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FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5 , 1999
FILE NO. 2-15037
FILE NO. 811-879
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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. 62
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No 62
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, Esq.
Dechert Price & Rhoads
1775 Eye Street, N.W.
Washington, DC 20006-2401
-------------------------
(Name and Address of Agent for Service)
It is proposed that this filing become effective (check appropriate box):
immediately upon filing pursuant to Paragraph (b);
on ___________________________ (date) pursuant to Paragraph (b);
60 days after filing pursuant to Paragraph (a)(1);
on ___________________________ (date) pursuant to Paragraph (a)(1);
X 75 days after filing pursuant to Paragraph (a)(2); or
on ___________________________ date) pursuant to paragraph (a) (2) of
Rule 485.
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THE INFORMATION IN THIS PROPSECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.
THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETEION
DATED AUGUST __, 1999
- --------------------------------------------------------------------------------
TRAINER WORTHAM FIRST MUTUAL FUNDS
TRAINER WORTHAM LARGE-CAP GROWTH FUND
October __, 1999
- --------------------------------------------------------------------------------
Investment Advisor
------------------
Trainer Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, New York 10022
Telephone: (888) 257-4450
Neither the Securities and Exchange Commission nor any other regulatory body has
approved the securities being offered by this prospectus or determined whether
this prospectus is accurate and complete. It is unlawful for anyone to make any
representation to the contrary.
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TRAINER WORTHAM FIRST MUTUAL FUNDS
TRAINER WORTHAM LARGE-CAP GROWTH FUND
TABLE OF CONTENTS
-----------------
RISK/RETURN SUMMARY AND FUND EXPENSES
RISK/RETURN SUMMARY
ANNUAL FEES AND EXPENSES
CAREFULLY REVIEW THIS IMPORTANT SECTION FOR A SUMMARY OF THE FUND'S
INVESTMENTS, RISKS AND FEES.
INVESTMENT OBJECTIVE AND STRATEGIES
INVESTMENT OBJECTIVE
POLICIES AND STRATEGIES
INVESTMENT RISKS
THIS SECTION CONTAINS DETAILS ON THE FUND'S INVESTMENT STRATEGIES AND
RISKS.
SHAREHOLDER INFORMATION
PRICING OF FUND SHARES
PURCHASING AND ADDING TO YOUR SHARES
SELLING YOUR SHARES
EXCHANGING YOUR SHARES
DIVIDENDS, DISTRIBUTIONS AND TAXES
CONSULT THIS SECTION TO OBTAIN DETAILS ON HOW SHARES ARE VALUED, HOW TO
PURCHASE, SELL AND EXCHANGE SHARES, RELATED CHARGES AND PAYMENTS OF
DIVIDENDS AND DISTRIBUTIONS.
FUND MANAGEMENT
THE INVESTMENT ADVISOR
PORTFOLIO MANAGER
THE DISTRIBUTOR AND ADMINISTRATOR
REVIEW THIS SECTION FOR DETAILS ON THE PEOPLE AND ORGANIZATIONS WHO OVERSEE
THE FUND.
2
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RISK/RETURN SUMMARY AND FUND EXPENSES
- -------------------------------------
TRAINER WORTHAM LARGE-CAP GROWTH FUND
INVESTMENT OBJECTIVE The Fund seeks capital appreciation.
PRINCIPAL INVESTMENT The Fund invests primarily in equity
STRATEGIES securities of large capitalization companies
that the Advisor believes have above average
growth rates. Approximately 75% of the Fund's
portfolio will be invested in stocks that are
among the 100 largest capitalization stocks in
the S&P 500 Index. The Advisor selects
companies that are well-managed, financially
sound, industry leaders with proven track
records.
PRINCIPAL INVESTMENT RISKS Because the Fund is subject to market risk,
the value of the Fund's investments will
fluctuate with market conditions and the value
of your investment in the Fund will also vary.
You could lose money on your investment in the
Fund, or the Fund could underperform other
investments.
WHO MAY WANT TO INVEST? Consider investing in the Fund if you are:
o Investing for a period of time in excess
of 3 to 5 years
o Looking to add a growth component to your
portfolio
o Looking for a high-quality,
well-diversified, all-equity portfolio
that provides the potential for growth of
your investment
o Willing to accept higher risks of
investing in the stock market in exchange
for potentially higher long term returns
This Fund will not be appropriate for someone:
o Investing for a period of time less than 3
to 5 years
o Not comfortable with market value
fluctuations
o Looking for current income
o Seeking safety of principal
3
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TRAINER WORTHAM LARGE-CAP GROWTH FUND (CONTINUED)
- -------------------------------------------------
ANNUAL FEES AND EXPENSES
- ------------------------
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Fund.
<TABLE>
<S> <C>
Shareholder Transaction Fees
(fees paid directly from your investment)
Maximum Sales Charge (load) on Purchases None
- --------------------------------------------------------------------------------
Maximum Deferred Sales Charge (load) None
Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
- --------------------------------------------------------------------------------
Management Fees 0.75%
- --------------------------------------------------------------------------------
Distribution and Service (12b-1) Fee 0.25%
- --------------------------------------------------------------------------------
Other Expenses 0.65%*
- --------------------------------------------------------------------------------
Total Fund Operating Expenses 1.65%*
- --------------------------------------------------------------------------------
Fee Waiver and/or Expense Reimbursement 0.15%*
- --------------------------------------------------------------------------------
NET EXPENSES 1.50%*
- --------------------------------------------------------------------------------
</TABLE>
* The Advisor has entered into an expense limitation agreement with the Trust
to limit the Total Fund Operating Expenses of the Fund to 1.50% of its
average daily net assets for its current fiscal year. Without this expense
limitation agreement, the Total Fund Operating Expenses for the Fund's
initial fiscal year are estimated to be 1.65%.
4
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TRAINER WORTHAM LARGE-CAP GROWTH FUND (CONTINUED)
- -------------------------------------------------
Expense Example
Use this table to compare fees and expenses with those of other Funds. It
illustrates the amount of fees and expenses you would pay, assuming the
following:
o $10,000 investment
o 5% annual return
o redemption at the end of each period
o no changes in the Fund's operating expenses
o reinvestment of dividends and distributions
Because this example is hypothetical and for comparison purposes only, your
actual costs will be different.
<TABLE>
<CAPTION>
1 3
Year Years
<S> <C> <C>
LARGE-CAP GROWTH FUND
- -------------------------------------------
$____ $____
- -------------------------------------------
</TABLE>
5
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INVESTMENT OBJECTIVE AND STRATEGIES
TRAINER WORTHAM LARGE-CAP GROWTH FUND
================================================================================
INVESTMENT OBJECTIVE
The investment objective of the Large-Cap Growth Fund is to seek
capital appreciation.
POLICIES AND STRATEGIES
The Advisor invests in reasonably priced, high-quality, large
capitalization companies with a consistent earnings growth rate above the
market. Approximately 75% of the Fund's assets will be invested in stocks that
are among the 100 largest capitalization stocks in the S&P 500 Index. The
Advisor selects companies that are well-managed, financially sound, industry
leaders with proven track records.
Consistent with the Large-Cap Growth Fund's investment objective, the
Fund:
o invests substantially all, but in no event less than 65% of the
value of its total assets in the equity securities of large
capitalization issuers
o invests in the following types of equity securities: common
stocks, preferred stocks, securities convertible into common
stocks, warrants and any rights to purchase common stocks
o may invest in fixed income securities consisting of corporate
notes, bonds and debentures that are rated investment grade at
the time of purchase
o may invest in obligations issued or guaranteed by agencies or
instrumentalities of the U.S. Government
o may engage in repurchase transactions pursuant to which the Fund
purchases a security and simultaneously commits to resell that
security to the seller (either a bank or a securities dealer) at
an agreed upon price on an agreed upon date (usually within
seven days of purchase)
o may invest in other investment companies
Portfolio Turnover. The annual rate of portfolio turnover is not
expected to exceed 100%. In general, the Advisor will not consider the rate of
portfolio turnover to be a limiting factor in determining when or whether to
purchase or sell securities in order to achieve the Fund's objective.
In the event that the Advisor determines that market conditions are
not suitable for the Fund's typical investments, the Advisor may, for temporary
defensive purposes during such unusual market conditions, invest all or any
portion of the Fund's assets in money market instruments.
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PRIOR PERFORMANCE OF COMPARABLE ACCOUNTS
The table below sets forth performance data relating to the historical
performance of the Large Cap Growth Equity Composite (the "Composite"). The
Composite represents the performance of accounts managed by Mr. Robert Vile, the
portfolio manager for the Fund and the individual primarily responsible for the
day-to-day management of the Fund's portfolio. The performance presented for
periods prior to June 1, 1998, occurred while Mr. Vile was affiliated with his
prior employer. Mr. Vile has been employed by the Adviser since June 1, 1998.
During all periods presented, Mr. Vile had complete investment discretion and
lead responsibility for selecting the securities to buy and sell for the
accounts in the Composite.
Each account represented in the Composite has substantially similar
investment objectives, policies, and strategies to those of the Fund. Most of
the accounts in the Composite were not subject to the requirements of the
Investment Company Act of 1940 or Subchapter M of the Internal Revenue Code,
which, if imposed, could have affected their performance. The performance
information for the Composite is the gross total return of the Composite, as
adjusted to reflect the estimated fees and expenses of the Fund.
The Composite data was calculated according to standards set by the
Association for Investment Management and Research ("AIMR").
The investment results presented below are not those of the Fund and are
not intended to predict or suggest returns that might be experienced by the Fund
or an individual investor having an interest in the Fund. These total return
figures represent past performance and do not indicate future results, which
will vary.
<TABLE>
TOTAL RETURN FOR THE LARGE CAP GROWTH
EQUITY COMPOSITE AND THE S&P 500 STOCK INDEX
<CAPTION>
- -------------------------------------------------------------------------------
Large Cap Growth
Equity Composite S&P 500 Stock Index+
- -------------------------------------------------------------------------------
Year Annual Total Return Annual Total Return
- -------------------------------------------------------------------------------
<S> <C> <C>
1998 ____% ____%
1997 ____% ____%
1996 ____% ____%
1995 ____% ____%
- -------------------------------------------------------------------------------
<CAPTION>
Time Period Average Annual Average Annual
(thru 12/31/98) Total Return Total Return
- -------------------------------------------------------------------------------
<S> <C> <C>
1 YEAR ____% ____%
3 YEARS ____% ____%
SINCE INCEPTION (4/1/94) ____% ____%
- -------------------------------------------------------------------------------
</TABLE>
+ THE S&P 500 STOCK INDEX MEASURES THE PERFORMANCE OF 500
LARGE-CAPITALIZATION U.S. COMPANIES. THIS INDEX IS UNMANAGED AND DOES NOT
REFLECT THE FEES AND EXPENSES TYPICALLY INCURRED BY MUTUAL FUNDS. RESULTS
INCLUDE REINVESTED DIVIDENDS.
7
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INVESTMENT RISKS
================================================================================
Any investment in the Fund is subject to investment risks,
including the possible loss of the principal amount invested.
Generally, the Fund will be subject to the following risks:
o MARKET RISK: Market risk refers to the risk related to investments in
securities in general and the daily fluctuations in the securities markets.
The Fund's performance per share will change daily based on many factors,
including fluctuation in interest rates, the quality of the companies in the
Fund's investment portfolio, national and international economic conditions
and general market conditions.
o CREDIT RISK: Credit risk refers to the risk related to the credit quality of
the issuer of a security held in the Fund's portfolio. The Fund could lose
money if the issuer of a security is unable to meet its financial
obligations.
o YEAR 2000 RISK: Like other funds and business organizations around the
world, the Fund could be affected adversely if the computer systems used by
the Advisor and the Funds' other service providers do not properly process
and calculate date related information for the year 2000 and beyond. In
addition, Year 2000 issues may affect adversely companies in which the Fund
invests where, for example, such companies incur substantial costs to
address Year 2000 issues or suffer losses caused by the failure to do so
adequately, and in a timely manner.
The Fund has been informed that the Advisor and the Fund's other
service providers have developed and are implementing clearly defined and
documented plans intended to minimize risks associated with Year 2000 issues
with regard to services critical to the Fund's operations. Internal efforts
include a commitment of adequate staff and funding to identify and remedy
Year 2000 issues, and specific actions such as taking inventory of software
systems, determining inventory items that may not function properly after
December 31, 1999, reprogramming or replacing such systems, and retesting
for Year 2000 readiness.
