net capital gains, if any, at
least annually. Dividends from net investment income or net short-term capital
gains will be taxable to you as ordinary income, whether received in cash or
in additional shares.
The Fund permits any shareholder located in states where the Fund's shares are
registered (regardless of the number of shares owned) to elect a Dividend
Reinvestment Plan for the automatic reinvestment of all distributions. If a
dividend is declared from net investment income or a capital gains
distribution is declared from net capital gains,
17
<PAGE>
investors electing under the Dividend Reinvestment Plan are required to take
such dividends or distribution in Fund shares rather than in cash. The full
amount of the distribution will be invested and the shareholder will be
credited with any full or fractional shares resulting. The investment under
the Dividend Reinvestment Plan will be made at the current net asset value on
the dividend payable date. Dividends and capital gains distributions will
result in a taxable event for the investor even though invested in shares.
An investor may elect or terminate participation in the Dividend Reinvestment
Plan at any time. Elections to participate must be made using the Investment
Application. Termination can be made by written notice. Costs of the Plan will
be borne by the Fund. There is no assurance that the Plan will result in a
profit for an investor.
For corporate investors in the Fund, dividends from net investment income will
generally qualify in part for the corporate dividends-received deduction.
However, the portion of the dividends so qualified depends on the aggregate
qualifying dividend income received by the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from long-term capital gains, whether received
in cash or in additional shares, are taxable to investors as long- term
capital gains, regardless of the length of time an investor has owned shares
in the Fund. The Fund does not seek to realize any particular amount of
capital gains during a year; rather, realized gains are a by-product of
management activities. Consequently, capital gains distributions may be
expected to vary considerably from year to year. Also, if purchases of shares
in a Fund are made shortly before the record date for a capital gains
distribution or a dividend, a portion of the investment will be returned as a
taxable distribution.
Dividends which are declared in October, November or December to shareholders
of record in such a month but which, for operational reasons, may not be paid
to the shareholder until the following January, will be treated for tax
purposes as if paid by a Fund and received by the shareholder on December 31
of the calendar year in which they are declared.
A sale or redemption of shares of a Fund is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Any loss incurred on
sale or exchange of a Fund's shares held for six months or less will be
treated as a long-term capital loss to the extent of any capital gain
dividends received with respect to such shares.
In addition to Federal taxes, shareholders may be subject to state and local
taxes on distributions. It is recommended that shareholders consult their tax
advisers regarding specific questions as to Federal, state, local or foreign
taxes.
Each year, the Fund will mail information to shareholders on the tax status of
the Fund's dividends and distributions made to shareholders.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer
18
<PAGE>
identification regulations. You may avoid this withholding requirement by
certifying on your account registration form your proper taxpayer
identification number and by certifying that you are not subject to backup
withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
Federal, state, local or foreign tax consequences of an investment in the
Fund.
PERFORMANCE INFORMATION
From time to time, performance information regarding the Fund, such as total
return, may be quoted in advertisements or in communications to shareholders.
These performance quotations represent the Fund's past performance, and should
not be considered as representative of future results. The Fund's total return
may be calculated on an average annual and/or aggregate basis for various
periods (which will be stated in all advertisements). Average annual total
return reflects the average percentage change per year in the value of an
investment in the Fund. Aggregate total return reflects the total percentage
change over the stated period. In calculating total return, the assumption is
made that dividends and capital gain distributions made by the Fund during the
period are reinvested in additional shares.
Total return of the Fund may be compared to: other mutual funds with similar
investment objectives; other relevant indices; rankings prepared by
independent services; and financial or industry publications and/or other
publications or services that monitor the performance of mutual funds, such as
Lipper Analytical, CDA/Weisenberger, the Investment Company Institute,
Morningstar, Inc., the Dow Jones Composite Average or its component indices
and Standard & Poor's 500 Stock Index or its component indices, among others.
The principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
A graph comparing the increase in value of a $10,000 investment in First
Mutual Fund with the performance of the Standard & Poor's 500 Index and a
discussion of performance is included in the Fund's Annual Report dated June
30, 1996.
19
<PAGE>
GENERAL INFORMATION
ORGANIZATION
First Mutual Fund is a separate, diversified, Series of Trainer, Wortham First
Mutual Funds, a Delaware business trust organized pursuant to a Trust
Instrument dated January 17, 1995. On October 1, 1996, the name of the Trust
was changed from First Mutual Funds to its present name. The Trust is
registered under the Act as an open-end management investment company commonly
known as a mutual fund. The Trustees of the Trust may establish additional
series or classes of shares of the Trust without the approval of shareholders.
The assets of each Series belong only to that Series, and the liabilities of
each Series are borne solely by that Series and no other.
DESCRIPTION OF SHARES
The Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $0.001 per share. Shares of the Fund represent
equal proportionate interests in the assets of the Fund only and have
identical voting, dividend, redemption, liquidation and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other right to subscribe to any additional shares. Currently,
there is only one class of shares issued by the Fund.
SHAREHOLDER MEETINGS
The Board of Trustees do not intend to hold annual meetings of shareholders of
the Fund. The Board of Trustees has undertaken to the Securities and Exchange
Commission, however, that they will promptly call a meeting for the purpose of
voting upon the question of removal of any Trustee when requested to do so by
holders of not less than 10% of the outstanding shares of the Fund. In
addition, subject to certain conditions, shareholders of the Fund may apply to
the Fund to communicate with other shareholders to request a shareholder's
meeting to vote upon the removal of a Trustee or Trustees.
CERTAIN PROVISIONS OF TRUST INSTRUMENT
Under Delaware law, the shareholders of the Fund will not be personally liable
for the obligations of the Trust; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations.
SHAREHOLDER REPORTS AND INQUIRIES
Shareholders will receive annual financial statements which are audited by the
Fund's independent accountants, Tait, Weller & Baker, as well as unaudited
semi-annual financial statements. Shareholder inquiries should be addressed to
First Mutual Fund, c/o FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903 or by calling (800) 257-4414.
20
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
HOW DOES IT WORK?
1. FPS Services, Inc., through our bank, UMB Bank, KC NA, draws an automatic
clearing house (ACH) debit electronically against your personal checking
account each month, according to your instructions.
2. Choose any amount ($50 or more) that you would like to invest regularly and
your debit for this amount will be processed by FPS Services, Inc. as if
you had written a check yourself.
3. Shares will be purchased and a confirmation sent to you.
HOW DO I SET IT UP?
1. Complete the forms and the Fund Application Form if you do not already have
an existing account.
2. Mark one of your personal checks or deposit slips VOID, attach it to the
forms below and mail to FPS Services, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903.
3. As soon as your bank accepts your authorization, debits will be generated
and your Automatic Investment Plan started. In order for you to have ACH
debits from your account, your bank must be able to accept ACH transactions
and/or be a member of an ACH association. Your branch manager should be
able to tell you your bank's capability. We cannot guarantee acceptance by
your bank.
4. Please allow one month for processing of your Automatic Investment Plan
before the first debit occurs.
- -------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN APPLICATION
To: FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Please start an Automatic Investment Plan for me and invest ____________________
($50 or more)
on the[ ] 10th[ ] 15th[ ] 20th of each month,
in shares of First Mutual Fund
Check one:
[ ] I am in the process of establishing an account.
or
[ ] My account number is: _____________________________________________________
- -------------------------------------------------------------------------------
Name as account is registered
- -------------------------------------------------------------------------------
Street
- -------------------------------------------------------------------------------
City State Zip
I understand that my ACH debit will be dated on the day of each month as
indicated above or as specified by written request. I agree that if such debit
is not honored upon presentation, FPS Services, Inc. may discontinue this
service and any share purchase made upon deposit of such debit may be
cancelled. I further agree that if the net asset value of the shares purchased
with such debit is less when said purchase is canceled than when the purchase
was made, FPS Services, Inc. shall be authorized to liquidate other shares or
fractions thereof held in my account to make up the deficiency. This Automatic
Investment Plan may be discontinued by FPS Services, Inc. upon 30-days written
notice or at any time by the investor by written notice to FPS Services, Inc.
which is received not later than 5 business days prior to the above designed
investment date.
Signature(s):
---------------------------------
---------------------------------
21
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
BANK REQUEST AND AUTHORIZATION
TO:
---------------------------------------------- -----------------------------
Name of Your Bank Bank Checking Account Number
----------------------------------------------------------------------------
Address of Bank or Branch Where Account is Maintained
As a convenience to me, please honor ACH debits on my account drawn by FPS
Services, Inc., UMB Bank, KC NA and payable to "FIRST MUTUAL FUND."
I agree that your rights with respect to such debit shall be the same as if
it were a check drawn upon you and signed personally by me. This authority
shall remain in effect until you receive written notice from me changing
its terms or revoking it, and until you actually receive such notice, I
agree that you shall be fully protected in honoring such debit.
I further agree that if any debit is dishonored, whether with or without
cause or whether intentionally or inadvertently, you shall be under no
liability whatsoever.
DEPOSITOR'S
--------------------------------------------------
Signature of Bank Depositor(s) as shown on bank records.
NOTE: Your bank must be able to accept ACH transactions and/or be a member
of an ACH association in order for your to use this service.
- -------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
TO:The Bank Named Above
So that you may comply with your Depositor's request and authorization,
TRAINER, WORTHAM FIRST MUTUAL FUNDS agrees as follows:
1. To indemnify and hold you harmless from any loss you may suffer arising
from or in connection with the payment by you of a debit drawn by FPS
Services, Inc. to the order of FIRST MUTUAL FUND designated on the
account of your depositor(s) executing the authorization including any
costs or expenses reasonably incurred in connection with such loss.
TRAINER, WORTHAM FIRST MUTUAL FUNDS will not, however, indemnify you
against any loss due to your payment of any debit generated against
insufficient funds.
2. To refund to you any amount erroneously paid to you to FPS Services,
Inc. on any such debit if claim for the amount of such erroneous payment
is made by you within 3 months of the date of such debit on which
erroneous payment was made.
22
<PAGE>
TRAINER, WORTHAM FIRST MUTUAL FUNDS
TRAINER, WORTHAM EMERGING GROWTH FUND
845 THIRD AVENUE, 6TH FLOOR
NEW YORK, NY 10022
(800) 257-4414
PROSPECTUS
OCTOBER 1, 1996
Trainer, Wortham First Mutual Funds (the "Trust") is an open-end, management
investment company which currently offers shares of three series: First Mutual
Fund; Trainer, Wortham Emerging Growth Fund; and Trainer, Wortham Total Return
Bond Fund (individually and collectively, the "Series"). Each Series has
distinct investment objectives and policies.
This prospectus pertains only to Trainer, Wortham Emerging Growth Fund (the
"Fund"). The Fund's investment objective is to seek capital appreciation
through investments in the common stock of emerging growth companies which are
defined by the Advisor as companies achieving or about to achieve rapid
earnings growth with weighted average market capitalizations of approximately
$1 billion. Trainer, Wortham & Co., Inc. (the "Advisor") serves as the Fund's
investment advisor.
The minimum initial investment for the Fund is $250. Subsequent investments
will be accepted in minimum amounts of $50.00
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Fund, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission and is available upon request
without charge by calling or writing to the Fund at the telephone number or
address shown above. The Statement of Additional Information bears the same
date as this Prospectus and is incorporated by reference in its entirety into
this Prospectus.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
23
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE INFORMATION........................................................
FINANCIAL HIGHLIGHTS.......................................................
INVESTMENT OBJECTIVE AND POLICIES..........................................
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS..............................
MANAGEMENT OF THE FUND.....................................................
THE BOARD OF TRUSTEES.....................................................
THE INVESTMENT ADVISOR....................................................
ADMINISTRATOR.............................................................
DISTRIBUTOR...............................................................
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT..............................
DISTRIBUTION PLAN..........................................................
BROKERAGE..................................................................
PURCHASE OF SHARES.........................................................
REDEMPTION OF SHARES.......................................................
EXCHANGE OF SHARES.........................................................
SHAREHOLDER SERVICES.......................................................
NET ASSET VALUE............................................................
DIVIDENDS AND TAXES........................................................
PERFORMANCE INFORMATION....................................................
GENERAL INFORMATION........................................................
</TABLE>
UNDERWRITER: ADVISOR:
Trainer, Wortham & Co., Inc.
FPS Broker Services, Inc.
845 Third Avenue
3200 Horizon Drive
New York, NY 10022
P.O. Box 61503
(800) 775-0604
King of Prussia, PA 19406-0903
(800) 257-4414
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION ABOUT THE ITEMS DISCUSSED IN THIS PROSPECTUS, A
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO THE FUND AT 845 THIRD AVENUE, 6TH FLOOR, NEW YORK, NY 10022, OR
BY CALLING (800) 257-4414.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
24
<PAGE>
EXPENSE INFORMATION
Below is a summary of the Fund's estimated operating expenses. A hypothetical
example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES (1)
(as a percentage of average net assets):
<TABLE>
<S> <C>
Management Fees (after fee waiver) (2).................................... 0.00%
12b-1 Fees................................................................ 0.50%
Other Expenses ........................................................... 0.75%
-----
Total Fund Operating Expenses (after fee waiver) (2)...................... 1.25%
=====
</TABLE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS
EXAMPLE: ------ -------
<S> <C> <C>
An investor would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2) redemption
at the end of each period $13 $40
</TABLE>
(1) Trainer, Wortham Emerging Growth Fund will commence investment
operations on or about October 1, 1996. The expenses shown are those
expected to be incurred for the Fund's first fiscal period.
(2) Based on estimated expenses for the current fiscal year, the Advisor
has voluntarily elected to waive its investment advisory fee and/or
assume certain expenses of the Fund other than brokerage fees,
extraordinary items and taxes to the extent Total Fund Operating
Expenses exceed 1.25%. Such waiver may be discontinued at the
discretion of the Advisor after the funds net assets exceed $7.5
million. Without such waiver, Management Fees stated above would be
1.25%. Other Expenses would remain the same and Total Fund Operating
Expenses are estimated to be 2.50%.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the tables above is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose any sales load, redemption or exchange
fees; however, the transfer agent currently charges investors who request
redemptions by wire transfer a fee of $9 for each transaction. For more
complete descriptions of the various costs and expenses, see the sections
entitled "Management of the Fund," and "Distribution Plan."
25
<PAGE>
FINANCIAL HIGHLIGHTS
Set forth below are unaudited "Financial Highlights" of Trainer, Wortham
Emerging Growth Fund for a share outstanding during the period from October 1,
1996 (commencement of operations) to February 28, 1997.
Emerging
Growth
-----------
Period
Ended
February 28
1997/1/
(unaudited)
-----------
Net Asset Value, Beginning of Period ............................ $ 10.00
Income from Investment Operations
Net investment income (loss) ................................... (0.02)
Net gains (losses) on securities (both
realized and unrealized) ..................................... (0.09)
-------
Total from investment operations ........................... (0.11)
-------
Less Distributions
Dividends (from net investment income) ......................... 0.00
Distributions (from capital gains) ............................. 0.00
-------
Total distributions ........................................ 0.00
-------
Net Asset Value, End of Period .................................. $ 9.89
=======
Total Return .................................................... 1.10% +
Ratios/Supplemental Data
Net assets, end of period (in 000's) ........................... $ 1,577
Ratio of expenses to average net assets**
before reimbursement of expenses by Advisor .................. 7.98% *
after reimbursement of expenses by Advisor ................... 1.25% *
Ratio of net investment income (loss) to average net assets**
before reimbursement of expenses by Advisor .................. 7.30% *
after reimbursement of expenses by Advisor ................... 0.57% *
Portfolio turnover rate ........................................ 34% *
Average commission rate paid ................................... $0.0809
/1/ The Fund commenced operations on October 1, 1996.
+ Since inception, not annualized.
* Annualized.
** Average net assets have been computed on the basis of the value of the net
assets at the end of the month.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to seek capital appreciation through
investments in the common stock of emerging growth companies. Emerging growth
companies are defined by the Advisor as companies that are achieving, or about
to achieve, rapid earnings growth due to a new product, a new industry,
technological innovation, new management, or a novel strategic corporate
positioning, among other factors. The weighted average market capitalization
of holdings in the Fund will be approximately $1 billion. The Fund seeks to
outperform equity returns generated by relevant benchmark indices such as the
Russell 2500 index and S & P 600 Small-cap Index, as well as, mutual fund
indices for funds with comparable investment objectives. The Fund seeks to
meet this objective by employing proprietary, fundamental, technical and
valuation analysis in the selection of small capitalization, publicly traded
U.S. companies. Due to the inherent risk in any investment program, the Fund
cannot ensure that its investment objectives will be realized. The value of a
Fund share will fluctuate as the value of the securities in the Fund's
portfolio fluctuate.
The Fund will normally invest at least 95% of the value of its total assets
(except when maintaining a temporary defensive position) in the common stock
of emerging growth companies as defined above. The Fund will invest in
companies that are achieving rapid earnings growth either as the result of new
products, a new corporate operating strategy, technological innovation,
financial recapitalization or new management among other factors. In general,
companies achieving strong earnings growth have higher near-term appreciation
potential than companies that are growing more slowly, out-of-favor "value"
stocks, or cyclical stocks. The Fund will seek to limit risk by investing only
in companies that can be accumulated at what the Advisor deems reasonable
valuations, and by avoiding situations in which financial distress is apparent
or imminent. The Fund will also contain risk through diversification; no
single investment will constitute more than 5% of the Fund at cost.
When in the opinion of the Advisor, a defensive investment posture is
warranted, the Fund is permitted to invest temporarily and without limitation
in U.S. Government obligations, money market instruments (such as U.S.
Treasury bills, commercial paper, certificates of deposit and banker's
acceptances) and repurchase agreements. Assets so invested will be productive
and yet readily available (when markets are deemed attractive) for
reinvestment in accordance with the Fund's principal investment policies.
The equity securities in which the Fund invests will be traded on a national
securities exchange or traded in the over-the-counter market. Up to 15% of the
Fund's net assets may be invested in foreign securities in the form of
American Depository Receipts ("ADRs"). The Fund does not expect to invest in
unsponsored ADRs. See "INVESTMENT STRATEGIES AND RISK CONSIDERATIONS."
27
<PAGE>
Although the Fund's portfolio is professionally managed, the Fund may suffer a
loss on investments resulting in a lower net asset value. The likelihood of
loss is greater than that for funds with more conservative investment
objectives.
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
Shareholders should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Fund, nor can
there be any assurance that the Fund's investment objective will be attained.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to permissible
portfolio securities. Under the terms of a repurchase agreement, the Fund
would acquire securities from financial institutions such as banks and
registered broker-dealers which the Advisor deems 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 then-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 102% of the
repurchase price (including accrued interest). If the seller were to default
on its repurchase obligation or become insolvent, the Fund 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 by the Fund were delayed
pending court action. It is the intent of the Fund to utilize repurchase
agreements to invest idle funds for short periods of time. Securities subject
to repurchase agreements will be held by the Fund's Custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by the Fund under the Investment Company Act of 1940,
as amended (the "Act").
AMERICAN DEPOSITORY RECEIPTS ("ADRS")
Investments in foreign securities are subject to special investment risks that
differ in some respects from those related to investments in securities of
U.S. domestic issuers. Such risks include potential political, social or
economic instability in the country of the issuer, the difficulty of
predicting international trade patterns, the possibility of the imposition of
exchange controls, expropriation, limits on removal of currency or other
assets, nationalization of assets, foreign withholding and income taxation,
and foreign trading practices (including higher trading commissions, custodial
charges and delayed settlements). Such securities may be subject to greater
fluctuations in price than securities issued by United States corporations or
issued or guaranteed by the U.S.
28
<PAGE>
Government, its agencies or instrumentalities. The markets on which such
securities trade may have less volume and liquidity, and may be more volatile,
than securities markets in the United States. In addition, there may be less
publicly available information about a foreign company than about a United
States domiciled company. Foreign companies generally are not subject to
uniform accounting, auditing and financial reporting standards comparable to
those applicable to domestic companies. There is generally less government
regulation of securities exchanges, brokers and listed companies abroad than
in the U.S. Confiscatory taxation or diplomatic developments could also affect
investment in those countries. In addition, foreign branches of U.S. banks,
foreign banks and foreign issuers may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting, and
recordkeeping standards than those applicable to domestic branches of U.S.
banks and domestic issuers.
For many foreign securities, dollar-denominated ADRs, which are traded in the
United States on exchanges or over-the-counter, are issued by domestic banks.
ADRs represent the right to receive securities of foreign issuers deposited in
a domestic bank or a correspondent bank. ADRs do not eliminate the risk
inherent in investing in the securities of foreign issuers. However, by
investing in ADRs rather than directly in stock of foreign issuers, the Fund
can avoid currency risks during the settlement period for either purchases or
sales. In general, there is a large, liquid market in the United States for
many ADRs. The information available for ADRs is subject to the accounting,
auditing and financial reporting standards of the domestic market or exchange
on which they are traded, whose standards are more uniform and more exacting
than those to which many foreign issuers may be subject. The Fund may also
invest in European Depository Receipts, or EDRs, which are receipts evidencing
an arrangement with a European bank similar to that for ADRs and are designed
for use in the European securities markets.
Certain ADRs and EDRs, typically those denominated as unsponsored, require the
holders thereof to bear most of the costs of such facilities while issuers of
sponsored facilities normally pay more of the costs thereof. The depository of
an unsponsored facility frequently is under no obligation to distribute
shareholder communications received from the issuer of the deposited
securities or to pass through the voting rights to facility holders in respect
to the deposited securities, whereas the depository of a sponsored facility
typically distributes shareholder communications and passes through the voting
rights.
ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities that are illiquid because of restrictions on transferability or
other reasons. Repurchase agreements with deemed maturities in excess of seven
days and securities that are not registered under the Securities Act of 1933
(the "1933 Act") but that may be purchased
29
<PAGE>
by institutional buyers pursuant to Rule 144A under the 1933 Act are subject
to this 10% limit. Rule 144A allows for a broader institutional trading market
for securities otherwise subject to restriction on resale to the general
public by establishing a "safe harbor" from the registration requirements of
the 1933 Act for resales of certain securities to qualified institutional
buyers.
MONEY MARKET INSTRUMENTS
The Fund may invest, in the following types of money market instruments, each
of which at the time of purchase must have or be deemed to have under rules of
the Securities and Exchange Commission remaining maturities of 13 months or
less. The Fund may invest in money market instruments and debt securities,
including bank obligations and commercial paper, which are at least comparable
in quality to the Fund's other investments. Bank obligations may include
bankers' acceptances, negotiable certificates of deposit and non-negotiable
time deposits earning a specified return, issued for a definite period of time
by a U.S. bank that is a member of the Federal Reserve System or is insured by
the Federal Deposit Insurance Corporation, or by a savings and loan
association or savings bank that is insured by the Federal Deposit Insurance
Corporation. Bank obligations also include U.S. dollar-denominated obligations
of foreign branches of U.S. banks or of U.S. branches of foreign banks, all of
the same type as domestic bank obligations. Investments in bank obligations
are limited to the obligations of financial institutions having more than $1
billion in total assets at the time of purchase. Investments by the Fund in
non-negotiable time deposits are limited to no more than 5% of its total
assets at the time of purchase.
U.S. TREASURY SECURITIES
U.S. Treasury securities include Treasury bills, Treasury notes and Treasury
bonds that differ in their interest rates, maturities and times of issuance.
Treasury bills have initial maturities of one year or less; Treasury notes
have initial maturities of one to ten years; and Treasury bonds generally have
initial maturities of greater than ten years.
U.S. GOVERNMENT SECURITIES
In addition to U.S. Treasury securities, U.S. Government securities include
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear
30
<PAGE>
fixed, floating or variable rates of interest. Principal and interest may
fluctuate based on generally recognized reference rates or the relationship of
rates. While the U.S. Government provides financial support to such U.S.
Government-sponsored agencies or instrumentalities, no assurance can be given
that it will always do so, since it is not so obligated by law.
MANAGEMENT OF THE FUND
THE BOARD OF TRUSTEES
Under Delaware law, the business and affairs of the Trust are managed under
the direction of the Board of Trustees. There are currently eight Trustees,
five of whom are not "interested persons" of the Trust within the meaning of
that term under the Act. The Trustees, in turn, elect the officers of the
Trust to supervise actively its day-to-day operations. The Statement of
Additional Information contains the name and background information regarding
each Trustee.
THE INVESTMENT ADVISOR
Trainer, Wortham & Co., Inc. (the "Advisor"), with offices at 845 Third
Avenue, New York, NY 10022 is the Trust's investment advisor and manager and
is registered as an investment advisor under the Investment Advisors Act of
1940, as amended.
The Advisor, organized in 1990, continues an investment counseling business
which began in 1924 as Trainer & Associates. The Advisor supervises
approximately $1.7 billion in investment accounts and is owned entirely by the
officers active in the day-to-day management of portfolios. By reason of his
ownership of 45% of the Advisor's stock, Charles V. Moore may be said to be a
"controlling person" of that firm.
Pursuant to an investment advisory agreement with the Trust on behalf of the
Fund, the Advisor receives an annual fee, accrued daily and paid monthly, of
1.25% of the Fund's average daily net assets. This fee is higher than the
advisory fee paid by most other funds; however, this fee is comparable to
those of other mutual funds with similar investment objectives. From time to
time, the Advisor may waive receipt of its fees and/or voluntarily assume
certain Fund expenses, which would have the effect of lowering the Fund's
expense ratio and increasing the yield to investors at the time such amounts
are waived or assumed, as the case may be. The Fund will not reimburse the
Advisor at a later time for the expenses assumed.
