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TRAINER WORTHAM FUNDS
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845 THIRD AVENUE, 6TH FLOOR
NEW YORK, NY 10022
(800) 257-4414
TRAINER WORTHAM CALIFORNIA INTERMEDIATE TAX-FREE FUND
PROSPECTUS JUNE 1, 1999
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TRAINER WORTHAM FIRST MUTUAL FUNDS (the "Trust") is an open-end management
investment company which currently offers shares of three series: FIRST MUTUAL
FUND, TRAINER WORTHAM TOTAL RETURN BOND FUND AND TRAINER WORTHAM CALIFORNIA
INTERMEDIATE TAX-FREE FUND (individually and collectively, the "Fund(s)"). Each
Fund has distinct investment objectives and policies. Trainer Wortham & Co.,
Inc., (the "Advisor") a wholly-owned subsidiary of First Republic Bank, serves
as the Fund's Investment Advisor.
This Prospectus pertains only to the TRAINER WORTHAM CALIFORNIA INTERMEDIATE
TAX-FREE FUND (the "Fund"). The Fund seeks to obtain as high a level of interest
income exempt from federal income tax and California personal income tax as is
consistent with prudent investment management.
There can be no assurance that the Fund will achieve its investment objective.
The Fund is a non-diversified fund as defined by the Investment Company Act of
1940, as amended (the "1940 Act"). Shares of the Fund are offered without a
sales charge.
The minimum initial investment for the Fund is $250. Subsequent investments will
be accepted in minimum amounts of $50.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. Investors should read this Prospectus
and retain it for future reference. Additional information about the Fund,
contained in a Statement of Additional Information dated October 30, 1998 as
revised on June 1, 1999, has been filed with the Securities and Exchange
Commission and is available upon request without charge by calling or writing to
the Fund at the telephone number or address shown above. The Statement of
Additional Information bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus. Additionally,
the Securities and Exchange Commission maintains a website (http:\www.sec.gov)
that contains the Statement of Additional Information, material incorporated by
reference into this Prospectus, and other information regarding the Trust and
its Funds which is filed electronically with the Securities and Exchange
Commission.
Shares of the Fund are not deposits or obligations of, or insured, guaranteed or
endorsed by, any bank, the Federal Deposit Insurance Corporation, the Federal
Reserve Board, or any other agency, entity or person. The purchase of Fund
shares involves investment risks including the possible loss of principal.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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TABLE OF CONTENTS
<TABLE>
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SUBJECT PAGE
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Expense Information......................................... 3
Investment Objectives and Policies.......................... 4
Investment Strategies and Risk Considerations............... 4
Management of the Trust..................................... 8
Board of Trustees......................................... 8
Investment Advisor........................................ 8
Administrator............................................. 9
Distributor............................................... 9
Transfer Agent/Accounting Services Agent.................. 9
Custodian................................................. 9
Brokerage................................................... 9
Purchase of Shares.......................................... 10
Redemption of Shares........................................ 11
Exchange of Shares.......................................... 12
Shareholder Services........................................ 13
Net Asset Value............................................. 13
Dividends and Taxes......................................... 14
Performance Information..................................... 15
General Information......................................... 16
</TABLE>
<TABLE>
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UNDERWRITER: INVESTMENT ADVISOR:
First Data Distributors, Inc. Trainer Wortham & Co., Inc.
4400 Computer Drive 845 Third Avenue
Westborough, MA 01581 New York, NY 10022
(800) 257-4414 (800) 775-0604
</TABLE>
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FOR MORE DETAILED INFORMATION ABOUT THE ITEMS DISCUSSED IN THIS PROSPECTUS, A
COPY OF THE STATEMENT OF ADDITIONAL INFORMATION MAYBE OBTAINED WITHOUT CHARGE BY
WRITING TO THE FUND AT 845 THIRD AVENUE, 6TH FLOOR, NEW YORK, NY 10022, OR BY
CALLING (800) 257-4414.
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EXPENSE INFORMATION
Below is a summary of the operating expenses for the Fund. A hypothetical
example based on the summary is also shown.
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<TABLE>
<CAPTION>
CALIFORNIA INTERMEDIATE
TAX-FREE FUND
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Shareholder Fees:(1)
(fees paid directly from your investment)................... None
Annual Fund Operating Expenses:
(expenses that are deducted from Fund assets)...............
Management Fees............................................. 0.45%
Distribution and Services...................................
(12b-1) Fees................................................ None
Other Expenses.............................................. 0.81%
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Total Annual Operating Expenses............................. 1.26%(2)
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Less Fee Waiver and/or Expense Reimbursement................ (0.51%)
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Net Annual Operating Expenses............................... 0.75%(3)
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</TABLE>
(1) A $9 wire redemption charge deducted from the amount of each redemption of
Fund shares you request by Federal Reserve wire.
(2) These are estimated gross fees and expense that would have been incurred for
the Fund's first fiscal year if Trainer Wortham & Co., Inc., the Advisor did
not waive any fees and/or reimbursement expenses.
(3) These are net fees and expenses that the Fund will incur for its first full
fiscal year ending June 30, 2000 because Trainer Wortham & Co., Inc. has
voluntarily and contractually agreed to waive advisory fees and/or
reimburse, to the extent necessary to maintain each Fund's Net Annual
Operating Expenses at the levels shown in the above table. This undertaking
shall continue for additional one-year terms absent 60 days notice form
Trainer Wortham & Co., Inc.
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EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds. The example assumes that:
- - You invest $1,000 in a Fund for the time periods indicated;
- - You redeem all of your shares at the end of each time period;
- - Your investment has a hypothetical 5% return each year;
- - All dividends are reinvested; and
- - The Fund operating expenses for the one year period are calculated net of any
fee waivers and/or expenses assumed, and the Fund operating expenses for the
three year, five year and ten year periods do not reflect fee waivers and/or
expenses assumed.
This example is for comparison purposes only. Actual return and expenses will be
different and the Fund's performance and expenses may be higher or lower. Based
on the above assumptions, your costs for the Fund would be:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
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<S> <C> <C> <C> <C>
Trainer Wortham California Intermediate Tax-Free Fund.... $8 $38 $66 $145
</TABLE>
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3
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INVESTMENT OBJECTIVES AND POLICIES
TRAINER WORTHAM CALIFORNIA
INTERMEDIATE TAX-FREE FUND:
The investment objective of the Fund is to seek to obtain as high a level of
interest income exempt from federal income tax and California personal income
tax as is consistent with prudent investment management. The Fund seeks to
achieve its objective by investing in debt securities, the interest income,
which is not includable in gross income for federal income tax purposes ("exempt
from federal income tax") and is exempt from California personal income taxes.
There is no assurance that the Fund will achieve its investment objective. A
portion of the income received from the Fund may be included in the calculation
of the federal alternative minimum tax. The Fund may also invest in open-end and
closed-end investment companies that invest in securities whose income is exempt
from federal income tax and California personal income tax. It is the current
intention of the Fund to limit its investment in such investment companies to
not more than 5% of its net assets. Income received from these investments is
exempt from federal, but not California tax.
The term "municipal securities" as used in this Prospectus means obligations
issued by or on behalf of states, territories and possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities. The term "California municipal securities" as used herein
refers to obligations that are issued by or on behalf of the State of California
and its political subdivisions. An opinion as to the tax-exempt status of the
interest paid on a municipal security is rendered to the issuer by the issuer's
bond counsel at the time of the issuance of the security.
The Fund invests primarily in California municipal securities that generally
have 3 to 20 years remaining to maturity at the time of acquisitions. The
dollar-weighted average portfolio maturity is expected to range from 3 to 10
years. The Fund restricts its municipal securities investments to those within
or a quality comparable to the four highest rating classifications of Moody's
Investors Service, Inc. ("Moody's") or the Standard & Poor's Ratings Group
("S&P"). Municipal bonds and notes and tax-exempt commercial paper would have,
at the date of purchase by the Fund, Moody's ratings of Aaa, Aa, A or Baa; MIG
1/VMIGI or MIG2/VMIG2; P-1; or S&P's ratings of AAA, AA, A, or BBB; SP-1+, SP-1,
or SP-2; A-1+ or A-1, respectively. Due to the risks inherent in any investment
program, the Fund cannot ensure that its investment objective will be realized.
The Fund's net asset value per share will fluctuate as market conditions change.
Securities ratings are the opinions of the ratings agencies issuing them and are
not absolute standards of quality. Because of the cost of ratings, certain
issuers do not obtain a rating for each issue. The Fund may purchase uncrated
municipal securities that the Advisor determines to have a credit quality
comparable to that required for investment by the Fund (see the discussion of
securities ratings above).