In the event that any systems upon which the Funds are dependent
are not Year 2000 ready by December 31, 1999, administrative errors and
account maintenance failures would likely occur.
While the ultimate costs or consequences of incomplete or
untimely resolution of Year 2000 issues by the Advisor or the Fund's service
providers cannot be assessed accurately at this time, the Fund currently has
no reason to believe that the Year 2000 plans of the Advisor and the Fund's
service providers will not be completed by December 31, 1999, or that the
anticipated costs associated with full implementation of their plans will
have a material adverse impact on either their business operations or the
financial condition of the Fund. The Fund and the Advisor will continue to
monitor closely developments relating to this issue, including establishment
by the Advisor and the Fund's service providers of contingency plans.
8
<PAGE> 10
SHAREHOLDER INFORMATION
-----------------------
PRICING OF FUND SHARES
- ----------------------
How NAV is Calculated
The NAV is calculated by adding the total value of the Fund's investments and
other assets, subtracting its liabilities and then dividing that figure by the
number of outstanding shares of the Fund:
NAV =
Total Assets - Liabilities
--------------------------
Number of Shares
Outstanding
The net asset value per share of the Fund is determined at the time trading
closes on the New York Stock Exchange ("NYSE") (currently 4:00 p.m., Eastern
Standard Time, Monday through Friday), except on business holidays when the NYSE
is closed. The NYSE recognizes the following holidays: New Year's Day,
President's Day, Martin Luther King, Jr. Day, Good Friday, Memorial Day, Fourth
of July, Labor Day, Thanksgiving Day, and Christmas Day. Any other holiday
recognized by the NYSE will be considered a business holiday on which the net
asset value of the Fund will not be calculated.
Your order for purchase, sale or exchange of shares is priced at the next NAV
calculated after your order is accepted by the Fund. This is what is known as
the offering price.
The Fund's securities are generally valued at current market prices. If market
quotations are not available, prices will be based on fair value as determined
by the Fund's Trustees.
PURCHASING AND ADDING TO YOUR SHARES
- ------------------------------------
You may purchase the Fund through the Distributor or through investment
representatives, who may charge additional fees and may require higher minimum
investments or impose other limitations on buying and selling shares. If you
purchase shares through an investment representative, that party is responsible
for transmitting orders by close of business and may have an earlier cut-off
time for purchase and sale requests. Consult your investment representative for
specific information.
The minimum initial investment in the Fund is $250. Subsequent investments must
be at least $50. First Data Distributors, Inc. (the "Distributor") acts as
Distributor of the Fund's shares. Shares of the Fund are offered continuously
for purchase at the net asset value per share of the Fund next determined after
a purchase order is received. Investors may purchase shares of the Fund by check
or wire, as described below.
All purchases must be in U.S. dollars. A fee will be charged for any checks that
do not clear. Third-party checks are not accepted without prior approval by the
Fund.
The Fund or the Advisor may waive its minimum purchase requirement, or the
Distributor may reject a purchase order, if it is deemed to be in the best
interest of the Fund and its shareholders.
9
<PAGE> 11
INSTRUCTIONS FOR OPENING OR ADDING TO AN ACCOUNT
By Regular Mail
Initial Investment:
1. Carefully read and complete the application.
2. Make check, certified check or money order payable to "Trainer Wortham
Large-Cap Growth Fund."
3. Mail to: Trainer Wortham First Mutual Funds, c/o First Data Investor
Services Group, King of Prussia, Pennsylvania, 19406.
Subsequent Investment:
1. Subsequent investments should be made by check payable to the Fund and
mailed to:
Trainer Wortham First Mutual Funds
c/o First Data Investor Services Group
P. O. Box 61767
King of Prussia, PA 19406
By Wire Transfer
NOTE: YOUR BANK MAY CHARGE A WIRE TRANSFER FEE.
For initial investment: Before wiring funds, you should call 1-800-441-6580 to
receive an account number. Follow the instructions below after receiving your
account number.
For initial and subsequent investments:
Instruct your bank to wire transfer your investment to:
Boston Safe Deposit & Trust
Routing Number: ABA #011001234
Account #000159
Name of the Fund
Name on the Account
Mail a completed account application to First Data Investor Services Group at
the above address.
SELLING YOUR SHARES
- -------------------
You may sell your shares at any time. Your sales price will be the next NAV
after your sell order is received by the Fund. Normally you will receive your
proceeds within 7 business days after your request is received. See section on
"General Policies on Selling Shares" below.
- --------------------------------------------------------------------------------
WITHDRAWING MONEY FROM YOUR FUND INVESTMENT
A request for a withdrawal in cash from the Fund constitutes a redemption or
sale of shares for a mutual fund shareholder.
- --------------------------------------------------------------------------------
10
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INSTRUCTIONS FOR SELLING SHARES
- -------------------------------
By telephone
(unless you have declined telephone sales privileges)
1. Call 1-800-441-6580 with instructions as to how you wish to receive your
funds (mail, wire, electronic transfer).
By mail
Write a letter of instruction indicating:
o your Fund and account number
o amount you wish to redeem
o address where your check should be sent
o account owner signature(s)
Mail to:
TRAINER WORTHAM FIRST MUTUAL FUNDS
c/o First Data Investor Services Group
P.O. Box 61503
King of Prussia, PA 19406
By Wire transfer
You must indicate this option on your application.
Call 1-800-441-6580 to request a wire transfer.
If you call by 4 p.m. Eastern Standard Time, your payment will normally be wired
to your bank on the next business day.
The Fund may charge a wire transfer fee of $9.00 per transaction.
Note: Your financial institution may also charge a separate fee.
GENERAL POLICIES ON SELLING SHARES
- ----------------------------------
REDEMPTIONS IN WRITING REQUIRED
You must request redemption in writing in the following situations:
1. Redemptions from Individual Retirement Accounts ("IRAs").
2. Circumstances under which redemption requests require a signature guarantee
include, but may not be limited to, each of the following:
o Redemptions over $10,000
o Your account registration or the name(s) on your account has changed
within the last 15 days
o The check is not being mailed to the address on your account
o The check is not being made payable to the owner of the account
o The redemption proceeds are being transferred to another Fund account
with a different registration
A signature guarantee can be obtained from a financial institution, such
as a bank, broker-dealer, credit union, clearing agency, or savings association.
VERIFYING TELEPHONE REDEMPTIONS
The Fund makes every effort to ensure that telephone redemptions are only made
by authorized shareholders. All telephone calls are recorded for your protection
and you will be asked for information to verify your identity. Given these
precautions, unless you have specifically indicated on your application that you
do not want the telephone redemption feature, you may be responsible for any
fraudulent telephone orders.
11
<PAGE> 13
REDEMPTIONS WITHIN 10 DAYS OF INITIAL INVESTMENT
When you have made your initial investment by check, you cannot redeem any
portion of it until the Transfer Agent is satisfied that the check has cleared
(which may require up to 10 business days). You can avoid this delay by
purchasing shares with a certified check.
REFUSAL OF REDEMPTION REQUEST
Payment for shares may be delayed under extraordinary circumstances or as
permitted by the Securities and Exchange Commission in order to protect
remaining shareholders.
REDEMPTION IN KIND
The Fund reserves the right to make payment in securities rather than cash,
known as "redemption in kind." This could occur under extraordinary
circumstances, such as a very large redemption that could affect Fund operations
(a redemption fee of more than 1% of the Fund's net assets). If the Fund deems
it advisable for the benefit of all shareholders, redemption in kind will
consist of securities equal in market value to your shares. When you convert
these securities to cash, you will pay brokerage charges.
CLOSING OF SMALL ACCOUNTS
If your account falls below $250, the Fund may ask you to increase your balance.
If it is still below $250 after 60 days, the Fund may close your account and
send you the proceeds at the then current NAV.
UNDELIVERABLE REDEMPTION CHECKS
For any shareholder who chooses to receive distributions in cash:
If distribution checks (1) are returned and marked as "undeliverable" or (2)
remain uncashed for six months, your account will be changed automatically so
that all future distributions are reinvested in your account. Checks that remain
uncashed for six months will be canceled and the money reinvested in the Fund.
12
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EXCHANGING YOUR SHARES
- ----------------------
You can exchange your shares in one Fund for shares of another Trainer Wortham
Fund. No transaction fees are charged for exchanges.
You must meet the minimum initial investment requirements for the Fund into
which you are exchanging.
INSTRUCTIONS FOR EXCHANGING SHARES
Exchanges may be made by calling 1-800-441-6580. Please provide the following
information:
o Your name and telephone number
o The exact name on your account and account number
o Taxpayer identification number (usually your Social Security number)
o Dollar value or number of shares to be exchanged
o The name of the Fund from which the exchange is to be made
o The name of the Fund into which the exchange is being made
Please refer to "Selling your Shares" for important information about telephone
transactions.
NOTES ON EXCHANGES
- - The registration and tax identification numbers of the two accounts
must be identical.
- - The Exchange Privilege (including automatic exchanges) may be changed
or eliminated at any time upon a 60-day notice to shareholders.
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 a 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. Shareholders who purchase or already own $5,000 or more of Fund shares
valued at the current public offering price, and who wish to receive periodic
payments may establish a Systematic Withdrawal Plan. In order to qualify for
this option, dividends and capital gains must be reinvested.
DISTRIBUTION AND SERVICE (12B-1) FEES
12b-1 fees compensate the Distributor and other dealers and investment
representatives for services and expenses relating to the sale and distribution
of the Fund's shares and/or for providing shareholder services. 12b-1 fees are
paid from Fund assets on an ongoing basis, and over time these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges. The maximum amount that the Fund may pay in 12b-1 fees
under its 12b-1 plan is 0.25% of its average daily net assets.
13
<PAGE> 15
DIVIDENDS, DISTRIBUTIONS AND TAXES
Any income the Fund receives in the form of dividends is paid out, less
expenses, to its shareholders. Income dividends and capital gains distributions
on the Fund are usually paid annually.
Dividends and distributions are treated in the same manner for federal income
tax purposes whether you receive them in cash or in additional shares.
An exchange of shares is considered a sale, and any related gains may be subject
to applicable taxes.
Dividends are taxable as ordinary income. Taxation on capital gains
distributions will vary with the length of time the Fund has held the security -
not how long the shareholder has been in the Fund.
Dividends are taxable in the year in which they are paid, even if they appear on
your account statement in the following year.
You will be notified in January of each year about the federal tax status of
distributions made by the Fund. Depending on your state of residence,
distributions also may be subject to state and local taxes, including
withholding taxes. There is a penalty on certain pre-retirement distributions
from retirement accounts. Consult your tax adviser about the federal, state and
local tax consequences in your particular circumstances.
Foreign shareholders may be subject to special withholding requirements.
The Fund is required to withhold 31% of taxable dividends, capital gains
distributions and redemptions paid to shareholders who have not provided the
Fund with their certified taxpayer identification number in compliance with IRS
rules. To avoid this, make sure you provide your correct Tax Identification
Number (Social Security Number for most investors) on your account application.
FUND MANAGEMENT
- ---------------
THE INVESTMENT ADVISOR
Trainer Wortham & Co., Inc., (the "Advisor"), with offices at 845 Third Avenue,
New York, NY 10022 and 111 Pine Street, San Francisco, CA 94111 is the Trust's
Investment Advisor and manager and is registered as an investment adviser under
the Investment Advisers Act of 1940, as amended.
The Advisor, organized in 1998, continues an investment counseling business,
which began in 1924 as Trainer & Associates. The Advisor supervises
approximately $3.0 billion in investment accounts and is a wholly owned
subsidiary of First Republic Bank. First Republic Bank is a commercial bank
headquartered at 111 Pine Street, San Francisco, California 94111, which is
engaged in general banking business and provides private banking services. First
Republic Bank has offices in California, Nevada and New York City and has
approximately $3.0 billion in assets as of June 30, 1999.
Pursuant to an Investment Advisory Agreement with the Trust on behalf of Trainer
Wortham Large-Cap Growth Fund, the Advisor receives an annual fee, accrued daily
and paid monthly, of 0.75% of the Fund's average daily net assets.