Subject to the general supervision of the Board of Trustees, and in accordance
with the Fund's investment objective, policies, and restrictions, the Advisor
manages the Fund's investment portfolio, makes decisions with respect to and
places orders for all purchases and sales of the portfolio securities. David
P. Como is the President of the Trust. Robert R. Douglass, Jr. is the Vice-
President and Portfolio Manager of the Fund. Mr. Douglass
31
<PAGE>
has been a Managing Director of the Advisor since August, 1994. Prior to
August, 1994, Mr. Douglass served as Assistant Vice-President at Warburg,
Pincus Counsellors, Inc.
ADMINISTRATOR
The Trust, on behalf of the Fund, has entered into an administrative services
agreement (the "Administration Agreement") with FPS Services, Inc. ("FPS"),
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, pursuant
to which the administrator receives a fee accrued daily and paid monthly of
0.15% of the value of such Fund's first $50 million of total average net
assets; 0.10% of the value of such Fund's next $50 million of total average
net assets; and 0.05% of the value of such Fund's total average net assets in
excess of $100 million, subject to an annual minimum fee of $72,000 for the
Trust.
The term of the Administration Agreement is two years and shall continue in
force each year thereafter, so long as such continuance is approved (i) by
FPS; (ii) by vote, cast in person at a meeting called for the purpose, of a
majority of the Board of Trustees who are not parties to the Administration
Agreement or interested persons (as defined in the Act) of any such party, and
(iii) by vote of a majority of the Board of Trustees or a majority of the
Fund's outstanding voting securities. The Fund and FPS may terminate the
Administration Agreement at any time without penalty upon giving the other
party 120 days written notice. The Administration Agreement shall
automatically terminate in the event of its assignment.
The services FPS provides to the Fund include: coordinating and monitoring of
any third parties furnishing services; providing the necessary office space,
equipment and personnel to perform administrative and clerical functions;
preparing, filing and distributing of proxy materials, periodic reports to
shareholders, registration statements and other documents; organizing of board
meetings; and responding to shareholder inquiries.
DISTRIBUTOR
FPS Broker Services, Inc. ("FPSB") serves as the Fund's Distributor on a best
efforts basis. FPSB is an affiliated company of FPS inasmuch as both are under
common ownership.
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
FPS also serves as the Fund's Transfer Agent, Dividend Disbursing Agent,
Redemption Agent and Accounting Services Agent. In such capacities, FPS is
responsible for providing record-keeping and administrative services
(including calculation of net asset value) and for processing share purchases
and redemptions. Correspondence relating to
32
<PAGE>
purchases and redemptions of Fund shares, or to dividend payments or
reinvestment, should be addressed to FPS Services, Inc.
CUSTODIAN
UMB Bank, n.a., Kansas City, MO is Custodian for the securities and cash of
the Fund.
DISTRIBUTION PLAN
The Shareholders of the Fund adopted a Plan of Distribution (the "Plan"),
effective October 1, 1996, pursuant to Rule 12b-1 under the Act, which was
approved by the Board of Trustees on July 25, 1996. The Plan permits the Fund
to pay certain expenses associated with the distribution of its shares. The
Plan provides that the Fund will reimburse FPSB for actual distribution and
shareholder servicing expenses incurred by FPSB not exceeding, on an annual
basis, 0.50% of the Fund's average daily net assets. Amounts expended by FPSB,
but not reimbursed by the Fund, in any year will not be a continuing liability
of the Fund in subsequent years. Because the Fund reimburses FPSB only for
actual expenditures, FPSB realizes no profit from the Plan. The Plan may be
terminated by either party at any time and the Fund shall have no liability
for expenses that were not reimbursed as of the date of termination.
All such payments made pursuant to the Plan shall be made for the purpose of
promoting the sale of shares or other such distribution related expenses,
including any distribution or service fees paid to securities dealers,
investment advisors, financial planners, and others, who have executed a
selling or services agreement with FPSB. Distribution expenses which are
attributable to a particular Series will be charged against that Series'
assets. Distribution expenses which are attributable to more than one Series
will be allocated among the Series in proportion to their relative net assets.
BROKERAGE
The Advisor will attempt to place portfolio transactions for the Fund with
those brokers and dealers who will execute orders in an effective manner at
the most favorable price. When the execution and price offered by two or more
brokers or dealers are comparable, the Advisor may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide research advice and other services. The Advisor may give consideration
to sale of shares of the Fund as a factor in the selection of brokers and
dealers to execute Fund portfolio transactions subject to seeking best price
and execution. The Fund may pay brokerage commissions to brokers which are
affiliated with Officers and Trustees of the Fund, provided that such
transactions are in compliance with Section 17(e)(2) of the Act.
33
<PAGE>
PORTFOLIO TURNOVER
The rate of portfolio turnover will depend on the investment strategy
implemented by the Advisor for the Fund which will vary over any given time
period, but may be influenced by the following: general market conditions;
valuation analysis; market volatility; and technical analysis. It is not the
policy of the Fund to invest with the goal of generating short-term trading
profits, rather the Fund seeks to generate long-term capital appreciation when
possible by holding investments over a full market cycle, which in the opinion
of the Advisor is normally 2-3 years. It is anticipated that the Fund's
investment objectives and strategy will result in a portfolio turnover rate of
less than 100% over the course of a fiscal year, however market conditions may
cause turnover to exceed 100% in certain years.
PURCHASE OF SHARES
Shares are offered for sale by the Fund on a continuous basis at the Fund's
net asset value. Purchasers of the Fund's shares pay no "sales load" or
underwriting commission, although broker-dealers effecting purchases or sales
of Fund shares for their customers may charge a service fee in connection
therewith. The minimum initial investment in the Fund is $250.00. Existing
shareholders may purchase additional shares with a minimum purchase of $50 per
transaction.
Purchases of the Fund are made at the net asset value per share next
determined after receipt by FPS as Transfer Agent of a purchase order in good
order. Thus, for orders received in good order before 4:00 p.m. (Eastern
time), the public offering price will be the net asset value as of 4:00 p.m.
(Eastern time) that day. Orders for Fund shares received after 4:00 p.m.
(Eastern time) will be purchased at the next-determined net asset value
determined on the business day following receipt of the order.
INVESTING BY TELEPHONE
The Fund may accept telephone orders from broker-dealers or service
organizations which have been previously approved by the Trust. It is the
responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for same to the Fund. Shares of the Fund
may be purchased through broker-dealers, banks and bank trust departments
which may charge the investor a transaction fee or other fee for their
services at the time of purchase. Such fees would not otherwise be charged if
the shares were purchased directly from the Fund.
INVESTING BY MAIL
Prospective shareholders may purchase shares of the Fund by completing and
signing the "Investment Application" enclosed with this Prospectus and sending
the application, together with a check payable to Trainer, Wortham Emerging
Growth Fund, c/o FPS
34
<PAGE>
Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-
0903. Except as noted below, purchases without full payment will not be
processed until payment is received. The ownership of shares shall be recorded
on the books of the Transfer Agent in an account under the shareholder's name.
A confirmation of the purchase will be issued showing the account number and
number of shares owned.
INVESTING BY WIRE
Shares may also be purchased by instructing the bank to wire Federal Funds to
the Transfer Agent. Federal Funds are monies of member banks within the
Federal Reserve System. The bank must include the full name(s) in which the
account is registered and the Fund account number, and should address its wire
as follows:
UMB BANK KC NA
ABA # 10-10-00695
FOR: FPS SERVICES, INC.
A/C 98-7037-071-9
FBO "Trainer, Wortham Emerging Growth Fund,"
Account of (exact name(s) of account registration)
Shareholder Account #________________________
When opening a new account by wire transfer, first telephone the Transfer
Agent at 800-441-6580 to request an account number and furnish the Fund with a
social security or other tax identification number. A completed application
with signature(s) of registrant(s) must be filed with the Fund immediately
subsequent to the initial wire. Federal Funds wires must be made in amounts of
$250 or more. The bank will generally charge a fee for this wire. The Fund
will not be responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems.
SUBSEQUENT INVESTMENTS
Once a shareholder's account has been established, additional purchases may be
made by sending a check payable to "Trainer, Wortham Emerging Growth Fund" c/o
FPS Services, Inc., P.O. Box 412797, Kansas City, MO 64141-2797. Please
enclose the stub of the account statement and include the Fund account number
on the check (as well as the attributable year for retirement plan
investments, if applicable). Additional purchases may also be made through the
Fund's Automatic Investment Plan which provides shareholders a convenient
method to make regularly scheduled subsequent investments. See "SHAREHOLDER
SERVICES".
35
<PAGE>
REDEMPTION OF SHARES
IN GENERAL
The Trust will make your redemption proceeds available as promptly as possible
and, in any event, within seven business days after your redemption order, in
proper order, is received. For your redemption order to be in proper order,
your order must include name as it appears on your account, your account
number and a signature guarantee as required as described below. However, your
redemption proceeds may be delayed if your purchased the shares to be redeemed
by check (including certified or cashier checks) until such check has cleared
and the Trust has collected good funds for your purchase. Such collection may
take 15 days or more.
REDEMPTIONS BY WRITTEN REQUEST
Shareholders may redeem shares by mail, by writing directly to the Transfer
Agent at FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903, and requesting liquidation of all or any part of their
shares. The redemption request must be signed exactly as the shareholder's
name appears on the form of registration and must include the Fund account
number. If shares are owned by more than one person, the redemption request
must be signed by all owners exactly as their names appear in the
registration. Shares registered in the name of corporations, trusts and
fiduciaries can be redeemed only upon instructions of a duly authorized
person. To protect the account, the Transfer Agent and the Fund from fraud,
signature guarantees are required for certain redemptions. Signature
guarantees are required for: (1) all redemptions of $25,000 or more; (2) any
redemptions if the proceeds are to be paid to someone other than the person(s)
or organization in whose name the account is registered; (3) any redemptions
which request that the proceeds be wired to a bank (unless bank information
was received at the time the account was established); and (4) requests to
transfer the registration of shares to another owner. The Transfer Agent
requires that signatures be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions include banks, broker-dealers, credit unions, national
securities exchanges, registered securities associations, clearing agencies
and savings associations. Broker-dealers guaranteeing signatures must be a
member of a clearing corporation or maintain net capital of at least $100,000.
Credit unions must be authorized to issue signature guarantees. Signature
guarantees will be accepted from any eligible guarantor institution which
participates in a signature guarantee program. The Transfer Agent cannot
accept guarantees from notaries public. The Transfer Agent may require
additional supporting documents for redemptions made by corporations,
executors, administrators, trustees and guardians.
36
<PAGE>
Shares will be redeemed at the net asset value, next determined after receipt
of a redemption request in proper form. Moreover, under the Act, the right of
redemption may be suspended when (a) trading on the New York Stock Exchange is
restricted or such Exchange is closed for other than weekends or holidays, (b)
the Securities and Exchange Commission has by order permitted such suspension,
or (c) an emergency exists making disposal of portfolio securities or
valuation of net assets not reasonably practicable. When in the opinion of the
Board of Trustees, conditions exist which make payments in cash on redemption
unwise or undesirable, the Fund may make payment on redemption in securities.
The value of a shareholder's shares upon redemption may be more or less than
their cost depending upon the value of the Fund's portfolio securities at the
time of redemption.
REDEMPTIONS BY TELEPHONE
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by instructing the Transfer
Agent by telephone at (800) 441-6580.
In order to arrange for redemption by wire or telephone after an account has
been opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent at the address
listed under "Investing by Mail." Such requests must be signed by the
shareholder, with signatures guaranteed (see "By Written Request" for details
regarding signature guarantees). Further documentation may be requested from
corporations, executors, administrators, trustees, or guardians.
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time by the Fund. Neither the
Fund nor any of their service contractors will be liable for any loss or
expense in acting upon telephone instructions that are reasonably believed to
be genuine. In attempting to confirm that telephone instructions are genuine,
the Fund will use such procedures as are considered reasonable, including
requesting a shareholder to correctly state his or her Fund account number,
the name in which his or her account is registered, his or her social security
number, banking institution, bank account number, and the name in which his or
her bank account is registered. To the extent that the Fund fails to use
reasonable procedures to verify the genuineness of telephone instructions, it
and/or its service contractors may be liable for any such instructions that
prove to be fraudulent or unauthorized.
Shares of the Fund may be redeemed through certain broker-dealers, banks and
bank trust departments who may charge the investor a transaction fee or other
fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed directly from the Fund.
37
<PAGE>
EXCHANGE OF SHARES
You may exchange your shares of any Series of the Trust for shares of either
of the other Series at net asset value without the payment of any fee or
charge in writing or by telephone. An exchange is considered a sale of shares
and may result in capital gain or loss for federal income tax purposes. Before
an exchange can be made, you must have received the current Prospectus for the
Series into which you wish to exchange, and the exchange privilege may be
exercised only in those states where shares of such Series, as the case may
be, may legally be sold. If the Transfer Agent receives exchange instructions
from you in writing or by telephone at (800) 441-6580, in good order by the
Valuation Time on any Business Day, the exchange will be effected that day.
For your exchange request to be in good order, your request must include your
name as it appears on your account, your account number, the amount to be
exchanged, the name of the Funds from which and to which the exchange is to be
made and a signature guarantee as may be required. A written request by you
for an exchange in excess of $25,000 must be accompanied by a signature
guarantee as described under "REDEMPTION OF SHARES--By Written Request."
SHAREHOLDER SERVICES
The following special services are available to shareholders. An investor may
change or stop these services at any time by written notice to the Fund.
AUTOMATIC INVESTMENT PLAN
The Fund has an Automatic Investment Plan which provides shareholders with a
convenient method by which investors may have amounts deducted directly from
their checking accounts for investment in the Fund. The minimum initial and
subsequent investments for the Fund also apply when using this method of
investing. To begin participating in this Plan, use the Automatic Investment
Plan Application found in the back of this Prospectus.
SYSTEMATIC CASH WITHDRAWAL PLAN
The Fund has a Systematic Withdrawal Plan, which provides for voluntary
automatic withdrawals of at least $50 monthly, quarterly, semi-annually or
annually. In order to qualify for this option, dividends and capital gains
must be reinvested.
RETIREMENT PLANS
The Fund has available an Individual Retirement Account for use by certain
individuals who qualify (including earned income from self-employment). More
detailed information about how to participate in this plan, the fees charged
by the Custodian bank, and the limits on contributions can be found in the
Statement of Additional Information or may be obtained by contacting the Fund
at (800) 257-4414.
38
<PAGE>
THIS IS YOUR
INVESTMENT APPLICATION
Detach and Mail to:
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
<PAGE>
INVESTMENT APPLICATION
- -------------------------------------------------------------------------------
MAIL TO: FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903
1. INITIAL INVESTMENT ($250 MINIMUM)
- -------------------------------------------------------------------------------
FORM OF PAYMENT
[_] Check for $ enclosed (payable to "Trainer, Wortham Emerging Growth
Fund")
[_] BY WIRE* An initial purchase of $ was wired on by
----------- ------------
(Date)
to account #
------------------------------- ------------------------------
Name of your Bank or Broker Number assigned by F/P/S
* Before making an initial investment by wire, you must be assigned an account
number by calling (800) 441-6580. Then have your local bank wire your funds
to: UMB Bank, N.A., ABA #10-10-00695 for credit to FPS AC #98-7037-071-9
(Trainer, Wortham Emerging Growth Fund). Be sure to include your name and
account number on the wire.
- --------------------------------------------------------------------------------
2. REGISTRATION (Please Print)
- --------------------------------------------------------------------------------
INDIVIDUAL
--------------------------------------------------- ------------------
First name Middle Initial Last Name Social Security #
--------------------------------------------------- ------------------
Jt. Owner First Name* Middle Initial Last Name Social Security #
Citizen of: [_] United States [_] Other (Please Indicate)
------------
* (Joint ownership with rights of survivorship unless otherwise noted).
- --------------------------------------------------------------------------------
GIFT TO MINORS
---------------------------------------------------------------------------
Name of Custodian (Name one only) As Custodian For (name one only)
Under the Uniform Gift to Minors Act
--------------- -------------------------
State Minor's Social Security #
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS**
---------------------------------------------------------------------------
Name of Corporation, Partnership, Trust or Other
---------------------------------------------------------------------------
Tax I.D. # Name of Trustee(s) Date of Trust
**Complete Corporate Resolution attached.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
---------------------------------------------------------------------------
Street Address and Apt. No. City State Zip
( ) ( )
-------------------------- --------------------------
Residence Telephone Number Business Telephone Number
- --------------------------------------------------------------------------------
4. DISTRIBUTION OPTIONS (Please indicate one)
- --------------------------------------------------------------------------------
[_] Reinvest (dividends & capital gains in additional shares).
[_] Cash Dividends (dividend in cash, capital gains in additional shares).
[_] All Cash (dividends & capital gains in cash).
- --------------------------------------------------------------------------------
5. SYSTEMATIC WITHDRAWAL PLAN (MINIMUM INITIAL INVESTMENT $5,000)
- --------------------------------------------------------------------------------
A check in the amount of $ (minimum $50) will be sent to
--------------
your address of record unless otherwise noted.
Please select desired frequency:
[_] Monthly, prior to last day
[_] Quarterly, prior to last day of , , ,
---------- ---------- ----------
and .
----------
[_] Semi-Annual or Annual, prior to the last day of , ,
---------- ----------
or .
----------
- --------------------------------------------------------------------------------
6. TELEPHONE PRIVILEGE: REDEMPTIONS; EXCHANGES BETWEEN FUNDS
- --------------------------------------------------------------------------------
Check box if you want this service:
I (We) authorize FPS Services, Inc. and/or Trainer, Wortham First Mutual
Funds to act upon instructions received by telephone from me (us) to redeem
shares or to exchange for shares of other Trainer, Wortham First Mutual
Funds. I (we) understand an exchange is made by redeeming shares of one
fund and using the proceeds to buy shares of another fund. Exchanges must
be made into identically registered accounts. Redemption proceeds will be
sent as indicated in this prospectus.
*If not otherwise indicated below, only exchanges will be allowed.
[_] Redemption [_] Exchanges [_] Both
Check one only, if none are checked all redemptions will be sent by check.
[_] All redemptions proceeds will be executed by an ACH transaction unless
FPS Services, Inc. is notified otherwise in writing. There is no charge
for ACH transactions. Allow 3 business days.
[_] All redemption proceeds will be executed by a FED Wire transaction
unless FPS Services is notified otherwise in writing. There is a $9
charge for FED Wire transactions.
[_] All redemption proceeds will be sent by check to the mailing address
indicated below unless FPS Services is notified otherwise in writing.
All FED Wire and ACH transactions will be sent as indicated below. There
will be no charge for ACH transactions. Any changes in ACH transactions
must be made in writing to FPS Services, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903. Please allow one month for ACH
instructions to be effective.
(Notify your bank of your intent to establish this option on your bank
account.)
---------------------------------------------------------------------------
Bank Name Branch Office (if applicable)
---------------------------------------------------------------------------
Bank Address (Do not use P.O. Box) City State Zip Code
---------------------------------------------------------------------------
Bank Wire Routing Name(s) on Your Your Bank Account
Number Bank Account Number
Voided Personal Check or Deposit Slip Must Be Attached
- --------------------------------------------------------------------------------
<PAGE>
7. SIGNATURE AND CERTIFICATION
- -------------------------------------------------------------------------------
THE FOLLOWING IS REQUIRED BY FEDERAL TAX LAW TO AVOID 20% BACKUP WITHHOLDING,
"BY SIGNING BELOW, I CERTIFY UNDER PENALTIES OF PERJURY THAT THE SOCIAL
SECURITY OR TAXPAYER IDENTIFICATION NUMBER ENTERED ABOVE IS CORRECT (OR I AM
WAITING FOR A NUMBER TO BE ISSUED TO ME), AND THAT I HAVE NOT BEEN NOTIFIED
BY THE IRS THAT I AM SUBJECT TO BACKUP WITHHOLDING UNLESS I HAVE CHECKED THE
BOX." IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, CHECK BOX [ ]. "THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE
YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING."
RECEIPT OF CURRENT PROSPECTUS IS HEREBY ACKNOWLEDGED.
-----------------------------------------------------------------
SIGNATURE [_] OWNER [_] CUSTODIAN [_] TRUSTEE DATE
-----------------------------------------------------------------
SIGNATURE OF JOINT OWNER (IF APPLICABLE)
- --------------------------------------------------------------------------------
8. INVESTMENT DEALER INFORMATION
- --------------------------------------------------------------------------------
---------------------------------------------------------------------------
Name of Firm Rep Name & No. Authorized Signature
---------------------------------------------------------------------------
Street Address City State Zip
- --------------------------------------------------------------------------------
<PAGE>
RESOLUTIONS
(THIS SECTION TO BE COMPLETED BY CORPORATIONS, TRUSTS, AND OTHER ORGANIZATIONS).
RESOLVED: That this corporation or organization become a shareholder of
Trainer, Wortham Emerging Growth Fund of Trainer, Wortham First Mutual Funds
(the "Trust") and that
- -------------------------------------------------------------------------------
IS (ARE) AWARE HEREBY AUTHORIZED TO COMPLETE AND EXECUTE THE APPLICATION OF
BEHALF OF THE CORPORATION OR ORGANIZATION AND TAKE ANY ACTION FOR IT AS MAY BE
NECESSARY OR APPROPRIATE WITH RESPECT TO ITS SHAREHOLDERS ACCOUNT(S) WITH THE
TRUST, AND IT IS FURTHER RESOLVED: THAT ANY ONE OF THE ABOVE-NOTED OFFICERS IS
AUTHORIZED TO SIGN ANY DOCUMENTS NECESSARY OR APPROPRIATE TO APPOINT FPS
SERVICES, INC. AS REDEMPTION AGENT OF THE CORPORATION OR ORGANIZATION FOR
SHARES OF THE TRUST, TO ESTABLISH OR ACKNOWLEDGE TERMS AND CONDITIONS
GOVERNING THE REDEMPTION OF SAID SHARES OR TO OTHERWISE IMPLEMENT THE
PRIVILEGES ELECTED ON THE APPLICATION.
===============================================================================
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the
----------------------
(Name of Corporation)
incorporated or formed under the laws of
--------------------------------------
(State)
and were adopted at a meeting of the Board or Trustees of the organization or
corporation duly called and held on __________ at which a quorum was present and
acting throughout, and that the same are now in full force and effect.
I further certify that the following is (are) the duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title Name Title
- ----------------------- ----------------------------------------------------
- ----------------------- ----------------------------------------------------
<PAGE>
NET ASSET VALUE
The net asset value per share of capital stock of the Fund will be determined
each business day on which the New York Stock Exchange is open for business as
of the close of regular trading hours (currently 4:00 p.m. Eastern time) and
for any other day (other than a day on which no shares are tendered for
redemption and no order to purchase or sell any shares is received) during
which there is a sufficient degree of trading in the Fund's portfolio
securities that the Fund's net asset value per share might be materially
affected. Determination of net asset value will be in accordance with
generally accepted accounting principles and will be computed by dividing the
value of the Fund's total net assets by the total number of shares
outstanding. Securities traded on a securities exchange are valued at the last
sale price prior to the time of computation or, if there have been no sales on
that day, at the mean of their closing bid and asked prices. Securities not
traded on a securities exchange but for which market quotations are readily
available will be valued at the mean of their bid and asked prices, although
securities traded over the counter on NASDAQ will be valued at their last sale
price. Securities not traded on a securities exchange and other securities or
assets for which market quotations are not readily available will be valued at
fair value as determined in good faith by the Board of Trustees. Once the
aggregate value of all securities has been determined, there will be added to
this total the dollar amount of cash on hand and receivables and the value of
all other assets. From the sum of the foregoing, the aggregate amount of all
liabilities and all accrued expenses will be deducted to produce the total net
asset value of all shares outstanding.
DIVIDENDS AND TAXES
The Fund intends to qualify annually to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As such, the Fund will not be subject to Federal income tax, or
to any excise tax, to the extent its earnings are distributed as provided in
the Code and by satisfying certain other requirements relating to the sources
of its income and diversification of its assets.
The Fund intends to distribute substantially all of its net investment income
and net capital gains. The Fund intends to distribute its net investment
income at least annually and to distribute its net capital gains, if any, at
least annually. Dividends from net investment income or net short-term capital
gains will be taxable to you as ordinary income, whether received in cash or
in additional shares.
The Fund permits any shareholder located in states where the Fund's shares are
registered (regardless of the number of shares owned) to elect a Dividend
Reinvestment Plan for the automatic reinvestment of all distributions. If a
dividend is declared from net investment income or a capital gains
distribution is declared from net capital gains,
39
<PAGE>
investors electing under the Dividend Reinvestment Plan are required to take
such Dividends or distribution in Fund shares rather than in cash. The full
amount of the distribution will be invested and the shareholder will be
credited with any full or fractional shares resulting. The investment under
the Dividend Reinvestment Plan will be made at the current net asset value on
the dividend payable date. Dividends and capital gains distributions will
result in a taxable event for the investor even though invested in shares.