Securities which are rated BBB by S&P or Baa by Moody's are considered
investment grade, but are more likely to have speculative characteristics, and
changes in economic conditions may lead to a weakened capacity to make principal
and interest payments than is the case with higher rated securities. As a matter
of operating policy, not more than 25% of the Fund's investments (other than
those guaranteed by the U.S. Government or any of its agencies or
instrumentalities) may be unrated securities. Such percentage shall apply only
at the time of acquisition of a security. To the extent that unrated municipal
securities may be less liquid, there may be somewhat greater market risk
incurred in purchasing them than in purchasing comparable rated securities. Any
unrated securities deemed to be not readily marketable by the Board of Trustees
will be included in the calculation of the limitation of 15% of net assets which
may be invested in illiquid securities and other assets.
INVESTMENT STRATEGIES AND
RISK CONSIDERATIONS
Shareholders should understand that all investments involve risk and there can
be no guarantee against loss resulting from an investment in the Fund, nor can
there be any assurance that any Funds investment objective will be attained.
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The 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. Since the Fund invests primarily in California municipal
securities, it may be advantageous to be able to invest more than 5% of such
assets in the securities of a particular issuer. This may result in additional
risk since changes in the value of the securities of one issuer may affect the
value of the Fund to a greater extent than would be the case with a diversified
fund. See "Special Risk Considerations in California." The Fund has qualified
and intends to continue to qualify to be treated as a "regulated investment
company" for purposes of the Internal Revenue Code ("the Code") and meet the
Code's separate requirements for portfolio diversification. See discussion of
taxes in "Dividends, Distributions and Income Taxation."
As a fundamental policy (i.e., the policy will not be changed without a majority
vote of its shareholders) the Fund will, under normal circumstances, invest up
to 100%, and not less than 80%, of its net assets in California municipal
securities, the interest on which is exempt from federal income tax and
California personal income tax and are not subject to the alternative minimum
tax. The Fund reserves the right to invest up to 20% of its net assets in
taxable U.S. Treasury securities which are secured by the "full faith and
credit" pledge of the U.S. Government, and in municipal securities of other
states which, although exempt from federal income taxes, are not exempt from
California income taxes. For temporary defensive purposes the Fund may invest in
excess of 20% of its net assets in these securities.
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 Trustees, that such securities are
liquid. If held by the 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 Trustees determines that such a security is not
illiquid, the Advisor will limit its 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 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
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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.
WHEN-ISSUED SECURITIES AND FIRM COMMITMENT AGREEMENTS
The 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 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 incor-
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rectly, 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.
SHARES OF INVESTMENT COMPANIES
The 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 Fund is authorized to make loans of its portfolio securities to
broker-dealers or to other institutional investors up to 33 1/3% 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.
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BORROWING
The 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 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 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 Trustees without shareholder approval.
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES
Under Delaware law, the business and affairs of the Trust are managed under the
direction of the Board of Trustees. There are currently eight Trustees, 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. The Statement of Additional
Information contains the name and background information regarding each Trustee.
INVESTMENT ADVISOR
Trainer Wortham & Co., Inc. (the "Advisor"), with offices at 845 Third Avenue,
New York, NY 10022 is the Trust's Investment Advisor and manager and is
registered as an investment 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 billion in investment accounts.
Pursuant to an Investment Advisory Agreement with the Trust on behalf of
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 these fees and/or
voluntarily assume certain Fund expenses, which would have the effect of
lowering the Fund's expense ratio and increasing the yield to investors at the
time such amounts are waived or assumed, as the case may be. The Fund will not
reimburse the Advisor at a later time for the expenses assumed.
Subject to the general supervision of the Board of Trustees, and in accordance
with the Fund's investment objectives, policies, and restrictions, the Advisor
manages the Fund's investment portfolios, makes decisions with respect to and
places orders for all purchases and sales of the portfolio securities. David P.
Como is the President of the Trust. John D. Knox is the Vice-President and
Portfolio Manager of the California Intermediate Tax-Free Fund. Mr. Knox joined
Trainer Wortham in December, 1995 as the Managing Director of Fixed Income.
Prior to joining Trainer Wortham, Mr. Knox served as Director of Global Fixed
Income and Managing Director from 1994-1995 for Bear Stearns Asset Management
and Bear Stearns, respectively. For more than 11 years prior thereto, Mr. Knox
was a Principal and Senior Portfolio Manager at Morgan
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Stanley Asset Management where he managed fixed income portfolios for a variety
of domestic and international clients.
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 provides
private banking services. First Republic Bank has offices in California, Nevada
and New York City and has approximately $3 billion in total net assets.
ADMINISTRATOR
First Data Investor Services Group, Inc. ("Investor Services Group"), a
wholly-owned subsidiary of First Data Corporation, which has its principal
business address at 4400 Computer Drive, Westborough, MA 01581, serves as
administrator of the Fund. The services that Investor Services Group provides to
the Fund include: coordinating and monitoring of any third parties furnishing
services; providing the necessary office space, equipment and personnel to
perform administrative and clerical functions; preparing, filing and
distributing of proxy materials, periodic reports to shareholders, registration
statements and other documents; organizing of board meetings; and responding to
shareholder inquiries.
The Trust, on behalf of the Fund, has entered into an administrative services
agreement dated July 25, 1996, as amended April 29, 1999 (the "Administration
Agreement") with First Data Investor Services Group, Inc., 3200 Horizon Drive,
P.O. Box 61503, King of Prussia, PA 19406-0903, pursuant to which the
Administrator receives a fee accrued daily and paid monthly of 0.15% of the
value of such Fund's first $50 million of total average net assets; 0.10% of the
value of the Fund's next $50 million of total average net assets; and 0.05% of
the value of the Fund's total average net assets in excess of $100 million,
subject to an annual minimum fee of $72,000 for the Trust.
The term of the Administration Agreement is two years and shall continue in
force year thereafter, so long as such continuance is approved (i) by Investor
Services Group; (ii) by vote, cast in person at a meeting called for the
purpose, of a majority of the Board of Trustees who are not parties to the
Administration Agreement or interested persons (as defined in the Act) of any
such party, and (iii) by vote of a majority of the Board of Trustees or a
majority of the Fund's outstanding voting securities. The Trust and/or Investor
Services Group may terminate the Administration Agreement at any time without
penalty upon giving the other party 120 days written notice.
DISTRIBUTOR
First Data Distributors, Inc. ("FDDI"), serves as the Fund's Distributor on a
best efforts basis. FDDI is an affiliated company of Investor Services Group
inasmuch as both are under common ownership.
TRANSFER AGENT AND ACCOUNTING SERVICES AGENT
Investor Services Group also serves as the Fund's Transfer Agent, Dividend
Disbursing Agent, Redemption Agent and Accounting Services Agent. In such
capacities, Investor Services Group is responsible for providing record-keeping
and administrative services (including calculation of net asset value) and for
processing share purchases and redemptions. Correspondence relating to purchases
and redemptions of Fund shares or to dividend payments or reinvestment should be
addressed to First Data Investor Services Group, Inc.
CUSTODIAN
UMB Bank, N/A., Kansas City, Missouri, is Custodian for the securities and cash
of the Fund.
BROKERAGE
The Advisor will attempt to place portfolio transactions for the Fund with those
brokers and dealers who will execute orders in an effective manner at the most
favorable price. When the execution and price offered by two or more brokers or
dealers are comparable, the Advisor may, in its discretion, purchase and sell
portfolio securities to and from brokers and dealers who provide research advice
and other services. The Advisor may give consideration to the sale of shares of
the Fund as a factor in the selection of brokers and dealers to execute
portfolio transactions subject to seeking best price and execution. The Fund may
pay brokerage commissions to brokers, which are affiliated with Of-
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ficers and Trustees of the Fund, provided that such transactions are in
compliance with Section 17(e)(2) of the Act.
PORTFOLIO TURNOVER
The Fund 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.
PURCHASE OF SHARES
Shares are offered for sale by the Fund on a continuous basis at the Fund's net
asset value. Purchasers of the Fund shares pay no "sales load" or underwriting
commission, although broker-dealers effecting purchases or sales of Fund shares
for their customers may charge a service fee in connection therewith. The
minimum initial investment in a Fund is $250. Existing shareholders may purchase
additional shares with a minimum purchase of $50 per transaction.
Purchases of the Fund are made at the net asset value per share next determined
after receipt by Investor Services Group as Transfer Agent of a purchase order
in good order. Thus, for orders received in good order before 4:00 p.m. (Eastern
time), the public offering price will be the net asset value determined as of
4:00 p.m. (Eastern time) that day. Orders for Fund shares received after 4:00
p.m. (Eastern Time) will be purchased at the next determined net asset value on
the business day following receipt of the order.