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
14
<PAGE> 16
portfolios, makes decisions with respect to and places orders for all purchases
and sales of the portfolio securities.
PORTFOLIO MANAGER
Robert Vile serves as portfolio manager of the Fund and is primarily responsible
for the day-to-day management of the Fund's portfolio. Mr. Vile joined the
Advisor in June 1998 as a Managing Director. Prior to June 1998, Mr. Vile was
employed by Harleysville Group as their equity portfolio manager.
The Statement of Additional Information has more detailed information about the
Advisor.
THE DISTRIBUTOR AND ADMINISTRATOR
First Data Distributors, Inc. is the Fund's distributor and First Data Investor
Services Group, Inc., is the Fund's administrator and they are located at 3200
Horizon Drive, King of Prussia, PA 19406.
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<PAGE> 17
For more information about the Fund, the following documents are available free
upon request:
ANNUAL/SEMI-ANNUAL REPORTS:
The Fund's annual and semi-annual reports to shareholders contain additional
information on the Fund's investments. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund, including its operations and investment policies. It
is incorporated by reference and is legally considered a part of this
prospectus.
- --------------------------------------------------------------------------------
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, OR REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUND BY CONTACTING THE FUND AT:
TRAINER WORTHAM FIRST MUTUAL FUNDS
845 THIRD AVENUE, 6TH FLOOR
NEW YORK, NY 10022
TELEPHONE: 1-888-257-4450
WWW.TRAINERWORTHAM.COM
- --------------------------------------------------------------------------------
You can review the Funds' reports and the SAI at the Public Reference Room of
the Securities and Exchange Commission. You can get text-only copies:
o For a duplicating fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009 or calling
1-800-SEC-0330.
o Free from the Commission's Website at http://www.sec.gov.
Investment Company Act file no. 811-879.
16
<PAGE> 18
TRAINER WORTHAM FUNDS
Trainer Wortham Large-Cap Growth Fund
THIS IS YOUR
INVESTMENT APPLICATION
Detach and mail to:
FIRST DATA INVESTOR SERVICES GROUP, INC.
P.O. BOX 61503
KING OF PRUSSIA, PA 19406-0903
<PAGE> 19
TRAINER WORTHAM FUNDS INVESTMENT APPLICATION
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1. INITIAL FUND INVESTMENT
Please indicate the amount you are investing in the fund. The minimum initial investment is $250 for the fund.
Trainer Wortham Large-Cap Growth Fund $ ____________________
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2. INITIAL INVESTMENT METHOD
[ ] Check (made payable to the fund)
[ ] Wire sent on (date) ____________________ for credit to account no.
____________________ *
*Before making an initial investment by wire, you must be assigned an
account number by calling (800) 441-6580. Have your local bank wire fund
to:
Boston Safe Deposit & Trust
ABA#011001234
Credit: Trainer Wortham Large-Cap Growth Fund
Act #000159
FBO (Insert Shareholder name and
new account number)
3. REGISTRATION AND SOCIAL SECURITY NUMBER (PLEASE PRINT)
INDIVIDUAL OR JOINT ACCOUNT:
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Owner's First Name Middle Initial Last Name Owner's Social Security #
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Joint Owner's First Name Middle Initial Last Name Joint Owner's Social
Security #
GIFT TO MINOR
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Name of Custodian (one name only)
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Name of Minor Minor's Social Security #
Under the _________________________________________ Uniform Gift/Transfer to
Minors Act State
CORPORATIONS, PARTNERSHIPS, TRUSTS AND OTHERS (Complete attached Corporate
Resolution)
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Name of Corporation, Partnership, Trust or Other
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Name of Trustee(s) Date of Trust Tax Identification No.
4. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
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Street Address & Apt. No. City State Zip
( )
Day Telephone
( )
Evening Telephone
5. DISTRIBUTION OPTIONS (All distributions will be reinvested unless otherwise
indicated below.)
[ ] Reinvest (dividends and capital gains in additional shares)
[ ] Cash Dividends (dividends in cash, capital gains in additional shares)
[ ] All Cash (dividends and capital gains in cash)
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6. SYSTEMATIC WITHDRAWAL PLAN (minimum initial investment of $5,000 is required)
I wish to have the following amount(s) systematically withdrawn from:
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Trainer Wortham Large-Cap Growth Fund $
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Please indicate the frequency of withdrawal, and if other than monthly, the
desired months. Liquidations take place on or about the 25th of the month.
[ ] Monthly
[ ] Quarterly ______________ , ______________ , ______________ and
______________
[ ] Semi annually ______________ and ______________
[ ] Annually
Unless indicated otherwise in Section 8, a check will be sent to your address
of record.
7. TELEPHONE PRIVILEGE
[ ] I (We) authorize First Data Investor Services Group, Inc. And/or Trainer
Wortham Funds to act upon instructions received by telephone from me (us)
to redeem shares or to exchange for shares of other Trainer Wortham 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 [ ] Exchange [ ] Both
8. REDEMPTIONS
(Unless otherwise indicated below, all redemptions will be sent by check.)
[ ] All redemption proceeds should be executed by an ACH transaction unless
First Data Investor Services Group, Inc. is notified in writing. There is
no charge for ACH transactions.
Allow 3 business days.
[ ] All redemptions proceeds should be executed by FED wire transaction unless
First Data Investor Services Group, Inc. is notified in writing. There is
a $9 charge for FED wire transactions.
All FED wire and ACH transactions will be sent as indicated below. Please
allow one month for ACH instructions to become effective. Any changes in these
instructions must be made in writing with signature guarantees as described in
the prospectus.
*Please notify your bank of your intent to establish this option on your
account.
*ATTACH A VOIDED CHECK OR DEPOSIT SLIP.
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Bank Name Branch Office
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Bank Address
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Bank Wire Routing Number Account Number
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Name(s) on Bank Account
9. SIGNATURE AND CERTIFICATION
(Required by Federal tax law to avoid backup withholding.)
"By signing below, I certify under penalty of perjury that the social security
or tax payer 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 withhold,
check box. [ ]
"The Internal Revenue Service does not require your consent to any provision
of this document other than the certificates required to avoid backup
withholding.
"I hereby acknowledge receipt of a current prospectus."
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Signature [ ] Owner [ ] Custodian [ ] Trustee Date
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Signature of Joint Owner (if
applicable) Date
10. INVESTMENT DEALER INFORMATION
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Name of Firm
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Firm Address
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Rep Name & Number
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Signature
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THIS SECTION TO BE COMPLETED BY CORPORATIONS, TRUSTS AND OTHER ORGANIZATIONS
RESOLUTIONS
RESOLVED: That this corporation or organization become a shareholder of Trainer
Wortham First Mutual Funds (the "Trust") and that
________________________________________________________________________________
(Name(s) of officers)
is (are) hereby authorized to complete and execute the Application on behalf of
the corporation or organization and take any action for it as may be necessary
or appropriate with respect to its shareholder 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 First Data Investor
Services Group, 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
__________________________________________________________________ incorporated
(Name of Corporation/Organization)
or formed under the laws of _________________________ and were adopted at a
(State)
meeting of the Board of Trustees of the corporation or organization duly
called and held on __________________________________ at which a quorum was
(Date)
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.
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TRAINER WORTHAM FUNDS
AUTOMATIC INVESTMENT PLAN APPLICATION
First Data Investor Services Group, Inc., P.O. Box 61503, King of Prussia, PA
19406-0903 (610) 239-4500
INSTRUCTIONS
HOW DOES IT WORK?
1. First Data Investor Services Group, Inc., through our bank, Boston Safe
Deposit & Trust, draws an Automatic Clearing House (ACH) debit electronically
against your personal checking/savings account each month, according to your
instructions.
2. Choose any amount of $50.00 or more that you would like to invest regularly
and your debit for this amount will be processed by First Data Investor
Services Group, 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 both sides of this form, and the Investment Application form if you
do not have an existing account.
2. Include initial investment check of $250.00 or more if you are establishing a
new account.
3. If you are using a Credit Union, please have your financial institution
verify the bank information.
4. Mark one of your personal checks or deposit slips VOID, attach it to this
form and mail to First Data Investor Services Group, Inc. at the above
address.
5. As soon as your bank accepts your authorization, debits will be generated and
your Automatic Investment Plan started. In order for you to have Automatic
Clearing House (ACH) debits from your account, your bank must be able to
accept ACH transactions and/or be a member of an ACH association. Your bank
manager should be able to tell you your bank's capabilities. We cannot
guarantee acceptance by your bank.
6. Please allow one month for processing before the first debit occurs.
7. Returned items will result in a $20.00 fee being deducted from your account.
MONTHLY WITHDRAWAL AMOUNT AND DATE
Please indicate amount you would like invested monthly. The minimum amount for
monthly investment is $50.
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[ ] Trainer Wortham Large-Cap Growth Fund $
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Date of Withdrawal: (check only one) [ ] 10th [ ] 15th [ ] 20th
ACCOUNT INFORMATION
Indicate One: [ ] I am in the process of establishing a new account
[ ] I have an established account. My account number is:
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Registered Owner
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Street Address
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City State Zip Code
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Day Time Phone Number Evening Phone Number
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BANK INFORMATION
Complete the following or attach a voided check below. If you are using a Credit
Union account, please complete this section and have your financial institution
verify the information.
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Bank Account Owner Joint Owner
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Bank Name
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Bank Branch Street Address
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City State Zip Code
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ABA Number (9 digits) Account Number
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Type of Account: [ ] Checking [ ] Savings
AUTHORIZATION AND SIGNATURE
I understand that my ACH debit will be dated on the day of each month I have
indicated on this form. I agree that if such a debit is not honored upon
presentation, First Data Investor Services Group, Inc. may discontinue this
service and any share purchase made upon deposit on 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,
First Data Investor Services Group, 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 First Data Investor Services
Group, Inc. upon 30 days written notice or at any time by the investor by
written notice to First Data Investor Services Group, Inc. which is received no
later than five (5) business days prior to the above designated investment date.
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SIGNATURE OF BANK ACCOUNT OWNER
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SIGNATURE OF JOINT BANK ACCOUNT OWNER
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STATEMENT OF ADDITIONAL INFORMATION
===================================
OCTOBER __, 1999
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TRAINER WORTHAM FIRST MUTUAL FUNDS
TRAINER WORTHAM FIRST MUTUAL FUND
TRAINER WORTHAM TOTAL RETURN BOND FUND
TRAINER WORTHAM CALIFORNIA INTERMEDIATE TAX-FREE FUND
TRAINER WORTHAM LARGE-CAP GROWTH FUND
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Trainer Wortham First Mutual Funds (the "Trust") currently offers shares
of the following four Series, representing separate portfolios of investments:
TRAINER WORTHAM FIRST MUTUAL FUND, TRAINER WORTHAM TOTAL RETURN BOND FUND,
TRAINER WORTHAM CALIFORNIA INTERMEDIATE TAX-FREE FUND AND TRAINER WORTHAM
LARGE-CAP GROWTH FUND (the "Fund(s)"). Information concerning each Fund is
provided in separate Prospectuses. 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 each Prospectus. 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 888-257-4450.
Each Fund's most recent Annual Report to Shareholders is a separate
document that is incorporated by reference into this Statement of Additional
Information. The Funds' Annual and Semi-Annual Reports to Shareholders are also
available without charge by calling 888-257-4450.
OCTOBER __, 1999
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TABLE OF CONTENTS
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THE TRUST....................................................................
INFORMATION ON PERMITTED INVESTMENTS AND RELATED RISK FACTORS................
American Depository Receipts ("ADRs")......................................
Convertible Securities.....................................................
U.S. Government Securities.................................................
U.S. Treasury Securities...................................................
Illiquid Securities........................................................
Repurchase Agreements......................................................
Money Market Instruments...................................................
Fixed-Income Securities....................................................
Forward Commitments........................................................
Mortgage-Related Securities................................................
Asset-Backed Securities....................................................
Municipal Obligations .....................................................
Zero Coupon & Stripped Securities..........................................
Foreign Government Obligations: Securities of Supranational Entities.......
Other Foreign Securities...................................................
Description of Municipal Securities........................................
Special Risk Considerations in California..................................
When-Issued Securities and Firm Commitment Agreements......................
Financial Futures Contracts................................................
Shares of Investment Companies.............................................