An investor may elect or terminate participation in the Dividend Reinvestment
Plan at any time. Elections to participate must be made using the Investment
Application. Termination can be made by written notice. Costs of the Plan will
be borne by the Fund. There is no assurance that the Plan will result in a
profit for an investor.
For corporate investors in the Fund, dividends from net investment income will
generally qualify in part for the corporate dividends-received deduction.
However, the portion of the dividends so qualified depends on the aggregate
qualifying dividend income received by the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from long-term capital gains, whether received
in cash or in additional shares, are taxable to investors as long-term capital
gains, regardless of the length of time an investor has owned shares in the
Fund. The Fund does not seek to realize any particular amount of capital gains
during a year; rather, realized gains are a by-product of management
activities. Consequently, capital gains distributions may be expected to vary
considerably from year to year. Also, if purchases of shares in a Fund are
made shortly before the record date for a capital gains distribution or a
dividend, a portion of the investment will be returned as a taxable
distribution.
Dividends which are declared in October, November or December to shareholders
of record in such a month but which, for operational reasons, may not be paid
to the shareholder until the following January, will be treated for tax
purposes as if paid by a Fund and received by the shareholder on December 31
of the calendar year in which they are declared.
A sale or redemption of shares of a Fund is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Any loss incurred on
sale or exchange of a Fund's shares held for six months or less will be
treated as a long-term capital loss to the extent of any capital gain
dividends received with respect to such shares.
In addition to Federal taxes, shareholders may be subject to state and local
taxes on distributions. It is recommended that shareholders consult their tax
advisers regarding specific questions as to Federal, state, local or foreign
taxes.
Each year, the Fund will mail information to shareholders on the tax status of
the Fund's dividends and distributions made to shareholders.
40
<PAGE>
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your account registration form your proper
taxpayer identification number and by certifying that you are not subject to
backup withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
Federal, state, local or foreign tax consequences of an investment in the
Fund.
PERFORMANCE INFORMATION
From time to time, performance information regarding the Fund, such as total
return, may be quoted in advertisements or in communications to shareholders.
These performance quotations will represent the Fund's past performance, and
should not be considered as representative of future results. The Fund's total
return may be calculated on an average annual and/or aggregate basis for
various periods (which will be stated in all advertisements). Average annual
total return reflects the average percentage change per year in the value of
an investment in the Fund. Aggregate total return reflects the total
percentage change over the stated period. In calculating total return, the
assumption is made that dividends and capital gain distributions made by the
Fund during the period are reinvested in additional shares.
Total return of the Fund may be compared to: other mutual funds with similar
investment objectives; other relevant indices such as the Russell 2500 Index
and the NASDAQ Composite Index; rankings prepared by independent services;
financial or industry publications and/or other publications or services that
monitor the performance of mutual funds such as Lipper Analytical,
CDA/Weisenberger, the Investment Company Institute and Morningstar, Inc.,
among others.
The principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
41
<PAGE>
GENERAL INFORMATION
ORGANIZATION
Trainer, Wortham Emerging Growth Fund is a separate, diversified, Series of
Trainer, Wortham First Mutual Funds, a Delaware business trust organized
pursuant to a Trust Instrument dated January 17, 1995. On October 1, 1996, the
name of the Trust was changed from First Mutual Funds to its present name. The
Trust is registered under the Act as an open-end management investment company
commonly known as a mutual fund. The Trustees of the Trust may establish
additional series or classes of shares of the Trust without the approval of
shareholders. The assets of each Series belong only to that Series, and the
liabilities of each Series are borne solely by that Series and no other.
DESCRIPTION OF SHARES
The Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $0.001 per share. Shares of the Fund represent
equal proportionate interests in the assets of the Fund only and have
identical voting, dividend, redemption, liquidation and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other right to subscribe to any additional shares. Currently,
there is only one class of shares issued by the Fund.
SHAREHOLDER MEETINGS
The Board of Trustees do not intend to hold annual meetings of shareholders of
the Fund. The Board of Trustees has undertaken to the Securities and Exchange
Commission, however, that they will promptly call a meeting for the purpose of
voting upon the question of removal of any Trustee when requested to do so by
holders of not less than 10% of the outstanding shares of the Fund. In
addition, subject to certain conditions, shareholders of the Fund may apply to
the Fund to communicate with other shareholders to request a shareholder's
meeting to vote upon the removal of a Trustee or Trustees.
CERTAIN PROVISIONS OF TRUST INSTRUMENT
Under Delaware law, the shareholders of the Fund will not be personally liable
for the obligations of the Trust; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations.
SHAREHOLDER REPORTS AND INQUIRIES
Shareholders will receive annual financial statements which are audited by the
Fund's independent accountants, Tait, Weller & Baker, as well as unaudited
semi-annual financial statements. Shareholder inquiries should be addressed to
Trainer, Wortham Emerging Growth Fund, c/o FPS Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, or by calling (800)
257-4414.
42
<PAGE>
[This page intentionally left blank.]
43
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
HOW DOES IT WORK?
1. FPS Services, Inc. through our bank, UMB Bank, KC NA, draws an automatic
clearing house (ACH) debit electronically against your personal checking
account each month, according to your instructions.
2. Choose any amount ($50 or more) that you would like to invest regularly and
your debit for the amount will be processed by FPS Services Inc. as if you
had written a check yourself.
3. Shares will be purchased and a confirmation sent to you.
HOW DO I SET IT UP?
1. Complete the forms and the Fund Application Form if you do not already have
an existing account.
2. Mark one of your personal checks or deposit slips VOID, attach it to the
forms below and mail to FPS Services, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903.
3. As soon as your bank accepts your authorization, debits will be generated
and your Automatic Investment Plan started. In order for you to have ACH
debits from your account, your bank must be able to accept ACH transactions
and/or be a member of an ACH association. Your branch manager should be
able to tell you your bank's capability. We cannot guarantee acceptance by
your bank.
4. Please allow one month for processing of your Automatic Investment Plan
before the first debit occurs.
- -------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN APPLICATION
TO:FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Please start an Automatic Investment Plan for me and invest
------------------
($50 or more)
on the [_] 10th [_] 15th [_] 20th of each month,
in shares of Trainer, Wortham Emerging Growth Fund
Check one:
[_] I am in the process of establishing an account.
or
[_]My account number is:
-------------------------------------------------------
- -------------------------------------------------------------------------------
Name as account is registered
- -------------------------------------------------------------------------------
Street
- -------------------------------------------------------------------------------
City State Zip
I understand that my ACH debit will be dated on the day of each month as
indicated above or as specified by written request. I agree that if such debit
is not honored upon presentation, FPS Services, Inc. may discontinue this
service and any share purchase made upon deposit of such debit may be
canceled. I further agree that if the net asset value of the shares purchased
with such debit is less when said purchase is canceled than when the purchase
was made, FPS Services Inc. shall be authorized to liquidate other shares or
fractions thereof held in my account to make up the deficiency. This Automatic
Investment Plan may be discontinued by FPS Services, Inc. upon 30-days written
notice or at any time by the investor by written notice to FPS Services, Inc.
which is received not later than 5 business days prior to the above designed
investment date.
Signature(s):
-------------------------
-------------------------
44
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
BANK REQUEST AND AUTHORIZATION
TO:
---------------------------------------------- -----------------------------
Name of Your Bank Bank Checking Account Number
----------------------------------------------------------------------------
Address of Bank or Branch Where Account is Maintained
As a convenience to me, please honor ACH debits on my account drawn by FPS
Services, Inc., UMB Bank, KC NA and payable to "TRAINER, WORTHAM EMERGING
GROWTH FUND"
I agree that your rights with respect to such debit shall be the same as if
it were a check drawn upon you and signed personally by me. This authority
shall remain in effect until you receive written notice from me changing
its terms or revoking it, and until you actually receive such notice, I
agree that you shall be fully protected in honoring such debt.
I further agree that if any debit is dishonored, whether with or without
cause or whether intentionally or inadvertently, you shall be under no
liability whatsoever.
DEPOSITOR'S
--------------------------------------------------------
Signature of Bank Depositor(s) as shown on bank records.
NOTE: Your bank must be able to accept ACH transactions and/or be a member
of an ACH association in order for your to use this service.
- -------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
TO:The Bank Named Above
So that you may comply with your Depositor's request and authorization,
TRAINER, WORTHAM FIRST MUTUAL FUNDS agrees as follows:
1. To indemnify and hold you harmless from any loss you may suffer arising
from or in connection with the payment by you of a debit drawn by FPS
Services, Inc. to the order of Trainer, Wortham Emerging Growth Fund
designated on the account of your depositor(s) executing the
authorization including any costs or expenses reasonably incurred in
connection with such loss. TRAINER, WORTHAM FIRST MUTUAL FUNDS will not,
however, indemnify you against any loss due to your payment of any debit
generated against insufficient funds.
2. To refund to you any amount erroneously paid to you to FPS Services,
Inc. on any such debit if claim for the amount of such erroneous payment
is made by you within 3 months of the date of such debit on which
erroneous payment was made.
45
<PAGE>
TRAINER, WORTHAM FIRST MUTUAL FUNDS
TRAINER, WORTHAM TOTAL RETURN BOND FUND
845 THIRD AVENUE, 6TH FLOOR
NEW YORK, NY 10022
(800) 257-4414
PROSPECTUS
OCTOBER 1, 1996
Trainer, Wortham First Mutual Funds (the "Trust") is an open-end management
investment company which currently offers shares of three series: First Mutual
Fund; Trainer, Wortham Emerging Growth Fund; and Trainer, Wortham Total Return
Bond Fund (individually and collectively, the "Series"). Each Series has
distinct investment objectives and policies.
This Prospectus pertains only to Trainer, Wortham Total Return Bond Fund (the
"Fund"). The Fund seeks to maximize total return, consistent with preservation
of capital, through investments in U.S. Government and agency securities,
investment grade corporate bonds and other fixed-income securities. Trainer,
Wortham & Co., Inc. (the "Advisor") serves as the Fund's investment advisor.
The minimum initial investment for the Fund is $250. Subsequent investments
will be accepted in minimum amounts of $50.00.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. Investors should read this
Prospectus and retain it for future reference. Additional information about
the Fund, contained in a Statement of Additional Information, has been filed
with the Securities and Exchange Commission and is available upon request
without charge by calling or writing to the Fund at the telephone number or
address shown above. The Statement of Additional Information bears the same
date as this Prospectus and is incorporated by reference in its entirety into
this Prospectus.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
46
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
EXPENSE INFORMATION........................................................
FINANCIAL HIGHLIGHTS.......................................................
INVESTMENT OBJECTIVE AND POLICIES..........................................
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS..............................
MANAGEMENT OF THE FUND.....................................................
THE BOARD OF TRUSTEES.....................................................
THE INVESTMENT ADVISOR....................................................
ADMINISTRATOR.............................................................
DISTRIBUTOR...............................................................
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT..............................
BROKERAGE..................................................................
PURCHASE OF SHARES.........................................................
REDEMPTION OF SHARES.......................................................
EXCHANGE OF SHARES.........................................................
SHAREHOLDER SERVICES.......................................................
NET ASSET VALUE............................................................
DIVIDENDS AND TAXES........................................................
PERFORMANCE INFORMATION....................................................
GENERAL INFORMATION........................................................
</TABLE>
<TABLE>
<S> <C>
UNDERWRITER: ADVISOR:
FPS Broker Services, Inc. Trainer, Wortham & Co., Inc.
3200 Horizon Drive 845 Third Avenue
P.O. Box 61503 New York, NY 10022
King of Prussia, PA 19406-0903 (800) 775-0604
(800) 257-4414
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
FOR MORE DETAILED INFORMATION ABOUT THE ITEMS DISCUSSED IN THIS PROSPECTUS, A
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION MAY BE OBTAINED WITHOUT CHARGE
BY WRITING TO THE FUND AT 845 THIRD AVENUE, 6TH FLOOR, NEW YORK, NY 10022, OR
BY CALLING (800)257-4414.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
47
<PAGE>
EXPENSE INFORMATION
Below is a summary of the Fund's estimated operating expenses. A hypothetical
example based on the summary is also shown.
ANNUAL FUND OPERATING EXPENSES(1)
(as a percentage of average net assets):
<TABLE>
<S> <C>
Management Fees (after fee waiver)(2)..................................... 0.00%
12b-1 Fees................................................................ 0.00%
Other Expenses............................................................ 0.75%
----
Total Fund Operating Expenses (after fee waiver)(2)....................... 0.75%
====
</TABLE>
EXAMPLE: 1 YEAR 3 YEARS
- -------- ------ -------
An investor would pay the following expenses on a $1,000
investment assuming (1) a 5% annual return and (2) redemption at
the end of each period.......................................... $8 $24
(1) Trainer, Wortham Total Return Bond Fund will commence investment
operations on or about October 1, 1996. The expenses shown are those
expected to be incurred for the Fund's first fiscal period.
(2) Based on estimated expenses for the current fiscal year, the Advisor
has voluntarily elected to waive its investment advisory fee and/or
assume certain expenses of the Fund other than brokerage fees,
extraordinary items and taxes to the extent Total Fund Operating
Expenses exceed 0.75%. Such waiver may be discontinued at the
discretion of the Advisor after the funds net assets exceed $7.5
million. Without such waiver, Management Fees stated above would be
0.45%. Other Expenses would remain the same and Total Fund Operating
Expenses are estimated to be 1.20%.
THE FOREGOING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The purpose of the table above is to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. The Fund does not impose any sales load, redemption or exchange
fees; however, the transfer agent currently charges investors who request
redemptions by wire transfer a fee of $9 for each transaction. For more
complete descriptions of the various costs and expenses, see the section
entitled "MANAGEMENT OF THE FUND".
48
<PAGE>
FINANCIAL HIGHLIGHTS
Set forth below are unaudited "Financial Highlights" of Trainer, Wortham Total
Return Bond Fund for a share outstanding during the period from October 1, 1996
(commencement of operations) to February 28, 1997 .
<TABLE>
<CAPTION>
Total Return
Bond
------------
Period
Ended
February 28
1997/1/
(unaudited)
------------
<S> <C>
Net Asset Value, Beginning of Period ............................ $ 10.00
Income from Investment Operations
Net investment income (loss) ................................... 0.21
Net gains (losses) on securities (both
realized and unrealized) ..................................... 0.05
-------
Total from investment operations ........................... 0.26
-------
Less Distributions
Dividends (from net investment income) ......................... (0.13)
Distributions (from capital gains) ............................. 0.00
-------
Total distributions ........................................ (0.13)
-------
Net Asset Value, End of Period .................................. $ 10.13
=======
Total Return .................................................... 2.61% +
Ratios/Supplemental Data
Net assets, end of period (in 000's) ........................... $ 7,573
Ratio of expenses to average net assets**
before reimbursement of expenses by Advisor .................. 2.05% *
after reimbursement of expenses by Advisor ................... 0.75% *
Ratio of net investment income (loss) to average net assets**
before reimbursement of expenses by Advisor .................. 4.40% *
after reimbursement of expenses by Advisor ................... 5.70% *
Portfolio turnover rate ........................................ 1.48% *
Average commission rate paid ................................... N/A
</TABLE>
- ---------------------------
/1/ The Fund commenced operations on October 1, 1996.
+ Since inception, not annualized
* Annualized
** Average net assets have been computed on the basis of the value of the net
assets at the end of the month.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to maximize total return consistent with preservation of
capital. The Fund will invest in U.S. Government and agency securities,
investment grade corporate bonds and other fixed-income securities. The Fund
will seek to produce conservative, risk adjusted returns. Above all,
management attempts to preserve principal, compound interest and produce
superior results over the course of a full business cycle.
The Advisor relies on historical yield relationships as a basis for
determining the Fund's portfolio structure. The Advisor's securities selection
process involves strategic decision making which considers portfolio sector
composition, maturity structure and duration. The Advisor's management
analyzes yield ratios and implements a disciplined process which helps to have
the Fund's portfolio positioned to be compared to the Lehman Aggregate Index.
Although the Advisor actively manages its portfolios, it does not consider
itself to be a market timer. All changes to the portfolio are made after
gradual and careful consideration. The Advisor anticipates a turnover rate of
less than 100%.
When the Fund has determined that adverse market and economic conditions
warrant, the Fund may invest all or part of its assets in high-quality money
market securities and repurchase agreements for temporary defensive purposes.
The Fund invests at least 65% of the value of its total assets (except when
maintaining a temporary defensive position) in fixed-income securities (which
it defines as bonds, debentures and other fixed-income securities). The Fund
is permitted to invest in a broad range of investment grade, U.S. dollar
denominated fixed-income securities and securities with debt-like
characteristics (e.g., bearing interest or having stated principal) of
domestic and foreign issuers. These debt securities include: bonds,
debentures, notes, money market instruments (including foreign bank
obligations, such as time deposits, certificates of deposit and bankers'
acceptances, commercial paper and other short-term corporate debt obligations,
and repurchase agreements), mortgage-related securities (including interest-
only and principal-only stripped mortgage-backed securities), asset-backed
securities, municipal obligations and convertible debt obligations. The
issuers may include domestic and foreign corporations, partnerships or trusts,
and governments or their political subdivisions, agencies or
instrumentalities. Under normal market conditions, the Fund seeks to provide
performance results that equal or exceed the Solomon Brothers Broad
Investment-Grade (BIG) Bond Index, which is a market-capitalization weighted
index that includes U.S. Treasury, Government-sponsored, mortgage and
investment grade fixed-rate corporate fixed-income securities with a maturity
of one year or longer and a minimum of $50 million amount outstanding at the
time of inclusion.
At least 75% of the value of the Fund's net assets must consist of securities
which, in the case of bonds and other debt instruments, are rated no lower
than A by Moody's
50
<PAGE>
Investors Service, Inc. ("Moody's"), Standard & Poor's Corporation ("S&P"),
Fitch Investors Service, Inc. ("Fitch") or Duff & Phelps, Inc. ("Duff"). Up to
25% of the value of the Fund's net assets may consist of securities which, in
the case of bonds and other debt instruments, are rated no lower than Baa by
Moody's and BBB by S&P. The Fund may invest in short-term fixed-income
obligations which are rated in the two highest rating categories by Moody's,
S&P, Fitch or Duff. See "INVESTMENT STRATEGIES AND RISK CONSIDERATIONS--Fixed-
Income Securities."
Although the Fund is professionally managed, the Fund may suffer a loss on
investments resulting in a lower net asset value.
INVESTMENT STRATEGIES AND RISK CONSIDERATIONS
Shareholders should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Fund, nor can
there be any assurance that the Fund's investment objective will be attained.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements with respect to permissible
portfolio securities. Under the terms of a repurchase agreement, the Fund
would acquire securities from financial institutions such as banks and
registered broker-dealers which the Advisor deems 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 then-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 102% of the
repurchase price (including accrued interest). If the seller were to default
on its repurchase obligation or become insolvent, the Fund 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 by the Fund were delayed
pending court action. It is the intent of the Fund to utilize repurchase
agreements to invest idle funds for short periods of time. Securities subject
to repurchase agreements will be held by the Fund's Custodian or in the
Federal Reserve/Treasury book-entry system. Repurchase agreements are
considered to be loans by the Fund under the Investment Company Act of 1940,
as amended (the "Act").
ILLIQUID SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities that are illiquid because of restrictions on transferability or
other reasons. Repurchase
51
<PAGE>
agreements with deemed maturities in excess of seven days and securities that
are not registered under the Securities Act of 1933 (the "1933 Act") but that
may be purchased by institutional buyers pursuant to Rule 144A under the 1933
Act are subject to this 10% limit. Rule 144A allows for a broader
institutional trading market for securities otherwise subject to restriction
on resale to the general public by establishing a "safe harbor" from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers.
FIXED-INCOME SECURITIES
Investors should be aware that even though interest-bearing securities are
investments which promise a stable stream of income, the prices of such
securities typically are inversely affected by changes in interest rates and,
therefore, are subject to the risk of market price fluctuations. Thus, if
interest rates have increased from the time a security was purchased, such
security, if sold, might be sold at a price less than its cost. Similarly, if
interest rates have declined from the time a security was purchased, such
security, if sold, might be sold at a price greater than its cost. In either
instance, if the security was purchased at face value and held to maturity, no
gain or loss would be realized. Certain securities purchased by the Fund, such
as those with interest rates that fluctuate directly or indirectly based on
multiples of a stated index, are designed to be highly sensitive to changes in
interest rates and can subject the holders thereof to extreme reductions of
yield and possibly loss of principal.
The values of fixed-income securities also may be affected by changes in the
credit rating or financial condition of the issuing entities. Once the rating
of a security purchased by the Fund has been adversely changed, the Fund will
consider all circumstances deemed relevant in determining whether to continue
to hold the security. Holding such securities that have been downgraded below
investment grade can subject the Fund to additional risk. Certain securities
purchased by the Fund, such as those rated Baa by Moody's or BBB by S&P, Fitch
or Duff, may be subject to such risk with respect to the issuing entity and to
greater market fluctuations than certain lower yielding, higher rated fixed-
income securities. Debt securities which are rated Baa by Moody's are
considered medium grade obligations; they are neither highly protected nor
poorly secured, and are considered by Moody's to have speculative
characteristics. Debt securities rated BBB by S&P are regarded as having
adequate capacity to pay interest and repay principal, and while such debt
securities ordinarily exhibit adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for debt securities in this
category than in higher rated categories. Fitch considers the obligor's
ability to pay interest and repay principal on debt securities rated BBB to be
adequate; adverse changes in economic conditions and circumstances, however,
are more likely to have an adverse impact on these debt securities and,
therefore, impair timely payment. Debt securities rated BBB by Duff are
considered to have below average protection factors but may still be
considered sufficient for prudent investment.
52
<PAGE>
FORWARD COMMITMENTS
The Fund may purchase securities on a when-issued or forward commitment basis,
which means that the price is fixed at the time of commitment, but delivery
and payment ordinarily take place a number of days after the date of the
commitment to purchase. The Fund will make commitments to purchase such
securities only with the intention of actually acquiring the securities, but
the Fund may sell these securities before the settlement date if it is deemed
advisable. The Fund will not accrue income in respect of a security purchased
on a when-issued or forward commitment basis prior to its stated delivery
date.
Securities purchased on a when-issued or forward commitment basis and certain
other securities held by the Fund are subject to changes in value (both
generally changing in the same way, i.e., appreciating when interest rates
decline and depreciating when interest rates rise) based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates. Such securities may expose the
Fund to risk because they may experience fluctuations in value prior to their
actual delivery. Purchasing debt securities on a when-issued or forward
commitment basis can involve the additional risk that the yield available in
the market when the delivery takes place actually may be higher than that
obtained in the transaction itself. A segregated account of the Fund
consisting of cash, cash equivalents or U.S. Government securities or other
high quality liquid debt securities of the type in which the Fund invests at
least equal at all times to the amount of the when-issued or forward
commitments will be established and maintained at the Fund's custodian bank.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are securities collateralized by pools of mortgage
loans assembled for sale to investors by various governmental agencies, such
as the Government National Mortgage Association and government-related
organizations such as the Federal National Mortgage Association and the
Federal Home Loan Mortgage Corporation, as well as by private issuers such as
commercial banks, savings and loan institutions, mortgage banks and private
mortgage insurance companies, and similar foreign entities. The mortgage-
related securities in which the Fund may invest include those with fixed,
floating and variable interest rates, those with interest rates that change
based on multiples of changes in interest rates and those with interest rates
that change inversely to changes in interest rates, as well as stripped
mortgage-backed securities which are derivative multi-class mortgage
securities. Stripped mortgage-backed securities usually are structured with
two classes that receive different proportions of interest and principal
distributions on a pool of mortgage-backed securities or whole loans. A common
type of stripped mortgage-backed security will have one class receiving some
of the interest and most of the principal from the mortgage collateral, while
the other class will receive most of the interest and the remainder of the
principal. In the most extreme case, one class will receive all of the
interest (the interest-only or "IO" class),
53
<PAGE>
while the other class will receive all of the principal (the principal-only or
"PO" class). Although certain mortgage-related securities are guaranteed by a
third party or otherwise similarly secured, the market value of the security,
which may fluctuate, is not so secured. If the Fund purchases a mortgage-
related security at a premium, all or part of the premium may be lost if there
is a decline in the market value of the security, whether resulting from
changes in interest rates or prepayments in the underlying mortgage
collateral. As with other interest-bearing securities, the prices of certain
of these securities are inversely affected by changes in interest rates.
However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true, since in periods of
declining interest rates the mortgages underlying the security are more likely
to prepay. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by unscheduled prepayments on the underlying
mortgages, and therefore, it is not possible to predict accurately the
security's return to the Fund. Moreover, with respect to stripped mortgage-
backed securities, if the underlying mortgage securities experience greater
than anticipated prepayments of principal, the Fund may fail to fully recoup
its initial investment in these securities even if the securities are rated in
the highest rating category by a nationally recognized statistical rating
organization. In addition, regular payments received in respect of mortgage-
related securities include both interest and principal. No assurance can be
given as to the return the Fund will receive when these amounts are
reinvested.
No assurance can be given as to the liquidity of the market for certain
mortgage-backed securities, such as collateralized mortgage obligations and
stripped mortgage-backed securities. Determination as to the liquidity of
interest-only and principal-only fixed mortgage-backed securities issued by
the U.S. Government or its agencies and instrumentalities will be made in
accordance with guidelines established by the Fund's Board of Trustees. In
accordance with such guidelines, the Advisor will monitor investments in such
securities with particular regard to trading activity, availability of
reliable price information and other relevant information. The Fund intends to
treat other stripped mortgage-backed securities as illiquid securities.