INVESTING BY TELEPHONE
The Fund may accept telephone orders from broker-dealers or service
organizations, which have been previously approved by the Trust. It is the
responsibility of such broker-dealers or service organizations to promptly
forward purchase orders and payments for same to the Fund. Shares of the Fund
may be purchased through broker-dealers; banks and bank trust departments, which
may charge the investor a transaction fee or other fee for their services at the
time of purchase. Such fees would not otherwise be charged if the shares were
purchased directly from the Fund.
INVESTING BY MAIL
Prospective shareholders may purchase shares of the Fund by completing and
signing the "Investment Application" enclosed with this Prospectus and sending
the application, together with a check payable to, "TRAINER WORTHAM CALIFORNIA
INTERMEDIATE TAX-FREE FUND", c/o First Data Investor Services Group, Inc., P.O.
Box 61503, King of Prussia, PA 19406-0903. Except as noted below, purchases
without full payment will not be processed until payment is received. The
ownership of shares shall be recorded on the books of the Transfer Agent in an
account under the shareholder's name. A confirmation of the purchase will be
issued showing the account number and number of shares owned.
INVESTING BY WIRE
Shares may also be purchased by instructing the bank to wire Federal Funds to
the Transfer Agent. Federal Funds are monies of member banks within the Federal
Reserve System. The bank must include the full name(s) in
10
<PAGE> 11
TRAINER WORTHAM FUNDS
TRAINER WORTHAM CALIFORNIA
INTERMEDIATE TAX-FREE 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> 12
TRAINER WORTHAM FUNDS INVESTMENT APPLICATION
<TABLE>
<S> <C> <C> <C> <C>
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 California Intermediate Tax-Free Fund $ ____________________
</TABLE>
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 California
Intermediate Tax-Free Fund
Act #000159
FBO (Insert Shareholder name and new account number from confirmation
received with letter to shareholders dated May 14, 1999)
_______________________________
3. REGISTRATION AND SOCIAL SECURITY NUMBER (PLEASE PRINT)
INDIVIDUAL OR JOINT ACCOUNT:
- -
- --------------------------------------------------------------------------------
Owner's First Name Middle Initial Last Name Owner's Social Security #
- -
- --------------------------------------------------------------------------------
Joint Owner's First Name Middle Initial Last Name Joint Owner's Social
Security #
GIFT TO MINOR
- -
- --------------------------------------------------------------------------------
Name of Custodian (one name only)
- -
- --------------------------------------------------------------------------------
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)
- -
- --------------------------------------------------------------------------------
Name of Corporation, Partnership, Trust or Other
- -
- --------------------------------------------------------------------------------
Name of Trustee(s) Date of Trust Tax Identification No.
4. MAILING ADDRESS OF RECORD AND TELEPHONE NUMBER(S)
- -
- --------------------------------------------------------------------------------
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)
<PAGE> 13
6. SYSTEMATIC WITHDRAWAL PLAN (minimum initial investment of $5,000 is required)
I wish to have the following amount(s) systematically withdrawn from:
<TABLE>
<S> <C>
Trainer Wortham California Intermediate Tax-Free Fund $
</TABLE>
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.
- -
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Bank Name Branch Office
</TABLE>
- -
- --------------------------------------------------------------------------------
Bank Address
- -
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Bank Wire Routing Number Account Number
</TABLE>
- -
- --------------------------------------------------------------------------------
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."
- --------------------------------------------------------------------------------
Signature [ ] Owner [ ] Custodian [ ] Trustee Date
- --------------------------------------------------------------------------------
Signature of Joint Owner (if
applicable) Date
10. INVESTMENT DEALER INFORMATION
- -
- --------------------------------------------------------------------------------
Name of Firm
- -
- --------------------------------------------------------------------------------
Firm Address
- -
- --------------------------------------------------------------------------------
Rep Name & Number
- --------------------------------------------------------------------------------
Signature
<PAGE> 14
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.
<PAGE> 15
which the account is registered and the Fund account number, and should address
its wire as follows:
Boston Safe Deposit & Trust
ABA # 011001234
Credit: (Insert Name of Your Fund)
Acct#: 000159
FBO Names(s) on account registration and new
account number from confirmation
received with letter to shareholders dated
May 14, 1999
For new account call 800-441-6580.
An account number will be assigned to you.
When opening a new account by wire transfer, first telephone the Transfer Agent
at 800-441-6580 to request an account number and furnish the respective Fund
with a social security or other tax identification number. A completed
application with signature(s) of registrant(s) must be filed with the Transfer
Agent immediately subsequent to the initial wire. Federal Fund wires must be
made in amounts of $250 or more. The bank will generally charge a fee for this
wire. The Fund will not be responsible for the consequences of delays, including
delays in the banking or Federal Reserve wire systems.
SUBSEQUENT INVESTMENTS
Once a shareholder's account has been established, additional purchases may be
made by sending a check payable to "TRAINER WORTHAM CALIFORNIA INTERMEDIATE
TAX-FREE FUND" c/o First Data Investor Services Group, Inc., P.O. Box 61767,
King of Prussia, PA 19406-0903. Please enclose the stub of the account statement
and include the Fund account number on the check (as well as the attributable
year for retirement plan investments, if applicable). Additional purchases may
also be made through an Automatic Investment Plan, which provides shareholders a
convenient method to make regularly scheduled subsequent investments. See
"SHAREHOLDER SERVICES."
REDEMPTION OF SHARES
IN GENERAL
The Trust will make your redemption proceeds available as promptly as possible
and, in any event, within seven business days after your redemption order, in
proper order, is received. For your redemption order to be in proper order, your
order must include name as it appears on your account, your account number and a
signature guarantee as required as described below. However, your redemption
proceeds may be delayed if you purchased the shares to be redeemed by check
(including certified or cashier checks) until such check has cleared and the
Trust has collected good Fund for your purchase. Such collection may take 15
days or more.
REDEMPTIONS BY WRITTEN REQUEST
Shareholders may redeem shares by mail by writing directly to the Transfer Agent
at First Data Investor Services Group, Inc., P.O. Box 61503, King of Prussia, PA
19406-0903, and requesting liquidation of all or any part of their shares. The
redemption request must be signed exactly as the shareholder's name appears on
the form of registration and must include the Fund's account number. If shares
are owned by more than one person, the redemption request must be signed by all
owners exactly as their names appear in the registration. Shares registered in
the name of corporations, trusts and fiduciaries can be redeemed only upon
instructions of a duly authorized person. To protect the account, the Transfer
Agent and the Funds from fraud, signature guarantees are required for certain
redemptions. Signature guarantees are required for: (1) all redemptions of
$25,000 or more; (2) any redemptions if the proceeds are to be paid to someone
other than the person(s) or organization in whose name the account is
registered; (3) any redemptions which request that the proceeds be wired to a
bank (unless bank information was received at the time the account was
established); and (4) requests to transfer the registration of shares to another
owner. The Transfer Agent requires that signatures be guaranteed by an "eligible
guarantor institution" as defined in Rule 17Ad-15 under the Securities Exchange
Act of 1934. Eligible guarantor institutions include banks, broker-dealers,
credit unions, national securities exchanges, registered securities
associations, clearing agencies and
11
<PAGE> 16
savings associations. Broker-dealers guaranteeing signatures must be a member of
a clearing corporation or maintain net capital of at least $100,000. Credit
unions must be authorized to issue signature guarantees. Signature guarantees
will be accepted from any eligible guarantor institution, which participates in
a signature guarantee program. The Transfer Agent cannot accept guarantees from
notaries public. The Transfer Agent may require additional supporting documents
for redemptions made by corporations, executors, administrators, trustees and
guardians.
Shares will be redeemed at the net asset value, next determined after receipt of
a redemption request in proper form. Moreover, under the Act, the right of
redemption may be suspended when (a) trading on the New York Stock Exchange is
restricted or such Exchange is closed for other than weekends or holidays, (b)
the Securities and Exchange Commission has by order permitted such suspension,
or (c) an emergency exists making disposal of portfolio securities or valuation
of net assets not reasonably practicable. When in the opinion of the Board of
Trustees, conditions exist which make payments in cash on redemption unwise or
undesirable; the Fund may make payment of redemption in securities.
The value of a shareholder's shares upon redemption may be more or less than
their cost depending upon the value of a Fund's portfolio securities at the time
of redemption.
REDEMPTIONS BY TELEPHONE
Shareholders who have so indicated on the application, or have subsequently
arranged in writing to do so, may redeem shares by instructing the Transfer
Agent by telephone at (800) 441-6580.
In order to arrange for redemption by wire or telephone after an account has
been opened, or to change the bank or account designated to receive redemption
proceeds, a written request must be sent to the Transfer Agent at the address
listed under "Investing by Mail." Such requests must be signed by the
shareholder, with signatures guaranteed (see "Redemptions by Written Request"
for details regarding signature guarantees). Further documentation may be
requested from corporations, executors, administrators, trustees, or guardians.