Loans of Portfolio Securities..............................................
Borrowing..................................................................
Investment Restrictions....................................................
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Portfolio Turnover.........................................................
INVESTMENT LIMITATIONS OF THE FUNDS..........................................
Other Investment Restrictions..............................................
MANAGEMENT OF THE TRUST......................................................
Trustees and Officers of the Trust.........................................
PRINCIPAL HOLDERS OF SECURITIES..............................................
INVESTMENT ADVISORY AND OTHER SERVICES.......................................
The Investment Advisor.....................................................
The Distributor............................................................
Distribution and Shareholder Service Plan..................................
The Administrator..........................................................
Transfer Agent and Fund Accountant.........................................
The Custodian..............................................................
Independent Auditors.......................................................
Brokerage Commissions......................................................
NET ASSET VALUE..............................................................
Systematic Withdrawal Plan.................................................
TAXES........................................................................
All Funds..................................................................
California Intermediate Tax-Free Fund......................................
PERFORMANCE INFORMATION......................................................
Calculation of Total Return................................................
SHARES OF BENEFICIAL INTEREST................................................
Description of Shares......................................................
Shareholder Meetings.......................................................
FINANCIAL STATEMENTS.........................................................
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THE TRUST
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This Statement of Additional Information pertains to the following four separate
funds incorporated under the laws of the State of Delaware:
NAME OF FUND
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TRAINER WORTHAM FIRST MUTUAL FUND ("FIRST MUTUAL FUND")
TRAINER WORTHAM TOTAL RETURN BOND FUND ("TOTAL RETURN BOND FUND")
TRAINER WORTHAM CALIFORNIA INTERMEDIATE TAX-FREE FUND ("CALIFORNIA INTERMEDIATE
TAX-FREE FUND")
TRAINER WORTHAM LARGE-CAP GROWTH FUND ("LARGE-CAP GROWTH FUND")
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") is an open-end
management investment company established as a Delaware business trust under a
Declaration of Trust dated January 17, 1995. FIRST MUTUAL FUND, TOTAL RETURN
BOND FUND AND LARGE-CAP GROWTH FUND are classified as diversified, meaning that,
with respect to 75% of its total assets, it has not invested more than 5% of its
assets in the securities of any single issuer (other than securities issued by
the U.S. Government or its agencies or instrumentalities). CALIFORNIA
INTERMEDIATE TAX-FREE FUND is considered "non-diversified" because the Fund may
invest more than 5% of its assets in the securities of a single California
issuer, such as the state of California.
Much of the information contained in this Statement of Additional
Information expands upon subjects discussed in the Prospectus of each Fund.
Capitalized terms not defined herein are defined in the Prospectus. No
investment in shares of a Fund should be made without first reading the
Prospectus.
INFORMATION ON PERMITTED INVESTMENTS
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AND RELATED RISK FACTORS
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AMERICAN DEPOSITORY RECEIPTS ("ADRS)"
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ADRs are typically issued by a U.S. financial institution and are
evidence ownership of underlying securities issued by a foreign issuer.
Sponsored ADRs are a joint arrangement between the foreign issuer and the U.S.
financial institution acting depository and tend to be more liquid than
unsponsored ADRs. FIRST MUTUAL FUND and LARGE-CAP GROWTH FUND may invest in
sponsored or unsponsored ADRs.
CONVERTIBLE SECURITIES
Convertible securities are securities such as rights, bonds, notes and
preferred stocks which are convertible into or exchangeable for common stocks.
Convertible securities have characteristics similar to both fixed income and
equity securities. Because of the conversion feature, the market value of
convertible securities tends to move together with the market value of the
underlying common stock. As a result, a Fund's selection of convertible
securities is based, to a great extent, on the potential for capital
appreciation that may exist in the underlying stock. The value of convertible
securities is also affected by prevailing interest rates, the credit quality of
the issuer, and any call provisions. FIRST MUTUAL FUND, TOTAL RETURN BOND FUND
and LARGE-CAP GROWTH FUND may invest in convertible securities.
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U.S. GOVERNMENT SECURITIES
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In addition to U.S. Treasury securities, each Fund may invest in U. S.
Government securities, including 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 issued by the Federal National Mortgage Association, by 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.
U.S. TREASURY SECURITIES
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Each Fund may invest in U.S. Treasury securities, including 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.
ILLIQUID SECURITIES
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Each Fund will not invest more than 10% of the value of the Fund's 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.
REPURCHASE AGREEMENTS
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Securities held by each of the Funds may be subject to repurchase
agreements. Under the terms of a repurchase agreement, a Fund would acquire
securities from member banks of the Federal Reserve System and registered
broker-dealers which Trainer Wortham deems creditworthy under guidelines
approved by the Trust's Board of Trustees, subject to the seller's agreement to
repurchase such securities at a mutually agreed-upon date and price. The
repurchase price would generally equal the price paid by the Fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying portfolio securities. The seller under a
repurchase agreement will be required to maintain at all times the value of
collateral held pursuant to the agreement at not less than 102% 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.
Additionally, there is no controlling legal precedent confirming that the Fund
would be entitled, as against a claim by such seller or its receiver or trustee
in bankruptcy, to
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retain the underlying securities, although the Board of Trustees of the Trust
believes that, under the regular procedures normally in effect for custody of
the Fund's securities subject to repurchase agreements and under Federal laws, a
court of competent jurisdiction would rule in favor of the Trust if presented
with the question. Securities subject to repurchase agreements will be held by
the Trust's Custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system. Repurchase agreements are considered to be
loans by a Fund under the 1940 Act.
MONEY MARKET INSTRUMENTS
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Each 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. Each 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 tat the time of purchase. Investments by a Fund
in non-negotiable time deposits are limited to no more than 5% of its total
assets at the time of purchase.
FIXED-INCOME SECURITIES
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Investors in each Fund 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 a Fund has been adversely changed, a 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
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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 is considered to have below average
protection factors but may still be considered sufficient for prudent
investment.
FORWARD COMMITMENTS
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The TOTAL RETURN BOND 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
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Mortgage-related securities which may be purchased by the TOTAL RETURN
BOND FUND 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), 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
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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 TOTAL RETURN BOND 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 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.
-8-
<PAGE> 31
MUNICIPAL OBLIGATIONS
- ---------------------
The TOTAL RETURN BOND FUND may invest in municipal obligations which 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 TOTAL RETURN BOND 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. 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.
-9-
<PAGE> 32
FOREIGN GOVERNMENT OBLIGATIONS; SECURITIES OF SUPRANATIONAL ENTITIES
- --------------------------------------------------------------------
The TOTAL RETURN BOND 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.
OTHER FOREIGN SECURITIES
- ------------------------
The TOTAL RETURN BOND 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 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.
DESCRIPTION OF MUNICIPAL SECURITIES
- -----------------------------------
Municipal securities may have fixed, variable or floating rates of
interest. Any variable or floating rate municipal security not payable on demand
within seven days will be deemed illiquid unless the Advisor determines,
according to procedures established by the Board of Directors, that such
securities are liquid. If held by the CALIFORNIA INTERMEDIATE TAX-FREE FUND,
such securities will be included in the calculation of the limitation of 15% of
net assets which may be invested in illiquid securities. Municipal bonds, which
finance long-term capital needs and generally have maturities of more than one
year when issued, are generally classified as either general obligation bonds or
revenue bonds. General obligation bonds are secured by the issuer's pledge of
its full faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, the proceeds of a
special excise tax or other specific revenue source. The Fund may also invest in
certificates of participation in general fund obligation leases of the State of
California and its political subdivisions. The staff of the Securities and
Exchange Commission may view such a security as illiquid. Unless the Board of
Directors determines that such a security is not illiquid, the Advisor will
limit its
-10-
<PAGE> 33
investment in such securities, together with all other illiquid securities and
assets, to 15% of the Fund's net assets.
The securities in which the Fund invests are subject to market and
credit risk. Market risk relates to the changes in market value that occur as a
result of variation in the level of prevailing interest rates and yield
relationships in the municipal securities market. In general, the longer the
maturity of a municipal security, the higher the yield and the greater the
potential for taxable capital appreciation or depreciation. Conversely, shorter
maturities tend to provide lower yields, but greater stability of principal. An
increase in interest rates will normally decrease the value of these longer-term
investments, while a decline in interest rates will normally increase the value
of these investments. Generally, the shorter the average maturity of the Fund's
portfolio, the less its price will be affected by interest rate fluctuations.
In addition to the market risk of changing interest rates, municipal
securities are subject to credit risk relating to the operations of individual
issuers. The ability of the Fund to achieve its investment objective is
dependent upon the continuing ability of the issuers of municipal securities in
which the Fund invests to meet their obligations for the payment of principal
and interest when due.
SPECIAL RISK CONSIDERATIONS IN CALIFORNIA
- -----------------------------------------
The CALIFORNIA INTERMEDIATE TAX-FREE FUND'S performance may be
especially affected by factors pertaining to the California economy, as well as
other factors affecting the ability of issuers of California municipal
securities to meet their obligations. As a result, the value of the Fund's
shares may fluctuate more widely than the value of shares of a portfolio
investing in securities relating to a number of different states. The amounts of
tax and other revenues available to issuers of California municipal securities
may be affected from time to time by economic, political, geographic and
demographic conditions.
There are additional risks associated with the Fund's investment in
California municipal obligations. These risks result from certain amendments to
the California Constitution and other statues that limit the taxing and spending
authority of California governmental entities, as well as from the general
financial conditions of the State of California. These may impair the ability of
issuers of California municipal obligations to pay interest and principal on
their obligations.
California constitutional and statutory amendments and initiatives have
imposed certain limitations on taxes that may be levied against real property,
as well as place limits on the annual appropriations of the state and its
political subdivisions. These initiative measures approved by California voters
have resulted in a reduction in state and local government revenues and in
spending limits.
The payment of California municipal securities may be dependent on the
ability and willingness of the California Legislature to assist local
governments in paying bond obligations, and on the collection of ad Valero or
special taxes by local governments within the state. The continuing ability of
the California Legislature to increase the revenue of local governments, as well
as to make timely payments in connection with its own obligations, and the
continuing ability of local governments to raise revenue through taxation will
affect the ability of the state and local governments to pay debt service on
these obligations.
An expanded discussion of investment considerations regarding investment
in California municipal obligations is contained in the Statement of Additional
Information.
-11-
<PAGE> 34
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS
- -----------------------------------------------------
The CALIFORNIA INTERMEDIATE TAX-FREE FUND may purchase securities on a
delayed delivery or "when-issued" basis and enter into firm commitment
agreements (transactions whereby the payment obligation and interest rate are
fixed at the time of the transaction, but the settlement is delayed). The Fund
will not purchase securities the value of which is greater than 5% of its net
assets on a when-issued basis. The Fund, as purchaser, assumes the risk of any
decline in value of the security beginning on the date of the agreement or
purchase, and no interest accrues to the Fund until its accepts delivery of the
security.
The Fund will not use such transactions for leveraging purposes, and
accordingly will segregate cash, cash equivalents or liquid securities or hold a
covered position in an amount sufficient to meet its payment obligations
thereunder. There is always a risk that the securities may not be delivered and
that the Fund may incur a loss or will have lost the opportunity to invest the
amount set aside for such transaction in the segregated asset account.
FINANCIAL FUTURES CONTRACTS
- ---------------------------
The CALIFORNIA INTERMEDIATE TAX-FREE FUND may purchase and sell
financial futures contracts listed on a commodities board of trade to hedge its
portfolio investments against changes in value or as a temporary substitute for
purchases or sales of actual securities. The Fund is not a commodity pool and
will engage in futures transactions only for bona fide hedging purposes. Futures
contracts are agreements to buy or sell underlying securities at a specific
future date and price. The underlying instrument may be a security or an index
of securities. By buying or selling a futures contract, the Fund agrees to buy
or sell the underlying instrument or to deliver or receive cash settlement.
Income from financial futures trading is not exempt from federal or state income
taxes.