ASSET-BACKED SECURITIES
The Fund may invest in asset-backed securities. The securitization techniques
used for asset-backed securities are similar to those used for mortgage-
related securities. These securities include debt securities and securities
with debt-like characteristics. The collateral for these securities has
included home equity loans, automobile and credit card receivables, boat
loans, computer leases, airplane leases, mobile home loans, recreational
vehicle loans and hospital account receivables.
Asset-backed securities present certain risks that are not presented by
mortgage-backed securities. Primarily, these securities do not have the
benefit of the same security interest in the related collateral. Credit card
receivables generally are unsecured and the debtors are entitled to the
protection of a number of state and federal consumer credit
54
<PAGE>
laws, many of which give such debtors the right to set off certain amounts
owed on the credit cards, thereby reducing the balance due. Most issuers of
asset-backed securities backed by automobile receivables permit the services
of such receivables to retain possession of the underlying obligations. If the
servicer were to sell these obligations to another party, there is a risk that
the purchaser would acquire an interest superior to that of the holders of the
related asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of asset-backed securities backed by
automobile receivables may not have a proper security interest in all of the
obligations backing such receivables. Therefore, there is the possibility that
recoveries on repossessed collateral may not, in some cases, be available to
support payments on these securities.
CONVERTIBLE SECURITIES
The Fund may purchase convertible securities, which are fixed-income
securities, such as bonds or preferred stock, which may be converted at a
stated price within a specified period of time into a specified number of
shares of common stock of the same or a different issuer. Convertible
securities are senior to common stock in a corporation's capital structure,
but usually are subordinated to non-convertible debt securities. While
providing a fixed-income stream (generally higher in yield than the income
derivable from a common stock but lower than that afforded by a non-
convertible debt security), a convertible security also affords an investor
the opportunity, through its conversion feature, to participate in the capital
appreciation of the common stock into which it is convertible.
The Fund also may invest in debt securities with warrants attached or in units
with warrants. A warrant is an instrument issued by a corporation which gives
the holder the right to subscribe to a specified amount of the corporation's
capital stock at a set price for a specified period of time.
In connection with its purchases of convertible securities (which include debt
securities with warrants), the Fund from time to time may hold common stock
received upon the conversion of the security or the exercise of the warrant.
The Fund does not intend to retain the common stock in its portfolio and will
sell it as promptly as it can and in a manner which it believes will reduce
the risk of loss in connection with the sale.
In general, the market value of a convertible security is the higher of its
"investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., the value of the underlying shares of common stock
if the security is converted). As a fixed-income security, the market value of
a convertible security generally increases when interest rates decline and
generally decreases when interest rates rise. However, the price of a
convertible security also is influenced by the market value of the security's
underlying common stock. Thus, the price of a convertible security generally
increases as the market value of the underlying stock increases, and generally
decreases as the market
55
<PAGE>
value of the underlying stock declines. Investments in convertible securities
generally entail less risk than investments in the common stock of the same
issuer.
MUNICIPAL OBLIGATIONS
Municipal obligations are debt obligations issued by states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies and instrumentalities, or multistate agencies
or authorities. While in general, municipal obligations are tax exempt
securities having relatively low yields as compared to taxable, non-municipal
obligations of similar quality, certain issues of municipal obligations, both
taxable and non-taxable, offer yields comparable and in some cases greater
than the yields available on other permissible investments. Municipal
obligations generally include debt obligations issued to obtain funds for
various public purposes as well as certain industrial development bonds issued
by or on behalf of public authorities.
Municipal obligations are classified as general obligation bonds, revenue
bonds and notes. General obligation bonds are secured by the issuer's pledge
of its faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenue 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, but not from the general
taxing power. Tax exempt industrial development bonds, in most cases, are
revenue bonds and generally do not carry the pledge of the credit of the
issuing municipality, but generally are guaranteed by the corporate entity on
whose behalf they are issued.
Dividends received by shareholders which are attributable to interest income
received by it from municipal obligations generally will be subject to federal
income tax. Municipal obligations bear fixed, floating or variable rates of
interest, which are determined in some instances by formulas under which the
municipal obligation's interest rate will change directly or inversely to
changes in interest rates or an index, or multiples thereof, in many cases
subject to a maximum and minimum. The Fund currently intends to invest no more
than 25% of its assets in municipal obligations. However, this percentage may
be varied from time to time without shareholder approval.
ZERO COUPON AND STRIPPED SECURITIES
The Fund may invest in zero coupon U.S. Treasury securities, which are
Treasury notes and bonds that have been stripped of their unmatured interest
coupons, the coupons themselves and receipts or certificates representing
interests in such stripped debt obligations and coupons. The Fund also may
invest in zero coupon securities issued by corporations and financial
institutions which constitute a proportionate ownership of the issuer's pool
of underlying U.S. Treasury securities. A zero coupon security pays no
interest to its holder during its life and is sold at a discount to its face
value at maturity.
56
<PAGE>
The amount of the discount fluctuates with the market price of the security.
The market prices of zero coupon securities generally are more volatile than
the market prices of securities that pay interest periodically and are likely
to respond to a greater degree to changes in interest rates than non-zero
coupon securities having similar maturities and credit qualities.
Federal income tax law requires the holder of a zero coupon security or of
certain pay-in-kind bonds to accrue income with respect to these securities
prior to the receipt of cash payments. If the Fund invests in such securities
it may be required, in order to maintain its qualification as a regulated
investment company and avoid liability for Federal income taxes, to distribute
the income accrued with respect to these securities and may have to dispose of
portfolio securities under disadvantageous circumstances in order to generate
cash to satisfy these distribution requirements.
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES
The Fund may invest in U.S. dollar denominated obligations issued or
guaranteed by one or more foreign governments or any of their political
subdivisions, agencies or instrumentalities that are determined by the Advisor
to be of comparable quality to the other obligations in which the Fund may
invest. Such securities also include debt obligations of supranational
entities. Supranational entities include international organizations
designated or supported by governmental entities to promote economic
reconstruction or development and international banking institutions and
related government agencies. Examples include the International Bank for
Reconstruction and Development (the World Bank), the European Coal and Steel
Community, the Asian Development Bank and the InterAmerican Development Bank.
The percentage of the Fund's assets invested in securities issued by foreign
governments will vary depending on the relative yields of such securities, the
economic and financial markets of the countries in which the investments are
made and the interest rate climate of such countries.
FOREIGN SECURITIES
The Fund may invest in U.S. dollar denominated obligations of foreign
corporations. Investing in securities issued by foreign corporations involves
considerations and possible risks not typically associated with investing in
obligations issued by domestic corporations. Less information may be available
about foreign companies than about domestic companies, and foreign companies
generally are not subject to the same uniform accounting, auditing and
financial reporting standards or to other regulatory practices and
requirements comparable to those applicable to domestic companies.
The risks associated with investing in foreign securities are often heightened
by investments in developing or emerging markets. Investments in emerging or
developing markets involve exposure to economic structures that are generally
less diverse and mature and to political systems which can be expected to have
less stability, than those of more developed countries. Moreover, the
economies of individual emerging market
57
<PAGE>
countries may differ favorably or unfavorably from the U.S. economy in such
respects as the rate of growth in gross domestic product, the rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments position.
MONEY MARKET INSTRUMENTS
The Fund may invest, in the following types of money market instruments, each
of which at the time of purchase must have or be deemed to have under rules of
the Securities and Exchange Commission remaining maturities of 13 months or
less. The Fund may invest in money market instruments and debt securities,
including bank obligations and commercial paper, which are at least comparable
in quality to the Fund's other investments. Bank obligations may include
bankers' acceptances, negotiable certificates of deposit and non-negotiable
time deposits earning a specified return, issued for a definite period of time
by a U.S. bank that is a member of the Federal Reserve System or is insured by
the Federal Deposit Insurance Corporation, or by a savings and loan
association or savings bank that is insured by the Federal Deposit Insurance
Corporation. Bank obligations also include U.S. dollar-denominated obligations
of foreign branches of U.S. banks or of U.S. branches of foreign banks, all of
the same type as domestic bank obligations. Investments in bank obligations
are limited to the obligations of financial institutions having more than $1
billion in total assets at the time of purchase. Investments by the Fund in
non-negotiable time deposits are limited to no more than 5% of its total
assets at the time of purchase.
U.S. TREASURY SECURITIES
U.S. Treasury securities include Treasury bills, Treasury notes and Treasury
bonds that differ in their interest rates, maturities and times of issuance.
Treasury bills have initial maturities of one year or less; Treasury notes
have initial maturities of one to ten years; and Treasury bonds generally have
initial maturities of greater than ten years.
U.S. GOVERNMENT SECURITIES
In addition to U.S. Treasury securities, U.S. Government securities include
securities issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. Some obligations issued or guaranteed by U.S. Government
agencies and instrumentalities, for example, Government National Mortgage
Association pass-through certificates, are supported by the full faith and
credit of the U.S. Treasury; others, such as those of the Federal Home Loan
Banks, by the right of the issuer to borrow from the Treasury; others, such as
those issued by the Federal National Mortgage Association, by discretionary
authority of the U.S. Government to purchase certain obligations of the agency
or instrumentality; and others, such as those issued by the Student Loan
Marketing Association, only by the credit of the agency or instrumentality.
These securities bear fixed, floating or variable rates of interest. Principal
and interest may fluctuate based on generally recognized reference rates or
the relationship of rates. While the U.S.
58
<PAGE>
Government provides financial support to such U.S. Government-sponsored
agencies or instrumentalities, no assurance can be given that it will always
do so, since it is not so obligated by law.
MANAGEMENT OF THE FUND
THE BOARD OF TRUSTEES
Under Delaware law, the business and affairs of the Trust are managed under
the direction of the Board of Trustees. There are currently eight Trustees,
five of whom are not "interested persons" of the Trust within the meaning of
that term under the Act. The Trustees, in turn, elect the officers of the
Trust to supervise actively its day-to-day operations. The Statement of
Additional Information contains the name and background information regarding
each Trustee.
THE INVESTMENT ADVISOR
Trainer, Wortham & Co., Inc. (the "Advisor"), with offices at 845 Third
Avenue, New York, NY 10022 is the Trust's investment advisor and manager and
is registered as an investment advisor under the Investment Advisors Act of
1940, as amended.
The Advisor, organized in 1990, continues an investment counseling business
which began in 1924 as Trainer & Associates. The Advisor supervises
approximately $1.7 billion in investment accounts and is owned entirely by the
officers active in the day-to-day management of portfolios. By reason of his
stock ownership of 45% of the Advisor, Charles V. Moore may be said to be a
"controlling person" of that firm.
Pursuant to an investment advisory agreement with the Trust on behalf of the
Fund, the Advisor receives an annual fee, accrued daily and paid monthly, of
0.45% of the Fund's average daily net assets. From time to time, the Advisor
may waive receipt of its fees and/or voluntarily assume certain Fund expenses,
which would have the effect of lowering the Fund's expense ratio and
increasing yield to investors at the time such amounts are waived or assumed,
as the case may be. The Fund will not reimburse the Advisor at a later time
for the expenses assumed.
Subject to the general supervision of the Board of Trustees, and in accordance
with the Fund's investment objective, policies, and restrictions, the Advisor
manages the Fund's investment portfolio, makes decisions with respect to and
places orders for all purchases and sales of the portfolio securities. David
P. Como is the President of the Trust. John D. Knox is the Vice-President and
Portfolio Manager of the Fund. Mr. Knox joined Trainer Wortham in December,
1995 as the Managing Director of Fixed Income. Prior to joining Trainer
Wortham, Mr. Knox served as Director of Global Fixed Income and Managing
Director from 1994-1995 for Bear Stearns Asset Management and Bear Stearns,
respectively. For more than 11 years prior thereto, Mr. Knox was a Principal
and
59
<PAGE>
Senior Portfolio Manager at Morgan Stanley Asset Management where he managed
fixed income portfolios for a variety of domestic and international clients.
ADMINISTRATOR
The Trust, on behalf of the Fund, has entered into an administrative services
agreement (the "Administration Agreement") with FPS Services, Inc. ("FPS"),
3200 Horizon Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, pursuant
to which the administrator receives a fee accrued daily and paid monthly of
0.15% of the value of such Fund's first $50 million of total average net
assets; 0.10% of the value of such Fund's next $50 million of total average
net assets; and 0.05% of the value of such Fund's total average net assets in
excess of $100 million, subject to an annual minimum fee of $72,000 for the
Trust.
The term of the Administration Agreement is two years and shall continue in
force each year thereafter, so long as such continuance is approved (i) by
FPS; (ii) by vote, cast in person at a meeting called for the purpose, of a
majority of the Board of Trustees who are not parties to the Administration
Agreement or interested persons (as defined in the Act) of any such party, and
(iii) by vote of a majority of the Board of Trustees or a majority of the
Fund's outstanding voting securities. The Fund and FPS may terminate the
Administration Agreement at any time without penalty upon giving the other
party 120 days written notice. The Administration Agreement shall
automatically terminate in the event of its assignment.
The services FPS provides to the Fund include: coordinating and monitoring of
any third parties furnishing services; providing the necessary office space,
equipment and personnel to perform administrative and clerical functions;
preparing, filing and distributing of proxy materials, periodic reports to
shareholders, registration statements and other documents; organizing of board
meetings; and responding to shareholder inquiries.
DISTRIBUTOR
FPS Broker Services, Inc. ("FPSB") serves as the Fund's Distributor on a best
efforts basis. FPSB is an affiliated company of FPS inasmuch as both are under
common ownership.
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
FPS serves as the Fund's Transfer Agent, Dividend Disbursing Agent, Redemption
Agent and Accounting Services Agent. In such capacities, FPS is responsible
for providing record-keeping and administrative services (including
calculation of net asset value) and for processing share purchases and
redemptions. Correspondence relating to purchases and redemptions of Fund
shares, or to dividend payments or reinvestment, should be addressed to FPS
Services, Inc.
60
<PAGE>
CUSTODIAN
UMB Bank, n.a., Kansas City, MO is Custodian for the securities and cash of
the Fund.
BROKERAGE
The Advisor will attempt to place portfolio transactions for the Fund with
those brokers and dealers who will execute orders in an effective manner at
the most favorable price. When the execution and price offered by two or more
brokers or dealers are comparable, the Advisor may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide research advice and other services. The Advisor may give consideration
to the sale of shares of the Fund as a factor in the selection of brokers and
dealers to execute Fund portfolio transactions subject to seeking best price
and execution. The Fund may pay brokerage commissions to brokers which are
affiliated with Officers and Trustees of the Fund, provided that such
transactions are in compliance with Section 17(e)(2) of the Act.
PORTFOLIO TURNOVER
The rate of portfolio turnover will depend on the investment strategy
implemented by the Advisor for the Fund which will vary over any given time
period, but may be influenced by the following: general market conditions;
valuation analysis; market volatility; and technical analysis. It is not the
policy of the Fund to invest with the goal of generating short-term trading
profits, rather the Fund seeks to generate long-term capital appreciation when
possible by holding investments over a full market cycle, which in the opinion
of the Advisor is normally 2-3 years. It is anticipated that the Fund's
investment objectives and strategy will result in a portfolio turnover rate of
less than 100% over the course of a fiscal year; however market conditions may
cause turnover to exceed 100% in certain years.
PURCHASE OF SHARES
Shares are offered for sale by the Fund on a continuous basis at the Fund's
net asset value. Purchasers of the Fund's shares pay no "sales load" or
underwriting commission, although broker-dealers effecting purchases or sales
of Fund shares for their customers may charge a service fee in connection
therewith. The minimum initial investment in the Fund is $250.00. Existing
shareholders may purchase additional shares with a minimum purchase of $50 per
transaction.
Purchases of the Fund are made at the net asset value per share next
determined after receipt by FPS as Transfer Agent, of a purchase order in good
order. Thus, for orders received in good order before 4:00 p.m. (Eastern
time), the public offering price will be the net asset value determined as of
4:00 p.m. (Eastern time) that day. Orders for Fund shares received after 4:00
p.m. (Eastern time) will be purchased at the next- determined net asset value
on the business day following receipt of the order.
61
<PAGE>
INVESTING BY TELEPHONE
The Fund may accept telephone orders from broker-dealers or service
organizations which have been previously approved by the Trust. It is the
responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for same to the Fund. Shares of the Fund
may be purchased through broker-dealers, banks and bank trust departments
which may charge the investor a transaction fee or other fee for their
services at the time of purchase. Such fees would not otherwise be charged if
the shares were purchased directly from the Fund.
INVESTING BY MAIL
Prospective shareholders may purchase shares of the Fund by completing and
signing the "Investment Application" enclosed with this Prospectus and sending
the application, together with a check payable to Trainer, Wortham Total
Return Bond Fund c/o FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903. Except as noted below, purchases without full
payment will not be processed until payment is received. The ownership of
shares shall be recorded on the books of the Transfer Agent in an account
under the shareholder's name. A confirmation of the purchase will be issued
showing the account number and number of shares owned.
INVESTING BY WIRE
Shares may also be purchased by instructing the bank to wire Federal Funds to
the Transfer Agent. Federal Funds are monies of member banks within the
Federal Reserve System. The bank must include the full name(s) in which the
account is registered and the Fund account number, and should address its wire
as follows:
UMB BANK KC NA
ABA # 10-10-00695
FOR: FPS SERVICES, INC.
A/C 98-7037-071-9
FBO "TRAINER, WORTHAM TOTAL RETURN BOND FUND,"
Account of (exact name(s) of account registration)
---------------------------------------
Shareholder Account #
---------------------------------
When opening a new account by wire transfer, first telephone the Transfer
Agent at 800-441-6580 to request an account number and furnish the Fund with a
social security or other tax identification number. A completed application
with signature(s) of registrant(s) must be filed with the Fund immediately
subsequent to the initial wire. Federal Funds wires must be made in amounts of
$250 or more. The bank will generally charge a fee for this wire. The Fund
will not be responsible for the consequences of delays, including delays in
the banking or Federal Reserve wire systems.
62
<PAGE>
SUBSEQUENT INVESTMENTS
Once a shareholder's account has been established, additional purchases may be
made by sending a check payable to "Trainer, Wortham Total Return Bond Fund"
c/o FPS Services, Inc., P.O. Box 412797, Kansas City, MO 64141-2797. Please
enclose the stub of the account statement and include the Fund account number
on the check (as well as the attributable year for retirement plan
investments, if applicable). Additional purchases may also be made through the
Fund's Automatic Investment Plan which provides shareholders a convenient
method to make regularly scheduled subsequent investments. See "SHAREHOLDER
SERVICES."
REDEMPTION OF SHARES
IN GENERAL
The Trust will make your redemption proceeds available as promptly as possible
and, in any event, within seven business days after your redemption order, in
proper order, is received. For your redemption order to be in proper order,
your order must include name as it appears on your account, your account
number and a signature guarantee as required as described below. However, your
redemption proceeds may be delayed if you purchased the shares to be redeemed
by check (including certified or cashier checks) until such check has cleared
and the Trust has collected good funds for your purchase. Such collection may
take 15 days or more.
REDEMPTIONS BY WRITTEN REQUEST
Shareholders may redeem shares by mail only, by writing directly to the
Transfer Agent at FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King
of Prussia, PA 19406-0903, and requesting liquidation of all or any part of
their shares. The redemption request must be signed exactly as the
shareholder's name appears on the form of registration and must include the
Fund account number. If shares are owned by more than one person, the
redemption request must be signed by all owners exactly as their names appear
in the registration. Shares registered in the name of corporations, trusts and
fiduciaries can be redeemed only upon instructions of a duly authorized
person. To protect the account, the Transfer Agent and the Fund from fraud,
signature guarantees are required for certain redemptions. Signature
guarantees are required for: (1) all redemptions of $25,000 or more; (2) any
redemptions if the proceeds are to be paid to someone other than the person(s)
or organization in whose name the account is registered; (3) any redemptions
which request that the proceeds be wired to a bank (unless bank information
was received at the time the account was established); and (4) requests to
transfer the registration of shares to another owner. The Transfer Agent
requires that signatures be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 under the Securities Exchange Act of 1934. Eligible
guarantor institutions
63
<PAGE>
This is your
INVESTMENT APPLICATION
Detach and Mail to:
FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
<PAGE>
INVESTMENT APPLICATION
- -------------------------------------------------------------------------------
MAIL TO: FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903
1. INITIAL INVESTMENT ($250 MINIMUM)
- -------------------------------------------------------------------------------
FORM OF PAYMENT
[ ] Check for $ enclosed (payable to "Trainer, Wortham Total Return Bond
Fund")
[ ] BY WIRE* An initial purchase of $ was wired on by
-------- --------
(Date)
to account #
------------------------------- ----------------------------
Name of your Bank or Broker Number assigned by FPS
* Before making an initial investment by wire, you must be assigned an account
number by calling (800) 441-6580. Then have your local bank wire your funds
to: UMB Bank, N.A., ABA #10-10-00695 for credit to FPS AC #98-7037-071-9
(Trainer, Wortham Total Return Bond Fund). Be sure to include your name and
account number on the wire.
- -------------------------------------------------------------------------------
2. REGISTRATION (Please Print)
- -------------------------------------------------------------------------------
INDIVIDUAL
-------------------------------------------------------- ---------------------
First name Middle Initial Last Name Social Security #
-------------------------------------------------------- ---------------------
Jt. Owner First Name* Middle Initial Last Name Social Security #
Citizen of: [ ] United States [ ] Other (Please Indicate)
------------
*(Joint ownership with rights of survivorship unless otherwise noted).
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
GIFT TO MINORS
------------------------------------------------------------------------------
Name of Custodian (Name one only) As Custodian For (name one only)
Under the Uniform Gift to Minors Act
------------ -------------------------
State Minor's Social Security #
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS**
-----------------------------------------------------------------------------
Name of Corporation, Partnership, Trust or Other
-----------------------------------------------------------------------------
Tax I.D. # Name of Trustee(s) Date of Trust
**Complete Corporate Resolution attached.
- -------------------------------------------------------------------------------
<PAGE>
3. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
- --------------------------------------------------------------------------------
------------------------------------------------------------------------------
Street Address and Apt. No. City State Zip
( ) ( )
-------------------------- -------------------------
Residence Telephone Number Business Telephone Number
- --------------------------------------------------------------------------------
4. DISTRIBUTION OPTIONS (Please indicate one)
- --------------------------------------------------------------------------------
[ ] Reinvest (dividends & capital gains in additional shares).
[ ] Cash Dividends (dividends in cash, capital gains in additional shares).
[ ] All Cash (dividends & capital gains in cash).
- --------------------------------------------------------------------------------
5. SYSTEMATIC WITHDRAWAL PLAN (MINIMUM INITIAL INVESTMENT $5,000)
- --------------------------------------------------------------------------------
A check in the amount of $ ____________ (minimum $50) will be sent to your
address of record unless otherwise noted.
Please select desired frequency:
[ ] Monthly, prior to last day
[ ] Quarterly, prior to last day of , , , and .
----- ----- ----- -----
[ ] Semi-Annual or Annual, prior to the last day of , , or .
----- ----- -----
- --------------------------------------------------------------------------------
6. TELEPHONE PRIVILEGE: REDEMPTIONS; EXCHANGES BETWEEN FUNDS
- --------------------------------------------------------------------------------
Check box if you want this service:
I (We) authorize FPS Services, Inc. and/or Trainer, Wortham First Mutual Funds
to act upon instructions received by telephone from me (us) to redeem shares
or to exchange for shares of other Trainer, Wortham First Mutual Funds. I (we)
understand an exchange is made by redeeming shares of one fund and using the
proceeds to buy shares of another fund. Exchanges must be made into
identically registered accounts. Redemption proceeds will be sent as indicated
in this prospectus.
* If not otherwise indicated below, only exchanges will be allowed.
[ ] Redemption [ ] Exchanges [ ] Both
Check one only, if none are checked all redemptions will be sent by check.
[ ] All redemptions proceeds will be executed by an ACH transaction unless FPS
Services, Inc. is notified otherwise in writing. There is no charge for
ACH transactions. Allow 3 business days.
[ ] All redemption proceeds will be executed by a FED Wire transaction unless
FPS Services is notified otherwise in writing. There is a $9 charge for
FED Wire transactions.
[ ] All redemption proceeds will be sent by check to the mailing address
indicated below unless FPS Services is notified otherwise in writing.
All FED Wire and ACH transactions will be sent as indicated below. There will
be no charge for ACH transactions. Any changes in ACH transactions must be
made in writing to FPS Services, Inc., 3200 Horizon Drive, P.O. Box 61503,
King of Prussia, PA 19406-0903. Please allow one month for ACH instructions to
be effective.
(Notify your bank of your intent to establish this option on your bank
account.)