The Fund reserves the right to refuse a wire or telephone redemption if it is
believed advisable to do so. Procedures for redeeming Fund shares by wire or
telephone may be modified or terminated at any time by the Fund. Neither the
Fund nor any of their service contractors will be liable for any loss or expense
in acting upon telephone instructions that are reasonably believed to be
genuine. In attempting to confirm that telephone instructions are genuine, the
Fund will use such procedures as are considered reasonable, including requesting
a shareholder to correctly state his or her Fund account number, the name in
which his or her account is registered, his or her social security number,
banking institution, bank account number, and the name in which his or her bank
account is registered. To the extent that the Fund fail to use reasonable
procedures to verify the genuineness of telephone instructions, it and/or its
service contractors may be liable for any such instructions that prove to be
fraudulent or unauthorized.
Shares of the Fund may be redeemed through certain broker-dealers; banks and
bank trust departments who may charge the investor a transaction fee or other
fee for their services at the time of redemption. Such fees would not otherwise
be charged if the shares were redeemed directly from the Fund.
EXCHANGE OF SHARES
You may exchange your shares of any Fund of the Trust for shares of the other
Funds at net asset value without the payment of any fee or charge in writing or
by telephone. An exchange is considered a sale of shares and may result in
capital gain or loss for Federal income tax purposes. Before an exchange can be
made, you must have received the current Prospectus for the Fund into which you
wish to exchange, and the exchange privilege may be exercised only in those
states where shares of such Fund, as the case may be, may legally be sold. If
the Transfer Agent receives exchange instructions from you in writing or by
telephone at (800) 441-6580, in good order by the Valuation Time on any Business
Day, the exchange will be effected that day. For your exchange request to be in
good order, your request must include your name as it appears on your account,
your account number, the amount to be exchanged, the name of the Fund from which
and to which
12
<PAGE> 17
the exchange is to be made and a signature guarantee as may be required. A
written request by you for an exchange in excess of $25,000 must be accompanied
by a signature guarantee as described under "Redemptions -- By Written Request."
SHAREHOLDER SERVICES
The following special services are available to shareholders. An investor may
change or stop these services at any time by written notice to the Fund.
AUTOMATIC INVESTMENT PLAN
The Fund has an Automatic Investment Plan, which provides shareholders with a
convenient method by which investors may have amounts deducted directly from
their checking accounts for investment in 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.
RETIREMENT PLANS
The Fund has available certain Individual Retirement Accounts for use by certain
individuals who qualify (including earned income from self-employment). More
detailed information about how to participate in these IRA Plans, the fees
charged by the Custodian bank, and brochures containing other pertinent
information, may be obtained by contacting the Fund at (800) 257-4414.
Traditional (deductible) IRAs:
Married individuals may make deductible contributions even if spouses are active
participants in an employer-sponsored plan. The 10% early withdrawal tax will
not apply for up to $10,000 for first-time home purchases or education expenses.
Roth IRAs:
The Fund offers the Roth IRA. While contributions to a Roth IRA are not
currently deductible, the amounts within the accounts accumulate tax-free and
qualified distributions will not be included in a shareholder's taxable income.
The contribution limit is $2,000 annually ($4,000 for joint returns) in
aggregate with contributions to Traditional IRAs. Certain income phaseouts
apply.
Education IRAs:
The Fund also offers the Education IRA. Like the Roth IRA, contributions are
non-deductible, but the investment earnings accumulate tax-free, and
distributions used for higher education expenses are not taxable. Contribution
limits are $500 per account and certain income phaseouts apply.
NET ASSET VALUE
The net asset value per share of capital stock of the Fund will be determined on
the next business day on which the New York Stock Exchange is open for business
as of the close of regular trading hours (currently 4:00 p.m. Eastern time) and
for any other day (other than a day on which no shares are tendered for
redemption and no order to purchase or sell any shares is received) during which
there is a sufficient degree of trading in the Fund's portfolio securities that
the Fund's net asset value per share might be materially affected. Determination
of net asset value will be in accordance with generally accepted accounting
principles and will be computed by dividing the value of Fund's total net assets
by the total number of shares outstanding. Securities traded on a securities
exchange are valued at the last sale price prior to the time of computation or,
if there have been no sales on that day, at the mean of their closing bid and
asked prices. Securities not traded on a securities exchange but for which
market quotations are read-
13
<PAGE> 18
ily available will be valued at the mean of their bid and asked prices, although
securities traded over the counter on NASDAQ will be valued at their last sale
price. Securities not traded on a securities exchange and other securities or
assets for which market quotations are not readily available will be valued at
fair value as determined in good faith by the Board of Trustees. Once the
aggregate value of all securities has been determined, there will be added to
this total the dollar amount of cash on hand and receivables and the value of
all other assets. From the sum of the foregoing, the aggregate amount of all
liabilities and all accrued expenses will be deducted to produce the total net
asset value of all shares outstanding.
DIVIDENDS AND TAXES
The Fund intends to distribute substantially all of its net investment income
and net capital gains. Dividends will be declared and paid quarterly by the
Trainer Wortham California Intermediate Tax-Free Fund. Dividends from net
investment income or net short-term capital gains will be taxable to you,
whether received in cash or in additional shares if derived from investments
other than municipal bonds.
The Fund permits any shareholder located in states where the Fund's shares are
registered (regardless of the number of shares owned) to elect a Dividend
Reinvestment Plan for the automatic reinvestment of all distributions. If a
dividend is declared from net investment income or a capital gains distribution
is declared from net capital gains, investors electing under the Dividend
Reinvestment Plan are required to take such dividends or distributions in Fund
shares rather than in cash. The full amount of the distribution will be invested
and the shareholder will be credited with any full or fractional shares
resulting. The investment under the Dividend Reinvestment Plan will be made at
the current net asset value on the dividend payable date. Dividends and capital
gains distributions will result in a taxable event for the investor even though
invested in shares.
An investor may elect or terminate participation in the Dividend Reinvestment
Plan at any time. Elections to participate must be made using the Investment
Application. Termination can be made by written notice. Costs of the Plan will
be borne by the Fund. There is no assurance that such Plan will result in a
profit for an investor.
TAXES
The Fund intends to qualify annually to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As such, the Fund will not be subject to Federal income tax, or to any
excise tax, to the extent its earnings are distributed as provided in the Code
and by satisfying certain other requirements relating to the sources of its
income and diversification of its assets.
The Fund intends to 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.
14
<PAGE> 19
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.
For corporate investors in the Fund, dividends from net investment income will
generally qualify in part for the corporate dividends-received deduction.
However, the portion of the dividends so qualified depends on the aggregate
qualifying dividend income received by the Fund from domestic (U.S.) sources.
Distributions paid by the Fund from 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. The Fund does not
seek to realize any particular amount of capital gains during a year; rather,
realized gains are a by-product of management activities. Consequently, capital
gains distributions may be expected to vary considerably from year to year.
Also, if purchases of shares in a Fund are made shortly before the record date
for a capital gains distribution or a dividend, a portion of the investment will
be returned as a taxable distribution.
Dividends which are declared in October, November or December to shareholders of
record in such a month but which, for operational reasons, may not be paid to
the shareholder until the following January, will be treated for tax purposes as
if paid by a Fund and received by the shareholder on December 31 of the calendar
year in which they are declared.
A sale or redemption of shares of a Fund is a taxable event and may result in a
capital gain or loss to shareholders subject to tax. 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.
The tax discussion set forth above is included for general information only.
Prospective investors should consult their own tax advisers concerning the
Federal, state, local or foreign tax consequences of an investment in the Fund.
PERFORMANCE INFORMATION
From time to time, performance information regarding the Fund, such as total
return, may be quoted in advertisements or in communications to shareholders.
These performance quotations represent a Fund's past performance, and should not
be considered as representative of future results. The Fund's total return may
be calculated on an average annual and/or aggregate basis for various periods
(which will be stated in all advertisements). Average annual total return
reflects the average percentage change per year in the value of an investment in
the Fund. Aggregate total return reflects the total percentage change over the
stated period. In calculating total return, the assumption is made that
dividends and capital gain distributions made by the Fund during the period are
reinvested in additional shares.
From time to time, the Fund may advertise its yield and "tax-equivalent" yield.
The 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, the 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 the 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
15
<PAGE> 20
investment at a stated income tax rate in order to equal the Fund's yield.
The 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 the Fund should not be
considered representative of what an investment in the Fund may earn in any
future period. When utilized, total return for the unmanaged indices described
in the Statement of Additional Information will be calculated assuming
reinvestment of dividends and interest, but will not reflect any deductions for
recurring expenses such as advisory fees, brokerage costs or administrative
expenses. 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 the Fund to an alternative investment should be made with
consideration of differences in features and expected performance. The Fund may
also be mentioned in newspapers, magazines, or other media from time to time.