Because fixed-income securities fluctuate in value inversely with the
movement of interest rates, a decline in value of a security can be hedged, or
offset, by an increase in value of an interest rate futures contract. Also, if
the Advisor anticipates that the value of a security will decline, it may
purchase a futures contract instead of the security to gain the benefit of the
expected lower price. Different trading strategies for futures have different
risk and return characteristics. The Advisor will choose among futures
strategies based on its judgment of how best to meet the Fund's goals. The
judgment will be based on factors such as current and anticipated interest
rates, relative market liquidity, and price levels in the futures markets
compared to the underlying securities markets. If the Advisor judges these
factors incorrectly, or if price changes in the futures positions are not well
correlated with other investments, the strategies may lower the Fund's return.
These strategies involve certain risks. There is no assurance that closing
purchase transactions will be available at favorable prices, resulting in
possible reduction of the Fund's income due to the use of hedging instruments,
and possible loss in excess of the initial margin. There may be imperfect
correlation between the contract and the underlying security and unsuccessful
hedging transactions due to incorrect market trend forecasts. A more thorough
description of these investment practices and their associated risks is
contained in the Statement of Additional Information.
When required by Securities and Exchange Commission guidelines, the Fund
will maintain a segregated account with the custodian with sufficient cash, U.S.
Government securities or other liquid securities to cover the potential
obligations created by futures. The Fund may invest up to 5% of its assets in
futures transactions represented by the aggregate "initial margin" (down
payment). The aggregate market value of securities underlying futures contracts
will not exceed 25% of the net assets of the Fund.
-12-
<PAGE> 35
SHARES OF INVESTMENT COMPANIES
- ------------------------------
The CALIFORNIA INTERMEDIATE TAX-FREE FUND may invest some portion of its
assets in shares of other no-load, open-end investment companies and closed-end
investment companies which invest in securities whose income is exempt from
Federal and California state income taxes. Pursuant to the 1940 Act, the
percentage of Fund assets which may be so invested is not limited, provided that
the Fund and its affiliates do not acquire more than 3% of the shares of any
such investment company. The provisions of the 1940 Act may also impose certain
restrictions on redemption of the Fund's shares in other investment companies.
The Fund's purchase of shares of investment companies may result in the payment
by a shareholder of duplicative management fees. The Advisor will consider such
fees in determining whether to invest in other mutual funds. The Fund will
invest only in investment companies which do not charge a sales load; however,
the Fund may invest in such companies with distribution plans and fees under
Rule 12b-1 of the 1940 Act, and may pay customary brokerage commissions to buy
and sell shares of closed-end investment companies.
The return on the Fund's investments in investment companies will be
reduced by the operating expenses, including investment advisory and
administrative fees, of such companies. The Fund's investment in a closed-end
investment company may require the payment of a premium above the net asset
value of the investment company's shares, and the market price of the investment
company thereafter may decline without any change in the value of the investment
company's assets. The Fund, however, will not invest in any investment company
or trust unless it is believed that the potential benefits of such investment
are sufficient to warrant the payment of any such premium.
As an exception to the above 1940 Act restrictions, the Fund does have
the authority to invest all of its assets in the securities of a single open-end
investment company with substantially the same fundamental investment objective,
restrictions and policies as that of the Fund. The Fund will notify its
shareholders prior to initiating such an arrangement.
LOANS OF PORTFOLIO SECURITIES
- -----------------------------
The CALIFORNIA INTERMEDIATE TAX-FREE FUND is authorized to make loans of
its portfolio securities to broker-dealers or to other institutional investors
up to 331/3% of its net assets. The borrower must maintain with the Fund's
custodian collateral consisting of cash, cash equivalents or U.S. Government
securities equal to at least 100% of the value of the borrowed securities, plus
any accrued interest. The Fund will receive any interest paid on the loaned
securities and a fee or a portion of the interest earned on the collateral. The
risks in lending portfolio securities, as with other extensions of secured
credit, consist of possible delay in receiving additional collateral or in the
recovery of the securities, or possible loss of rights in the collateral should
the borrower fail financially. The lender also may bear the risk of capital loss
on investment of the cash collateral, which must be returned in full to the
borrower when the loan is terminated. Loans will be made only to firms deemed by
the Advisor to be of good standing and will not be made unless, in the judgment
of the Advisor, the consideration to be earned from such loans would justify the
associated risk.
BORROWING
- ---------
The CALIFORNIA INTERMEDIATE TAX-FREE FUND may borrow from banks up to
30% of the value of its total assets for temporary or emergency purposes and
enter into reverse repurchase agreements. If the income and gains on securities
purchased with the proceeds of borrowings or reverse repurchase agreements
exceed
-13-
<PAGE> 36
the cost of such borrowings or agreements, the Fund's earnings or net asset
value will increase faster than otherwise would be the case; conversely, if the
income and gains fail to exceed the cost, earnings or net asset value would
decline faster than otherwise would be the case. If the 300% asset coverage
required by the 1940 Act should decline as a result of market fluctuation or
other reasons, the Fund may be required to sell some of its portfolio securities
within three days to reduce the borrowings and restore the 300% asset coverage,
even though it may be disadvantageous from an investment standpoint to sell
securities at that time.
INVESTMENT RESTRICTIONS
- -----------------------
The CALIFORNIA INTERMEDIATE TAX-FREE FUND has certain fundamental
policies that are described in the Statement of Additional Information under
"Investment Restrictions." These investment restrictions include prohibitions
against borrowing money (except as described above) and against concentrating
the Fund's investments in issuers conducting their principal business activities
in a single industry (except that this limitation does not apply with respect to
U.S. Government securities). In addition, a minimum of 80% of assets must be
invested in California municipal securities exempt from federal and California
income taxes and not subject to the alternative minimum tax on individuals.
These investment restrictions and the Fund's investment objective cannot be
changed without the approval of shareholders of the Fund; all other investment
practices described in this Prospectus and in the Statement of Additional
Information can be changed by the Board of Directors without shareholder
approval.
PORTFOLIO TURNOVER
- ------------------
The Funds expects to trade in securities for short-term gain whenever
deemed advisable by the Advisor in order to take advantage of anomalies
occurring in general market, economic or political conditions. Therefore, the
Fund may have a higher portfolio turnover rate than that of some other
investment companies, but it is anticipated that the annual portfolio turnover
rate of the Fund will not exceed 100%. The portfolio turnover rate is calculated
by dividing the lesser of sales or purchases of long-term portfolio securities
by the Fund's average month-end long-term investments. High portfolio turnover
involves correspondingly greater transaction costs in the form of dealer spreads
or brokerage commissions and other costs that the Fund will bear directly, and
may result in the realization of net capital gains, which are generally taxable
whether or not distributed to shareholders.
INVESTMENT LIMITATIONS OF THE FUNDS
-----------------------------------
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).
-14-
<PAGE> 37
(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, a Fund 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%.
(h) SECURITIES OF OTHER INVESTMENT COMPANIES: The Funds will not
invest in the securities of other investment companies.
(i) ISSUANCE OF SENIOR SECURITIES: The Funds are not authorized to
issue securities senior to the shares offered by each
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;
-15-
<PAGE> 38
(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 a 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 Advisor who own more
than 1/2 of 1%, own, in aggregate, more than 5% of the
outstanding securities of such issuer.
MANAGEMENT OF THE TRUST
-----------------------
TRUSTEES AND OFFICERS OF THE TRUST
- ----------------------------------
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, six 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
NAME, AGE POSITION(S) PRINCIPAL OCCUPATION(S) DURING THE
& ADDRESS HELD WITH PAST FIVE YEARS
TRUST
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
James F. Twaddell (59) Chairman of the Board; Investment Banker at Schneider
c/o Schneider Securities, Inc. Trustee since 1979 Securities, Inc. since June 1995;
2 Charles Street Chairman of the Board, Director and
Providence, RI 02904 Registered Representative of Barclay
Investment, Inc. until June 1995.
- -------------------------------------------------------------------------------------------------------
Robert H. Breslin, Jr. (70) Trustee since 1979; Partner in the law firm of Breslin &
107 Forge Road Member of Audit Sweeney, Warwick, RI. since 1970.
E. Greenwich, RI 02818 Committee
- -------------------------------------------------------------------------------------------------------
David P. Como(1) (52) Trustee since 1984; Managing Director, Trainer Wortham &
111 Pine Street President Co., Inc. since 1969.
3rd Floor
San Francisco, CA 94111
- -------------------------------------------------------------------------------------------------------
Raymond Eisenberg (75) Trustee since 1960; President of Raymond Eisenberg &
488 County Street Chairman of the Audit Associates, PC Accountants and
New Bedford, MA 02740 Committee Auditors, New Bedford, MA since 1980.
- -------------------------------------------------------------------------------------------------------
</TABLE>
-16-
<PAGE> 39
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
David Elias(1) (53) Trustee since 1991 President and Chief Investment Officer
500 Essjay Road of Elias Asset Management, Inc.,
Suite 220 Buffalo, NY since 1978.
Williamsville, NY 14221
- --------------------------------------------------------------------------------------------------------
Robert S. Lazar (54) Trustee since 1976; Retired in 1992, formerly an Engineer,
P.O. Box 4158 Member of the Audit Newport, RI; Director, Newport Federal
Middletown, RI 02842-0011 Committee Savings Bank, Newport, RI.
- --------------------------------------------------------------------------------------------------------
Martin S. Levine (45) Trustee since 1994; Controller and Chief Financial Officer
c/o John P. Picone, Inc. Member of the Audit of John P. Picone, Inc., Contractors
31 Garden Lane Committee and Engineers, Lawrence, NY, since
Lawrence, NY 11559 1984.
- --------------------------------------------------------------------------------------------------------
Berkeley Belknap Vice President Portfolio Manager and Research
111 Pine Street Analyst, received her BA degree in
3rd Floor History from Yale University in 1992;
San Francisco, CA 94111 Financial Analyst with Morgan Stanley
in the Investment Banking Division
from 1993 to 1995, option trader in
the Foreign Exchange Division from
1995 to 1996. Ms. Belknap joined
Trainer Wortham in 1997 and holds the
following licenses with the NASD:
Series 7 and 63.
- --------------------------------------------------------------------------------------------------------
Timothy J. O'Hara (48) Trustee since 1998 Publisher of CU Journal, a national
Faulkner & Gray weekly financial newspaper owned by
224 Datura Street Faulkner & Gray, Inc.
Suite 709
W. Palm Beach, FL 33401
- --------------------------------------------------------------------------------------------------------
Todd Eisenberg Trustee since July 1999 Managing Partner for Petitti, Eisenberg &
488 Pleasant Street Gamache, P.C. since 1982.
New Bedford, MA 02740
- --------------------------------------------------------------------------------------------------------
John D. Knox Vice President Fixed Income Portfolio Manager of
845 Third Avenue Trainer Wortham First Mutual Funds
6th Floor since 1994.
New York, NY 10022
- --------------------------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE> 40
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Debra L. Como (40) Secretary & Treasurer Mutual Fund and Marketing Distribution
111 Pine Street Agent for Trainer Wortham First Mutual
3rd Floor Funds from 1993 to present;
San Francisco, CA 94111 Vice-President & Director of Fund/Plan
Broker Services, Inc. from 1987 to
1993.
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) "Interested person" within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940. 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 Trainer
Wortham.
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 currently comprised of four
disinterested Trustees; under the Trust's By-laws, the President also serves as
an Ex-Officio member of the Audit Committee.
The following table sets forth information regarding the total
compensation paid by the Trust to its Trustees for their services as Trustees
during the fiscal year ended June 30, 1999.