- --------------------------------------------------------------------------------
Bank Name Branch Office (if applicable)
- --------------------------------------------------------------------------------
Bank Address (Do not use P.O. Box) City State Zip
- --------------------------------------------------------------------------------
Bank Wire Routing Number Name(s) on Your Bank Account Your Bank Account Number
Voided Personal Check or Deposit Slip Must Be Attached
- --------------------------------------------------------------------------------
<PAGE>
7. SIGNATURE AND CERTIFICATION
- --------------------------------------------------------------------------------
THE FOLLOWING IS REQUIRED BY FEDERAL TAX LAW TO AVOID 20% BACKUP WITHHOLDING,
"BY SIGNING BELOW, I CERTIFY UNDER PENALTIES OF PERJURY THAT THE SOCIAL
SECURITY OR TAXPAYER IDENTIFICATION NUMBER ENTERED ABOVE IS CORRECT (OR I AM
WAITING FOR A NUMBER TO BE ISSUED TO ME), AND THAT I HAVE NOT BEEN NOTIFIED BY
THE IRS THAT I AM SUBJECT TO BACKUP WITHHOLDING UNLESS I HAVE CHECKED THE BOX."
IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING, CHECK BOX []. "THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR
CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATIONS
REQUIRED TO AVOID BACKUP WITHHOLDING."
RECEIPT OF CURRENT PROSPECTUS IS HEREBY ACKNOWLEDGED.
-----------------------------------------------------------------------------
SIGNATURE [ ] OWNER [ ] CUSTODIAN [ ] TRUSTEE DATE
-----------------------------------------------------------------------------
SIGNATURE OF JOINT OWNER (IF APPLICABLE)
- --------------------------------------------------------------------------------
8. INVESTMENT DEALER INFORMATION
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------------
Name of Firm Rep. Name & No. Authorized Signature
-----------------------------------------------------------------------------
Street Address City State Zip
- --------------------------------------------------------------------------------
<PAGE>
RESOLUTIONS
(THIS SECTION TO BE COMPLETED BY CORPORATIONS, TRUSTS, AND OTHER
ORGANIZATIONS).
RESOLVED: That this corporation or organization become a shareholder of
Trainer, Wortham Total Return Bond Fund of Trainer, Wortham First Mutual Funds
(the "Trust") and that
- -------------------------------------------------------------------------------
IS (ARE) AWARE HEREBY AUTHORIZED TO COMPLETE AND EXECUTE THE APPLICATION OF
BEHALF OF THE CORPORATION OR ORGANIZATION AND TAKE ANY ACTION FOR IT AS MAY BE
NECESSARY OR APPROPRIATE WITH RESPECT TO ITS SHAREHOLDERS ACCOUNT(S) WITH THE
TRUST, AND IT IS FURTHER RESOLVED: THAT ANY ONE OF THE ABOVE-NOTED OFFICERS IS
AUTHORIZED TO SIGN ANY DOCUMENTS NECESSARY OR APPROPRIATE TO APPOINT FPS
SERVICES, INC. AS REDEMPTION AGENT OF THE CORPORATION OR ORGANIZATION FOR
SHARES OF THE TRUST, TO ESTABLISH OR ACKNOWLEDGE TERMS AND CONDITIONS
GOVERNING THE REDEMPTION OF SAID SHARES OR TO OTHERWISE IMPLEMENT THE
PRIVILEGES ELECTED ON THE APPLICATION.
- -------------------------------------------------------------------------------
CERTIFICATE
I hereby certify that the foregoing resolutions are in conformity with the
Charter and By-Laws or other empowering documents of the ______________________
(Name of Corporation)
incorporated or formed under the laws of ______________________________________
(State)
and were adopted at a meeting of the Board of Directors or Trustees of the
organization or corporation duly called and held on __________ at which a quorum
was present and acting throughout, and that the same are now in full force and
effect.
I further certify that the following is (are) the duly elected officer(s) of
the corporation or organization, authorized to act in accordance with the
foregoing resolutions.
Name Title Name Title
- ------------------------------------ ------------------------------------
- ------------------------------------ ------------------------------------
Witness my hand and the seal of the corporation or organization this ____ day
of ______, 19___
- --------------------------------------- --------------------------------------
*Secretary-Clerk Other Authorized Officer (if required)
*If the Secretary or other recording officer is authorized to act by the above
resolutions, this certificate must also be signed by another officer.
<PAGE>
include banks, broker-dealers, credit unions, national securities exchanges,
registered securities associations, clearing agencies and savings
associations. Broker-dealers guaranteeing signatures must be a member of a
clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees. Signature guarantees
will be accepted from any eligible guarantor institution which participates in
a signature guarantee program. The Transfer Agent cannot accept guarantees
from notaries public. The Transfer Agent may require additional supporting
documents for redemptions made by corporations, executors, administrators,
trustees and guardians.
Shares will be redeemed at the net asset value, next determined after receipt
of a redemption request in proper form. Moreover, under the Act, the right of
redemption may be suspended when (a) trading on the New York Stock Exchange is
restricted or such Exchange is closed for other than weekends or holidays, (b)
the Securities and Exchange Commission has by order permitted such suspension,
or (c) an emergency exists making disposal of portfolio securities or
valuation of net assets not reasonably practicable. When in the opinion of the
Board of Trustees, conditions exist which make payments in cash on redemption
unwise or undesirable, the Fund may make payment on redemption in securities.
The value of a shareholder's shares upon redemption may be more or less than
their cost depending upon the value of the Fund's portfolio securities at the
time of redemption.
REDEMPTIONS BY TELEPHONE
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by instructing the Transfer
Agent by telephone at (800) 441-6580.
In order to arrange for redemption by wire or telephone after an account has
been opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent at the address
listed under "Investing by Mail". Such requests must be signed by the
shareowner, with signatures guaranteed (see "By Written Request" for details
regarding signature guarantees). Further documentation may be requested from
corporations, executors, administrators, trustees, or guardians.
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time by the Fund. Neither the
Fund nor any of their service contractors will be liable for any loss or
expense in acting upon telephone instructions that are reasonably believed to
be genuine. In attempting to confirm that telephone instructions are genuine,
the Fund will use such procedures as are considered reasonable, including
requesting a shareowner to correctly state his or her Fund account
64
<PAGE>
number, the name in which his or her account is registered, his or her social
security number, banking institution, bank account number, and the name in
which his or her bank account is registered. To the extent that the Fund fails
to use reasonable procedures to verify the genuineness of telephone
instructions, it and/or its service contractors may be liable for any such
instructions that prove to be fraudulent or unauthorized.
Shares of the Fund may be redeemed through certain broker-dealers, banks and
bank trust departments who may charge the investor a transaction fee or other
fee for their services at the time of redemption. Such fees would not
otherwise be charged if the shares were redeemed directly from the Fund.
EXCHANGE OF SHARES
You may exchange your shares of any Series of the Trust for shares of either
of the other Series at net asset value without the payment of any fee or
charge in writing or by telephone. An exchange is considered a sale of shares
and may result in capital gain or loss for federal income tax purposes. Before
an exchange can be made, you must have received the current Prospectus for the
Series into which you wish to exchange, and the exchange privilege may be
exercised only in those states where shares of such Series, as the case may
be, may legally be sold. If the Transfer Agent receives exchange instructions
from you in writing or by telephone at (800) 441-6580, in good order by the
Valuation Time on any Business Day, the exchange will be effected that day.
For your exchange request to be in good order, your request must include your
name as it appears on your account, your account number, the amount to be
exchanged, the name of the Fund from which and to which the exchange is to be
made and a signature guarantee as may be required. A written request by you
for an exchange in excess of $25,000 must be accompanied by a signature
guarantee as described under "REDEMPTION OF SHARES--By Written Request."
SHAREHOLDER SERVICES
The following special services are available to shareholders. An investor may
change or stop these services at any time by written notice to the Fund.
AUTOMATIC INVESTMENT PLAN
The Fund has an Automatic Investment Plan which provides shareholders with a
convenient method by which investors may have amounts deducted directly from
their checking accounts for investment in the Fund. The minimum initial and
subsequent investments for the Fund also apply when using this method of
investing. To begin participating in this Plan, use the Automatic Investment
Plan Application found in the back of this Prospectus.
SYSTEMATIC CASH WITHDRAWAL PLAN
The Fund has a Systematic Withdrawal Plan, which provides for voluntary
automatic withdrawals of at least $50 monthly, quarterly, semi-annually or
annually. In order to qualify for this option, dividends and capital gains
must be reinvested.
65
<PAGE>
RETIREMENT PLANS
The Fund has available an Individual Retirement Account for use by certain
individuals who qualify (including earned income from self-employment). More
detailed information about how to participate in this plan, the fees charged
by the Custodian bank, and the limits on contributions can be found in the
Statement of Additional Information or may be obtained by contacting the Fund
at (800) 257-4414.
NET ASSET VALUE
The net asset value per share of capital stock of the Fund will be determined
each business day on which the New York Stock Exchange is open for business as
of the close of regular trading hours (currently 4:00 p.m. Eastern time) and
for any other day (other than a day on which no shares are tendered for
redemption and no order to purchase or sell any shares is received) during
which there is a sufficient degree of trading in the Fund's portfolio
securities that the Fund's net asset value per share might be materially
affected. Determination of net asset value will be in accordance with
generally accepted accounting principles and will be computed by dividing the
value of the Fund's total net assets by the total number of shares
outstanding. Securities traded on a securities exchange are valued at the last
sale price prior to the time of computation or, if there have been no sales on
that day, at the mean of their closing bid and asked prices. Securities not
traded on a securities exchange but for which market quotations are readily
available will be valued at the mean of their bid and asked prices, although
securities traded over the counter on NASDAQ will be valued at their last sale
price. Securities not traded on a securities exchange and other securities or
assets for which market quotations are not readily available will be valued at
fair value as determined in good faith by the Board of Trustees. Once the
aggregate value of all securities has been determined, there will be added to
this total the dollar amount of cash on hand and receivables and the value of
all other assets. From the sum of the foregoing, the aggregate amount of all
liabilities and all accrued expenses will be deducted to produce the total net
asset value of all shares outstanding.
DIVIDENDS AND TAXES
The Fund intends to qualify annually to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As such, the Fund will not be subject to Federal income tax, or
to any excise tax, to the extent its earnings are distributed as provided in
the Code and by satisfying certain other requirements relating to the sources
of its income and diversification of its assets.
The Fund intends to distribute substantially all of its net investment income
and net capital gains. Dividends, if any, from net investment income will be
declared and paid quarterly by Trainer, Wortham Total Return Bond Fund.
Dividends from net investment income or net short-term capital gains will be
taxable to you as ordinary
66
<PAGE>
income, whether received in cash or in additional shares. It is not
anticipated that any portion of the Dividends received from net investment
income of the Fund will qualify for the corporate Dividends received
deduction.
The Fund permits any shareholder located in states where the Fund's shares are
registered (regardless of the number of shares owned) to elect a Dividend
Reinvestment Plan for the automatic reinvestment of all distributions. If a
dividend is declared from net investment income or a capital gains
distribution is declared from net capital gains, investors electing under the
Dividend Reinvestment Plan are required to take such Dividends or distribution
in Fund shares rather than in cash. The full amount of the distribution will
be invested and the shareholder will be credited with any full or fractional
shares resulting. The investment under the Dividend Reinvestment Plan will be
made at the current net asset value on the dividend payable date. Dividends
and capital gains distributions will result in a taxable event for the
investor even though invested in shares.
An investor may elect or terminate participation in the Dividend Reinvestment
Plan at any time. Elections to participate must be made using the Investment
Application. Termination can be made by written notice. Costs of the Plan will
be borne by the Fund. There is no assurance that the Plan will result in a
profit for an investor.
The Fund's investment in certain bonds, such as zero coupon bonds, may cause
the Fund to recognize income and make distributions prior to the receipt of
cash payments. These bonds are subject to special tax rules concerning the
amount, character and timing of income required to be reported by the Fund and
distributed.
Distributions paid by the Fund from long-term capital gains, whether received
in cash or in additional shares, are taxable to investors as long-term capital
gains, regardless of the length of time an investor has owned shares in the
Fund. The Fund does not seek to realize any particular amount of capital gains
during a year; rather, realized gains are a by-product of management
activities. Consequently, capital gains distributions may be expected to vary
considerably from year to year. Also, if purchases of shares in a Fund are
made shortly before the record date for a capital gains distribution or a
dividend, a portion of the investment will be returned as a taxable
distribution.
Dividends which are declared in October, November or December to shareholders
of record in such a month but which, for operational reasons, may not be paid
to the shareholder until the following January, will be treated for tax
purposes as if paid by a Fund and received by the shareholder on December 31
of the calendar year in which they are declared.
A sale or redemption of shares of a Fund is a taxable event and may result in
a capital gain or loss to shareholders subject to tax. Any loss incurred on
sale or exchange of a Fund's shares held for six months or less will be
treated as a long-term capital loss to the extent of any capital gain
dividends received with respect to such shares.
67
<PAGE>
In addition to Federal taxes, shareholders may be subject to state and local
taxes on distributions. It is recommended that shareholders consult their tax
advisers regarding specific questions as to Federal, state, local or foreign
taxes.
Each year, the Fund will mail information to shareholders on the tax status of
the Fund's dividends and distributions made to shareholders.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions, and redemptions paid to shareholders who have not complied with
IRS taxpayer identification regulations. You may avoid this withholding
requirement by certifying on your account registration form your proper
taxpayer identification number and by certifying that you are not subject to
backup withholding.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
Federal, state, local or foreign tax consequences of an investment in the
Fund.
PERFORMANCE INFORMATION
From time to time, performance information regarding the Fund, such as total
return or yield, may be quoted in advertisements or in communications to
shareholders. These performance quotations will represent the Fund's past
performance, and should not be considered as representative of future results.
The Fund's total return may be calculated on an average annual and/or
aggregate basis for various periods (which will be stated in all
advertisements). Average annual total return reflects the average percentage
change per year in the value of an investment in the Fund. Aggregate total
return reflects the total percentage change over the stated period. In
calculating total return, the assumption is made that dividends and capital
gain distributions made by the Fund during the period are reinvested in
additional shares.
The Fund may also advertize its yield. The Fund's yield is calculated by
dividing the net investment income per share earned during a recent 30-day (or
one month) period by the maximum public offering price per share on the last
day of that period.
Performance of the Fund may be compared to: other mutual funds with similar
investment objectives; other relevant indices; rankings prepared by
independent services or other financial or industry publications and/or other
publications or services that monitor the performance of mutual funds, such as
the services of Lipper Analytical, CDA/Weisenberger, the Investment Company
Institute, Morningstar, Inc., the Dow Jones Composite Average or its component
indices and Solomon Brothers Broad Investment Grade Bond Index, Standard &
Poor's 500 Stock Index or its component indices, among others.
The principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their
original cost.
68
<PAGE>
GENERAL INFORMATION
ORGANIZATION
Trainer, Wortham Total Return Bond Fund is a separate, diversified, Series of
Trainer, Wortham First Mutual Funds, a Delaware business trust organized
pursuant to a Trust Instrument dated January 17, 1995. On October 1, 1996, the
name of the Trust was changed from First Mutual Funds to its present name. The
Trust is registered under the Act as an open-end management investment company
commonly known as a mutual fund. The Trustees of the Trust may establish
additional series or classes of shares of the Trust without the approval of
shareholders. The assets of each Series belong only to that Series, and the
liabilities of each Series are borne solely by that Series and no other.
DESCRIPTION OF SHARES
The Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $0.001 per share. Shares of the Fund represent
equal proportionate interests in the assets of the Fund only and have
identical voting, dividend, redemption, liquidation and other rights. All
shares issued are fully paid and non-assessable, and shareholders have no
preemptive or other right to subscribe to any additional shares. Currently,
there is only one class of shares issued by the Fund.
SHAREHOLDER MEETINGS
The Board of Trustees do not intend to hold annual meetings of shareholders of
the Fund. The Board of Trustees has undertaken to the Securities and Exchange
Commission, however, that they will promptly call a meeting for the purpose of
voting upon the question of removal of any Trustee when requested to do so by
holders of not less than 10% of the outstanding shares of the Fund. In
addition, subject to certain conditions, shareholders of the Fund may apply to
the Fund to communicate with other shareholders to request a shareholder's
meeting to vote upon the removal of a Trustee or Trustees.
CERTAIN PROVISIONS OF FUND INSTRUMENT
Under Delaware law, the shareholders of the Trust will not be personally
liable for the obligations of the Trust; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations.
SHAREHOLDER REPORTS AND INQUIRIES
Shareholders will receive annual financial statements which are audited by the
Fund's independent accountants, Tait, Weller & Baker, as well as unaudited
semi-annual financial statements. Shareholder inquiries should be addressed to
Trainer, Wortham Total Return Bond Fund, c/o FPS Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903, or by calling (800)
257-4414.
69
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
70
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
HOW DOES IT WORK?
1. FPS Services, Inc. through our bank, UMB Bank, KC NA, draws an automatic
clearing house (ACH) debit electronically against your personal checking
account each month, according to your instructions.
2. Choose any amount ($50 or more) that you would like to invest regularly and
your debit for the amount will be processed by FPS Services Inc. as if you
had written a check yourself.
3. Shares will be purchased and a confirmation sent to you.
HOW DO I SET IT UP?
1. Complete the forms and the Fund Application Form if you do not already have
an existing account.
2. Mark one of your personal checks or deposit slips VOID, attach it to the
forms below and mail to FPS Services, Inc., 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903.
3. A soon as your bank accepts your authorization, debits will be generated
and your Automatic Investment Plan started. In order for you to have ACH
debits from your account, your bank must be able to accept ACH transactions
and/or be a member of an ACH association. Your branch manager should be
able to tell you your bank's capability. We cannot guarantee acceptance by
your bank.
4. Please allow one month for processing of your Automatic Investment Plan
before the first debit occurs.
- -------------------------------------------------------------------------------
AUTOMATIC INVESTMENT PLAN APPLICATION
TO: FPS Services, Inc.
3200 Horizon Drive
P.O. Box 61503
King of Prussia, PA 19406-0903
Please start an Automatic Investment Plan for me and invest
-----------------
($50 or more)
on the[ ] 10th[ ] 15th[ ] 20th of each month, in shares of Trainer, Wortham
Total Return Bond Fund
Check one:
[ ] I am in the process of establishing an account.
or
[ ] My account number is:
-----------------------------------------------------
- -------------------------------------------------------------------------------
Name as account is registered
- -------------------------------------------------------------------------------
Street
- -------------------------------------------------------------------------------
City State Zip
I understand that my ACH debit will be dated on the day of each month as
indicated above or as specified by written request. I agree that if such debit
is not honored upon presentation, FPS Services, Inc. may discontinue this
service and any share purchase made upon deposit of such debit may be
canceled. I further agree that if the net asset value of the shares purchased
with such debit is less when said purchase is canceled than when the purchase
was made, FPS Services Inc. shall be authorized to liquidate other shares or
fractions thereof held in my account to make up the deficiency. This Automatic
Investment Plan may be discontinued by FPS Services, Inc. upon 30-days written
notice or at any time by the investor by written notice to FPS Services, Inc.
which is received not later than 5 business days prior to the above designed
investment date.
Signature(s):
--------------------------
--------------------------
71
<PAGE>
AUTOMATIC INVESTMENT PLAN APPLICATION
BANK REQUEST AND AUTHORIZATION
TO:
---------------------------------------------- -----------------------------
Name of Your Bank Bank Checking Account Number
----------------------------------------------------------------------------
Address of Bank or Branch Where Account is Maintained
As a convenience to me, please honor ACH debits on my account drawn by FPS
Services, Inc., UMB Bank, KC NA and payable to "Trainer, Wortham Total
Return Bond Fund."
I agree that your rights with respect to such debit shall be the same as
if it were a check drawn upon you and signed personally by me. This
authority shall remain in effect until you receive written notice from me
changing its terms or revoking it, and until you actually receive such
notice, I agree that you shall be fully protected in honoring such debt.
I further agree that if any debit is dishonored, whether with or without
cause or whether intentionally or inadvertently, you shall be under no
liability whatsoever.
DEPOSITOR'S
-----------------------------------------------------------
Signature of Bank Depositor(s) as shown on bank records.
NOTE: Your bank must be able to accept ACH transactions and/or be a member
of an ACH association in order for you to use this service.
- -------------------------------------------------------------------------------
INDEMNIFICATION AGREEMENT
TO: The Bank Named Above
So that you may comply with your Depositor's request and authorization,
TRAINER, WORTHAM FIRST MUTUAL FUNDS agrees as follows:
1. To indemnify and hold you harmless from any loss you may suffer arising
from or in connection with the payment by you of a debit drawn by FPS
Services, Inc. to the order of Trainer, Wortham Total Return Fund
designated on the account of your depositor(s) executing the
authorization including any costs or expenses reasonably incurred in
connection with such loss. TRAINER, WORTHAM FIRST MUTUAL FUNDS will
not, however, indemnify you against any loss due to your payment of any
debit generated against insufficient funds.
2. To refund to you any amount erroneously paid to you to FPS Services,
Inc. on any such debit if claim for the amount of such erroneous
payment is made by you within 3 months of the date of such debit on
which erroneous payment was made.
72
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
October 1, 1996
As Supplemented April 1, 1997
- --------------------------------------------------------------------------------
TRAINER, WORTHAM FIRST MUTUAL FUNDS
First Mutual Fund
Trainer, Wortham Emerging Growth Fund
Trainer, Wortham Total Return Bond Fund
- --------------------------------------------------------------------------------
Trainer, Wortham First Mutual Funds (the "Trust") currently offers shares of the
following three series representing separate portfolios of investments: First
Mutual Fund; Trainer, Wortham Emerging Growth Fund; and Trainer, Wortham Total
Return Bond Fund (individually and collectively, the "Series" or "Fund(s)").
Information concerning each Series is provided in separate Prospectuses, each
dated October 1, 1996 as supplemented April 1, 1997. This Statement of
Additional Information is not a Prospectus, but should be read in conjunction
with the current Prospectus for each Fund. Much of the information contained
herein expands upon subjects discussed in the Prospectuses. No investment in
shares should be made without first reading the applicable Prospectus. A copy of
each Series' Prospectus may be obtained without charge by writing to the Trust,
at 845 Third Avenue, 6th Floor, New York, NY 10022 or by calling (800) 257-4414.
Underwriter: Advisor:
FPS Broker Services, Inc. Trainer, Wortham & Co., Inc.
3200 Horizon Drive 845 Third Avenue, 6th Floor
P.O. Box 61503 New York, NY 10022
King of Prussia, PA 19406-0903 (212) 759-7755
(800) 257-4414
No person has been authorized to give any information or to make any
representation not contained in this Statement of Additional Information or in
the Prospectus in connection with the offering made by the Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Trust or its Distributor. The Prospectus does not
constitute an offering by the Trust or by the Distributor in any jurisdiction in
which such offering may not lawfully be made.
- --------------------------------------------------------------------------------
Page 1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Trainer, Wortham First Mutual Funds...................................... 3
Investment Objectives and Policies....................................... 3
Investment Restrictions.................................................. 4
Other Investment Restrictions............................................ 5
Trustees and Officers.................................................... 5
Control Persons and Principal Holders of Securities...................... 6
Investment Advisor....................................................... 6
Administrator............................................................ 8
Distributor.............................................................. 8
Transfer Agent and Accounting Services Agent............................. 8
Custodian................................................................ 9
Legal Counsel............................................................ 9
Auditors................................................................. 9
Distribution Plan........................................................ 9
Brokerage................................................................ 10
Individual Retirement Account............................................ 11
Performance Calculations................................................. 12
General Information...................................................... 13
Financial Statements..................................................... 14
Appendix "A" - Annual Report to Shareholders dated June 30, 1996
for First Mutual Fund...................................................
Appendix "B" - Interim Financial Statements dated February 28, 1997
for Trainer, Wortham Emerging Growth Fund and Trainer, Wortham
Total Return Bond Fund..................................................
</TABLE>
- --------------------------------------------------------------------------------
Page 2
<PAGE>
TRAINER, WORTHAM FIRST MUTUAL FUNDS
Trainer, Wortham First Mutual Funds (the "Trust"), 845 Third Avenue, 6th Floor,
New York, NY 10022, is an open-end management investment company, which
currently offers shares of the following three diversified Series, each with its
own investment objectives and policies: First Mutual Fund; Trainer, Wortham
Emerging Growth Fund; and Trainer, Wortham Total Return Bond Fund.
INVESTMENT OBJECTIVES AND POLICIES
Investment Objectives
First Mutual Fund
The Fund seeks to achieve capital appreciation through investment in common
stocks and securities convertible into common stocks. Its secondary objective is
income.
Trainer, Wortham Emerging Growth Fund
The Fund seeks to achieve capital appreciation through investments in the common
stock of emerging growth companies which are defined as companies achieving or
about to achieve rapid earnings growth with weighted average market
capitalizations of approximately $1 billion. The Fund seeks to outperform equity
returns generated by relevant benchmark indices and funds with comparable
objectives by employing proprietary fundamental, technical and valuation
analysis in the selection of smaller-capitalization, publicly-traded U.S.
companies.
Trainer, Wortham Total Return Bond Fund
The Fund seeks to maximize total return, consistent with preservation of
capital.
Investment Policies
The following discussion of investment techniques and instruments should be read
in conjunction with the "INVESTMENT OBJECTIVE AND POLICIES" and "INVESTMENT
STRATEGIES AND RISK CONSIDERATIONS" sections of the Prospectus of each Fund.
The Board of Trustees may, in the future, authorize a Fund to invest in
securities other than those listed herein and in the Prospectuses, provided such
investment would be consistent with that Fund's investment objective and that it
would not violate any fundamental investment policies or restrictions applicable
to that Fund.
The following discussion applies to all of the Funds.