The Fund assumes no responsibility for the accuracy of such data. The Fund's
results also should be considered relative to the risks associated with the
Fund's investment objective and policies. See "Investment Results" in the
Statement of Additional Information.
The principal value of an investment in the Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
GENERAL INFORMATION
ORGANIZATION
The Fund is a separate Series of shares of TRAINER WORTHAM FIRST MUTUAL FUNDS, a
Delaware business trust organized pursuant to a Trust Instrument dated January
17, 1995. On October 1, 1996, the name of the Trust was changed from First
Mutual Fund to its present name. The Trust is registered under the Act as an
open-end management investment company commonly known as a mutual fund. The
Trustees of the Trust may establish additional series or classes of shares of
the Trust without the approval of shareholders. The assets of Fund belong only
to that Fund, and the liabilities of Fund are borne solely by that Fund and no
other.
DESCRIPTION OF SHARES
The Fund is authorized to issue an unlimited number of shares of beneficial
interest with a par value of $0.001 per share. Shares of the Fund represent
equal proportionate interests in the assets of the Fund only and have identical
voting, dividend, redemption, liquidation and other rights. All shares issued
are fully paid and non-assessable, and shareholders have no preemptive or other
right to subscribe to any additional shares. Currently, there is only one class
of shares issued by the Fund.
SHAREHOLDER MEETINGS
The Board of Trustees does not intend to hold annual meetings of shareholders of
the Fund. The Board of Trustees has undertaken to the Securities and Exchange
Commission, however, that they will promptly call a meeting for the purpose of
voting upon the question of removal of any Trustee when requested to do so by
holders of not less than 10% of the outstanding shares of the Fund. In addition,
subject to certain conditions, shareholders of the Fund may apply to the Fund to
communicate with other shareholders to request a shareholder's meeting to vote
upon the removal of a Trustee or Trustees.
CERTAIN PROVISIONS OF TRUST INSTRUMENT
Under Delaware law, the shareholders of the Fund will not be personally liable
for the obligations of the Trust; a shareholder is entitled to the same
limitation of personal liability extended to shareholders of corporations.
SHAREHOLDER REPORTS AND INQUIRIES
Shareholders will receive annual financial statements, which are audited by the
Fund's independent accountants, Briggs, Bunting and Dougherty, LLP as well as
unaudited semi-annual financial statements. Shareholder inquiries should be
addressed to "TRAINER WORTHAM CALIFORNIA INTERMEDIATE TAX-FREE FUND", c/o First
Data Investor Services Group, Inc., P.O. Box 61503, King of Prussia, PA
19406-0903 or by calling (800) 257-4414.
16
<PAGE> 21
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, United Missouri
Bank KC N.A., 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.
<TABLE>
<S> <C>
[ ] Trainer Wortham California Intermediate Tax-Free Fund $
</TABLE>
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:
- -
- --------------------------------------------------------------------------------
Registered Owner
- -
- --------------------------------------------------------------------------------
Street Address
- -
- --------------------------------------------------------------------------------
City State Zip Code
- -
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Day Time Phone Number Evening Phone Number
</TABLE>
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.
- -
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Bank Account Owner Joint Owner
</TABLE>
- -
- --------------------------------------------------------------------------------
Bank Name
- -
- --------------------------------------------------------------------------------
Bank Branch Street Address
- -
- --------------------------------------------------------------------------------
City State Zip Code
- -
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ABA Number (9 digits) Account Number
</TABLE>
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.
- --------------------------------------------------------------------------------
SIGNATURE OF BANK ACCOUNT OWNER
- --------------------------------------------------------------------------------
SIGNATURE OF JOINT BANK ACCOUNT OWNER
<PAGE> 22
TRUSTEES:
Robert H. Breslin, Jr.
David P. Como
Raymond Eisenberg
David Elias
Robert S. Lazar
Martin S. Levine
Timothy J. O'Hara
James F. Twaddell
For additional information about the
Trainer Wortham Funds call:
800.257.4414
TRAINER WORTHAM FUNDS
845 Third Avenue/6th Floor, New York, New York 10022
800.257.4414 - Fax: 415.288.1401
TRAINER WORTHAM FUNDS
PROSPECTUS
June 1, 1999
800.257.4414
CALIFORNIA INTERMEDIATE TAX-FREE FUND
<PAGE> 23
STATEMENT OF ADDITIONAL INFORMATION
October 30, 1998
As Revised on
June 1, 1999
- --------------------------------------------------------------------------------
TRAINER, WORTHAM FIRST MUTUAL FUNDS
First Mutual Fund
Trainer, Wortham Total Return Bond Fund
Trainer, Wortham California Intermediate Tax-Free Fund
- --------------------------------------------------------------------------------
Trainer, Wortham First Mutual Funds (the "Trust") currently offers shares of the
following three Series, representing separate portfolios of investments: First
Mutual Fund, Trainer, Wortham Total Return Bond Fund and Trainer, Wortham
California Intermediate Tax-Free Fund (the "Fund(s)"). Information concerning
each Fund is provided in separate Prospectuses, First Mutual Fund and Trainer,
Wortham Total Return Bond Fund each dated October 30, 1998 and Trainer, Wortham
California Intermediate Tax-Free Fund dated June 1, 1999. 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 (800) 257-4414.
UNDERWRITER: Investment Advisor:
First Data Distributors, Inc. Trainer, Wortham & Co., Inc.
4400 Computer Drive 845 Third Avenue, 6th Floor
Westborough, MA 01581 New York, NY 10022
(800) 257-4414 (212) 759-7755
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION OR IN
EACH PROSPECTUS IN CONNECTION WITH THE OFFERING MADE BY EACH PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE TRUST OR ITS DISTRIBUTOR. NEITHER PROSPECTUS
CONSTITUTES AN OFFERING BY THE TRUST OR BY THE DISTRIBUTOR IN ANY JURISDICTION
IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-1-
<PAGE> 24
TABLE OF CONTENTS
Page
----
Trainer, Wortham First Mutual Funds .........................................
Investment Objectives and Policies ..........................................
Investment Restrictions.......................................................
Other Investment Restrictions.................................................
Trustees and Officers.........................................................
Control Persons and Principal Holders of Securities...........................
Investment Advisor............................................................
Administrator.................................................................
Distributor...................................................................
Distribution Plan.............................................................
Transfer Agent and Accounting Services Agent..................................
Custodian.....................................................................
Legal Counsel.................................................................
Auditors......................................................................
Brokerage.....................................................................
Performance Calculations......................................................
General Information...........................................................
Financial Statements..........................................................
Page 2
<PAGE> 25
TRAINER, WORTHAM FIRST MUTUAL FUNDS
Trainer, Wortham First Mutual Funds (the "Trust"), 845 Third Avenue, 6th Floor,
New York, NY 10022, is an open-end management investment company, which
currently offers shares of the following three Funds, each with its own
investment objectives and policies: First Mutual Fund, Trainer, Wortham Total
Return Bond Fund (Total Return Bond Fund) and Trainer, Wortham California
Intermediate Tax-Free Fund.
INVESTMENT OBJECTIVES AND POLICIES
INVESTMENT OBJECTIVES
FIRST MUTUAL FUND
The Fund seeks to achieve capital appreciation through investment in common
stocks and securities convertible into common stocks. Its secondary objective is
income.
TOTAL RETURN BOND FUND
The Fund seeks to maximize total return, consistent with preservation of
capital.
TRAINER, WORTHAM CALIFORNIA INTERMEDIATE TAX-FREE FUND
The Fund seeks to obtain as high a level of interest income exempt from federal
income tax and California personal income tax as is consistent with prudent
investment management.
INVESTMENT POLICIES
The following discussion of investment techniques and instruments should be read
in conjunction with the "INVESTMENT OBJECTIVE AND POLICIES" and "INVESTMENT
STRATEGIES AND RISK CONSIDERATIONS" sections of each Funds' Prospectus.
The Board of Trustees may, in the future, authorize a Fund to invest in
securities other than those listed herein and in the Prospectuses, provided such
investment would be consistent with that Fund's investment objective and that it
would not violate any fundamental investment policies or restrictions applicable
to that Fund.
The following discussion applies to each of the Funds.
Each Fund will not, as to 75% of its total assets, purchase the securities of
any one issuer (other than cash, cash items, and obligations of the United
States Government) if immediately thereafter, and as a result of the purchase,
the Fund would (a) have more than 5% of the value of its total assets invested
in the securities of such issuer, or (b) hold more than 10% of any or all
classes of the securities of any one issuer. The Funds will not invest in the
securities of other investment companies. Although permitted under the Trust's
Declaration of Trust and By-laws, the following types of transactions are not
currently anticipated:
1. Investment in restricted securities (including non-marketable
securities);
2. Engaging in short selling; and
3. Arbitrage activities.
Although it is not the current intention of the Funds to borrow, each Fund may
borrow for the purpose of investing in portfolio securities. To the extent that
the Funds borrow money, they will incur interest expense. Any investment gains
made with the additional funds in excess of interest paid will cause the net
asset value of the Fund's shares to rise faster than would, otherwise be the
case. Conversely, any investment losses from such monies will cause the net
asset value of the Funds shares to fall faster than would otherwise be the case.