COMPENSATION TABLE:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
NAME, AGE AGGREGATE TOTAL
& ADDRESS COMPENSATION COMPENSATION
FROM TRUST FROM TRUST AND FUND COMPLEX
- ------------------------------------------------------------------------------------
<S> <C> <C>
James F. Twaddell, $5,000 $5,000
Chairman
- ------------------------------------------------------------------------------------
Robert H. Breslin, Jr., $5,200 $5,200
Trustee, Member of Audit
Committee
- ------------------------------------------------------------------------------------
David P. Como(1), $ 0 $ 0
Trustee
- ------------------------------------------------------------------------------------
Raymond Eisenberg, $4,700 $4,700
Trustee, Chairman of the Audit
Committee
- ------------------------------------------------------------------------------------
</TABLE>
-18-
<PAGE> 41
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------
David Elias(1), $ 0 $ 0
Trustee
- ------------------------------------------------------------------------------------
Robert S. Lazar, $5,200 $5,200
Trustee, Member of Audit
Committee
- ------------------------------------------------------------------------------------
Martin S. Levine, $5,200 $5,200
Trustee, Member of Audit
Committee
- ------------------------------------------------------------------------------------
Berkeley Belknap, $ 0 $ 0
Vice President
- ------------------------------------------------------------------------------------
Timothy J. O'Hara, $ 0 $ 0
Trustee, Member of Audit
Committee
- ------------------------------------------------------------------------------------
Todd Eisenberg*, $ 0 $ 0
Trustee
- ------------------------------------------------------------------------------------
John D. Knox, $ 0 $ 0
Vice President
- ------------------------------------------------------------------------------------
Debra L. Como, $ 0 $ 0
Secretary & Treasurer
- ------------------------------------------------------------------------------------
</TABLE>
As of June 30, 1998, the compensation for disinterested Trustees
included a fee of $500 per meeting of the Board of Trustees attended and an
annual retainer of $3,000. In addition, the Trustees were reimbursed for
expenses incurred in connection with their attendance at meetings of the Board
of Trustees. 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
Mr. Como is an officer and/or trustee, receives fees from the Trust for acting
as its Investment Advisor. (See the section entitled "INVESTMENT ADVISOR.")
*Mr. Eisenberg was elected to the Board of Trustees on July 20, 1999 and
did not receive any compensation during the June 30, 1999 fiscal year.
-19-
<PAGE> 42
PRINCIPAL HOLDERS OF SECURITIES
-------------------------------
Listed below are the names and addresses of those shareholders and
accounts who, as of July 15, 1999, owned of record or beneficially 5% or more of
the shares of a Fund.
Persons or organizations owning 25% or more of the outstanding shares of
a Fund may be presumed to "control" (as that term is defined in the 1940 Act) a
Fund. As a result, these persons or organizations could have the ability to
approve or reject those matters submitted to the shareholders of such Fund for
their approval.
As of July 15, 1999, the Trustees and Officers of the Trust individually and as
a group owned beneficially less than 1.00% of the outstanding shares of any
Fund.
As of July 15, 1999, the following persons owned of record or beneficially more
than 5% of the outstanding voting shares of FIRST MUTUAL FUND:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES HELD PERCENTAGE
- ------------------------------------ ----------- ----------
<S> <C> <C>
Trainer Wortham Profit Sharing Trust 359,117.030 10.75%
c/o Trainer Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Perry R. Como 251,687.556 7.53%
c/o Trainer Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Semper Trust Co. c/f IRA r/o of 231,732.480 6.93%
Perry R. Como
c/o Trainer Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Semper Trust Co. c/f IRA r/o of 165,750.138 4.96%
Alice Stone Trainer
304 Pomperaug Woods
Southbury, CT 06488-1872
</TABLE>
As of July 15, 1999, the following persons owned of record or beneficially more
than 5% of the outstanding voting shares of TOTAL RETURN BOND FUND:
-20-
<PAGE> 43
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES HELD PERCENTAGE
- ------------------------------------ ----------- ----------
<S> <C> <C>
H. Williamson Ghriskey, Jr. 388,530.365 22.87%
TRST Margot Marsh Biodiversity Foundation
c\o Trainer Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
HW Mali Profit Sharing Ret Plan 189,212.468 11.13%
c\o Trainer Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Daniel U. Escaro 119,251.108 7.02%
TRST York Labs PSP
DTD N/A
c/o York Hospital
1001 S. George Street
York, PA 17405
AMSOUTH Bank 99,752.355 5.87%
TRST Tuscaloosa Ear Nose & Throat
Center PC Profit Sharing Plan
Walburn A/CC/O trainer Wortham & Co.
845 Third Avenue
New York, NY 10022-6601
</TABLE>
As of July 15, 1999, the following persons owned of record or beneficially more
than 5% of the outstanding voting shares of CALIFORNIA INTERMEDIATE TAX-FREE
FUND:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES HELD PERCENTAGE
- ------------------------------------ ----------- ----------
<S> <C> <C>
Catherine Sullivan 201,612.903 41.21%
55 Laurel Street
San Francisco, CA 94118
Richard & Cynthia Long Trust 120,000.000 24.53%
2395 Old Soda Springs Road
Napa, CA 94558
Charlotte Vaughn Winton 100,000.000 20.44%
3905 Clay Street
San Francisco, CA 94118
</TABLE>
-21-
<PAGE> 44
<TABLE>
<S> <C> <C>
Joseph Paige and May Paige JWROS 30,000.000 6.13%
60 Parkwood Drive
Atherton, CA 94027
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
--------------------------------------
THE INVESTMENT ADVISOR
- ----------------------
In 1981, 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 1998, 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 $3.0 billion in investment
accounts. The advisor is a wholly-owned subsidiary of First Republic Bank. First
Republic Bank is a commercial bank headquartered at 111 Pine Street, San
Francisco, California 94111, which is engaged in a general banking business and
it also provides private banking services. First Republic Bank has offices in
California, Nevada and New York City and has approximately $3.0 billion in
assets.
The Directors of the Advisor are: A. Alexander Arnold III, Katherine
August deWilde, David P. Como, James P. Conn, H. Williamson Ghriskey, Jr., James
H. Herbert, II, Charles V. Moore and Roger O. Walther. Mr. Como, Managing
Director of the Advisor, is the President and a Trustee 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 each
Fund's investment objectives, policies, and restrictions, the Advisor will
manage the Funds' 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.
Pursuant to individual Investment Advisory Agreements, with respect to
FIRST MUTUAL FUND and LARGE-CAP GROWTH 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 TOTAL RETURN BOND FUND and CALIFORNIA
INTERMEDIATE TAX-FREE 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 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.
For the fiscal years ended June 30, 1999, 1998 and 1997, with respect to
FIRST MUTUAL FUND, the Fund paid the Advisor fees aggregating $331,176, $280,113
and $235,424, respectively.
With respect to the TOTAL RETURN BOND FUND, for the fiscal year ended
June 30, 1999, the Advisor earned Investment Advisory fees of $63,531, of which
$36,141 were waived. For the fiscal year ended June
-22-
<PAGE> 45
30, 1998, the Advisor earned Investment Advisory fees of $45,382, all of which
it voluntarily waived. For the fiscal period October 1, 1996 (commencement of
operations) through June 30, 1997, the Advisor earned Investment Advisory fees
of $22,431, all of which it voluntarily waived.
With respect to the CALIFORNIA INTERMEDIATE TAX-FREE FUND, for the
period June 10, 1999 (commencement of operations) through June 30, 1999, the
Advisor earned Investment Advisory fees of $735, all of which it voluntarily
waived.
THE DISTRIBUTOR
- ---------------
First Data Distributors, Inc. ("FDDI"), 3200 Horizon Drive, P.O. Box
61503, King of Prussia, PA 19406-0903 serves as the Trust's Distributor pursuant
to an Underwriting Agreement (the "Underwriting Agreement"). FDDI is an
affiliated company of the Administrator, Investor Services Group, inasmuch as
both FDDI and Investor Services Group are under common ownership.
The Underwriting Agreement 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.
DISTRIBUTION AND SHAREHOLDER SERVICE PLAN
- -----------------------------------------
FIRST MUTUAL FUND and LARGE-CAP GROWTH FUND each have adopted a Plan of
Distribution (the "Plan" or "Plans") pursuant to Rule 12b-1 under the Act. The
Plans permit each Fund to pay certain expenses associated with the distribution
of its shares. The Plans provide that each Fund will reimburse FDDI 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.
In adopting each Plan, the Board of Trustees considered the likelihood
that the Plan is designed to benefit the 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 each Fund and their shareholders would benefit from the adoption of the
Plan.
Each Plan 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 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 a 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,
-23-
<PAGE> 46
including a majority of the disinterested trustees as described above. While a
Plan is in effect, the selection and nomination of a Fund's disinterested
Trustees is committed to the disinterested Trustees.
Each 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 a 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 Plans provide that FDDI 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, 1999, distribution expenses for FIRST MUTUAL FUND
were reimbursed as follows:
<TABLE>
<CAPTION>
EXPENSE ITEM AMOUNT
- ------------ ------
<S> <C>
Printing $ 9,023.37
Underwriter Compensation $16,405.03
Compensation to Broker Dealer's $ 3,303.16
Fulfillment Distribution Paid to Como Group $24,000.00
Marketing and Advertising $35,299.37
TOTAL 12B-1 EXPENSES *$88,030.93
</TABLE>
* Reimbursement to Plan for the fiscal year ended June 30, 1999 was
$15,623.75.
THE ADMINISTRATOR
- -----------------
First Data Investor Services Group, Inc., ("Investor Services Group")
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") Investor Services Group is an affiliate of the
Trust's Distributor, FPS Broker Services, Inc. Pursuant to the Administration
Agreement, Investor Services Group 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
-24-
<PAGE> 47
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 Investor Services Group.
The services Investor Services Group 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, Investor Services Group received
administration fees of $66,391 $59,915 and $55,489, for the fiscal years ended
June 30, 1999, 1998, and 1997, respectively. For the fiscal year ended June 30,
1999 and 1998 and for the fiscal period ended June 30, 1997, TOTAL RETURN BOND
FUND paid Investor Services Group administration fees of $ 20,116, $15,476 and
$9,270, respectively. For the period June 10, 1999 (commencement of operations)
to June 30, 1999, CALIFORNIA INTERMEDIATE TAX-FREE FUND paid Investor Services
Group administration fees of $3,478.
TRANSFER AGENT AND FUND ACCOUNTANT
- ----------------------------------
Investor Services Group 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 under the section entitled
"GENERAL INFORMATION" in the 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 Investor Services Group 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 Investor Services Group in the performance of
its duties or from reckless disregard of its obligations and duties thereunder.
The Trust pays Investor Services Group 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, Investor Services Group 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.
THE CUSTODIAN
- -------------
UMB Bank, n.a., 928 Grand Avenue, Kansas City, Missouri 64141, serves as
the Funds' Custodian pursuant to a Custody Agreement. In such capacity, the
Custodian holds or arranges for the holding of all portfolio securities and
other assets of the Funds.
-25-
<PAGE> 48
INDEPENDENT AUDITORS
- --------------------
Briggs, Bunting and Dougherty, LLP, 2121 Two Logan Square, 18th & Arch
Streets, Philadelphia, PA 19103-4901 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 Briggs, Bunting and
Dougherty, LLP.
BROKERAGE COMMISSIONS
- ---------------------
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 each 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
transaction. It is not the policy of the Funds to deal solely with one broker,
but it is each 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.
During the fiscal year ended June 30, 1999, 1998 & 1997, FIRST MUTUAL
FUND paid total brokerage commissions of $51,226, $77,023.60 and $99,150.57,
respectively. 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. During the
fiscal years ended June 30, 1999, 1998 and 1997 the Trust paid no such brokerage
commissions.
NET ASSET VALUE
---------------
As indicated in the Prospectus, the net asset value of each Fund is
determined and the shares of each Fund are priced as of the earlier of 4:00
p.m., Eastern Time, or the close of regular trading on the New York Stock
Exchange (the "Exchange"), on each Business Day. A "Business Day" is any day the
Exchange is open for regular business. Currently the Exchange is closed in
observance of the following holidays: New Year's Day, Martin Luther King, Jr.
Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas Day.
Valuations of securities purchased by the Funds are supplied by
independent pricing services used by Investor Services Group, as administrator,
which have been approved by the Trustees of the Trust. Equity securities which
are listed or admitted to trading on a national securities exchange or other
market trading system which reports actual transaction prices on a
contemporaneous basis will be valued at the last sales price on the exchange on
which the security is principally traded. Equity securities for which there is
no sale on that day and equity securities traded only in the over-the-counter
market will be valued at their closing bid prices obtained from one or more
dealers making markets for such securities or, if market quotations are not
readily available, at their fair value as determined in good faith by the Board
of Trustees.
Valuations of fixed and variable income securities ("debt securities")
are based upon a consideration of yields or prices of obligations of comparable
quality, coupon, maturity and type, indications at to value
-26-
<PAGE> 49
from recognized dealers, and general market conditions. The pricing services may
use electronic data processing techniques and/or a computerized matrix system to
determine valuations. Debt securities for which market quotations are readily
available are valued based upon those quotations.