The Funds will not, as to 75% of their total assets, purchase the securities of
any one issuer (other than cash, cash items, and obligations of the United
States Government) if immediately thereafter, and as a result of the purchase,
the Funds would (a) have more than 5% of the value of their total assets
invested in the securities of such issuer, or (b) hold more than 10% of any or
all classes of the securities of any one issuer. The Funds will not invest in
the securities of other investment companies. Although permitted under the
Trust's Declaration of Trust and By-laws, the following types of transactions
are not anticipated:
1. Investment in restricted securities (including non-marketable
securities);
2. Engaging in short selling; and
3. Arbitrage activities.
Although it is not the current intention of the Funds to borrow, each Fund may
borrow for the purpose of investing in portfolio securities. To the extent that
the Funds borrow money, they will incur interest expense. Any investment gains
made with the additional funds in excess of interest paid will cause the net
asset value of the Funds' shares to rise faster
- --------------------------------------------------------------------------------
Page 3
<PAGE>
than would otherwise be the case. Conversely, any investment losses from such
monies will cause the net asset value of the Funds shares to fall faster than
would otherwise be the case. The foregoing investment policies may be changed
without shareholder approval except to the extent they are reflected in the
Funds fundamental policies. (See "INVESTMENT RESTRICTIONS" below.)
INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions with respect to their
investment policies. These restrictions are fundamental policies, and may not be
changed as to a Fund unless authorized by the vote of a majority of the
outstanding shares of the Fund, as that term is defined herein under the section
entitled "GENERAL INFORMATION" below.
(a) UNDERWRITING OF SECURITIES: The Funds will not engage in the
underwriting of securities of other issuers.
(b) DIVERSIFICATION: The Funds have adopted the policy prohibiting it
from, as to 75% of each Fund's total assets, investing more than 5%
of its total assets in the securities of any one issuer (other than
securities issued by the Government or its agencies or
instrumentalities).
(c) INDUSTRY CONCENTRATIONS: The Funds may not purchase the securities
of issuers conducting their principal business activities in the same
industry, other than obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities if immediately after
such purchase the value of a Fund's investments in such industry
would exceed 25% of the value of the total assets of the Fund.
(d) PURCHASE AND SALE OF REAL ESTATE: The Funds will not engage in the
purchase and sale of interests in real estate except that the Funds
may engage in the purchase and sale of marketable securities which
may represent indirect interests in real estate.
(e) PURCHASE AND SALE OF COMMODITIES OR COMMODITY CONTRACTS: The Funds
will not engage in the purchase and sale of commodities or commodity
contracts.
(f) MAKING OF LOANS TO OTHER PERSONS: The Funds will not make loans to
any person or company, except that the Funds may purchase a portion
of an issue of publicly distributed bonds, debentures or other debt
securities and except further that the Funds may enter into
repurchase agreements.
(g) BORROWING OF MONEY: From time to time, the Funds may borrow money.
All such borrowings shall be exclusively from banks. The purpose of
such borrowings shall be both for temporary use and to provide funds
for the purchase of additional investments whenever the Board of
Trustees of the Trust shall deem it desirable. In connection with any
such borrowing, the Funds shall issue promissory notes or other
evidences of indebtedness and shall, when required, pledge, assign or
otherwise encumber its assets, provided, however, (i) that
immediately after such borrowing it shall have an asset coverage of
at least 300% for all its borrowing and (ii) that in the event such
asset coverage shall at any time fall below 300% it shall, within
three days thereafter (not including Sundays and holidays) or such
longer periods as the U.S. Securities and Exchange Commission (the
"SEC") may prescribe by rules and regulations, reduce the amount of
its borrowings to an extent that the asset coverage of the borrowings
shall be at least 300%.
(i) SECURITIES OF OTHER INVESTMENT COMPANIES: The Funds will not
invest in the securities of other investment companies.
- --------------------------------------------------------------------------------
Page 4
<PAGE>
(j) ISSUANCE OF SENIOR SECURITIES: The Funds are not authorized to
issue securities senior to the shares offered by this Prospectus,
except in connection with borrowings under the terms described above
under "BORROWING OF MONEY."
OTHER INVESTMENT RESTRICTIONS
(a) The Funds may not invest in oil, gas or mineral leases;
(b) The Funds may invest up to 5% of their total assets at the time of
purchase in warrants. Included within this amount, but not to exceed
2% of the Fund's total assets are warrants which are not listed on
the New York Stock Exchange or the American Stock Exchange. This
restriction does not apply to warrants initially attached to
securities purchased by the Funds;
(c) The Funds will not invest in real estate limited partnerships; and
(d) The Funds will not purchase securities on margin, but the Funds
may obtain such short-term credits as may be necessary for the
purchase and sale of securities.
(e) Purchase or retain the securities of any issuer if, to the knowledge
of the Fund, any officer or trustee of the Fund or of its Investment
Advisor owns beneficially more than 1/2 of 1%, of the outstanding
securities of such issuer, and such officers and trustees of the Fund
or of its investment manager who own more than 1/2 of 1%, own, in
aggregate more than 5% of the outstanding securities of such issuer.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their addresses, affiliations,
if any, with Trainer, Wortham & Co., Inc. (the "Advisor") and principal
occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Name, Age Position(s) Aggregate Total Principal Occupation(s) During the Past Five
& Address Held with Compensation Compensation Years
Trust From Trust From Trust
for Fiscal and Fund
Year Ended Complex Paid
6/30/96 to Trustees
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
James F. Twaddell (57) Chairman of the $200.00 $200.00 Investment Banker at Schneider Securities,
c/o Schneider Securities, Board; Inc. since June 1995; Chairman of the Board,
Inc. Trustee since Director and Registered Representative of
2 Charles Street 1979 Barclay Investment, Inc. until June 1995.
Providence, RI 02904
- ------------------------------------------------------------------------------------------------------------------------------------
Robert H. Breslin, Jr. (68) Trustee since $400.00 $400.00 Partner in the law firm of Breslin & Sweeney,
107 Forge Road 1979. Warwick, RI. since 1970.
E. Greenwich, RI 02818
- ------------------------------------------------------------------------------------------------------------------------------------
David P. Como/1/ (50) President; $0 $0 Managing Director of BIL, Trainer, Wortham
845 Third Avenue Trustee since and/or Trainer and Associates since 1969.
Sixth Floor 1982.
New York, NY 10022
- ------------------------------------------------------------------------------------------------------------------------------------
Raymond Eisenberg (73) Chairman of the $400.00 $400.00 President of Raymond Eisenberg & Associates,
414 County Street Audit Committee; PC Accountants and Auditors, New Bedford, MA
New Bedford, MA 02740 Trustee since since 1980.
1960.
- ------------------------------------------------------------------------------------------------------------------------------------
David Elias/1/ (51) Trustee since $0 $0 President and Chief Investment Officer of
500 Essjay Road 1991. Elias Asset Management, Inc., Buffalo, NY
Suite 220 since 1978.
Williamsville, NY 14221
- ------------------------------------------------------------------------------------------------------------------------------------
Robert S. Lazar (52) Member of the $200.00 $200.00 Retired in 1992; formerly an
P.O. Box 4158 Audit Committee; Engineer, Newport, RI; Director, Newport
Middletown, RI 02842-0011 Trustee since Federal Savings Bank, Newport, RI.
1976
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Page 5
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
H. Williamson Ghriskey, Jr. Vice-President $0 $0 Managing Director of BIL, Trainer, Wortham
(52) and and/or Trainer and Associates since 1978.
845 Third Avenue Treasurer
Sixth Floor
New York, NY 10022
- ------------------------------------------------------------------------------------------------------------------------------------
Martin S. Levine (43) Member of the $400.00 $400.00 Controller and Chief Financial Officer of John
c/o John P. Picone, Inc. Audit Committee; P. Picone, Inc., Contractors and Engineers,
31 Garden Lane Trustee since Lawrence, NY, since 1984.
Lawrence, NY 11559 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Terri Thibadeau/1/(49) Trustee since $0 $0 Private Investor; Member of the Board of St.
167 Seabreeze Avenue 1995 Edwards Church in Palm Beach, FL since
Palm Beach, FL 33480 1990.
- ------------------------------------------------------------------------------------------------------------------------------------
Debra L. Clark (37) Secretary $0 $0 Mutual Fund and Marketing Distribution Agent
845 Third Avenue for Trainer, Wortham First Mutual Funds from
Sixth Floor 1993 to present; Vice-President & Director of
New York, NY 10022 Fund/Plan Broker Services, Inc. from 1987 to
1993.
- ------------------------------------------------------------------------------------------------------------------------------------
Charles H.G. Honey (25) Vice-President $0 $0 Sr. Research Analyst, Trainer, Wortham & Co.,
Inc. since May 1994; Equity Analyst, Woodward
and Associates from June 1993 to May 1994.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ "Interested person" within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940, as amended (the "Act"). Mr. Como is an
"interested person" by reason of his affiliation with the Advisor and as a
result of being an Officer of the Trust. Mr. Elias may be regarded as an
"interested person" by reason of a material business relationship with the
Advisor. Ms. Thibadeau is an "interested person" because she is Mr. Como's
sister.
The Audit Committee of the Board of Trustees of the Trust was established to
consider such matters as the selection of the independent certified public
accountant for the Trust, review of the auditor's report on accounting
procedures and internal controls, review of the quarterly reports on brokerage
commissions paid by the Trust, and other issues referred to the Committee by the
full Board. The Audit Committee is comprised of three disinterested Trustees;
under the Trust's By-laws, the President also serves as an Ex-Officio member of
the Audit Committee.
As of June 30, 1996, the Trustees of the Trust received a fee of $200 per
meeting of the Board of Trustees attended. In addition, the trustees were
reimbursed expenses incurred with connection to their attendance at meetings of
the Board of Trustees. Effective with the commencement of Trainer, Wortham
Emerging Growth Fund and Trainer, Wortham Total Return Bond Fund, the Trustees
will receive a $3,000 per calendar year retainer and a $500 per meeting fee.
Members of the Audit Committee also receive fees for meetings attended. However,
no Officer of the Trust receives any compensation directly from the Trust for
performing the duties of their offices. The Advisor, of which Messrs. Como and
Ghriskey are officers and/or trustees, receives fees from the Trust for acting
as its investment advisor. (See the section entitled "INVESTMENT ADVISOR".)
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of September 9, 1996 the Trustees and Officers of the Trust individually and
as a group owned beneficially less than 1.00% of the outstanding shares of First
Mutual Fund.
As of September 9, 1996, the following persons owned of record or beneficially
more than 5% of the outstanding voting shares of First Mutual Fund:
- --------------------------------------------------------------------------------
Page 6
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Beneficial Owner Number of Shares Held Percentage
- ------------------------------------ --------------------- -----------
<S> <C> <C>
Perry R. Como 141,093.001 5.97%
c/o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Roncom Productions Employees 155,545.512 6.58%
Deferred Profit Sharing Trust
845 Third Avenue, 6th Floor
New York, NY 10022
Trainer, Wortham Profit Sharing Trust 406,770.230 17.22%
c/o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
</TABLE>
As of March 26, 1997, the following persons owned of record or beneficially more
than 5% of the outstanding voting shares of TRAINER, WORTHAM EMERGING GROWTH
FUND:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES HELD PERCENTAGE
- ------------------------------------ --------------------- ----------
<S> <C> <C>
Robert R. Douglas 20,130.805 13.48%
c/o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Charles V. Moore 50,000.000 33.48%
TRST Trainer, Wortham & Co. Pension Plan
845 Third Avenue, 6th Floor
New York, NY 10022
Trainer, Wortham Profit Sharing Trust 50,000.000 33.48%
c/o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
</TABLE>
As of March 26, 1997, the following persons owned of record or beneficially more
than 5% of the outstanding voting shares of TRAINER, WORTHAM TOTAL RETURN BOND
FUND:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES HELD PERCENTAGE
- ------------------------------------ --------------------- ----------
<S> <C> <C>
James E. Lawler and Megan Lawler Thorn 41,469.368 5.71%
TRST Glenn N. Howatt Foundation
c/o Trainer, Wortham & Co., c\o Eileen Katz
845 Third Avenue, 6th Floor
New York, NY 10022
Mary B. Menzies 50,095.721 6.90%
c\o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Kalman I. Nulman 50,596.347 6.97%
TRST Milton Brown Foundation
c/o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Charles McVeigh 70,374.016 9.70%
Capital/Income Acct.
c\o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Daniel Potter 71,282.281 9.82%
Exec Estate of Alice O. Potter
c\o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
HW Mali Profit Sharing Ret Plan 136,919.937 18.87%
c\o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
H. Williamson Ghriskey, Jr. 172,199.606 23.73%
TRST Margot Marsh Biodiversity Foundation
c\o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
</TABLE>
INVESTMENT ADVISOR
In December 1990, Trainer, Wortham & Co., Inc. ("the Advisor") became the
investment advisor of the Trust. The Advisor has offices at 845 Third Avenue,
6th Floor, New York, N.Y. 10022. The Advisor, organized in 1990, continues an
investment counseling business which began in 1924 as Trainer & Associates. The
Advisor is registered as an investment advisor under the Investment Advisers Act
of 1940, as amended, and supervises approximately $1.7 billion in investment
accounts. The Advisor is owned entirely by the officers active in the day-to-day
management of portfolios. By reason of his stock ownership of 45% of the
Advisor, Charles V. Moore, President may be said to be a "controlling person" of
that firm.
The Directors of the Advisor are: A. Alexander Arnold III, David P. Como, H.
Williamson Ghriskey, Jr., and Charles V. Moore. Mr. Como, managing director of
the Advisor, is the President and a Trustee of the Trust. Since 1982, Mr. Como
has been primarily responsible for the day-to-day investment management of the
Trust's portfolio. Mr. Ghriskey, Jr., managing director of the Advisor, is Vice-
President, and Treasurer of the Trust.
Each Fund's Investment Advisory Agreement provides that, subject to the general
supervision of the Trust's Board of Trustees and in accordance with the Fund's
investment objectives, policies, and restrictions, the Advisor will manage the
Fund's investment portfolio, make decisions with respect to and place orders for
all purchases and sales of the portfolio securities. Pursuant to the Investment
Advisory Agreements, the Advisor is not liable for any mistake of judgment,
mistake of law, or other loss to a Fund in connection with its performance under
the Investment Advisory Agreements except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for its services or a
loss resulting from willful misfeasance, bad faith or gross negligence on the
part of the Advisor in the performance of its duties, or by reason of its
reckless disregard of its obligations under the Investment Advisory
Agreements.
Under the Investment Advisory Agreement, with respect to First Mutual Fund, the
Advisor receives an annual investment advisory fee, accrued daily and paid
monthly, of 0.75% of the Fund's average daily net assets; with respect to
Trainer, Wortham Emerging Growth Fund, the Advisor receives an annual fee,
accrued daily and paid monthly, of 1.25% of the Fund's average daily net assets,
and with respect to Trainer, Wortham Total Return Bond Fund, the Advisor
receives an annual fee, accrued daily and paid monthly, of 0.45% of the Fund's
average daily net assets. From time to time, the Advisor may waive receipt of
its fees and/or voluntarily assume certain Fund expenses, which would have the
effect of lowering a Fund's expense ratio and increasing yield to investors at
the
- --------------------------------------------------------------------------------
Page 7
<PAGE>
time such amounts are waived or assumed, as the case may be. No Fund will
reimburse the Advisor at a later time for the expenses it has assumed.
Under the Investment Advisory Agreements, if the total expenses borne by a Fund
in any fiscal year exceed expense limitations imposed by applicable state
securities regulations, the Advisor will reimburse the Fund for such excess. In
connection with the registration of the Funds' shares for sale in certain
states, the Advisor has agreed with the regulatory commissions of such states
that if the operating expenses in any year (excluding taxes, brokerage
commissions and interest) exceed 2 1/2% of the first $30 million of a Fund's
average net assets, 2% of the next $70 million and 1 1/2% of the remaining
average net assets, the Advisor shall reimburse the Funds for such excess.
Expenses incurred pursuant to such Fund's Distribution Plan are excluded from
this limitation.
For the fiscal years ended June 30, 1996, June 30, 1995 and June 30, 1994, with
respect to First Mutual Fund, the Fund paid the Advisor fees aggregating
$191,340, $139,966 and $173,869, respectively.
ADMINISTRATOR
FPS Services, Inc., ("FPS"), 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, Pennsylvania 19406-0903, serves as the Trust's Administrator pursuant
to an Administration Agreement (the "Administration Agreement") FPS is an
affiliate of the Trust's Distributor, FPS Broker Services, Inc. Pursuant to the
Administration Agreement, FPS receives an annual fee, accrued daily and paid
monthly, of 0.15% on the first $50 million of the average daily net assets of
the Trust, 0.10% on the next $50 million of the average daily net assets of the
Trust; and 0.05% on average daily net assets of the Trust over $100 million,
subject to a minimum fee of $72,000 for the Trust. Minimum fees are $48,000 per
year for the first Series, and $12,000 for each additional Series or class. The
Trust pays the fees and out-of-pocket costs of FPS.
The services FPS provides to the Trust include: the coordination and monitoring
of any third parties furnishing services to the Trust; providing the necessary
office space, equipment and personnel to perform administrative and clerical
functions for the Trust; preparing, filing and distributing proxy materials,
periodic reports to shareholders, organization of Board meetings, registration
statements and other documents; and responding to shareholder inquiries.
With respect to First Mutual Fund, FPS received administration fees of $45,248,
$42,007 and $42,125 for the fiscal years ended June 30, 1996, June 30, 1995, and
June 30, 1994, respectively.
DISTRIBUTOR
FPS Broker Services, Inc. ("FPSB") serves as the Trust's Distributor pursuant to
an Underwriting Agreement (the "Underwriting Agreement"). FPSB is an affiliated
company of the Administrator, FPS, inasmuch as both FPSB and FPS are under
common ownership.
The Underwriting Agreement will terminate in the event of assignment and may be
renewed for successive one-year periods provided that each continuance is
specifically approved by (1) the vote of a majority of the Trust's outstanding
voting shares or by the Board of Trustees and (2) the vote of a majority of the
Board of Trustees who are not "interested persons" of the Trust and who have no
direct or indirect financial interest in the Underwriting Agreement.
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
FPS serves as the Trust's Transfer Agent, Dividend Disbursing Agent and
Redemption Agent pursuant to a Transfer Agent Services Agreement and also serves
as the Trust's Accounting Services Agent pursuant to an Accounting Services
Agreement (the "Accounting and Transfer Agent Services Agreements"). The
Accounting and Transfer Agent Services Agreements will continue in effect from
year to year, provided such continuance is specifically approved at least
annually by the Board of Trustees or by a vote of a majority of the outstanding
shares of the Trust (as defined
- --------------------------------------------------------------------------------
Page 8
<PAGE>
under the section entitled "GENERAL INFORMATION" in each Fund's Prospectus), and
a majority of the Board of Trustees who are not interested persons (as defined
in the Act) of any party to the respective Agreements, by votes cast in person
at a meeting called for such purpose.
The Accounting and Transfer Agent Services Agreements provide generally that FPS
shall be indemnified against liabilities to the Trust in connection with matters
relating to the Accounting and Transfer Agent Services Agreements except those
arising out of willful misfeasance, bad faith or gross negligence on the part of
FPS in the performance of its duties or from reckless disregard of its
obligations and duties thereunder.
The Trust pays FPS an annual fee of $15.00 per shareholder account (subject to a
minimum monthly fee of $2,250) for its services as Transfer Agent, Dividend
Disbursing Agent and Redemption Agent. For accounting services, FPS receives
from the Trust an annual fee, payable monthly, of $24,000 on the first $10
million of average daily net assets; .0004% on the next $40 million of average
daily net assets; .0003% of the next $50 million of average daily net assets;
and .0001% of average daily net assets in excess of $100 million.
CUSTODIAN
UMB Bank, KC, NA, P.O. Box 412797, Kansas City, MO is Custodian for the
securities and cash of each Fund.
LEGAL COUNSEL
Dechert, Price & Rhoads, Washington, D.C. serves as counsel to the Trust.
AUDITORS
Tait, Weller & Baker, 2 Penn Center Plaza, Suite 700, Philadelphia, PA
19102-1707 have been selected as the independent accountants for the Funds and
will provide audit and tax services. The books of the Funds will be audited at
least once each year by Tait, Weller & Baker.
DISTRIBUTION PLAN
First Mutual Fund and Trainer, Wortham Emerging Growth Fund have adopted a Plan
of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan
permits the respective Fund to pay certain expenses associated with the
distribution of its shares. The Plan provides that First Mutual Fund and
Trainer, Wortham Emerging Growth Fund will reimburse FPSB for actual
distribution and shareholder servicing expenses incurred by FPSB not exceeding,
on an annual basis, 0.25% and 0.50%, respectively, of the respective Fund's
average daily net assets.
In adopting the Plan, the Board of Trustees considered the likelihood that the
Plan is designed to benefit each Fund and its shareholders by strengthening the
system for distributing the Fund's shares and thereby increasing sales and
reducing redemptions. Potential benefits from increased sales and reduced
redemptions include: (i) additional funds being available for investment,
thereby giving the Fund's portfolio manager greater flexibility in pursuing the
Fund's investment objectives; (ii) reducing the likelihood that an unusually
large demand for redemption would require disadvantageous liquidations of
portfolio investments; and (iii) increasing net assets, thereby reducing on a
per share basis those expenses which do not rise proportionately with net
assets. The Board of Trustees concluded that there was a reasonable likelihood
that the Fund and its shareholders would benefit from the adoption of the Plan.
The Plan will terminate in the event of assignment and may be renewed for
successive one year periods provided that each continuance is specifically
approved by: (1) the vote of a majority of the Fund's outstanding voting shares
or by
- --------------------------------------------------------------------------------
Page 9
<PAGE>
the Board of Trustees; and (2) the vote of a majority of the Board of Trustees
who are not "interested persons" of the Fund and who have no direct or indirect
financial interest in the Plan.
Any change in the Plan that would materially increase the amount of distribution
expense borne by the Fund requires shareholder approval; any other material
change requires approval by the Board of Trustees, including a majority of the
disinterested trustees as described above. While the Plan is in effect, the
selection and nomination of the Fund's disinterested Trustees is committed to
the disinterested Trustees.
The Plan authorizes the Fund to pay service organizations, which may include but
are not limited to: (1) compensation to securities brokers and dealers for
selling shares; (2) compensation to securities brokers and dealers, accountants,
attorneys, investment advisors and pension actuaries for services rendered to
their clients relating to the distribution of shares of the Fund; (3)
compensation to such parties for marketing research and promotional services
specifically relating to the distribution of Fund shares; (4) the costs of
advertising in newspapers, magazines or other periodicals, or on radio or
television; (5) the costs of telephone (including "WATS" and "800" services),
mail (including postage and other delivery costs) or other direct solicitation
of prospective investors; (6) the costs of preparing and printing prospectuses
and other sales material for prospective investors, and the cost of distributing
these materials; (7) the fees of public relations consultants; and (8) any other
distribution expenses that the Board of Trustees may from time to time approve
before such expenses are incurred.
All such payments made pursuant to the Plan shall be made for the purpose of
selling shares issued by the Fund. Payments of compensation pursuant to (3)
above may be based in whole or in part on a percentage of the regular salary
expense for those employees of such parties engaged in marketing research and
promotional services specifically relating to the distribution of Fund shares
based on the amount of time devoted by such employees to such activities, and
any out-of-pocket expenses associated with the distribution of Fund shares.
The Plan provides that FPSB will be reimbursed on a monthly basis for expenses
incurred in connection with the distribution of Fund shares. During the fiscal
year ended June 30, 1996, distribution expenses for First Mutual Fund were
reimbursed as follows:
<TABLE>
<CAPTION>
Expense Item Amount
<S> <C>
Advertising and Printing...................................... $6,055.98
Marketing Support Personnel
and Salaries.................................................$49,832.62
Travel/Marketing Meetings..................................... $1,664.67
TOTAL 12B-1 EXPENSES..........................................$57,553.27
</TABLE>
BROKERAGE
It is the policy of each Fund to secure the execution of orders on its portfolio
transactions in an effective manner at the most favorable price. Pursuant to its
agreement with each Fund, the Advisor determines, subject to the general
supervision of the Board of Trustees and in accordance with the Fund's
investment objectives, policies and restrictions, which securities are to be
purchased and sold and which brokers are to be eligible to execute its portfolio
transactions. It is not the policy of the Funds to deal solely with one broker,
but it is the Fund's intention to place portfolio transactions with those
brokers which provide the most favorable combination of price, execution and
services to the Trust. Research services are a factor in selection of brokers,
but payment in excess of brokerage commissions charged by other brokers is not
made in recognition of research services. The reasonableness of brokerage
commissions is evaluated by comparison to fees charged by other brokers where
the execution and services are comparable.
- --------------------------------------------------------------------------------
Page 10
<PAGE>
During the fiscal year ended June 30, 1996, First Mutual Fund paid a total of
$73,171.25 in brokerage commissions; $132,302.77 for the fiscal year 1995; and
$154,935 for the fiscal year 1994. The Board of Trustees including a majority of
the disinterested Trustees, have adopted certain procedures pursuant to
Rule 17e-1 governing brokerage transactions between the Trust and affiliated
brokers. The Trust has, in the past, paid brokerage commissions to brokers which
are affiliated with Officers and Trustees of the Trust. During the fiscal years
ended June 30, 1996, 1995 and 1994 the Trust paid no such brokerage
commissions.