The foregoing investment policies may be changed without shareholder approval
except to the extent they are reflected in a Fund's fundamental policies. (See
"INVESTMENT RESTRICTIONS" below.)
Page 3
<PAGE> 26
INVESTMENT RESTRICTIONS
The Funds have adopted the following restrictions with respect to their
investment policies. These restrictions are fundamental policies, and may not be
changed as to a Fund unless authorized by the vote of a majority of the
outstanding shares of the Fund, as that term is defined herein under the section
entitled "GENERAL INFORMATION" below.
(a) UNDERWRITING OF SECURITIES: The Funds will not engage in the
underwriting of securities of other issuers.
(b) DIVERSIFICATION: The Funds have adopted the policy prohibiting it
from, as to 75% of each Fund's total assets, investing more than
5% of its total assets in the securities of any one issuer (other
than securities issued by the Government or its agencies or
instrumentalities).
(c) INDUSTRY CONCENTRATIONS: The Funds may not purchase the
securities of issuers conducting their principal business
activities in the same industry, other than obligations issued or
guaranteed by the U.S. Government, its agencies or
instrumentalities if immediately after such purchase the value of
a Fund's investments in such industry would exceed 25% of the
value of the total assets of the Fund.
(d) PURCHASE AND SALE OF REAL ESTATE: The Funds will not engage in
the purchase and sale of interests in real estate except that the
Funds may engage in the purchase and sale of marketable
securities which may represent indirect interests in real estate.
(e) PURCHASE AND SALE OF COMMODITIES OR COMMODITY CONTRACTS: he 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%.
(i) SECURITIES OF OTHER INVESTMENT COMPANIES: Except for the Trainer
Wortham California Intermediate Tax-Free Fund, The Funds will
not invest in the securities of other investment companies.
(j) 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."
Page 4
<PAGE> 27
OTHER INVESTMENT RESTRICTIONS
(a) The Funds may not invest in oil, gas or mineral leases;
(b) The Funds may invest up to 5% of their total assets at the time of
purchase in warrants. Included within this amount, but not to
exceed 2% of the Fund's total assets are warrants which are not
listed on the New York Stock Exchange or the American Stock
Exchange. This restriction does not apply to warrants initially
attached to securities purchased by the Funds;
(c) The Funds will not invest in real estate limited partnerships; and
(d) The Funds will not purchase securities on margin, but the Funds may
obtain such short-term credits as may be necessary for the purchase
and sale of securities.
(e) Purchase or retain the securities of any issuer if, to the
knowledge of 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.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust, their addresses, affiliations,
if any, with Trainer, Wortham & Co., Inc. (the "Advisor") and principal
occupations during the past five years, are as follows:
<TABLE>
<CAPTION>
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
NAME, AGE POSITION(S) AGGREGATE TOTAL PRINCIPAL OCCUPATION(S) DURING THE
& ADDRESS HELD WITH COMPENSATION COMPENSATION PAST FIVE YEARS
TRUST FROM TRUST FROM TRUST
FOR FISCAL AND FUND
YEAR ENDED COMPLEX PAID
6/30/98 TO TRUSTEES
FOR FISCAL
YEAR ENDED
6/30/98
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
<S> <C> <C> <C> <C>
James F. Twaddell (59) Chairman of $5,000 $5,000 Investment Banker at Schneider
c/o Schneider Securities, the Board; Securities, Inc. since June 1995;
Inc. Trustee Chairman of the Board, Director and
2 Charles Street since 1979 Registered Representative of Barclay
Providence, RI 02904 Investment, Inc. until June 1995.
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
Robert H. Breslin, Jr. (70) Trustee $5,200 $5,200 Partner in the law firm of Breslin &
107 Forge Road since 1979; Sweeney, Warwick, RI. since 1970 .
E. Greenwich, RI 02818 Member of
Audit
Committee
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
David P. Como(1) (52) Trustee $0 $0 Managing Director, Trainer, Wortham &
388 Market Street since 1984; Co., Inc. since 1969.
2nd Floor President
San Francisco, CA 94111
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
Raymond Eisenberg (75) Trustee $4,700 $4,700 President of Raymond Eisenberg &
488 County Street since 1960; Associates, PC Accountants and
New Bedford, MA 02740 Chairman of Auditors, New Bedford, MA since 1980.
the Audit
Committee
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
David Elias(1) (53) Trustee $0 $0 President and Chief Investment Officer
500 Essjay Road since 1991 of Elias Asset Management, Inc.,
Suite 220 Buffalo, NY since 1978.
Williamsville, NY 14221
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
Trustee Retired in 1992 ; formerly an
Robert S. Lazar (54) since 1976; $5,200 $5,200 Engineer, Newport, RI; Director,
P.O. Box 4158 Member of Newport Federal Savings Bank, Newport,
Middletown, RI 02842-0011 the Audit RI.
Committee
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
</TABLE>
Page 5
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
Martin S. Levine (45) Trustee $5,200 $5,200 Controller and Chief Financial Officer
c/o John P. Picone, Inc. since 1994; of John P. Picone, Inc., Contractors
31 Garden Lane Member of and Engineers, Lawrence, NY, since
Lawrence, NY 11559 the Audit 1984.
Committee
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
Berkeley Belknap Vice $0 $0 Portfolio Manager and Research Analyst,
388 Market Street President received her BA degree in History from
2nd Floor Yale University in 1992; financial
San Francisco, CA 94111 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, Ms. Belknap holds the following
licenses with the NASD: Series 7 and 63.
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
Timothy J. O'Hara (48) Trustee $0 $0 Publisher of CU Journal , a national
Faulkner & Gray since 1998 weekly financial newspaper owned by
224 Datura Street Faulkner & Gray, Inc.
Suite 709
W. Palm Beach, FL 33401
- ---------------------------- ------------- ---------------- --------------- ----------------------------------------
Debra L. Clark (39) Secretary & $0 $0 Mutual Fund and Marketing Distribution
388 Market Street Treasurer Agent for Trainer, Wortham First
2nd Floor Mutual 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.
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 [Messrs. Como and
Ghriskey] Mr. Como [are officers] is an officer and/or trustee, receives fees
from the Trust for acting as its Investment Advisor. (See the section entitled
"INVESTMENT ADVISOR.")
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of May 26, 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 May 26, 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 10.79
c/o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Perry R. Como 251,687.556 7.56
c/o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
</TABLE>
- ----------------------------------
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
Page 6
<PAGE> 29
<TABLE>
<S> <C> <C>
Semper Trust Co. c/f IRA r/o of 231,732.480 6.96
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 4.98
Alice Stone Trainer
304 Pomperaug Woods
Southbury, CT 06488-1872
Semper Trust Co. Cust IRA r/o of 165,750.138 4.98
Alice Stone Trainer
304 Pomperaug Woods
Southbury CT 06488-1872
Semper Trust Co. Cust IRA r/o of 101,893.784 3.06
Thomas B Dunn
c/o D-Aspen Inc.
PO Box 458
Buckhannon WV 26201-0458
Claiborne Pell 93,461.019 2.81
Trst Claiborne Pell Trust
U/D Dated 3/9/98
3425 Prospect St NW
Washington DC 20007-3219
Mary Menzies 87,749.149 2.64
Attn David Como
845 3rd Ave
New York NY 10022-6601
</TABLE>
As of May 26, 1999, the following persons owned of record or beneficially more
than 5% of the outstanding voting shares of TOTAL RETURN BOND FUND:
<TABLE>
<CAPTION>
NUMBER OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES HELD PERCENTAGE
- ------------------------------------ ----------- ----------
<S> <C> <C>
H. Williamson Ghriskey, Jr.
Trst Margot Marsh Biodiversity Foundation 384,173.558 22.28
c\o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
HW Mali Profit Sharing Ret Plan 187,090.723 10.85
c\o Trainer, Wortham & Co., Inc.
845 Third Avenue, 6th Floor
New York, NY 10022
Daniel U. Escaro 117,913.879 6.84
Trst York Labs PSP
DTD N/A
c/o York Hospital
1001 S. George Street
York, PA 17405
Merchants Fund Inc 98,730.192 5.73
c/o Trainer Wortham & Comp
845 3rd Ave
New York NY 10022-6601
Amsouth Bank 98,633.776 5.72
Trst Tuscaloosa Ear Nose & Throat
Center PC Profit Sharing Plan
Walburn A/CC/O Trainer Wortham & Co
845 3rd Ave
New York NY 10022-6601
Ernesta Krackiewicz 62,231.161 3.61
3401 38th St NW Apt 509
Washington DC 20016-3041
Kalman I Nulman 57,669.799 3.34
Trst Milton Brown Foundation
C/O Trainer Wortham & Co Inc
845 3rd Ave
New York NY 10022-6601
</TABLE>
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 1990, continues an investment
counseling business which began in 1924 as Trainer & Associates. The Advisor is
registered as an investment advisor under the Investment Advisers Act of 1940,
as amended, and supervises approximately $3 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 billion in total net assets.