The procedures used by the pricing service are reviewed by the officers
of the Trust under the general supervision of the Trustees. The Trustees may
deviate from the valuation provided by the pricing service whenever, in their
judgment, such valuation is not indicative of the fair value of the debt
security. In such instances the debt security will be valued at fair value as
determined in good faith by or under the direction of the Trustees.
SYSTEMATIC WITHDRAWAL PLAN
- --------------------------
Each Fund offers a Systematic Withdrawal Plan ("SWP") if you wish to
receive regular distributions from your account in that Fund. However, before
you can utilize the SWP, your account in the Fund must have a current value of
$5,000 or more, your dividend and distributions must be automatically reinvested
and your requested distribution must be $50 or more made on a monthly,
quarterly, semi-annual or annual basis.
Your automatic payments under the SWP will either be made by check
mailed to your address as shown on the books of the Transfer Agent to your bank
account designated on your Account Application form. An application form for the
SWP may be obtained by calling 1-800-441-6580. You may change or cancel the SWP
at any time, upon written notice to the Transfer Agent at least five days prior
to SWP withdrawal date for which you want such change or cancellation.
Please note that if your redemptions from a Fund exceed your dividends
from that Fund, your invested principal in the account may decrease. Thus
depending on the frequency and amounts of the withdrawals and/or any
fluctuations in the net asset value per share, your original investment could be
exhausted entirely using the SWP.
TAXES
-----
ALL FUNDS
- ---------
Each 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 Funds 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 their income and diversification of their assets.
Distributions paid by a Fund from capital gains, whether received in cash
or in additional shares, are taxable to investors as capital gains, regardless
of the length of time an investor has owned shares in the Fund. 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.
-27-
<PAGE> 50
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. The Fund is
required to withhold 31% of taxable dividends, capital gains distributions, and
redemptions paid to shareholders that 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.
CALIFORNIA INTERMEDIATE TAX-FREE FUND
- -------------------------------------
The Fund intends to invest in sufficient municipal securities so that it
will qualify to pay "exempt-income dividends" (as defined in the Code) to
shareholders. Exempt-interest dividends distributed to shareholders are not
includable in the shareholder's gross income for federal income tax purposes.
However, this favorable tax treatment may not apply to shareholders who are
"substantial users" (or "related persons" thereto) with respect to facilities
financed by securities held by the Fund.
To the extent that dividends are derived from interest on California
municipal securities, or from interest earnings on certain U.S. Government
obligations, and as long as at least 50% of the value of the total assets of the
Fund consists of bonds on which the interest is exempt from taxation under the
laws of California or the laws of the United States, such dividends will also be
exempt from California personal income taxes. For California income tax
purposes, capital gain distributions and any income from investment in taxable
securities (other than California municipal obligations and direct U.S.
Government obligations) are taxable as ordinary income. The Fund will inform
shareholders annually as to the portion of the distributions, which constitutes
dividends exempt from California personal income tax. All distributions received
by a corporation doing business in California may be subject to California
franchise taxes.
Interest income (in the form of dividends) exempt from federal income
tax is not necessarily exempt under the income or other tax laws of state and
local taxing authorities. Shareholders should consult their tax advisors about
the status of distributions from the Fund in this regard.
The Tax Reform Act of 1986 restricts the federal tax exemption for
interest earned on certain municipal obligations. Under that law, interest on
"private activity" municipal bonds (for example, those issued to finance housing
projects) issued after the effective date is an item of "tax preference" subject
to the individual Alternative Minimum Tax. It is the current intention of the
Fund not to purchase bonds that are subject to the individual Alternative
Minimum Tax. Shareholders will be given prior notification if the Fund intends
to change this policy. Corporate shareholders may wish to consult their tax
advisors before investing in the Fund, since some of the interest on municipal
bonds held in the Fund's portfolio may be included in income subject to the
corporate Alternative Minimum Tax.
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 a Fund, such as
total return, may be quoted in advertisements or in communications to
shareholders. These performance quotations represent a Fund's past
-28-
<PAGE> 51
performance, and should not be considered as representative of future results. A
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.
From time to time, a Fund may advertise its yield and "tax-equivalent"
yield. A Fund's yields are calculated according to methods that are standardized
for all mutual funds. Because yield calculation methods differ from the methods
used for other purposes, a Fund's yield may not equal its distribution rate, the
income paid to a shareholder s account, or the income reported in the Fund's
financial statements. The yield of a Fund refers to the income generated by an
investment in the Fund over a 30-day period (which period will be stated in the
advertisement). This income is then "annualized." That is, the amount of income
generated by the investment during that period is assumed to be generated each
30 days over a 365-day period and is shown as a percentage of the investment.
The Fund may also advertise together with its yield a tax-equivalent yield which
reflects the yield which would be required of a taxable investment at a stated
income tax rate in order to equal the Fund's yield.
A Fund's investment results will vary from time to time depending upon
market conditions, the composition of the Fund's portfolio, and operating
expenses of the Fund, so that any investment results reported by a Fund should
not be considered representative of what an investment in the Fund may earn in
any future period. These factors and possible differences in calculation methods
should be considered when comparing the Fund's investment results with those
published for other investment companies, other investment vehicles and
unmanaged indices. The comparison of a Fund to an alternative investment should
be made with consideration of differences in features and expected performance.
The Fund's may also be mentioned in newspapers, magazines, or other media from
time to time. The Fund's assume no responsibility for the accuracy of such data.
Each Fund's results also should be considered relative to the risks associated
with the Fund's investment objective and policies.
The principal value of an investment in a Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
CALCULATION OF TOTAL RETURN
- ---------------------------
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)"
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.
-29-
<PAGE> 52
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.
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, 1999 were 43.53%, 29.28% and 16.83%, respectively. The aggregate total
returns for the same five and ten year periods were 261.35% and 374.20%,
respectively. The total return for TOTAL RETURN BOND FUND for the one year
period ended June 30, 1999 was 2.79%. The average annual total return for the
TOTAL RETURN BOND FUND since its inception on Oct. 1, 1996 through June 30, 1999
was 5.66%.
A 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.
For the period ended June 30, 1999, TOTAL RETURN BOND FUND had a yield
of 4.77%. 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
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<PAGE> 53
generally a function of the kind and quality of the instruments held in a
portfolio, portfolio maturity, operating expenses and market conditions.
SHARES OF BENEFICIAL INTEREST
-----------------------------
DESCRIPTION OF SHARES
- ---------------------
The Trust is authorized to issue an unlimited number of shares of
beneficial interest with a par value of $0.001 per share. Shares a Fund
represent equal proportionate interests in the assets of that 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.
SHAREHOLDER MEETINGS
- --------------------
The Board of Trustees does not intend to hold annual meetings of
shareholders of the Fund. Subject to certain conditions, shareholders of the
Funds may seek to communicate with other shareholders to request a shareholder's
meeting to vote upon the removal of a Trustee or Trustees.
FINANCIAL STATEMENTS
--------------------
The audited financial statements and notes thereto for each Fund,
contained in the Annual Report to Shareholders dated June 30, 1999, are
incorporated by reference into this Statement of Additional Information and have
been audited by Briggs, Bunting and Dougherty, LLP., whose report also appears
in the Annual Report and is also incorporated by reference herein. No other
parts of the Annual Report are incorporated by reference herein. Such financial
statements and notes thereto have been incorporated herein in reliance on the
report of Briggs, Bunting and Dougherty, LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
-31-
<PAGE> 54
APPENDIX "A"
------------
DESCRIPTIONS OF SECURITIES RATINGS
-32-
<PAGE> 55
APPENDIX "A"
RATINGS OF SECURITIES
---------------------
COMMERCIAL PAPER RATINGS
- ------------------------
STANDARD & POOR'S CORPORATION:
Commercial paper ratings of Standard & Poor's Corporation ("S&P") are current
assessments of the likelihood of timely payment of debts having original
maturities of no more than 365 days. Commercial paper rated "A-1" by S&P
indicates that the degree of safety regarding timely payment is either
overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted "A-1+." Commercial paper rated "A-2" by S&P
indicates that capacity for timely payment on issues is strong. However, the
relative degree of safety is not as high as for issues designated "A-1."
MOODY'S INVESTORS SERVICE, INC.:
The rating "Prime-1" is the highest commercial paper rating assigned by Moody's
Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated "Prime-2" (or
related supporting institutions) have a strong capacity for repayment of
short-term promissory obligations.
This will normally be evidenced by many of the characteristics of "Prime-1"
rated issuers, but to a lesser degree. Earnings trends and coverage ratios,
while sound, will be more subject to variations. Capitalization characteristics,
while still appropriate, may be more affected by external conditions.
Ample alternative liquidity is maintained.
FITCH IBCA:
Commercial paper rated "F-1" by Fitch IBCA ("Fitch") is regarded as having the
strongest degree of assurance for timely payments. Commercial paper rated "F-2"
by Fitch is regarded as having an assurance of timely payment only slightly less
than the strongest rating, i.e., "F-1." The plus (+) sign is used after a rating
symbol to designate the relative position of an issuer within the rating
category.
CORPORATE DEBT RATINGS
- ----------------------
STANDARD & POOR'S CORPORATION:
An S&P corporate debt rating is a current assessment of the creditworthiness of
an obligor with respect to a specific obligation. Debt rated "AAA" has the
highest rating assigned by S&P. Capacity to pay interest and repay principal is
extremely strong. Debt rated "AA has a very strong capacity to pay interest and
to repay principal and differs from the highest rated issues only in small
degree. Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories. Debt
rated "BBB" is regarded as having an adequate capacity to pay interest and repay
principal. Whereas it normally exhibits adequate
-33-
<PAGE> 56
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories. Debt rated "BB" and
"B" is regarded as having predominantly speculative characteristics with respect
to capacity to pay interest and repay principal. "BB" indicates the least degree
of speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major exposures
to adverse conditions. Debt rated "BB" has less near-term vulnerability to
default than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or economic conditions
which could lead to inadequate capacity to meet timely interest and principal
payments. The "BB" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BBB" rating. Debt rated "B" has a
greater vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The "B" rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied "BB" or "BB-" rating.
MOODY'S INVESTORS SERVICE, INC.:
The following summarizes the six highest ratings used by Moody's for corporate
debt. Bonds that are rated "Aaa" by Moody's are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues. Bonds
that are rated "Aa" are judged to be of high quality by all standards. Together
with the "Aaa" group, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in "Aaa" securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in "Aaa" securities. Bonds that
are rated "A" by Moody's possess many favorable investment attributes and are to
be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future. Bonds that
are rated "Baa" by Moody's are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well. Bonds that are rated "Ba" are
judged to have speculative elements; their future cannot be considered as well
assured. Often the protection of interest and principal payments may be very
moderate and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this class. Bond
which are rated "B" generally lack characteristics of the desirable investment.
Assurance of interest and principal payments or of maintenance of other terms of
the contract over any long period of time may be small. Moody's applies
numerical modifiers (1, 2, and 3) with respect to bonds rated "Aa" through "B."
The modifier 1 indicates that the bond being rated ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the bond ranks in the lower end of its generic
rating category.
-34-
<PAGE> 57
DUFF & PHELPS, INC.:
The following summarizes the six highest long-term debt ratings by Duff &
Phelps, Inc. ("Duff"). Debt rated "AAA" has the highest credit quality. The risk
factors are negligible being only slightly more than for risk-free U.S. Treasury
debt. Debt rated "AA" has a high credit quality and protection factors are
strong. Risk is modest but may vary slightly from time to time because of
economic conditions. Debt rated "A" has protection factors that are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress. Debt rated "BBB" has below average protection factors but is
still considered sufficient for prudent investment. However, there is
considerable variability in risk during economic cycles. Debt rated "BB" is
below investment-grade but deemed likely to meet obligations when due. Present
or prospective financial protection factors fluctuate according to industry
conditions or company fortunes. Overall quality may move up or down frequently
within this category. Debt rated "B" is below investment-grade and possesses
risk that obligations will not be met when due. Financial protection factors
will fluctuate widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the rating within
this category or into a higher or lower rating grade. To provide more detailed
indications of credit quality, the ratings from "AA" to "B" may be modified by
the addition of a plus (+) or minus (-) sign to show relative standing within
this major rating category.