First Mutual Fund's portfolio turnover rate of 107% in the year ended June 30,
1996 was lower than the 198% rate for the prior year. The rate of portfolio
turnover will not be a limiting factor in making portfolio decisions. A high
rate or portfolio turnover may result in the realization of substantial capital
gains and involves correspondingly greater transaction costs.
INDIVIDUAL RETIREMENT ACCOUNT
Each Fund offers a plan (the "IRA") for use by any individual with compensation
for services rendered (including earned income from self-employment) who wishes
to use shares of the Fund as a funding medium for individual retirement saving.
The only exception is an individual who has attained, or will attain, age 70 1/2
before the end of the taxable year. Such an individual may only contribute to an
IRA for his or her nonworking spouse under age 70 1/2.
Subject to the restriction set forth below, an individual may make annual
deductible contributions to the IRA up to the lesser of 100% of gross income or
$2,000 ($2,250 total for the individual and individual's non-income earning
spouse with two separate accounts). For purposes of tax year 1996 these
contributions may be made at any time on or before April 15, 1997. Changes to
the IRA tax laws will become effective in 1997.
The Code provides that the $2,000 ($2,250) deduction discussed above will be
phased-out for certain individuals who are active participants in an employer-
sponsored retirement plan and whose adjusted gross income ("AGI") equals or
exceeds certain dollar limits. If such an individual is a married person with
AGI on his or her joint return in excess of $40,000 but less than $50,000, or a
single person with AGI in excess of $25,000 but less than $35,000, the
individual's $2,000 ($2,250) deduction will be ratably reduced. A married
individual with AGI on his or her joint return of $50,000 or more, or a single
individual with AGI of $35,000 or more, may not deduct his or her IRA
contribution.
Under the Code, even if the individual is not a participant in an employer-
sponsored retirement plan, if his or her spouse is a participant in such a plan
and if their AGI, filing jointly, is more than $40,000, the individual and his
or her spouse will both be subject to the phase-out discussed above. If neither
the individual nor his or her spouse is a participant in an employer-sponsored
retirement plan, or if the individual's AGI is less than the $40,000 or $25,000
amounts discussed above, the individual may continue to make deductible
contributions of $2,000 ($2,250).
Non-deductible contributions to an IRA may be made under the Code to the extent
an individual is unable to make a deductible contribution under the phase-out
rules discussed above.
An individual's IRA contributions (and earnings thereon) generally may not be
withdrawn (without the individual's incurring a 10% additional income tax) until
age 59 1/2, except in the event of death or disability. In addition,
distributions before age 59 1/2 are not subject to the 10% additional income tax
if they are in the form of substantially equal periodic payments over the life
or life expectancy of the individual, or over the joint lives or joint life
expectancy of the individual and his or her beneficiary. Earnings on amounts
contributed (both deductible and nondeductible) to the IRA are not taxed until
distributed.
In the IRA, distributions of net investment income and capital gains will be
automatically reinvested in the Fund. Retirement plan participants will be
billed for all maintenance fees which are to be paid to UMB Bank, MO. Payment
may be made through liquidation of shares of the Fund.
- --------------------------------------------------------------------------------
Page 11
<PAGE>
UMB Bank furnishes custodial services for the IRA for a service fee chargeable
as follows: (a) annual maintenance fee - $12 (per participant's account);
(b) lump sum distribution or termination fee -$7 (per participant's account);
and (c) periodic cash distributions - $1 (each payment).
The foregoing brief description is not a complete or definitive explanation of
the IRA available for investment in the Fund. Any person who wishes to establish
a retirement plan account may do so by contacting the Fund. The complete IRA
documents and applications will be provided to existing or prospective
shareholders upon request, without obligation. Since this IRA involves a
commitment covering future years, it is important that the investor consider his
or her needs and whether the investment objective of the Trust as described in
each Fund's Prospectus and this Statement of Additional Information is most
likely to fulfill them. The Funds recommends that investors consult their
attorneys or tax advisors if they are uncertain that the retirement programs
described herein are appropriate for their needs.
PERFORMANCE CALCULATIONS
Funds compute their average annual total return by determining the average
annual compounded rate of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
payment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result. This calculation can be expressed as
follows:
ERV = P(1 + T)/n/
Where: ERV = ending redeemable value at the end of the period covered
by the computation of a hypothetical $1,000 payment made at
the beginning of the period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of
years.
T = average annual total return.
The Funds compute their aggregate total return by determining the aggregate
compounded rate of return during specified period that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
Aggregate Total Return = [ (ERV) - 1 ]
---
P
Where: ERV = ending redeemable value at the end of the period covered by
the computation of a hypothetical $1,000 payment made at the
beginning of the period.
P = hypothetical initial payment of $1,000.
The calculations of average annual total return and aggregate total return
assume the reinvestment of all dividends and capital gain distributions on the
reinvestment dates during the period. The ending redeemable value (variable
"ERV" in each formula) is determined by assuming complete redemption of the
hypothetical investment and the deduction of all nonrecurring charges at the end
of the period covered by the computations.
- --------------------------------------------------------------------------------
Page 12
<PAGE>
Based on the foregoing calculations, the average annual total returns for the
First Mutual Fund for the one year, five year and ten year periods ended June
30, 1996 were 49.12%, 14.75% and 11.04%, respectively. The aggregate total
returns for the same five and ten year periods were 98.94% and 184.89%,
respectively.
The Trainer, Wortham Total Return Bond Fund may also quote its yield in
advertisements and investor communications. The yield computation is determined
by dividing the net investment income per share earned during a recent 30-day
(or one month) period by the maximum offering price per share on the last day of
that period and annualizing the resulting figure, according to the following
formula:
YIELD = 2 [ ( a - b + 1)/6/ - 1 ]
-----
cd
Where: a = dividends and interest earned during the period;
b = expenses accrued for the period (net of reimbursements);
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends; and
d = the maximum offering price per share on the last day of
the period.
Since performance will fluctuate, performance data for the Funds should not be
used to compare an investment in the Fund's shares with bank deposits, savings
accounts and similar investment alternatives which often provide an agreed-upon
or guaranteed fixed yield for a stated period of time. Shareholders should
remember that performance is generally a function of the kind and quality of the
instruments held in a portfolio, portfolio maturity, operating expenses and
market conditions.
GENERAL INFORMATION
As referenced in each Fund's Prospectus and this Statement of Additional
Information, the holders of "a majority of the outstanding shares" of the Fund
means the vote of the lesser of: (a) 67% or more of the shares present at any
annual or special meeting of shareholders, if the holders of more than 50% of
the outstanding shares are present or represented by proxy at the meeting; or
(b) more than 50% of the outstanding shares of the Fund.
Shareholder inquiries should be directed to the Fund at the address or telephone
number listed on the front cover of this Statement of Additional Information.
Shareholders are urged to put significant inquiries or complaints in writing.
The Trust is registered with the Securities and Exchange Commission as a
management investment company. Such registration does not involve supervision by
the Commission of the management or policies of the Trust.
Each Fund's Prospectus 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
each Fund's Prospectus and this Statement of Additional Information.
Federal Taxes
The Funds have elected to be treated as regulated investment companies under
Subchapter M of the Code and each intends to qualify as such for each future
fiscal year. The Trustees reserve the right not to maintain the qualification of
the Fund as a regulated investment company if they determine such course of
action to be beneficial to you. In such case, the Fund will be subject to
Federal, and possibly state, corporate taxes on its taxable income and gains,
and distributions to shareholders will be taxable as ordinary dividend income to
the extent of the Fund's available earnings and profits. Shareholders will be
advised annually as to the Federal income tax consequences of distributions made
during the year.
- --------------------------------------------------------------------------------
Page 13
<PAGE>
FINANCIAL STATEMENTS
First Mutual Fund's Financial Statements, including the notes thereto, for the
fiscal year ended June 30, 1996, which have been audited by Tait, Weller &
Baker, are included as Appendix "A" to this Statement of Additional
Information.
Trainer, Wortham Total Return Bond and Trainer, Wortham Emerging Growth Funds'
unaudited financial statements for the period October 1, 1996 (commencement of
operations) through February 28, 1997, including notes thereto, are included in
this Statement of Additional Information.
- --------------------------------------------------------------------------------
Page 14
<PAGE>
[LOGO OF FIRST MUTUAL FUNDS APPEARS HERE]
July 30, 1996
Dear Fellow Shareholder:
As we complete another fiscal year, I am pleased to provide you with the
Trust's audited annual report. This has been a remarkable year for First
Mutual Funds, and we take great pride in the value we have created for our
shareholders. On both an absolute and relative basis the Trust's performance
during the fiscal year was exceptional. We outperformed our benchmarks, the
S&P 500 and the Russell 2000 index for the 12 month period ended 6/30/96 as
shown below. The Trust has also provided long-term consistent returns to its
shareholders. Total returns of the Trust and its benchmark indexes for the
period ended June 30th for the 1, 3, 5, 10 year and "since inception" periods
were:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION
------ ------- ------- -------- ---------
<S> <C> <C> <C> <C> <C>
First Mutual Funds.................... 49.12% 21.46% 14.75% 11.04% 15.20%
S&P 500............................... 27.21% 17.26% 15.60% 13.72% 15.56%
Russell 2000.......................... 30.46% 14.10% 15.61% 8.41% 10.02%
</TABLE>
We believe the performance of the Trust over the last year is directly
correlated to our strict adherence to our investment strategy and process.
While we have always believed that wealth is created through the long-term
ownership of growth businesses, we have spent a considerable amount of time
refining the implementation of this process and enhancing our valuation
discipline. We continue to invest in companies that are characterized by
exceptional fundamentals, attractive valuations and reasonable expectations.
We focus on the determinants of value as they relate to the economic model of
the business. In other words, we allocate capital to value creators.
Specifically, we try to understand the mechanics of value creation and
determine intrinsic value. We measure and quantify expectations so that we can
determine the rationality of expectations and capture value at entry price. In
addition, this valuation discipline allows us to contain risk by selling
stocks which have appreciated significantly above their intrinsic value. In
summary, we evaluate the management, market position, return on invested
capital, cash flow and growth, in order to answer the question "do you want to
own the business and at what price?"
The past twelve months have been very kind to the equity markets, and we do
not predict the performance of either the market or the Trust. As such, we
would not be surprised to see the Trust or the market move up, down, or
sideways over the next six months. However, over a more meaningful measure of
time, if we successfully implement our strategy, we would expect value to be
realized.
As always we will continue to run the Trust in a prudent manner and focus on
creating value for our shareholders.
Sincerely yours,
/s/ David E. Beard /s/ David P. Como /s/ Charles Honey
David E. Beard David P. Como Charles Honey
<PAGE>
SCHEDULE OF INVESTMENTS JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------- -----------
<C> <S> <C>
COMMON STOCKS - 93.43%
CHEMICALS - 4.15%
60,000 First Mississippi Corp. ................................. $ 1,335,000
-----------
COMPUTER SOFTWARE - 4.93%
12,000 Sterling Software, Inc.*................................. 924,000
35,000 Wang Laboratories, Inc.*................................. 660,625
-----------
1,584,625
-----------
DIVERSIFIED OPERATIONS - 5.62%
10,000 AlliedSignal, Inc. ...................................... 571,250
10,000 American Brands, Inc. ................................... 453,750
18,750 Thermo Electron Corp.*................................... 780,469
-----------
1,805,469
-----------
ELECTRICAL-CIRCUIT BOARDS - 1.17%
32,000 Continental Circuits Corp.*.............................. 376,000
-----------
FINANCIAL INSTITUTIONS - 11.23%
10,000 Bank of Boston Corp. .................................... 495,000
5,000 Citicorp................................................. 413,125
15,000 First USA, Inc. ......................................... 825,000
58,000 Insignia Financial Group, Inc., Cl. A*................... 1,580,500
20,000 ISB Financial Corp. ..................................... 295,000
-----------
3,608,625
-----------
FOOD PRODUCTS - 1.59%
16,800 Heinz (H.J.) Co. ........................................ 510,300
-----------
LEISURE-HOTELS/MOTELS - 5.44%
25,000 HFS, Inc.*............................................... 1,750,000
-----------
MACHINERY-DIVERSIFIED - 3.57%
20,000 Blount International, Inc., Cl. A........................ 630,000
10,000 York International Corp. ................................ 517,500
-----------
1,147,500
-----------
MACHINERY-VISION - 7.36%
60,000 Medar, Inc.*............................................. 622,500
47,800 Perceptron, Inc.*........................................ 1,744,700
-----------
2,367,200
-----------
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------- -----------
<C> <S> <C>
MEDIA-RADIO/TV - 13.96%
30,000 American Radio Systems Corp.*............................ $ 1,290,000
34,900 Heftel Broadcasting Corp., Cl. A*........................ 1,033,912
35,500 Sinclair Broadcast Group, Cl. A*......................... 1,544,250
33,000 Westinghouse Electric Corp. ............................. 618,750
-----------
4,486,912
-----------
MEDICAL-PRODUCTS/SUPPLY - 7.43%
20,000 Angeion Corp.*........................................... 155,000
20,000 ATS Medical, Inc.*....................................... 202,500
10,000 ATS Medical, Inc. Warrants*.............................. 7,500
10,000 Guidant Corp. ........................................... 492,500
10,000 Johnson & Johnson........................................ 495,000
73,785 Lasersight, Inc.*........................................ 802,412
15,000 Sano Corp.*.............................................. 232,500
-----------
2,387,412
-----------
OIL & GAS-EXPLORATION & PRODUCTS - 6.26%
100,000 Abacan Resource Corp.*................................... 417,180
50,000 Belden & Blake Corp.*.................................... 1,037,500
25,000 Cairn Energy USA, Inc.*.................................. 359,375
50,000 Queen Sand Resources, Inc.* (Note 4)..................... 200,000
-----------
2,014,055
-----------
OIL & GAS-FIELD SERVICES - 2.86%
35,000 Pride Petroleum Services, Inc.*.......................... 498,750
5,000 Schlumberger, Ltd. ...................................... 421,250
-----------
920,000
-----------
PUBLISHING-NEWS - 4.87%
25,000 Harte-Hanks Communications............................... 693,750
12,000 Tribune Co. ............................................. 871,500
-----------
1,565,250
-----------
RETAIL - 6.44%
25,000 CUC International, Inc.*................................. 887,500
12,000 Federated Department Stores, Inc.*....................... 409,500
30,000 Warnaco Group, Cl. A..................................... 772,500
-----------
2,069,500
-----------
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
--------- -----------
<C> <S> <C>
TELECOMMUNICATIONS - 6.55%
20,000 Glenayre Technologies, Inc.*.......................... $ 1,000,000
20,000 WorldCom, Inc.*....................................... 1,107,500
-----------
2,107,500
-----------
TOTAL COMMON STOCKS (COST $21,708,555) - 93.43%....... 30,035,348
-----------
<CAPTION>
PRINCIPAL
AMOUNT
---------
<C> <S> <C>
CONVERTIBLE BONDS- 1.99%
$500,000 American Body Armor & Equipment,
5.00%, 04/30/01 (Cost $500,000)....................... 640,000
-----------
TOTAL INVESTMENTS (COST $22,208,555**) - 95.42%....... 30,675,348
OTHER ASSETS LESS OTHER LIABILITIES - 4.58%........... 1,471,788
-----------
NET ASSETS - 100.00%.................................. $32,147,136
===========
*Non-income producing security
**Cost for Federal income tax purposes is $22,208,555 and net unrealized
appreciation consists of:
Gross unrealized appreciation......................... $ 8,742,811
Gross unrealized depreciation......................... (276,018)
-----------
Net unrealized appreciation........................... $ 8,466,793
===========
</TABLE>
The notes to the financial statements are an integral part of these statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments in securities at market value
(identified cost $22,208,555) (Notes 1 and 4)..................... $30,675,348
Cash............................................................... 707,222
Receivables:
Dividends and interest............................................ 22,137
Investment securities sold........................................ 757,725
Capital stock sold................................................ 10,550
Other assets....................................................... 8,244
-----------
TOTAL ASSETS...................................................... 32,181,226
-----------
LIABILITIES
Accrued expenses................................................... 34,090
-----------
TOTAL LIABILITIES................................................. 34,090
-----------
NET ASSETS
(applicable to outstanding shares of 2,327,103; unlimited shares of
$0.001 par value authorized)...................................... $32,147,136
===========
Net asset value, offering and redemption price per share
($32,147,136/2,327,103)........................................... $ 13.81
===========
SOURCE OF NET ASSETS
Paid-in capital.................................................... $19,391,533
Accumulated net realized gain on investments....................... 4,288,810
Net unrealized appreciation of investments......................... 8,466,793
-----------
NET ASSETS........................................................ $32,147,136
===========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
STATEMENT OF OPERATIONS
YEAR ENDED JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividends......................................................... $ 220,569
Interest.......................................................... 14,981
-----------
TOTAL INCOME..................................................... 235,550
-----------
EXPENSES
Advisory fees (Note 3)............................................ 191,340
Distribution expense (Note 3)..................................... 63,780
Administrator expense............................................. 45,248
Transfer agent fees............................................... 32,079
Bookkeeping and pricing........................................... 24,000
Insurance expense................................................. 17,016
Custodian fees.................................................... 17,339
Legal expense..................................................... 8,807
Registration expense.............................................. 18,529
Independent accountants........................................... 11,000
Other............................................................. 8,303
Trustees' fees and expenses....................................... 3,000
Reports to shareholders........................................... 3,972
-----------
TOTAL EXPENSES................................................... 444,413
-----------
NET INVESTMENT LOSS.............................................. (208,863)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain from security transactions...................... 5,869,876
Net change in unrealized appreciation of investments.............. 4,618,568
-----------
Net realized and unrealized gain on investments................... 10,488,444
-----------
Net increase in net assets resulting from operations.............. $10,279,581
===========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATIONS
Net investment loss................................. $ (208,863) $ (144,069)
Net realized gain on investments.................... 5,869,876 555,050
Net change in unrealized appreciation of invest-
ments.............................................. 4,618,568 3,822,245
----------- -----------
Net increase in net assets resulting from operations
................................................... 10,279,581 4,233,226
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS
Distributions from realized gains on investments
($0.9235 and $0.1877 per share, respectively)...... (1,927,263) (406,887)
----------- -----------
(1,927,263) (406,887)
----------- -----------
CAPITAL SHARE TRANSACTIONS
Receipt from shares sold............................ 3,039,765 2,464,698
Receipt from shares issued on reinvestment of dis-
tributions......................................... 1,720,464 369,927
Shares redeemed..................................... (1,246,789) (7,825,757)
----------- -----------
Net increase (decrease) in net assets resulting from
capital shares transactions (a).................... 3,513,440 (4,991,132)
----------- -----------
Total Increase (Decrease) in Net Assets............ 11,865,758 (1,164,793)
NET ASSETS
Beginning of year................................... 20,281,378 21,446,171
----------- -----------
End of year......................................... $32,147,136 $20,281,378
=========== ===========
(a)Transactions in capital stock were:
Shares sold........................................ 259,258 279,383
Shares issued on reinvestment of distributions..... 154,718 46,299
Shares redeemed.................................... (109,829) (914,197)
----------- -----------
Net increase (decrease)............................ 304,147 (588,515)
Beginning balance.................................. 2,022,956 2,611,471
----------- -----------
Ending balance..................................... 2,327,103 2,022,956
=========== ===========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The table below sets forth financial data for a share of capital stock
outstanding throughout each year presented.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
-------------------------------------------
1996 1995 1994 1993 1992
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
YEAR............................. $10.03 $8.21 $9.29 $8.49 $9.24
------- ------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------
Net investment income (loss)..... (0.09) (0.09) (0.09) (0.06) 0.01
Net gains (losses) on securities
(both realized and unrealized).. 4.79 2.10 (0.13) 1.09 (0.09)
------- ------- ------- ------- -------
Total from investment
operations..................... 4.70 2.01 (0.22) 1.03 (0.08)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS
------------------
Dividends (from net investment
income)......................... 0.00 0.00 0.00 0.00 (0.02)
Distributions (from capital
gains).......................... (0.92) (0.19) (0.86) (0.23) (0.65)
------- ------- ------- ------- -------
Total distributions............. (0.92) (0.19) (0.86) (0.23) (0.67)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF YEAR...... $13.81 $10.03 $8.21 $9.29 $8.49
======= ======= ======= ======= =======
TOTAL RETURN...................... 49.12% 25.04% (3.91%) 12.17% (1.01%)
RATIOS/SUPPLEMENTAL DATA
- ------------------------
Net assets, end of period (in
000's).......................... $32,147 $20,281 $21,446 $19,093 $18,143
Ratio of expenses to average net
assets**........................ 1.74% 2.16% 1.97% 1.99% 1.87%
Ratio of net investment income
(loss) to average net assets**.. (0.82%) (0.77%) (0.97%) (0.61%) 0.08%
Portfolio turnover rate.......... 107% 198% 178% 172% 175%
Average commission rate paid..... $0.0683 N/A N/A N/A N/A
</TABLE>
- ---------------------------------
** Average net assets have been computed on the basis of the value of the net
assets at the end of the month.
The notes to financial statements are an integral part of these financial
statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996
- -------------------------------------------------------------------------------
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended,
as an open-ended, diversified management company. The Trust's primary
investment objective is to seek capital appreciation principally through
investments in common stock. The Trust may also invest in securities
convertible into common stock such as convertible bonds or preferred stock.
Its secondary investment objective is to seek income from dividends and
interest. Because of the risks inherent in any investment program, the Trust
cannot ensure that its investment objectives will be realized. The following
is a summary of significant accounting policies consistently followed by the
Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles for investment
companies.
A. SECURITY VALUATION. Investments in securities traded on a national
securities exchange are valued at the last reported sales price on the last
business day of the period. Unlisted securities, or listed securities in which
there were no sales, are valued at the mean of the closing bid and ask prices.
Short-term obligations with remaining maturities of 60 days or less are valued
at cost plus accrued interest which approximates market value.
B. OTHER. As is common in the industry, security transactions are accounted
for on the date the securities are purchased or sold (trade date). Cost is
determined and gains and losses are based on the identified cost basis for
both financial statement and federal income tax purposes. Dividend income and
distributions to shareholders are reported on the ex-dividend date. Interest
income and estimated expenses are accrued daily. Distributions are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. Those differences are primarily due to
different treatments for net operating losses.
C. NET ASSET VALUE PER SHARE. Net asset value per share of the capital stock
of the Trust is determined daily as of the close of trading on the New York
Stock Exchange by dividing the value of its net assets by the number of Trust
shares outstanding. The offering price and redemption price per share is the
same as the net asset value per share.
D. FEDERAL INCOME TAXES. It is the policy of the Trust to comply with
requirements of the Internal Revenue Code applicable to regulated investment
companies, if such qualification is in the best interest of its stockholders,
and to make distributions of net investment income and capital gains (after
reduction for any amounts available for federal income tax purposes as capital
loss carryovers) sufficient to relieve it from all, or substantially all,
federal income taxes.
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996
- -------------------------------------------------------------------------------
E. USE OF ESTIMATES IN FINANCIAL STATEMENTS. In preparing financial statements
in conformity with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements, as well as the reported
amounts of income and expenses during the reporting period. Actual results may
differ from these estimates.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments,
aggregated $27,044,280 and $26,693,537, respectively, for the year ended June
30, 1996.
NOTE 3 - INVESTMENT MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Trainer, Wortham & Co., Inc. (the "Advisor") is the investment advisor for the
Trust pursuant to an investment advisory agreement (the "Agreement") effective
October 31, 1991. Under the terms of the Agreement, the Advisor receives an
annual fee, accrued daily and paid quarterly, of 0.75% on the first
$40,000,000 of the average daily net assets of the Trust and 0.50% on average
daily net assets over $40,000,000.
For the year ended June 30, 1996, the Trust paid the Advisor $191,340 in
advisory fees. The Trust has adopted a Distribution Plan (the "Plan"),
effective October 31, 1991, pursuant to Rule 12b-1 under the Investment
Company Act of 1940, which permits the Trust to pay certain expenses
associated with the distribution of its shares. The Plan provides that the
Trust will reimburse Fund/Plan Broker Services, Inc. (the "Distributor"), the
Trust's sole Underwriter and Distributor, for actual distribution and
shareholder servicing expenses incurred by the Distributor not exceeding, on
an annual basis, 0.25% of the Trust's average daily net assets. For the year
ended June 30, 1996, the Trust reimbursed the Distributor $63,780 for
distribution costs incurred.
NOTE 4 - RESTRICTED SECURITIES
The investment in 50,000 shares of Queen Sand Resources, Inc. common stock,
the sale of which is restricted, has been valued by the Board of Trustees
after considering certain pertinent factors, including the results of
operations of Queen Sands Resources, Inc. since the date of purchase in 1995
and the sales price of recent private placements in its common stock. There is
no quoted market value for Queen Sands Resources, Inc. shares.
<PAGE>
NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996
- -------------------------------------------------------------------------------
Certain officers and trustees of the Trust are affiliated persons of the
Advisor.
FIRST MUTUAL FUNDS
845 Third Avenue, 6th Floor
New York, NY 10022
OFFICERS INVESTMENT ADVISOR
David P. Como, President Trainer, Wortham & Co., Inc.