The Directors of the Advisor are: A. Alexander Arnold III, David P. Como, H.
Williamson Ghriskey, Jr., and Charles V. Moore. Mr. Como, Managing Director of
the Advisor, is the President and a Trustee of the Trust. Since 1982, Mr. Como
has been primarily responsible for the day-to-day investment management of the
Trust's portfolio.
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.
- ----------------------------------
Language indicated as being shown by strike out in the typeset document is
enclosed in brackets "[" and "]" in the electronic format.
Page 7
<PAGE> 30
Pursuant to individual Investment Advisory Agreements, with respect to FIRST
MUTUAL FUND, the Advisor receives an annual investment advisory fee, accrued
daily and paid monthly, of 0.75% of the Fund's average daily net assets; with
respect to TOTAL RETURN BOND FUND the Advisor receives an annual fee, accrued
daily and paid monthly, of 0.45% of the Fund's average daily net assets and with
respect to TRAINER, WORTHAM 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, 1998, 1997 and 1996, with respect to FIRST
MUTUAL FUND, the Fund paid the Advisor fees aggregating $280,113, $235,424 and
$191,340, respectively.
With respect to the TOTAL RETURN BOND FUND, for the fiscal year ended June 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.
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 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 $59,915, $55,489 and $45,248, for the fiscal years ended
June 30, 1998, 1997, and 1996, respectively. For the fiscal year ended June 30,
1998 and for the fiscal period ended June 30, 1997, TOTAL RETURN BOND FUND paid
Investor Services Group administration fees of $15,476 and $9,270, respectively.
DISTRIBUTOR
First Data Distributors, Inc. ("FDDI"), 4400 Computer Drive, Westborough,
MA 01581 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 PLAN
FIRST MUTUAL FUND has adopted a Plan of Distribution (the "Plan") pursuant to
Rule 12b-1 under the Act. The Plan permits the Fund to pay certain expenses
associated with the distribution of its shares. The Plan provides that FIRST
MUTUAL 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.
Page 8
<PAGE> 31
In adopting the 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 the Fund and its shareholders would benefit from the adoption of the Plan.
The 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, 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.
The Plan authorizes the Fund to pay service organizations, which may include but
are not limited to: (1) compensation to securities brokers and dealers for
selling shares; (2) compensation to securities brokers and dealers, accountants,
attorneys, investment advisors and pension actuaries for services rendered to
their clients relating to the distribution of shares of the Fund; (3)
compensation to such parties for marketing research and promotional services
specifically relating to the distribution of Fund shares; (4) the costs of
advertising in newspapers, magazines or other periodicals, or on radio or
television; (5) the costs of telephone (including "WATS" and "800" services),
mail (including postage and other delivery costs) or other direct solicitation
of prospective investors; (6) the costs of preparing and printing prospectuses
and other sales material for prospective investors, and the cost of distributing
these materials; (7) the fees of public relations consultants; and (8) any other
distribution expenses that the Board of Trustees may from time to time approve
before such expenses are incurred.
All such payments made pursuant to 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 Plan provides 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, 1998, distribution expenses for First Mutual Fund were
reimbursed as follows:
EXPENSE ITEM AMOUNT
- ------------ ------
Advertising and Printing $ 21,840.05
Marketing Support Personnel and Salaries $ 75,168.15
Trail Commissions paid to Brokers $ 1,904.68
Travel/Marketing Meetings $ 1,587.16
TOTAL 12B-1 EXPENSES *$100,500.04
* Reimbursement to Plan for the fiscal year ended June 30, 1998 was $9,949.86.
TRANSFER AGENT AND ACCOUNTING
SERVICES AGENT
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.
Page 9
<PAGE> 32
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.
CUSTODIAN
UMB Bank, KC, NA, P.O. Box 412797, Kansas City, MO is Custodian for the
securities and cash of each Fund.
LEGAL COUNSEL
Dechert Price & Rhoads, 1775 Eye Street, N.W., Washington, DC 20006 serves as
Counsel to the Trust.
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
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, 1998, 1997 & 1996, FIRST MUTUAL FUND paid
total brokerage commissions of $77,023.60, $99,150.57 and $73,171.25,
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, 1998, 1997 and 1996 the Trust paid no such brokerage
commissions.
PERFORMANCE CALCULATIONS
Funds compute their average annual total return by determining the average
annual compounded rate of return during specified periods that equate the
initial amount invested to the ending redeemable value of such investment. This
is done by dividing the ending redeemable value of a hypothetical $1,000 initial
payment by $1,000 and raising the quotient to a power equal to one divided by
the number of years (or fractional portion thereof) covered by the computation
and subtracting one from the result. This calculation can be expressed as
follows:
Page 10
<PAGE> 33
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.
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, 1998 were 25.40%, 19.31% and 14.62%, respectively. The aggregate total
returns for the same five and ten year periods were 141.91% and 291.59%,
respectively. The total return for Total Return Bond Fund for the one year
period ended June 30, 1998 was 7.84%. The average annual total Return for the
TOTAL RETURN BOND FUND since its inception on Oct. 1, 1996 through June 30, 1998
was 7.33%.
THE TRAINER, WORTHAM TOTAL RETURN BOND FUND may also quote its yield in
advertisements and investor communications. The yield computation is determined
by dividing the net investment income per share earned during a recent 30-day
(or one month) period by the maximum offering price per share on the last day of
that period and annualizing the resulting figure, according to the following
formula:
YIELD = 2 [(a-b+1)6-1]
cd
Where: a = dividends and interest earned during the
period;
b = expenses accrued for the period (net of
reimbursements);
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends; and
d = the maximum offering price per share on the
last day of the period.
For the thirty day period ended June 30, 1998, TOTAL RETURN BOND FUND had a
yield of 5.32%. Since performance will fluctuate, performance data for the Funds
should not be used to compare an investment in the Fund's shares with bank
deposits, savings accounts and similar investment alternatives which often
provide an agreed-upon or guaranteed fixed yield for a stated period of time.
Shareholders should remember that performance is generally a function of the
kind and quality of the instruments held in a portfolio, portfolio maturity,
operating expenses and market conditions.
GENERAL INFORMATION
As used in each Fund's Prospectus and this Statement of Additional Information,
the holders of "a majority of the outstanding shares" of the Fund means the vote
of the lesser of: (a) 67% or more of the shares present at any annual or special
meeting of shareholders, if the holders of more than 50% of the outstanding
shares are present or represented by proxy at the meeting; or (b) more than 50%
of the outstanding shares of the Fund.
Shareholder inquiries should be directed to the Fund at the address or telephone
number listed on the front cover of this Statement of Additional Information.
Shareholders are urged to put significant inquiries or complaints in writing.
Page 11
<PAGE> 34
The Trust is registered with the Securities and Exchange Commission as a
management investment company. Such registration does not involve supervision by
the Commission of the management or policies of the Trust.
Each Fund's Prospectus and this Statement of Additional Information are not an
offering of the securities herein described in any state in which such offering
may not lawfully be made. No salesman, dealer or other person is authorized to
give any information or make any representation other than those contained in
each Fund's Prospectus and this Statement of Additional Information.
FINANCIAL STATEMENTS
The audited financial statements and notes thereto for each Fund, contained in
the Annual Report to Shareholders dated June 30, 1998, 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.
Page 12
<PAGE> 35
TRAINER, WORTHAM FIRST MUTUAL FUNDS
FORM N-1A
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits:
- -------- ----------------------------------
(a) Financial Statements Included in Part A:
Prospectus for FIRST MUTUAL FUND --
"Financial Highlights"
Prospectus for TRAINER, WORTHAM TOTAL RETURN BOND
FUND -- "Financial Highlights"
Financial Statements Included in Part B:
Annual Report (TRAINER, WORTHAM FIRST MUTUAL
FUNDS) to Shareholders dated June 30, 1998
(b) EDGAR Exhibits Filed Pursuant to Form N-1A:
(1) Copies of Charter:
(a) Agreement and Declaration of Trust dated
October 18, 1994, last amended July 25,
1996 -- 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.
(2) Copies of existing By-Laws:
(a) 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.
(3) Copies of any voting trust agreement --
Not Applicable.
(4) Specimen stock certificate -- Incorporated herein
by reference to Exhibit No. 4 to Post-Effective
Amendment No. 41 to Registration Statement No.