FITCH IBCA:
The following summarizes the six highest long-term debt ratings by Fitch
IBCA(except for "AAA" ratings, plus(+) or minus (-) signs are used with a rating
symbol to indicate the relative position of the credit within the rating
category). Bonds rated "AAA" are considered to be investment-grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and repay principal, which is unlikely to be affected by reasonably
foreseeable events. Bonds rated "AA" are considered to be investment-grade and
of very high credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds rated "AAA."
Because bonds rated in the "AAA" and "AA" categories are not significantly
vulnerable to foreseeable future developments, short-term debt of these issues
is generally rated "F-1+." Bonds rated as "A" are considered to be
investment-grade and of high credit quality. The obligor's ability to pay
interest and repay principal is considered to be strong, but may be more
vulnerable to adverse changes in economic conditions and circumstances than
bonds with higher ratings. Bonds rated "BBB" are considered to be
investment-grade and of satisfactory credit quality. The obligor's ability to
pay interest and repay principal is considered to be adequate. Adverse changes
in economic conditions and circumstances, however, are more likely to have
adverse impact on these bonds, and therefore, impair timely payment. The
likelihood that the ratings for these bonds will fall below investment-grade is
higher than for bonds with higher ratings. Bonds rated "BBB" are considered
speculative. The obligor's ability to pay interest and repay principal may be
affected over time by adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in satisfying its
debt service requirements. Bonds rated "B" are considered highly speculative.
While bonds in this class are currently meeting debt service requirements, the
probability of continued timely payment of principal and interest reflects the
obligor's limited margin of safety and the need for reasonable business and
economic activity throughout the life of the issue.
-35-
<PAGE> 58
THOMPSON BANKWATCH, INC.:
The following summarizes the six highest long-term debt ratings by Thompson
BankWatch, Inc. ("Thompson"). "AAA" is the highest category and indicates that
the ability to repay principal and interest on a timely basis is very high. "AA"
is the second highest category and indicates a superior ability to repay
principal and interest on a timely basis with limited incremental risk versus
issues rated in the highest category. "A" is the third highest category and
indicates the ability to repay principal and interest is strong. Issues rated
"A" could be more vulnerable to adverse developments (both internal and
external) than obligations with higher ratings. "BBB" is the lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings. While not investment-grade, the "BB" rating suggests that the
likelihood of default is considerably less than for lower-rated issues. However,
there are significant uncertainties that could affect the ability to adequately
service debt obligations. Issuer rated "B" show a higher degree of uncertainty
and therefore greater likelihood of default that higher rated issuers. Adverse
developments could well negatively affect the payment of interest and principal
on a timely basis. Thomson may include a plus (+) or minus (-) designation to
indicate where within the respective category the issue is placed.
-36-
<PAGE> 59
TRAINER WORTHAM FIRST MUTUAL FUNDS
FORM N-1A
PART C: OTHER INFORMATION
Item 23.
(a) Agreement and Declaration of Trust dated October 18, 1994, last
amended July 25, 1996 -- Incorporated herein by reference to
Exhibit No. 1(a) to Post-Effective Amendment No. 56 to
Registration Statement No. 2-15037 filed electronically
September 30, 1996.
(b) 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 Statement No.
2-15037 filed electronically September 30, 1996.
(c) None
(d) (i) 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.
(ii) 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.
(iii) Investment Advisory Agreement for TRAINER WORTHAM
CALIFORNIA INTERMEDIATE TAX-FREE FUND between Registrant
and Trainer Wortham & Co., Inc. dated April 29, 1999
--Incorporated herein by reference to Exhibit No. 5(d)
to Post-Effective Amendment No. 61 to Registration
Statement No. 2-15037 filed electronically June 1, 1999.
(iv) Investment Advisory Agreement for TRAINER WORTHAM
LARGE-CAP GROWTH FUND -- to be filed by amendment.
(e) (ii) Underwriting Agreement between Registrant and First Data
Distributors, Inc. dated January 1, 1999 - Incorporated
herein by reference to Exhibit No. 6(b) to
Post-Effective Amendment No.60 to Registration Statement
No. 2-15037 filed electronically March 16, 1999.
(f) None.
(g) (i) 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.
(ii) 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.
(h) (i) 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.
(a) Amendment to Administration Agreement dated
April 28, 1998 - Incorporated herein by
reference to Exhibit No. 9(a)(i) to
Post-Effective Amendment No. 59 to Registration
Statement No. 2-15037 filed electronically
October 30, 1998.
-1-
<PAGE> 60
(ii) 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.
(a) Amendment to Accounting Services Agreement dated
April 28, 1998 - Incorporated herein by
reference to Exhibit No. 9(b)(i) to
Post-Effective Amendment No. 59 to Registration
Statement No. 2-15037 filed electronically
October 30, 1998.
(iii) 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.
(a) Amendment to Transfer Agent Services Agreement
dated April 28, 1998 - Incorporated herein by
reference to Exhibit No. 9(c)(i) to
Post-Effective Amendment No. 59 to Registration
Statement No. 2-15037 filed electronically
October 30, 1998.
(i) Consent of Dechert Price & Rhoads -- Not Applicable.
(j) Consent of Briggs, Bunting & Dougherty, LLP - To be filed by
amendment.
(k) Not Applicable.
(l) None.
(m) (i) Distribution (12b-1) Plan for FIRST MUTUAL FUND, with
Fund/Plan Broker Services, Inc., dated October 31, 1991
-- Incorporated herein by reference to Exhibit No. 15(a)
to Post-Effective Amendment No. 56 to Registration
Statement No. 2-15037 filed electronically September 30,
1996.
(ii) Distribution (12b-1) Plan for LARGE-CAP GROWTH FUND,
with First Data Distributors, Inc., dated April 29,
1999 -- to be filed by amendment.
(n) Financial Data Schedules -- Not applicable
(o) None.
(p) Powers-of-Attorney -- Filed herewith.
Item 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None.
Item 25. 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 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
willful misfeasance, bad
-2-
<PAGE> 61
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,
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 26. 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 June 30, 1999 supervised approximately $3.0 billion in
investment accounts.
The company is a wholly owned subsidiary of First
Republic Bank of San Francisco, California. The business
and other connections of the officers and directors of
Trainer Wortham & Co., are set forth in the Form ADV of
Trainer Wortham & Co., as currently on file with U.S.
Securities and Exchange Commission, and which is
incorporated by reference herein.
Item 27. Principal Underwriter
---------------------
(a) First Data Distributors, Inc., the principal underwriter for
the Registrant's securities, currently acts as principal
underwriter for the following entities:
The Galaxy Fund
Galaxy Fund II
The Galaxy VIP Fund
Alleghany Funds (f/k/a CT&T Funds)
-3-
<PAGE> 62
Wilshire Target Funds, Inc.
The Potomac Funds
Panorama Trust
First Choice Funds Trust
Undiscovered Managers Fund
LKCM Funds
BT Insurance Funds Trust
ABN AMRO Funds (f/k/a Rembrandt Funds)
IBJ Funds Trust
ICM Series Trust
Forward Funds, Inc.
Light Index Funds, Inc.
WorldWide Index Funds
Weiss, Peck & Greer Funds Trust
Weiss, Peck & Greer International Fund
WPG Growth Fund
WPG Growth and Income Fund
WPG Tudor Fund
RWB/WPG U.S. Large Stock Fund
Tomorrow Funds Retirement Trust
The Govett Funds, Inc.
IAA Trust Growth Fund, Inc.
IAA Trust Asset Allocation Fund, Inc.
IAA Trust Tax Exempt Bond Fund, Inc.
IAA Trust Taxable Fixed Income Series Fund, Inc.
Matthews International Funds
McM Funds
Metropolitan West Funds
Smith Breeden Series Fund
Smith Breeden Trust
The Stratton Funds, Inc.
Stratton Growth Fund, Inc.
Stratton Monthly Dividend REIT Shares, Inc.
Trainer Wortham First Mutual Funds
(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
3200 Horizon Drive
King of Prussia, PA 19406-0903
Lynne M. Cannon Vice President and None
3200 Horizon Drive Principal
King of Prussia, PA 19406-0903
Rocco J. Cavalieri Director and None
3200 Horizon Drive Vice-President
King of Prussia, PA 19406-0903
Gerald J. Holland Director, Vice- None
3200 Horizon Drive President and
King of Prussia, PA 19406-0903 Principal
</TABLE>
-4-
<PAGE> 63
<TABLE>
<S> <C> <C>
Sandra L. Adams Principal None
3200 Horizon Drive
King of Prussia, PA 19406-0903
Bruno DiStefano Principal None
3200 Horizon Drive
King of Prussia, PA 19406-0903
Mary P. Efstration Secretary None
3200 Horizon Drive
King of Prussia, PA 19406-0903
</TABLE>
(c) None
Item 28. 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) First Data Investor Services Group, 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) Dechert Price & Rhoads, 1775 Eye Street N.W.,
Washington, DC 20006 (Articles of Association,
By-Laws and Minute Books).
(5) First Data Investor Services Group, Inc. and
First Data Distributors, 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 29. Management Services
-------------------
None
Item 30. Undertakings
------------
None
-5-
<PAGE> 64
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 62 to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in King of Prussia, PA on August 5, 1999.
TRAINER WORTHAM FIRST MUTUAL FUNDS
David P. Como*
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this 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 August 5, 1999
Board and Trustee
*Debra L. Como Secretary and Treasurer August 5, 1999
*Robert S. Lazar Trustee August 5, 1999
*David Elias Trustee August 5, 1999
*Raymond Eisenberg Trustee August 5, 1999
*Robert H. Breslin, Jr. Trustee August 5, 1999
*Timothy J. O'Hara Trustee August 5, 1999
*Todd Eisenberg Trustee August 5, 1999
</TABLE>
* By: /s/ Kelly O'Neill
---------------------------------------------
Kelly O'Neill, as Attorney-in-Fact
pursuant to Power-of-Attorney
-6-
<PAGE> 1
99.B INDEX TO EXHIBITS FILED PURSUANT TO FORM N-1A
POWER OF ATTORNEY
<PAGE> 2
EXHIBIT 99 B (P)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ David P. Como
- ---------------------------
David P. Como, President
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________ , 199_, by David P. Como, President of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 3
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ James F. Twaddell
- ---------------------------
James F. Twaddell, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by James F. Twaddell, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 4
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ Robert H. Breslin
- ---------------------------
Robert H. Breslin, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by Robert H. Breslin, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 5
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ Raymond Eisenberg
- ---------------------------
Raymond Eisenberg, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by Raymond Eisenberg, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 6
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ David Elias
- ---------------------------
David Elias, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by David Elias, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 7
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ Robert S. Lazar
- ---------------------------
Robert S. Lazar, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by Robert S. Lazar, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 8
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ Martin S. Levine
- ---------------------------
Martin S. Levine, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by Martin S. Levine, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 9
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ Timothy J. O'Hara
- ---------------------------
Timothy J. O'Hara, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by Timothy J. O'Hara, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
<PAGE> 10
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ Debra L. Como
- ---------------------------
Debra L. Como, Secretary & Treasurer
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by Debra L. Como, Secretary & Treasurer of Trainer
Wortham First Mutual Funds.
Notary Public
<PAGE> 11
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned constitutes and
appoints GERALD J. HOLLAND, CAROLYN F. MEAD, ESQ., KELLY O'NEILL and DEBORAH ANN
POTTER, and each of them, with full power to act without the other, as a true
and lawful attorney-in-fact and agent, with full and several power of
substitution, to sign any Registration Statement, or amendment thereto of
TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") to be filed with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended,
and the Securities Act of 1933, as amended; and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the U.S.
Securities and Exchange Commission; and to take any appropriate action to
qualify or register all or part of the securities of the Trust for sale in
various states; granting to such attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act requisite and
necessary to be done in connection therewith, as fully as that person might or
could do in person, hereby ratifying and confirming all that such
attorneys-in-fact and agents or any of them, or any substitute or substitutes,
may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney on the
day of ____________, 199_.
/s/ Todd L. Eisenberg
- ---------------------------
Todd L. Eisenberg, Trustee
ACKNOWLEDGEMENT
---------------
State of ________________________ )
) ss:
County of _______________________ )
The foregoing instrument was acknowledged before me this ____ day of
__________________, 199_, by Todd L. Eisenberg, Trustee of Trainer Wortham First
Mutual Funds.
Notary Public