H. Williamson Ghriskey, Jr. 845 Third Avenue, 6th Floor
Vice President/Treasurer New York, NY 10022
Charles H.G. Honey
Vice President
Debra L. Clark, Secretary
LEGAL COUNSEL AUDITORS
Stradley, Ronon, Stevens, & Young Tait, Weller & Baker
2600 One Commerce Square Two Penn Center Plaza, Suite 700
Philadelphia, PA 19103 Philadelphia, PA 19102
CUSTODIAN FUND ADMINISTRATION
United Missouri Bank KC, NA Fund/Plan Services, Inc.
P.O. Box 412797 P.O. Box 874
Kansas City, MO 64141-2797 Conshohocken, PA 19428
This report is submitted for the general information of the shareholders of
the Trust. It is not authorized for distribution to prospective investors in
the Trust unless preceded or accompanied by an effective Prospectus which
includes details regarding the Trust's objectives, policies, expenses and
other information.
<PAGE>
TRAINER, WORTHAM FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
February 28, 1997 (unaudited)
<TABLE>
<CAPTION>
Emerging Total Return
Growth Bond
----------- -----------
<S> <C> <C>
ASSETS
Investments in securities at market value (identified cost $1,504,855
and $7,482,325, respectively)..................................................... $ 1,532,258 $ 7,463,334
Cash................................................................................. 0 481,250
Receivables:
Dividends and interest............................................................ 100 92,494
Investment securities sold........................................................ 48,905 0
Deferred organizational cost......................................................... 11,014 11,021
Other assets......................................................................... 36,596 29,579
----------- -----------
TOTAL ASSETS..................................................................... 1,628,873 8,077,678
----------- -----------
LIABILITIES
Payable for securities purchased..................................................... 28,000 481,000
Payable to Advisor................................................................... 23,430 23,430
----------- -----------
TOTAL LIABILITIES................................................................ 51,430 504,430
----------- -----------
NET ASSETS
(applicable to outstanding shares of 159,422 and 747,239,
respectively; unlimited shares of $0.001 par value authorized....................... $ 1,577,443 $ 7,573,248
=========== ===========
Net asset value, offering and redemption price per share............................. $ 9.89 $ 10.13
=========== ===========
SOURCE OF NET ASSETS
Paid-in capital...................................................................... $ 1,581,454 $ 7,523,643
Undistributed net investment income (loss)........................................... (3,062) 59,417
Accumulated net realized gain (loss) on investments.................................. (28,352) 9,180
Net unrealized appreciation (depreciation) of investments............................ 27,403 (18,992)
----------- -----------
NET ASSETS....................................................................... $ 1,577,443 $ 7,573,248
=========== ===========
</TABLE>
The notes to financial statements are an integral part of these statements.
<PAGE>
TRAINER, WORTHAM FUNDS
STATEMENTS OF OPERATIONS
February 28, 1997 (Unaudited)
================================================================================
Emerging Total Return
Growth /1/ Bond /1/
---------- ------------
INVESTMENT INCOME
Dividends........................................ $ 278 $ 0
Interest......................................... 3,344 144,621
---------- ----------
TOTAL INCOME................................... 3,622 144,621
---------- ----------
EXPENSES
Advisory fees.................................... 6,684 10,071
Distribution expense............................. 2,674 0
Administrator expense............................ 4,000 4,000
Transfer agent fees.............................. 8,001 8,003
Bookkeeping and pricing.......................... 8,000 8,168
Insurance expense................................ 28 112
Custodian fees................................... 4,520 2,703
Registration expense............................. 6,474 7,064
Organization expense............................. 985 979
Other............................................ 1,296 4,777
Reports to shareholders.......................... 35 159
---------- ----------
TOTAL EXPENSES................................. 32,697 46,036
Expenses waived and reimbursed................. (36,013) (29,251)
---------- ----------
NET EXPENSES 6,684 16,785
---------- ----------
NET INVESTMENT INCOME (LOSS)................... (3,062) 127,836
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) from security
transactions.................................... (28,352) 11,000
Net change in unrealized appreciation
(depreciation) of investments................... 27,403 (18,992)
---------- ----------
Net realized and unrealized loss on investments.. (949) (7,992)
---------- ----------
Net increase (decrease) in net assets resulting
from operations................................. $ (4,011) $ 119,844
========== ==========
/1/ The Emerging Growth Fund and Total Return Bond Fund commenced operations on
October 1, 1996.
The notes to financial statements are an integral part of these statements.
<PAGE>
TRAINER, WORTHAM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
================================================================================
<TABLE>
<CAPTION>
Emerging Total Return
Growth Bond
----------- ------------
Period Period
Ended Ended
February 28 February 28
1997/1/ 1997/1/
(unaudited) (unaudited)
----------- ------------
<S> <C> <C>
OPERATIONS
Net investment income (loss).................................... $ (3,062) $ 127,836
Net realized gain (loss) on investments......................... (28,352) 11,000
Net change in unrealized appreciation
(depreciation) of investments.................................. 27,403 (18,992)
---------- ----------
Net increase (decrease) in net assets resulting from operations. (4,011) 119,844
---------- ----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income........................................... 0 (68,419)
Realized gains on investments................................... 0 (1,820)
---------- ----------
Total Distributions ........................................ 0 (70,239)
---------- ----------
CAPITAL SHARE TRANSACTIONS
Receipt from shares sold........................................ 1,581,718 7,928,916
Receipt from shares issued on reinvestment of distributions..... 0 66,188
Shares redeemed................................................. (264) (471,461)
---------- ----------
Net increase in net assets resulting from capital share
transactions (a)............................................... 1,581,454 7,523,643
---------- ----------
Total increase in net assets................................ 1,577,443 7,573,248
NET ASSETS
Beginning of period............................................. 0 0
---------- ----------
End of period................................................... $1,577,443 $7,573,248
========== ==========
(a) Transactions in capital stock were:
Shares sold................................................ 159,448 787,618
Shares issued on reinvestment of distributions............. 0 6,527
Shares redeemed............................................ (26) (46,906)
---------- ----------
Net increase............................................... 159,422 747,239
Beginning balance.......................................... 0 0
---------- ----------
Ending balance............................................. 159,422 747,239
========== ==========
</TABLE>
/1/ The Emerging Growth Fund and Total Return Bond Fund commenced operations on
October 1, 1996.
The notes to financial statements are an integral part of these financial
statements.
<PAGE>
TRAINER, WORTHAM FUNDS
FINANCIAL HIGHLIGHTS
================================================================================
The table below sets forth financial data for a share of capital stock
outstanding throughout each period presented.
<TABLE>
<CAPTION>
Emerging Total Return
Growth Bond
----------- ------------
Period Period
Ended Ended
February 28 February 28
1997/1/ 1997/1/
(unaudited) (unaudited)
----------- ------------
<S> <C> <C>
Net Asset Value, Beginning of Period ............................ $ 10.00 $ 10.00
Income from Investment Operations
Net investment income (loss) ................................... (0.02) 0.21
Net gains (losses) on securities (both
realized and unrealized) ..................................... (0.09) 0.05
------- -------
Total from investment operations ........................... (0.11) 0.26
------- -------
Less Distributions
Dividends (from net investment income) ......................... 0.00 (0.13)
Distributions (from capital gains) ............................. 0.00 0.00
------- -------
Total distributions ........................................ 0.00 (0.13)
------- -------
Net Asset Value, End of Period .................................. $ 9.89 $ 10.13
======= =======
Total Return .................................................... 1.10% + 2.61% +
Ratios/Supplemental Data
Net assets, end of period (in 000's) ........................... $ 1,577 $ 7,573
Ratio of expenses to average net assets**
before reimbursement of expenses by Advisor .................. 7.98% * 2.05% *
after reimbursement of expenses by Advisor ................... 1.25% * 0.75% *
Ratio of net investment income (loss) to average net assets**
before reimbursement of expenses by Advisor .................. 7.30% * 4.40% *
after reimbursement of expenses by Advisor ................... 0.57% * 5.70% *
Portfolio turnover rate ........................................ 34% * 1.48% *
Average commission rate paid ................................... $0.0809 N/A
</TABLE>
/1/ The Emerging Growth Fund and Total Return Bond Fund commenced operations on
October 1, 1996.
+ Since the inception, not annualized.
* Annualized.
** Average net assets have been computed on the basis of the value of the net
assets at the end of the month.
The notes to financial statements are an integral part of these financial
statements.
<PAGE>
TRAINER, WORTHAM FIRST MUTUAL FUNDS
Form N-1A
Part C: Other Information
==========================
Item 24. Financial Statements and Exhibits:
- -------- ----------------------------------
(a) Financial Statements Included in Part A:
Prospectus for First Mutual Fund -- "Financial Highlights"
Financial Statements Included in Part B:
Appendix "A" includes Annual Report (First Mutual Fund) to
Shareholders dated June 30, 1996
Appendix "B" includes Interim Financial Statements for Trainer,
Wortham Emerging Growth Fund and Trainer, Wortham Total Return
Bond Fund dated February 28, 1997
(b) EDGAR Exhibits Filed Pursuant to Form N-1A:
(1) Copies of Charter:
(a) Agreement and Declaration of Trust dated October 18, 1994,
last amended July 25, 1996.
(2) Copies of existing By-Laws:
By-Laws dated October 18, 1994, last amended July 25, 1996.
Incorporated herein by reference to Exhibit No. (2)(a) to Post-
Effective Amendment No. 56 to Registration No. 2-15037 filed
electronically September 30, 1996.
(3) Copies of any voting trust agreement -- Not Applicable.
(4) Specimen stock certificate -- Incorporated herein by reference
to Exhibit No. 4 to Post-Effective Amendment No. 41 to
Registration Statement No. 2-15037 filed on October 31, 1985.
(5) Copies of all investment advisory contracts:
(a) Investment Advisory Agreement for First Mutual Fund between
Registrant and Trainer, Wortham & Co., Inc. dated September
30, 1996. Incorporated herein by reference to Exhibit No.
(5)(a) to Post-Effective Amendment No. 56 to Registration
Statement No. 2-15037 filed electronically September 30,
1996.
(b) Investment Advisory Agreement for Trainer, Wortham Emerging
Growth Fund between Registrant and Trainer,
<PAGE>
Wortham & Co., Inc. dated July 25, 1996. Incorporated herein
by reference to Exhibit No. (5)(b) to Post-Effective
Amendment No. 56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(c) Investment Advisory Agreement for Trainer, Wortham Total
Return Bond Fund between Registrant and Trainer, Wortham &
Co., Inc. dated July 25, 1996. Incorporated herein by
reference to Exhibit No. (5)(c) to Post-Effective Amendment
No. 56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(6) Copies of each underwriting or distribution contract:
(a) Underwriting Agreement between Registrant and Fund/Plan
Broker Services, Inc. dated July 25, 1996. Incorporated
herein by reference to Exhibit No. (6)(a) to Post-Effective
Amendment No. 56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(7) Copies of all bonus, profit sharing, pension other similar
contracts -- Not Applicable.
(8) Copies of all custodian agreements:
(a) Custody Agreement with UMB Bank, N.A. -- dated October 18,
1994. Incorporated herein by reference to Exhibit No. (8)(a)
to Post-Effective Amendment No. 56 to Registration Statement
No. 2-15037 filed electronically September 30, 1996.
(b) Amendment dated July 25, 1996 to Custody Agreement,
reflecting the Trust's name change and creation of new
Series. Incorporated herein by reference to Exhibit No.
(8)(b) to Post-Effective Amendment No. 56 to Registration
Statement No. 2-15037 filed electronically
September 30, 1996.
(9) (a) Administration Agreement between Registrant and Fund/Plan
Services, Inc., dated July 25, 1996. Incorporated herein by
reference to Exhibit No. (9)(a) to Post-Effective Amendment
No. 56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(b) Accounting Services Agreement between Registrant and
Fund/Plan Services, Inc., dated July 25, 1996. Incorporated
herein by reference to Exhibit No. (9)(b) to Post-Effective
Amendment No. 56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(c) Transfer Agent Services Agreement between Registrant and
Fund/Plan Services, Inc., dated July 25, 1996. Incorporated
herein by reference to Exhibit No. (9)(c) to Post-Effective
Amendment No. 56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(10) Opinion and consent of counsel is incorporated herein by
reference to Registrant's Rule 24f-2 Notice filed August 28,
1996.
(11) (a) None.
(b) Consent of Tait, Weller & Baker is.
(12) None.
<PAGE>
(13) None.
(14) (a) Individual Retirement Custodial Account, Disclosure Statement
and Application is incorporated herein by reference to
Exhibit 14(a) of Post-Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A filed on
August 30, 1985.
(b) Keogh and Corporate Defined Contribution Master Plan and
Custodial Agreement is incorporated herein by reference to
Exhibit 14(b) of Post-Effective Amendment No. 40 to
Registrant's Registration Statement on Form N-1A filed on
August 30, 1985.
(15) (a) Distribution (12b-1) Plan for First Mutual Fund, with
Fund/Plan Broker Services, Inc., dated October 31, 1991.
Incorporated herein by reference to Exhibit (15)(a) to Post-
Effective Amendment No. 56 to Registration Statement No. 2-
15037 filed electronically September 30, 1996.
(b) Distribution (12b-1) Plan for Trainer, Wortham Emerging
Growth Fund with Fund/Plan Broker Services, Inc. dated July
25, 1996. Incorporated herein by reference to Exhibit (15)(b)
to Post-Effective Amendment No. 56 to Registration Statement
No. 2-15037 filed electronically September 30, 1996.
(16) Schedule of computations of performance quotations
Not applicable.
(17) Powers-of-Attorney incorporated by reference to Exhibit No. (6)
of Post Effective Amendment No. 53 to Registrant's Registration
Statement on Form N-1A filed on October 28, 1995.
(27) Financial Data Schedules for Appendix "B" of SAI.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
As of: March 27, 1997.
Title of Class Number of Record Holders
-------------- ------------------------
First Mutual Fund 669
Common Stock,
$0.01 Par Value
Title of Class Number of Record Holders
-------------- ------------------------
Trainer, Wortham Emerging Growth 36
Common Stock
$0.01 Par Value
Title of Class Number of Record Holders
-------------- ------------------------
Trainer, Wortham Total Return Bond 21
Common Stock
$0.01 Par Value
Item 27. Indemnification
---------------
Article VII, Section 2 of the Registrant's Agreement and Declaration
of Trust provides as follows: The Trustees shall not be responsible or
liable in any
<PAGE>
event for any neglect or wrong-doing of any officer, agent, employee,
Manager or Principal Underwriter of the Trust, nor shall any Trustee be
responsible for the act or omission of any other Trustee, and, subject
to the provisions of the Bylaws, the Trust out of its assets may
indemnify and hold harmless each and every trustee and officer of the
Trust from an against any and all claims, demands, costs, losses,
expenses, and damages whatsoever arising out of or related to such
Trustee's performance of his or her duties as a Trustee or officer of
the Trust; provided that nothing herein contained shall indemnify, hold
harmless or protect any Trustee or officer from or against any
liability to the Trust or any Shareholder to which he or she would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his or her office.
Every note, bond, contract, instrument, certificate or undertaking and
every other act or thing whatsoever issued, executed or done by or on
behalf of the Trust or the Trustees or any of them in connection with
the Trust shall be conclusively deemed to have been issued, executed or
done only in or with respect to their or his or her capacity as
Trustees or Trustee, and such Trustees or Trustee shall not be
personally liable thereon.
Article Sixth of the By-Laws of the Trust provide that any trustee and
officer shall be indemnified against reasonable costs and expenses
incurred in connection with any proceeding to which he or she is made a
party by reason of his being or having been a trustee or officer of the
Trust, except in relation to any action, suit or proceeding in which he
or she is adjudged liable because of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of his office. In the absence of an adjudication which
expressly absolves a trustee or officer of liability for such willful
misfeasance, etc., a written opinion of independent counsel is required
prior to payment of indemnification.
Indemnification of the Trust's investment advisor, distributor,
custodian, administrator, transfer agent, dividend disbursing and
redemption agent and accounting services agent is provided for,
respectively, in Section 8 of the Investment Advisory Agreement
(Exhibit 5(a)); Section 8 of the Underwriting Agreement (Exhibit 6(a)),
Section 18 of the Custodian Agreement (Exhibit 8), Section 25 of the
Administration Agreement (Exhibit 9(a)) Section 8(d) of the
Administration Agreement (Exhibit 9(c)), and Section 23 of the
Accounting Services Agreement (Exhibit 9(c)).
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of the Trust pursuant to the foregoing provisions, or
otherwise, the Trust has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
<PAGE>
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Trust of expenses
incurred or paid by a trustee, officer or controlling person of the
Trust in the successful defense of any action, suit or proceeding) is
asserted by such trustee, officer, or controlling person in connection
with the securities which have been registered, the Trust will, unless
in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 28. Business and Other Connections of Investment Advisor
----------------------------------------------------
Trainer, Wortham & Co., Inc. is engaged in investment advising and
counseling, and continues an investment counseling business which began
in 1924 as Trainer & Associates. The company is registered as an
investment advisor under the Investment Advisors Act of 1940 and, as of
September 1996, supervised approximately $1.7 billion in investment
accounts.
The Investment Advisor holds administrative records prepared prior to
May 1, 1991 required to be maintained pursuant to Section 31(a) under
the Investment Company Act of 1940, and the rules promulgated
thereunder.
To the knowledge of the Registrant, none of the directors or officers
of Trainer, Wortham & Co., Inc. 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 for his own account or
in the capacity of director, officer, employee, partner or trustee.
Item 29. Principal Underwriters
----------------------
(a) Fund/Plan Broker Services, Inc. ("FPBS"), the principal underwriter for
the Registrant's securities, currently acts as principal underwriter
for the following entities:
<TABLE>
<S> <C>
The Brinson Funds Smith Breeden Series Fund
CT&T Funds Smith Breeden Short Duratin US Gov't Fund
Fairport Funds Smith Breeden Trust
Focus Trust, Inc. The Japan Alpha Fund
IAA Trust Mutual Funds The Stratton Funds, Inc.
Matthews International Funds Trainer, Wortham First Mutual Funds
McM Funds Stratton Growth Fund
Polynous Trust Stratton Monthly Dividend Shares, Inc.
Sage/Tso Trust The Timothy Plan
</TABLE>
<PAGE>
(b) The table below sets forth certain information as to the
Underwriter's Trustees, Officers and Control Persons:
<TABLE>
<CAPTION>
Position Position
Name and Principal and Offices and Offices
Business Address with Underwriter with Registrant
------------------ ---------------- ---------------
<S> <C> <C>
Kenneth J. Kempf Director, President None
2 W. Elm Street
Conshohocken, PA 19428-0874
Lynne M. Cannon Vice-President and None
2 West Elm Street Principal
Conshohocken, PA 19428-0874
Rocco J. Cavalieri Director and None
2 West Elm Street Vice-President
Conshohocken, PA 19428-0874
Gerald J. Holland Director, Vice- None
2 W. Elm Street President and
Conshohocken, PA 19428-0874 Principal
Joseph M. O'Donnell, Esq. Director and None
2 West Elm Street Vice-President
Conshohocken, PA 19428-0874
Sandra L. Adams Assistant Vice- None
2 W. Elm Street President and
Conshohocken, PA 19428-0874 Principal
Mary P. Efstration Secretary None
2 W. Elm Street
Conshohocken, PA 19428-0874
John H. Leven Treasurer None
2 W. Elm Street
Conshohocken, PA 19428-0874
</TABLE>
James W. Stratton, may be considered a control person of the
Underwriter due to his direct or indirect ownership of Fund/Plan
Services, Inc., the parent of the Underwriter.
(c) Not applicable
<PAGE>
Item 30. Location of Accounts and Records
--------------------------------
(1) Trainer, Wortham & Co., Inc., 845 Third Avenue, New York, NY 10022
(records relating to its functions as investment advisor).
(2) UMB Bank, KC, NA, P.O. Box 412797, Kansas City, MO 64141-2797
(records prepared after February 29, 1988 relating to its functions
as Custodian).
(3) FPS Services, Inc. 3200 Horizon Drive, P.O. Box 61503, King of
Prussia, PA 19406-0903 (records prepared after March 15, 1985
relating to its functions as Transfer Agent, dividend disbursing
and redemption agent, and Accounting Services Agent); and since
April 16, 1991 for its administrative records.
(4) Stradley, Ronon, Stevens & Young, 2600 One Commerce Square,
Philadelphia, PA 19103-7098 (Articles of Association, By-Laws and
Minute Books).
(5) FPS Services, Inc. and FPS Broker Services, Inc., 3200 Horizon
Drive, P.O. Box 61503, King of Prussia, PA 19406-0903
(Administrative records and those records relating to functions as
Distributor prepared after May 1, 1991 which are required to be
maintained pursuant to Section 31(a) under the Investment Company
Act of 1940, as the rules promulgated thereunder).
Item 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
------------
(1) The Registrant hereby undertakes to promptly call a meeting of
shareholders for the purpose of voting upon the question of removal
of any trustee or trustees when requested in writing to do so by
the record holders of not less than 10 percent of the Registrant's
outstanding shares and to assist its shareholders in accordance
with the requirements of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
(2) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report for the fiscal year ended June 30, 1996, upon request
and without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant hereby certifies that it meets all of the
requirements for effectiveness of this Post-Effective Amendment No. 56 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933,
and has duly caused this Post-Effective Amendment No. 57 to its Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in Conshohocken PA on April 1, 1997.
TRAINER, WORTHAM FIRST MUTUAL FUNDS
-----------------------
David P. Como*
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 56 to Registrant's Registration Statement has been signed below
by the following persons in the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
*James F. Twaddell Chairman of the April 1, 1997
Board and Trustee
*H. Williamson Ghriskey, Jr. Vice President April 1, 1997
Secretary and Treasurer
*Robert S. Lazar Trustee April 1, 1997
*David Elias Trustee April 1, 1997
*Raymond Eisenberg Trustee April 1, 1997
*Robert H. Breslin, Jr. Trustee April 1, 1997
*Martin S. Levine Trustee April 1, 1997
</TABLE>
* By:
-----------------------------------
Michelle A. Whalen, as Attorney-in-Fact
pursuant to Power-of-Attorney
<PAGE>
TRAINER, WORTHAM FIRST MUTUAL FUNDS
INDEX TO EXHIBITS ON FORM N1-A
Item No. 24 Financial Statements and Exhibits
- ----------------------------------------------
(27) Financial Data Schedules for Appendix "B" of SAI
(from Interim Financial Statements dated February 28, 1997)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000036563
<NAME> TRAINER, WORTHAM FIRST MUTUAL FUNDS
<SERIES>
<NUMBER> 2
<NAME> TRAINER, WORTHAM EMERGING GROWTH FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 1,504,855
<INVESTMENTS-AT-VALUE> 1,532,258
<RECEIVABLES> 49,005
<ASSETS-OTHER> 47,610
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,628,873
<PAYABLE-FOR-SECURITIES> 28,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,430
<TOTAL-LIABILITIES> 51,430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,581,454
<SHARES-COMMON-STOCK> 159,422
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> (3,062)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (28,352)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27,403
<NET-ASSETS> 1,577,443
<DIVIDEND-INCOME> 278
<INTEREST-INCOME> 3,344
<OTHER-INCOME> 0
<EXPENSES-NET> 6,684
<NET-INVESTMENT-INCOME> (3,062)
<REALIZED-GAINS-CURRENT> (28,352)
<APPREC-INCREASE-CURRENT> 27,403
<NET-CHANGE-FROM-OPS> (4,011)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 159,448
<NUMBER-OF-SHARES-REDEEMED> 26
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 1,577,443
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,684
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 42,697
<AVERAGE-NET-ASSETS> 1,302,160
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.02)
<PER-SHARE-GAIN-APPREC> (0.09)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.89
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000036563
<NAME> TRAINER, WORTHAM FIRST MUTUAL FUNDS
<SERIES>
<NUMBER> 3
<NAME> TRAINER, WORTHAM TOTAL RETURN BOND FUND
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 5-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 7,482,325
<INVESTMENTS-AT-VALUE> 7,463,334
<RECEIVABLES> 92,494
<ASSETS-OTHER> 40,600
<OTHER-ITEMS-ASSETS> 481,250
<TOTAL-ASSETS> 8,077,678
<PAYABLE-FOR-SECURITIES> 481,000
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,430
<TOTAL-LIABILITIES> 504,430
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,523,643
<SHARES-COMMON-STOCK> 747,239
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 59,417
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9,180
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (18,992)
<NET-ASSETS> 7,573,238
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 144,621
<OTHER-INCOME> 0
<EXPENSES-NET> 16,785
<NET-INVESTMENT-INCOME> 127,836
<REALIZED-GAINS-CURRENT> 11,000
<APPREC-INCREASE-CURRENT> (18,992)
<NET-CHANGE-FROM-OPS> 119,844
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 68,419
<DISTRIBUTIONS-OF-GAINS> 1,820
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 787,618
<NUMBER-OF-SHARES-REDEEMED> 46,906
<SHARES-REINVESTED> 6,527
<NET-CHANGE-IN-ASSETS> 7,573,248
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 10,071
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 46,036
<AVERAGE-NET-ASSETS> 5,452,759
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.21
<PER-SHARE-GAIN-APPREC> 0.05
<PER-SHARE-DIVIDEND> 0.13
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.13
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