2-15037 filed on October 31, 1985.
(5) Copies of all investment advisory contracts:
(a) Investment Advisory Agreement for FIRST
MUTUAL FUND between Registrant and
Trainer, Wortham & Co., Inc. dated
September 30, 1996 -- Incorporated herein
by reference to Exhibit No. 5(a) to
Post-Effective Amendment No. 56 to
Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(b) Investment Advisory Agreement for
TRAINER, WORTHAM EMERGING GROWTH FUND
between Registrant and Trainer, Wortham
& Co., Inc. dated July 25, 1996
--Incorporated herein by reference to
Exhibit No. 5(b) to Post-Effective
Amendment No. 56 to Registration
Statement No. 2-15037 filed
electronically September 30, 1996.
(c) Investment Advisory Agreement for
TRAINER, WORTHAM TOTAL RETURN BOND FUND
between Registrant and Trainer, Wortham &
Co., Inc. dated July 25, 1996 --
Incorporated herein by reference to
Exhibit No. 5(c) to Post-Effective
Amendment No. 56 to Registration
Statement No. 2-15037 filed
electronically September 30, 1996.
(d) Investment advisory Agreement for
Trainer, Wortham California Intermediate
Tax-Free Fund between Registrant and
Trainer, Wortham & Co., Inc. dated April
29, 1999 -- filed herewith.
(f) Operating Expenses Agreement between
Trainer, Wortham First Mutual Funds and
Trainer, Wortham & Co., Inc. dated May
27, 1999 -- filed herewith.
<PAGE> 36
(6) Copies of each underwriting or distribution contract:
(a) Underwriting Agreement between Registrant and
Fund/Plan Broker Services, Inc. dated July 25,
1996 -- Incorporated herein by reference to
Exhibit No. 6(a) to Post-Effective Amendment No.
56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(b) Underwriting Agreement between Registrant and
First Data Distributors, Inc. dated January 1,
1999 - is filed herewith.
(i) Amendment to Underwriting Agreement between
Registrant and First Data Distributors, Inc.
dated April 29, 1999 -- filed herewith.
(7) Copies of all bonus, profit sharing, pension other similar
contracts -- Not Applicable.
(8) Copies of all custodian agreements:
(a) Custody Agreement with UMB Bank, N.A. -- dated
October 18, 1994 --Incorporated herein by
reference to Exhibit No. 8(a) to Post-Effective
Amendment No. 56 to Registration Statement No.
2-15037 filed electronically September 30, 1996.
(b) Amendment dated July 25, 1996 to Custody
Agreement, reflecting the Trust's name change and
creation of new Series -- Incorporated herein by
reference to Exhibit No. 8(b) to Post-Effective
Amendment No. 56 to Registration Statement No.
2-15037 filed electronically September 30, 1996.
(i) Amendment to Custody Administration and
Agency Agreement dated April 29, 1999--filed
herewith
(9) (a) Administration Agreement between Registrant and
Fund/Plan Services, Inc., dated July 25, 1996 --
Incorporated herein by reference to Exhibit No.
9(a) to Post-Effective Amendment No. 56 to
Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(i) 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.
(ii) Amendment to Administration Agreement dated
April 29, 1999--filed herewith
(b) Accounting Services Agreement between Registrant
and Fund/Plan Services, Inc., dated July 25, 1996
--Incorporated herein by reference to Exhibit No.
9(b) to Post-Effective Amendment No. 56 to
Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(i) 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.
(ii) Amendment to Accounting Services Agreement
dated April 29, 1999--filed herewith.
(c) Transfer Agent Services Agreement between
Registrant and Fund/Plan Services, Inc., dated
July 25, 1996 --Incorporated herein by reference
to Exhibit No. 9(c) to Post-Effective Amendment
No. 56 to Registration Statement No. 2-15037 filed
electronically September 30, 1996.
(i) 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.
(ii) Amendment to Transfer Agent Services
Agreement between Registrant & Fund/Plan
Services, Inc. dated April 29, 1999--filed
herewith.
(10) Not Applicable
<PAGE> 37
(11) (a) None.
(b) Consent of Briggs, Bunting & Dougherty, LLP -- Not
applicable.
(12) None.
(13) None.
(14) (a) Individual Retirement Custodial Account,
Disclosure Statement and Application is
incorporated herein by reference to Exhibit 14(a)
of Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A filed on
August 30, 1985.
(b) Keogh and Corporate Defined Contribution Master
Plan and Custodial Agreement is incorporated
herein by reference to Exhibit 14(b) of
Post-Effective Amendment No. 40 to Registrant's
Registration Statement on Form N-1A filed on
August 30, 1985.
(15) 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.
(16) Schedule of computations of performance quotations. Not
applicable.
(17) Powers-of-Attorney incorporated by reference to Exhibit No.
(6) of Post Effective Amendment No. 60 to Registrant?s
Registration Statement on Form N-1A are filed herewith.
(27) Financial Data Schedules for Appendix "A" of SAI -- Not
applicable
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Not applicable.
Item 26. Number of Holders of Securities
-------------------------------
As of :
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
-------------- ------------------------
<S> <C>
FIRST MUTUAL FUND 712
Common Stock,
$0.01 Par Value
Title of Class Number of Record Holders
-------------- ------------------------
TRAINER, WORTHAM TOTAL RETURN BOND FUND 49
Common Stock,
$0.01 Par Value
</TABLE>
Item 27. Indemnification
---------------
Article VII, Section 2 of the Registrant's Agreement and
Declaration of Trust provides as follows: The Trustees
shall not be responsible or liable in any 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 faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or
her office.
<PAGE> 38
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 28. Business and Other Connections of Investment Advisor
----------------------------------------------------
Trainer, Wortham & Co., Inc. is engaged in investment
advising and counseling, and continues an investment
counseling business which began in 1924 as Trainer &
Associates. The company is registered as an investment
advisor under the Investment Advisors Act of 1940 and, as
of September 8, supervised approximately $billion in
investment accounts.
The Investment Advisor holds administrative records
prepared prior to May 1, 1991 required to be maintained
pursuant to Section 31(a) under the Investment Company Act
of 1940, and the rules promulgated thereunder.
To the knowledge of the Registrant, none of the directors
or officers of Trainer, Wortham & Co., Inc. is or has been
at any time during the past two fiscal years engaged in
any other business, profession, vocation or employment of
a substantial nature for his own account or in the
capacity of director, officer, employee, partner or
trustee.
Item 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)
<PAGE> 39
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
</TABLE>
<PAGE> 40
<TABLE>
<CAPTION>
<S> <C> <C>
Gerald J. Holland Director, Vice- None
3200 Horizon Drive President and
King of Prussia, PA 19406-0903 Principal
Sandra L. Adams None
3200 Horizon Drive
King of Prussia, PA 19406-0903 Principal
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) Not applicable
Item 30. Location of Accounts and Records
--------------------------------
(1) Trainer, Wortham & Co., Inc., 845 Third Avenue,
New York, NY 10022 (records relating to its
functions as investment advisor).
(2) UMB Bank, KC, NA, P.O. Box 412797, Kansas City, MO
64141-2797 (records prepared after February 29,
1988 relating to its functions as Custodian).
(3) 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,
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 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
------------
(1) The Registrant hereby undertakes to promptly call
a meeting of shareholders for the purpose of
voting upon the question of removal of any trustee
or trustees when requested in writing to do so by
the record holders of not less than 10 percent of
the Registrant's outstanding shares and to assist
its shareholders in accordance with the
requirements of Section 16(c) of the Investment
Company Act of 1940 relating to shareholder
communications.
(2) Registrant hereby undertakes to furnish each
person to whom a prospectus is delivered with a
copy of the Registrant's latest annual report for
the fiscal year ended June 30, 1996, upon request
and without charge.
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant and has duly caused this Post-Effective
Amendment No. 61 to its Registration Statement to be signed on its behalf by the
undersigned, thereto duly authorized, in King of Prussia, PA on June 1, 1999.
TRAINER, WORTHAM FIRST MUTUAL FUNDS
David P. Como*
President and Trustee
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 61 to Registrant's Registration Statement has been signed below by
the following persons in the capacities and on the date(s) indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
*James F. Twaddell Chairman of the June 1, 1999
Board and Trustee
*Debra L. Clark Secretary and Treasurer June 1, 1999
*Robert S. Lazar Trustee June 1, 1999
*David Elias Trustee June 1, 1999
*Raymond Eisenberg Trustee June 1, 1999
*Robert H. Breslin, Jr. Trustee June 1, 1999
*Martin S. Levine Trustee June 1, 1999
*Timothy J. O'Hara Trustee June 1, 1999
</TABLE>
* By: /s/ Kelly O'Neill
-----------------------
Kelly O'Neill, as Attorney-in-Fact
pursuant to Power-of-Attorney
